20VC: Index's Danny Rimer on Investing Lessons from Hits like Figma, Discord and Etsy to Missing Snapchat, Airbnb, Facebook & Spotify | Why Valuation is a Trap and Market Sizing, Signalling and Sector/Geo-Specific Funds are all Noise

25:57What, not you, but any multi -stage firm. Ah, the signaling risk is real. How do you bat that back? It used to be more of a concern. I think there's so much money sloshing around and so many folks have so many different funds that Signal risk is more of the past. I mean if you look at the Continuum of entrepreneurial power versus investor power over the last couple of decades It's only gone in the entrepreneurial direction if you want to raise at this point and you are capable You're gonna be able to raise irrespective of who's been in previous rounds. It sounds self serving, but I really feel like it's happened.

26:35It's really rare that we ever not get to invest because folks are concerned about signaling any longer. Do you think there's too much money in venture today? You mentioned everyone has these different funds. Is that too much cash in the game? I think so. I think so. I think it's more a question of how thoughtful are folks being about putting that money to work. We've talked about this before. I'm not a huge fan of sector funds because I think that with sectors, you're not looking for the best companies, you're looking for the best company in that sector. I'm not a fan of impact funds because you're rationalizing a mediocre investment because you're doing something good for the world.

27:13I'm not a fan of geographic funds because, again, you're looking for the best companies in a geo. Those are all compromises on the caliber of entrepreneur and company that you're backing. Can I ask in terms of like the skating of the different fun programs, How did you think about that? Because you could have raised much more, I'm sure. Yeah, we could have. Why did you not? First of all, because we have plenty of resources, it's more a question of making sure that we have enough resources to continue to back the entrepreneur. The second one, it would have probably changed the whole dynamic and culture of the firm.

27:46How so? Well, the larger the funds, the more folks you have to hire, the more partners you have around the table. Everyone at index, we have very, very personalities, but we all really enjoy working with one another. And it's just relatively small crew that fits around a table. The more funds we have, the larger the organization, the strategists that we would have would have to have bigger teams, and they also like being smaller. So it just changes the configuration, and possibly it changes also the motivation. You know, we've always been focused on getting to carry as soon as possible. And the larger the funds, the longer it will take and the more attractive the management fee is, so it just doesn't sit right.

28:33Many people speculate in the future eventually you'll have kind of the cost -cose, which is like the large money providers, which is all the big brands that we know who scaled into asset gatherers, not disparaging me, but just raising huge funds. and boutiques which is your specialist providers like a benchmark USB, even a ribbit which although large but it is very fintech focused and absolutely owns their niche. Do you agree with that? You're either massive or you're a boutique. I mean of course we're trying to wedge ourselves in between. Yeah that's not what I think. But I agree with you. I think there will be acid aggregators and artisans and what we're trying to be when we talk about internally is scaled artisans.

29:11The parallel that you know obviously we have to come up with examples of how to think about it and I do have Swiss brews, right? I grew up in Switzerland and and index started in Switzerland. So we were thinking that the Apple Watch is actually the most successful luxury watch out there. It has many more skews than Rolex that sells a million watches. However, from a profit standpoint, Rolex and used Rolexes are a much better business than Apple. Maybe we could be the scaled artisans. I'm seeing you said there about kind of the scaled artisans and Rolex in particular. I spoke to Georgia and one of your partners and she said that Danny understands brand and scarcity better than anyone else.

29:51I thought I was a really interesting comment from her. What does she mean, do you think about that and how do you think about that? It's nice of her to say, thanks for talking to Georgia. She said you're a total tosser too. That was awful. But what did she mean by that? The technology space has been so lucrative, It's been such an incredible industry. The most companies create brands as a byproduct of a great product or service. I really couldn't tell you what Google's marketing strategy has been from the get go. Other than a cool white screen with like a cool couple of colors with their logo and maybe a drawing, I really have no idea how they've impacted me from a marketing standpoint.

30:33And most companies that have been successful be they enterprise or consumer in the tech space. the marketing has been a byproduct of a great product or service. Really, the exception to the rule would be Apple and probably Airbnb. And I scratch my head to try and think of others. So, given how deliberate index is, we obviously are going to spend a lot of time thinking of branding. And try and bring that to our entrepreneurs. Force them to think about branding proactively, the concept of what you stand for and how you tell that story. It's very difficult to build a brand. And if it's deluded and you see it everywhere, unless that's your model, which is a franchise model.

