E15: Redpoint's Logan Bartlett on Carving Out a Spot in Venture

27:09And I think it was like maybe$750 million raised in the first in 99. And then like a year later came back and raised, I think a billion plus or something, right? And it was like peak bubble hottest thing out there. And this sort of goes back to the founding story and having its roots in all these firms or companies is, well, we sort of know what happened after the internet bubble was it was a very long, dark period of time for internet-focused big funds. And what did that mean? Well, it meant that whereas I think in the early days of Redpoint, people were courting the press and everyone was kissing their ass saying, oh my gosh, this is so amazing.

27:51And you're an internet fund and you're so big and you're ambitious and all that. I think they learned the group shied away from press. Right. And and mostly kept themselves out of the limelight for 15 years after that and just kind of went to work and stayed away from a bunch of those things. And there was figuring out exactly what the evolution of the firm was going to be like over that period of time. There was nurturing the next generation of people to come up. There was trying to pick the big next opportunities that were going to come out of the vintage post-internet. And what emerged was a very resilient group who had eschewed a lot of the things that came back into vogue over the course of the last couple of years.

28:48Right. And so, again, when you go through the founding of these things, we, I think, institutionally had a lot of scar tissue from seeking too much publicity, raising too much money, drawing attention to yourself as the main character, which is ironic now that I do podcasts and stuff like that. right yeah but that that ethos and us sort of came to be and then we were fortunate enough through 2007 2008 2009 2010 we invested in a handful of businesses that proved to be pretty transformative stripe and then after that snowflake and we were in draft kings and series a and looker and sentinel one and hashi corp and zendesk and twilio and a bunch of those right and so it was a really good run of just like putting our head down and doing all that the founders also did a really nice job of recruiting in the next generation of leadership.

29:39And so my partners, Scott and Satish, came in and they kind of served as the stewards that helped with the transition of the founding group stepping back and then sort of stepping up. And so where we are today is we have an early fund, we have a growth fund, I'm on the growth fund, we call it early growth. It's mostly series B's, series C's. We have four partners on one, three partners on the other, a team of, call it, eight on both sides in total. And what we're looking for, we're smaller probably than the firms that look like us. We operate more autonomously than other firms. Our early growth fund isn't tacked on to it.

30:20We're not raised together. We don't have a single management company that sits across both. We are distinct in our investment decisioning, in our hiring, in our processes we run and all that stuff. But we share all the services and all those things that are very much commingled. We're a little smaller than all of the names that people know and that you've had on before. That's intentional. We will stay a little smaller. Our growth fund is early growth. We want to go a little earlier than what you would think of as a growth fund. And we want it to stand on its own and not be a follow-on vehicle.

31:03And all that stuff is sort of rooted in history and it's worked out pretty well. You know, Sam Lessing came on the podcast and he talked about how he thinks it's seed. It's going back to, it's not this like clubby kind of network driven stuff. It's really finding things that other people don't want to do so you can get in at better prices, et cetera. Like for the stuff that you do, are you always competing with the best? And if so, how do you think about being Trump and not Jeb Bush in the analogy of be different, not just strictly worse. Yeah. So I think there's this thing. So the clubby thing I haven't totally thought of.

31:36I think now that you say it or that Sam said it, I think that's probably true insofar as it's a byproduct of the abundance of capital in the ecosystem. And so there's just going to, I don't think it's maybe just true of seed. I think it's probably true of a bunch of different stages that people will play a little bit more zero sum. And I think of all the trends that have probably happened that are slightly irreversible. I think the zero-sum nature of elements of venture is probably going to persist in some ways and that rounds aren't going to be split quite the same way as they were before. If you have a$4 billion or$5 billion fund, you're trying to figure out how to deploy it, you're not going to offload some of the risk to people.

32:17And so I think that is probably true. So the question on how we view the world. So I think there's elements of an email address. And I think about this a lot of like, there's an at sign that exists between the email address. And there's a before the at sign, which is Logan. And there's an after the at sign that's at Redpoint, right? And there's some firms that only focus on the after the at sign. And it's like, hey, the person's fungible, or we try to make the person fungible. And that's actually a great place to land. because then your brand carries beyond any individual. Founders can step back.

32:55People can leave. Restructurings can happen, all that. After the at sign and the email address carries the day, right? We don't operate like that. The people matter to us. And we're a group of individuals under a single umbrella that stylistically are going to appeal to different people and are going to have different interests. And we try to stand out as a firm. We try to be in the echelon of the group that people think about. Right. And I don't know if that number is 10, if it's six, if it's 15. There's some number of people in the industry. And it's probably, you know, a function of you're going to be in the room with the important companies and the areas we care about.

33:39We focus very much on being in the room with the important companies. and that's going to evolve, right? And it's going to be, people thought it was crypto a couple of years ago. People are all in on AI now. Who knows exactly what that's going to look like in the future? But I don't think singularly focusing on an industry or anything like that is a long-term durable strategy, just the way markets move and things like that. So ultimately, I think we leverage the at-reb point to get in the room and then we leverage the individual to resonate in whatever way is applicable. And it doesn't always work, right?