31:15So scarcity and brand really go hand in hand. And then it's a question of how to appreciate those facets and how do you increase them and decrease them at certain points. It's really very hard to build a brand when you're halfway through. I think people forget about brand until way too late, and then they're like, shit, I should have thought about this before, and then it's way harder. I guess we're saying the same thing Harry, which is, most brands are not real brands. There are very few companies that have true brands. Well, I think brands are like you have people who are full or against them.

31:44You know, I think it sounds crazy, but Donaldson Burger King actually, pretty good brands. People often I'm a Burger King or I'm a McDonald's Nike or Adidas. Same thing. Apple or Android, same thing. People don't, when they don't feel, then we have a problem. Yeah, that's right. But it also takes a long time to get to that scale, where your brand is actually relevant to people. Very few of our companies across the portfolio and we have a pretty significant portfolio and we thankfully have some great entrepreneurs Very few of them legitimately have brands yet in fact, I'm not sure that any of them truly have mainstream brands You said the word relevant there and it made me think of a show it was Keese Reboy and we talked about sourcing selecting and servicing kind of three -core pillars of venture and he said his biggest weakness is sourcing staying relevant.

32:33He's like, it's a young person's game. If I were to ask you, sourcing, selecting, servicing, where are you strongest and where are you weakest? I think probably one of the things that index is best at is the exiting part, because we spend a lot of time thinking about exiting. Let's just unpack that. It was going to be one of my questions, but like, true. But again, I was speaking to many of your LPs as well as part of this. I like, I got a lot of index. The DPI is real. I always hear, you know, I can't eat IRL and within Dex that it need to that should be a billboard attack line by the way. I'm happy.

33:05I'm happy. I'm happy to Provide you with ideas. But like how do you think about when to sell? Back to the discipline our LPs are we have no family offices in sovereign wealth funds. They're all institutions and they're mostly nonprofits or their customers are nonprofits. So we're really trying to make sure that our fiduciary responsibilities creating the most amount of returns as possible because their professionals are giving it away. We're not going to sacrifice the quality of the company based on anything but trying to create the most amount of carry as possible. When it comes to exiting, it really clarifies things, right?

33:44Like we're just trying to make sure that we don't believe our own BS. We don't get emotional about our own entrepreneurs and that we stay true to creating the biggest exits possible, or getting to a decision of exiting the company as quickly as possible when it's not working. So exiting is both for successes and failures. How does it differ? Don't tell me about that. Well, in the case of a failure, you want to make sure that you're aware of that failure as quickly as possible. You've learned those lessons and you convince the entrepreneur to shut down shop and start something new with the scar tissue at hand.

34:22Would you rather they start something new with the cash that they've got, say 50 % of the lost round? Or would you rather, hey, let's just get a landing pad for this and return cash. I'm sorry to be so unclear about this. It's really going to be based on how much conviction they have on what they're starting up afresh, rather than trying to come up with something because they feel like they have to have another shot at it or they don't want to disappoint people. We're not disappointed ever if a company shuts down. They've given it their best shot. God bless Thank you for letting us be part of the ride and let's move on and your winners Will you sell an increment save a time?

35:01Yes, we will in our winners It's a question of first of all just being disciplined about when to exit making sure that we are not Sort of falling into the trap of thinking that because they've been successful They will naturally be more successful over time and making sure that we hold the partner who's associated with a company very Honest by insisting that they have a one vote rather than the primary vote on deciding when to exit That's a really tough thing, but it's made an enormous amount of difference from Audience to data dog to one. You did it well and when did you do it badly when it's a private?

35:44sale, it's really difficult to do, right? Because the market is not clear, it's more difficult to really have transparency on what's going on in the company. When I was talking about exiting, I was really talking about exiting when the company is public. From one investor to the next, that's difficult. Unless you're getting fully out, you know, in the case of end clothing, we sold it to a private equity firm that was a clear sale. But it's really tough when you're taking increments off as the company is growing. I mean you might be very good at that. We're not even trying to do that. I think you're kind.

36:17I could have done that. I'm talking about when a company is public just making sure that there's discipline around not optimizing because we think that they're going to be worth so much more the next year than they are today. But rather evaluating the company and I've been a recipient of this advice like Denny, if you like it so much, you can keep the stock. Or if you like it so much, you can buy back that stock. But right now, we're making the right decision for our LPs. But when have you done it? And in hindsight, you did it wrong. In other words, you sold and actually it skyrocketed. It continued to go up.

36:53And what did you not see? The biggest mistakes that we've done as a firm is holding on too long, rather than selling too early. Which one would that be? Another one where we sold to early was definitely Etsy. We didn't take into consideration the fact that Josh Silverman was going to come in and totally transform the organization and that obviously we left a lot of money on the table. At that point we weren't on the board and so therefore we didn't have the same knowledge of the company back to your earlier question I guess. Not in all cases have we lost money by holding too long. It's been mixed but it's mostly been holding too long.

37:30You mentioned Etsy that we mentioned Figma right? It kind of hits that you have an incredible. It's all me, by the way. It has nothing to do with my partners or the companies. You all, just remember that. You are a true venture capitalist. What do you consider your biggest winner? I'm being crude, so I am asking for a name. I mean, I have so many stories. Come on, hey. Yeah, man. I don't know. I would like to think that my biggest winner is something that's gestating right now. There's no reason why they shouldn't be bigger. I mean, you know, Charmaine at Get Harley should be a huge winner. Tom, a motorway.

38:04Okay. Harry, we're gonna choose one. I'm not gonna choose one. What is your biggest takeaway from those? Going back to analyzing successes and failures and learning from them. When you think about that's kind of what I'm going for, which is like, when you think about your biggest success, what is that? And then when you analyze it, what are the big takeaways from it? Big successes, you know, King was an amazing lesson in the sense that King was a company where the market really collapsed on them. So at first it was a, it was skill -based games on the web that didn't happen. Then it was skill -based games on mobile, but it wasn't quite working.

38:42Then they had to reinvent themselves and be on Facebook, mobile games channel, and they had some successes there. It's such a great lesson of an incredible team, like Ricardo, Sebastian, and then eventually Stiffon, who, you know, well, coming in and just grinding away at excellence. That was an amazing story of success. It was also a lesson for index because, you know, we wanted to lead that round. And then the Apex folks who didn't really plan our, in our space, came in and offered a much bigger valuation, Michael Chowfen and Mike Risman. and then we decided to make an exception to the rule and still put in a smaller check.

39:27So we were going to lead with 15 million, which at the time was a huge series A, and they came in with 25 million, and we had an opportunity to put in an incremental 5 million at their valuation, and we decided to hold our breath and do it. And it was clearly great decision. That was really based on the team. When do you stretch on price versus when do you not? When we have conviction on the early rounds, there's a lot of room to stretch on price. In the later stage growth rounds, when the multiples are going to be more challenging to get, we have much more discipline on valuation. It's one thing to stretch on price.

40:02It's another thing to stretch on price and ownership. You can pay more, but just have the same ownership as one thing. But in that case, you're also stretched on ownership, but you're putting five in of that. Right. Well, you don't have Shardoula as a partner. So Shardula is always like, do you like this company or not? Like, why are we not increasing our ownership, even though it's a later stage round? I mean, you and I have talked about this. The dynamic of having peers around a table who think very differently from you, but are emphatic about their perspective and it's clearly different from yours.

40:36You just get to a better decision. Okay, so we have, like, King is an example there. How does that make you advise founders on when to give up versus whether to continue? As he mentioned, multiple iterations, not it was a surprise, but it was a multiple iterative moment when they hit the winner. It really depends on the story. In the case of King, they kept on reinventing themselves. They reinvented the team, or members of the team, they reinvented the org structure, they reinvented the approach that we're taking to the market. So it was almost as though they were hitting the reboot button every 12 to 14 months, with a new approach getting further conviction about the market and about the fact that they were gonna win irrespective of what everyone else was saying.

41:20That is such a great team to continually give them more time to figure it out. How important do you think it is for an investor to have early wins in that career? You had quite a few early hits. The recommendation that I always give new partners who join like FLAD from Airbnb just joined us. The visceral desire is to put points on the board, get involved, make a lot of investments, develop that muscle, meet as many companies as possible, kiss every frog, etc. And my recommendation is always the antithesis of that. Take your time, make very few bets, really think through every meeting, don't see that many folks unless the bar is maintained.

42:05But you don't have a ball. The bar is the index bar. I get that but what I say is don't do many deals but meet many people as you need to develop a bunch of what great entrepreneurs look like But even then you'll probably be wrong. So don't do many at all, right? But if you don't meet many you're not gonna build that muscle, right? Yes, you're right You got to meet a lot of people But you have to make sure that your time is not equally distributed with those people So have enormous amount of time with folks who clearly are exceptional and try and limit the amount of time that you spend with folks who are still figuring out what they should be doing.

42:42Yes. We mentioned earlier Snap. I heard about Snap when I did some calls. I didn't know if I'm gonna say it. Apparently it was a loss. Hit me. What happened? Well, it's clearly a loss. I mean, we didn't make the investment. That one was an unusual one. But did you try? Sorry, I'm being a dick. Did you try and they chose someone else? Or did you say no? So what happened there was to my recollection, we had the opportunity to invest, but we had a growth fund and we were unwilling to put the amount necessary to lock in the round. And so as a result of that, we didn't do the deal. Why were you unwilling?

43:21I mean, it was naivete, right? It was one of our first growth funds and it was going to represent north of 10 % of the fund in one investment. and we didn't think creatively on how we could justify that amount. I remember it distinctly as $61 million and we were willing to invest $40 million and that incremental 21, we should have just said, yes, we're in for it and figured out on the back end how we were going to do that. That's a hard one. Over 10 % is a lot. In a consumer social company which has more volatility than the enterprise companies. to your kindness earlier, I'll give you a little bit of credit on that one.

44:02Clearly, we could appreciate how brilliant Evan was. Was it really obvious? Brilliant. I mean, had such clarity on what Snap was and what it wasn't and how he was doing it. To my recollection, that was really a case of having full conviction about him, but did not having the courage of investing north of 10 % of our fund in the company. And you know how I was talking about valuations? At the time, we thought the peak amount that a social platform would be worth was a billion dollars because Instagram sold to Facebook for a billion dollars. So we're like, okay, how big can snap really be? Fundamentally, you know, and YouTube was $600 million or how big can snapchat truly be?

44:49Is it realistically going to be another social media platform? Can you be worth hundreds of billions as a social media platform? We were very naive about that. Hundreds of billions dollars as a social media platform. Another discussion that I was told I had to go to, you're like, God, I wish you hadn't done all these fucking calls. Apparently there was a discussion at Facebook, at four to five billion, and you guys decided not to do it. So, gosh, it's interesting what you're digging up here. No, we... So this was a funny one. And so we raised the growth fund, the first growth fund, the first call was to Facebook.

45:25So Owen, Vanara and Chamath came to London and Gideon, and they presented, it was the first company that presented. And we offered them what we thought was an incredible term sheet, which was to put in 50 million at five billion. And they came back and to their credit went to Microsoft. And they got an offer for 10 billion valuation. And they came back and said, look, we won't do five, but we'll do it at 10 and we said absolutely no way. That's just no way that we can justify doing it at 10 and so we passed on that. Thankfully to Owen's credit, he felt so appreciative of the fact that we helped him get that Microsoft deal that he ended up telling us some pretty significant secondary and so it turned out to be a great investment for index.

46:13Oh, to be fair, everything in hindsight, so he's like, oh my god, oh, But it's like that was a nuts price at the time. Yeah, I remember when Yuri did the DST round I'm really going back here, but I mean everyone was like 9 billion this guy doesn't get and hit water and investment Yeah, yeah, what an unbelievable investment. I will never forget meeting Tomage He was at DST at the time and we met up and it was a year after we had done that Facebook investment And it was still pre IPO and we were exchanging notes and he asked me so how have you been spending your year? and so I told him about the new companies that I was excited about and the new investments that we made and I asked him, so how's your year been?

46:53What have you been doing? He's like, I've literally spent my year just trying to scoop up as much Facebook second area as possible. And I promptly paid for that lunch and went back to the partnership and said, guys, we've wasted a year. That was a brilliant understanding of where to double down on value and where to spend your time. Do you think Venture is about the hundreds of decisions he might put a day or the ones two that you make a year? Clearly the one or two that you make per year. So my wife who's a spiritual student but really she's a teacher more than a student but she probably would not acknowledge that.

47:30She talks about the fact that we are constantly at Forks in the Road and really our path is just making decisions at different Forks in the Road. So we make hundreds of Forks in the Road every day. And so whatever our path is, is based on this ledger of what we've done, whether we've gone left or right. And so a lot of luck and a lot of decision making, I think, is aligned with those Forks in the Road. I do wanna go back to you mentioned, I have just been naturally like incredible. What I worry about with Founders is sometimes they look at these incredible leaders today and they go, well, I'm not that.

48:12And it's like they look at them at the end point or kind of 10 years in and go, well, I'm not that. Were there any founders that were maybe not obviously incredible? You mentioned Daniel being always incredible, but have turned into obviously incredible founders. By the way, what I would say about Evan is he spiked in certain areas. I mean, he was not great in other areas. And I'm still not sure that he's great in the other areas. So I think it's more about having a really clear spike in a particular part of your personality or vision rather than the full product. And part of the reason why at index we love working in the US and in Europe is that those spikes manifest themselves in very different ways.

48:56In the US folks are super confident and so you know they will not only spike in certain areas, but they're actually not that good in certain areas, but they'll still think that they spike in those areas. And so the level of polish and sophistication that you have to sift through is really significant. In Europe, of course, it's the antithesis of that, right? Like, they're not even aware at how good they are in particular areas, let alone the fact that they're much better than they think they are in other areas. So it's really sifting through and being able to actually Recognize that spike in Europe and celebrate that spike and get them to continue to focus on it We're gonna get to US and Europe I just want to ask one more thing on the kind of the deal reviews We mentioned kind of you know not doing a snap and just not doing it We mentioned some of the winners in terms of actually like zeros.

49:49What was the zero that caused you the most lessons? It's more than one zero But the one that I learned the most lessons from is probably NastyGal. This company that was in the US, it was an e -commerce company, actually the founder Sophia wrote a book that was really popular about her journey as an entrepreneur. But what I learned about the NastyGal situation the most was the fact that I was trying my dorn -dist to make it somewhat successful, just money back, or an ongoing concern. Even though my partners were saying, Danny, please let this go, you're spending so much time thinking about it. I'm like, guys, I hardly have any more board meetings.

50:35They're like, yeah, but how much time at night are you thinking about this? You know, before you go to bed, how much time are you trying to figure out how nasty God is going to work? What is the first thing that you're thinking about when you wake up. And it was a big lesson that I had to just let go of the failure and move on. And that was the biggest lesson that I learned. Letting go of the failure moving on. Yeah. Why was that so difficult to do? Because it's difficult for anyone. I mean, that's part of the reason why I think that operators are not necessarily the best investors. Because because it was earlier in your career, it was more important to you not have a big loss.

51:13Okay, so great question. As I reflect on it, it was a big check that I had written, it was a growth investment, I had pounded the table on it, I got full support, unanimous support, so it felt good in the first round, but then I came back because the company needed more money, and I pounded the table there, and the partners were like, hmm, you sure about this, and I did get a positive vote, but it was not the high average that I got on the first one. And so I felt responsible to the partners that I didn't put good money after bad, and not only did I put good money after bad, but the opportunity cost of spending time trying to turn around nasty gal versus focusing on the next great opportunity was very expensive.

52:02Did you let your emotions get in the way of your rational financial decision making on the reserves check? Absolutely. Absolutely. Have you found a way to detach emotions from your investing? The only way I can do it is by trying to remember all the mistakes that I've done as much as possible. Trying to remember what our true North is, what we're trying to do, and making sure that my partners keep me honest. Your best companies don't need you. Agree? For sure. So why spend time on them? They don't need us to be a success, but our contribution can create another multiple. If I can take a certain 10x and make it a 12x or a 14x, it's well worth the time.

52:44Georgia told me that you are one of the best for giving effective feedback. She's like, they don't often want to hear it, but he's very good at effective feedback with empathy. How do you do that, Danny? You know, one of the ways that we talk about index is compassionate ask -kickers So I prefer the term compassionate to empathetic and I credit Jeff Weiner who is definitely one of the best CEOs that has ever been in this industry Who if you have an interviewed you should? He said no really so I should we should keep that in yeah It's actually a social pressure because he's such an amazing coach for and investor and investor amazing investor But he explained to me the difference.

53:26So empathy, you're taking on an understanding. You're like literally taking on the pain of the other, which is not really helpful. Compassion means you understand what the person is going through, but there's a distance between you and the other person. So you can actually be much more helpful because you're not taking on all of that difficult energy and that difficult emotion that is coming from the other person. So compassionate ask -ikers means that you're compassionate and ask -ikers means that you get stuff done So if things are not happening you actually push someone out of the way and you make sure that you execute on the plan So back to that true North when it comes to giving feedback to entrepreneurs I'm being very transparent.

54:12I'm very vulnerable and explain my issues. I always ask for feedback on on what I am doing well, but more importantly, what I could improve on how I'm supporting the company or how I'm delivering the message. And I don't hold back from making sure that they understand what I'm recognizing and what patterns I'm seeing, repeat themselves, which I've seen 10 times before. So for me, I'm like, if you have a partnership, it has to be all in one place. The team that I'm building will always be in London or where I am. But that's really important just because you could be the best partnership in the world But when you're in as if in New York, the communications lost.

54:53Yeah, it is much easier out of one office That's why when we open offices We don't actually hire folks to open the office We actually take partners from one office and move them So Mike and I moved to San Francisco to open that office and Shardouon, Mactown moved to New York to open that office And it's not in either situation as though this was a family -led decision. There was a lot of revolt with families to do what was right for the firm, but we felt that was the only way to make sure that we understood body language through Zoom calls and screens by bringing that culture to those new Geos.

55:28You want literally the only European firm that's been able to scale into the US and really do as well as you have done. What do you think you've done to enable that? No, I mean this was references as Well, many attributions, but it's true. What do you think you did to enable on? I mean, making the tough calls, it's me. It is, it's me. It is, no. It's making the tough calls as a partnership. Like, the fact that the partners in London were holding the fort while we set up to start San Francisco and they gave us the time to make a presence, but also invested. I mean, Jan was flying there back and forth once a month for a long time as we were setting up San Francisco.

56:11What was the hardest thing about building the SF office? Because people like, you know, all these index guys from Europe. Making sure that we didn't fall into the herd -like mentality and staying true to our roots of being outsiders. That was really tough because basically it's a one industry town and folks have been there for a long time or folks scream for mountain tops incredibly loudly. But we do have a differentiated approach. So just making sure that we weren't falling prey to what everyone else was doing. And those are some of the proudest moments of index, right? Like when we didn't invest in crypto, when it was more contrary and to not invest, rather than to invest in crypto, that was tough, but it felt right.

56:52Talk to me about that partnership discussion. You know, it was many discussions because we were trying to squint and figure out who was going to be the champion was going to lead us to the promised land of being excited about crypto. And none of us could do it. There were many approaches. Martin is really good at being disciplined and process -oriented, really thinking through new areas. And so he dabbled, tried to get excited, but he could. So the baton was passed to Mike at the time, and he could. And then the baton was passed to me, maybe on the consumer side, maybe on the gaming side, and I couldn't.

57:32The interesting thing in the crypto is like the best outcome is you just bought Bitcoin in my case. Exactly. Europe is the question mark for a lot of US LPs and I think more so than ever right now. Everyone is down on Europe. A lot of the US firms have retrenched. I was with one of the best partners in Europe who will remain nameless and they were like I can't think of a great fucking company that's come out of Europe in the last three to four years and that's the first time ever in my career I felt like this. Okay. God bless. We need more of those folks. How do feel about when you hear that. You like Total Bullshit?

58:05Yeah, I will. I bullshit no, but absurd. I mean, we're seeing so many opportunities. Every time we've messed up is when we over -rotate a bed against Europe. Here's one that was shocking to us. You know, as a firm, we sort of felt like Brexit is going to have an impact on the UK when it comes to starting companies. So we have to to spend more time in Berlin and Paris and Amsterdam Stockholm. All these other places where entrepreneurs are more likely to kick off companies. Well guess what? We were totally wrong on that. London has continued to maintain basically an equivalent dynamism of entrepreneurialism as it did pre -Brexit, which is a total shock to me, but it's absolutely true.

58:50So we over -rotated against a geo and we've proactively fixed that. Europe is just moving forward and the entrepreneurs are better and the teams are better and the support that's being provided is better. The ability to be a global phenomenon and be globally successful has only gotten greater. Do you recalibrate your mind when meeting American vases European founders? Always. I mean, as I said, you know, we expect the American founders to be very polished and sophisticated. So therefore, we discount quite a bit of what they say. And we do the opposite for European entrepreneurs. What's sort of cool is that, you know, we feel like outsiders in both continents.

59:34And so therefore, we have a little distance, but we do understand the culture as well. That's why we really invest in Europe, in the US, and Israel. We don't really invest in other, in other Geos, because we don't, that was why we didn't invest in China or in India or Latin America. because we didn't see what competitive advantage we had to understand those cultures, to understand and have the right filter to be able to truly see what the entrepreneur was saying and sift through, you know, what was true and what was probably an exaggeration. You mentioned being an outsider in SFT. You prefer founders who are an outsider to a market or insiders to a market.

1:00:12It's more about whether their passion is true to what they're going after. They might have different reasons like you know one of the companies that we've invested in them Super excited about in a new market that we haven't spent any time on in a long time and that sort of felt like a sleeper for us But we're super excited about is the insurance market and we invest in Ron from empathy Ron is he an outsider to the insurance industry? Yes. Is he an outsider to Enterprise sales to ensure is yes He's an insider to the whole concept of empathy through personal experience that has rocked him to the soul.

1:00:51And I have met very few people who have thought about grief and how to help people who are grieving as much as Ron. So he's sort of an outsider and an insider. The outsider insider is really based on the passion that we recognize. Is this person placed on this earth to go after this opportunity? In the case of Ron, he's an outsider, but wow, has he been placed on this earth? Final one, because I could talk to you all day, but you mentioned your wife earlier. Yes. Dude, you build index and you are on planes every week, I'm sure most of your life, she's lost 20 years. How do you do that and have a great marriage at the same time?

1:01:30Really? I'm glad that you're saying that I have a great marriage. I bet your wife, she was one of the references. I told you someone said you were a tosser. Yeah, there you go. I let it out. God. I mean, it's kind of you to say, I do think we have a great marriage. I think it's a question of just prioritizing the right things. Like there are very few priorities in my life, and my family is the first, and my work is the second, and my interests are the third. And that's it. I don't really have time for much else. And so once I have that clarity, then it's a question of putting in the time and the effort in the best way possible.

1:02:09And a lot of it is luck, right? So, has that been a time when you put your priorities wrong? And what did you learn from that? Holy shit, so many. Unfortunately, the priorities have always been to prioritize work over family. And those are the biggest regrets, always, rather than the other way around. Is that one that comes to mind? You know, there have been certain trips that I thought were absolutely essential for index where I really pounded the table at home that I should go on and I really regret those trips because they were completely meaningless in the grand scheme of things. You're asking me through when she hears that back.

1:02:53She's heard it, trust me. This is, I live my life, I'm not saying sorry, it's much easier. Are you ready for a quick fight, Danny? I love this. So what have you changed your mind on most in the last 12 months? It's gonna sound really weird, but there's this whole dimension, this spiritual dimension, that I was sort of holding myself away from, you know, like, how do I explore that side? How do I explore instinct and gut? and how do I look for deeper meaning in things that are not evident and clear in the same manner? Does that mean you're more reflective? It's twofold. One is just trusting my instinct a lot more and sticking to my instinct.

1:03:35Does that go against strong conviction or strong opinions that you see held? Yeah, because especially in this industry, right, we've been trained to think through for principle thinking to be analytical, to think of all these other signals that either are the primary driver for our investment thesis or are the primary support for our investment thesis. And I'm sort of saying actually, what is the first impact, what is the first reaction that you have to the founder, to the opportunity? How does it make you feel? Can you build on that? But all of that other stuff is actually going to help you rationalize one way or another, but try and keep it as far away from your decision making as possible.

1:04:21What's the most memorable first found in meeting you've had? Meeting Jason from Discord, because none of the investors wanted me to meet him. They had no desire to get another investor in. And I finally convinced Christian from Playfish who was at EA to make an introduction and and Jason gave me 15 minutes and I showed up at a blue bottle. Jason's like, okay, well, you know, who's a super nice guy. I don't know if you've ever interviewed him, but no, I haven't. I have a super nice guy and he's like, you know, Danny, I'm here. I have 15 minutes and I said, great. And it was just the day or the week that Nasty Gal going into bankruptcy was announced.

1:04:58And so I wanted to talk about Disco. He's like, so tell me about Nasty Gal. Tell me about that experience. Tell me about how it went with the entrepreneur. Literally, it was an hour of grilling me on how I had handled and we had handled that situation. And it followed up with him agreeing to have dinner with myself and two partners the night after. At that dinner, he showed us two slides. So Dick Costello from Twitter was spending time with us as an adventure partner at the time. It was a short duel in myself. We had dinner with him and he showed us two slides and based on the retention of Discord at the time we followed up the next day and offered a matern sheet.

1:05:42So that was a really unusual unorthodox Approach. Discord was not the discord today, is it? Actually interestingly, it's now back to its roots So what happened was during COVID discord became much more of a mainstream stream platform and now it's going back to what it was when we invested which is really a vertical solution for gamers to enjoy themselves. That's really what they're about. Who is your most formidable competition and why them? When you hear that X is around a deal who you're like oh I'm gonna have to get my A game on. So like for me again it was helpful. When Chris's off at point nine is on something, shit I got to get to work.

1:06:20Like really? The folks at Sequoia are a big fierce competitor and the folks at Acceler, fierce and those come to mind for consumer stuff. Certainly Sequoia comes to mind a lot. Benchmark, we don't see him as often anymore, but I mean we pay attention to all these folks. What ball member have you learnt the most from sitting alongside and what did you learn? I mean we were just talking about Benchmark, so actually the person I learned most from was one of the original benchmark partners named Kevin Harvey, who was incredibly generous in a couple of ways. The first was I joined the Board of MySQL after having lost the deal.

1:07:00So I had decided to partner with KP because it was against benchmark and it was in the heyday of KP and Kevin still won them over. But Martin, the CEO, was excited about index enough and wanted to give us a shot that he gave us a little sliver so I could join as an observer. and then we had the right to build our position up to 10 % as secondary came available. And so Kevin went from not really wanting me at all to being just a great board member to learn from in terms of his approach, to also being an incredible source of learnings that he was generous about on how to do things correctly and how to do things appropriately.

1:07:43So a lot of the early decisions that index did were based on really some important tweaks to the benchmark model that Andy Rackliffe and Kevin Harvey taught us about. One of them was if you are crazy enough to open it in an office in another geo, make sure you actually move partners to make it happen. Don't think that you're going to be able to hire people and that's going to translate into the same culture. You know me pretty well by now. I do. What would be your biggest advice to me building a firm, having built in that's to the incredible stage that it is? What do you think it would be? Focus on the partnership.

1:08:23Yes. Higher peers. Sounds like you're well on your way of doing that. What's the best investment advice you often give out? I feel like I'm giving so much here. Come on. You have more, like, what else? I told you everything. I have no secrets. Come on. One more. Some of the best investment advice I think is remembering how humbling this business is and not thinking that you ever have it figured out that every frickin time you are going to make mistakes and all you can do is learn from your partners and learn from the history of mistakes that you've done prior, but you're not much better if any better at this game.

1:09:04Where is index in 10 years time in an ideal world? I really would love to see that index in 10 years has continued to progress on a number of fronts. First of all, that the partnership is not much bigger than it is today, that our funds are not much bigger than it is today. But that our returns have only gotten better because the caliber of partner that we have is better because we've hired better people and they've learned from better investors and we're seeing better companies and we have a better mechanism of really understanding who the best entrepreneurs are that match our culture and that we're really good at winning and doing the sourcing winning Operating and exiting side.

1:09:50I would like to think that index might have one more office in 10 years We open an office every 10 years at least that's what we've done So maybe we'll have another geo in 10 years and we'll have where would the next year? I don't know. I mean that's up to the partnership. I'm one voice and I shouldn't be there in 10 years If I'm still there I'm doing something wrong or they're doing something wrong So I'd like to see that the baton has been passed and that the folks are taking index to higher and higher Territory but maintaining what we're all about Danny, listen, I love doing this. Thank you for putting up with my meandering and direct questions Do you see I was much nicer when I was younger, wasn't I?

1:10:27It was much easier than into you. Yeah, what's going on here? I know, sorry about that. I'm kidding. But seriously, I love doing this, man. It's such a pleasure, Harry. Thank you so much. And your questions are never what I expect them to be, but I always end up telling you a lot more than I had planned on. You have to understand I am the biggest venture nerd. And so for me to have the chance and the position where I can sit down and learn from decades of wisdom of building an incredible firm like InDes from Danny there. It really is a dream, I hope that you enjoyed the show. You can of course watch it live in the studio on YouTube by searching for 20VC, that's 2 -0VC on YouTube.

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1:13:44As always I so appreciate all the support and stay tuned for an incredible episode this coming Wednesday with Michael Eisenberg at a laugh.