34:11Like if we're, doing our job well, we should win 50 % at best of the things that we want to go after. Because I will tell you, there's another great group of those 10 people. It could be apples and oranges of what you're actually deciding on. We're not going to win 100%, nor should we. Like if we have too high of an acceptance rate on the term sheets we're giving, I don't know. We're probably not competing hard enough and getting ourselves into the right rooms. And so ultimately, I think the brand gets us in and the individuals are where we win. And each individual probably has a slightly different brand, a different style.

34:42I'm a little bit more out there. Some people are a little bit more measured and carry a room from a thoughtfulness of industry standpoint. And that resonates with founders. And ultimately, I think you need the totality of what you bring to a competitive situation to be better than whoever you're competing with. You don't necessarily need any single thing to spike, to go back to the earlier analogy. And that wasn't true in 2021. I think ultimately in 2021, people were solving for single things like, oh, I want the best customer intros or I want the most recruiting talent or I want the single, whatever highest profile investor.

35:16And I think in general, people are probably looking for a basket that's better than whoever else you're competing with. Yeah. I take your point on force rank strongly. One way I conceptualize it is it's the up leveling from going from like, hey, when someone brings up your name, everyone's like, yeah, they're amazing. We'd love to have them to like, this is the name that comes up first, or this is the name that I just have to have or whatever reason or that they're at this pantheon the way i think about it by the way is is i think we can beat any firm with our tier a or tier number one person throwing a perfect game right uh we can if if it's in the domain and we have the relationships and we execute a great process um are are there's there's firms that uh we we have to do that to act we have to execute really well because they have 50 years of history and they're they are very venerable and uh we need to run a really good process but we can still win um and there's firms that if we throw uh if we're not throwing a very good game they're just going to beat us 10 times out of 10 and our job is to is to keep up leveling that ratio of like, we can be slightly off one night and still win.

36:32We can get there slightly late on a process standpoint and still hold our own. Like we need to keep doing those things. So the after the at sign of red point or the individual that's in the room carries a value or resonance with a founder that we don't need to throw a perfect game to beat some of the names we mentioned. Yeah. It is interesting how kind of nebulous it is when you talked about like, who is the top 50? Like, why isn't there like a Midas list for firms? Like at the highest level, people have an idea, but just to like pick on a random like Lightspeed, which I really like, but I don't know if they're like number seven or like number 35.

37:06Like in terms of sort of after the first three, first five, it just kind of gets nebulous. I think it also gets really hard to even define even that top three, top five thing. I don't know if everyone would agree on who those people are. And there's also this weird thing in venture of like the job that you do for your LPs is different than the job that you do for your founders. And so what resonates with a founder, there's this weird tension that exists of like, hey, founders want good prices. LPs want low prices, right? And those two things are very much at odds. And so what an LP would say of who are the best funds is going to be very different than what a founder would say of who were the best funds.

38:03And there was a period of time over 2021 that the best funds, quote unquote, were just the worst investors, right? And so I think that's one reason that there's no consistency in that is you're solving for different constituencies and the way that they operate. And then I think there is individual elements and there are sectors that evolve and there's people that are earlier in their career or later in their career. And ultimately, a board is almost like a basketball team in that you need different positions. You need someone to be a point guard and someone to be a center and someone to be a power forward.

38:36And so you're also not solving for exactly the same thing. I think maybe you're solving for the most likelihood of success or the best likelihood of success but like sometimes you need a point guard on your team and it doesn't matter if the best power forward is available like you want to recruit in the point guard and so there's no like normal heuristic of even how to solve for the distribution. Is there an example of a firm in the last like 15 years who wasn't at the top three or top five but has kind of shot up, maybe they were even 50 and now they're 10 but just like has had a distinct tier rise that you admire?

39:11You know, I think the first thing that came to mind, and it was more of a rise from founding. I'll give you two that I admire. One is Amplify, if people know them, and the infrastructure software investing, where like they quite literally were founded in 2012. But pick the right, a right theme, which was infrastructure software and the right group of individuals to go after that. And Sunil actually was an ex-battery guy. And so we have that shared common DNA. And they've just executed it really well. And it was the right sector to go after at the right time with the right group of people. And they have risen to one of, if not the top, like seed infrastructure investors.

39:56Lenny's an old Redpoint guy, and he's over there and doing an amazing job. And so I hold them in really high esteem of having come from nothing, picked right, done it well, risen to a really high caliber there. I also, again, another firm that's probably has gotten to go in the last 10 years, but I have a lot of respect for Thrive and how they go about doing things. They've gotten bigger, certainly than we are, but there's an artisanal craft to how I think they think about what is a Thrive company that I really respect. And I think Founders Fund, you mentioned it earlier of like, oh yeah, that's a founder's fund company.

40:34I think that Thrive tries to have an element of that as well. And I just, I like that. I like that like design taste and the types of founders that they choose to work with and the caliber of the ambitions that the people are going after. I think it's cool. So both of them have sort of started from nothing and risen from there. Did Thrive do Instagram? I did Instagram. Because they just also did retro. Yes. Yeah. Out of Instagram. And when I saw that, I was like, oh, that's an interesting, Totally, totally. Yeah. And that's the that's the nice network effect of like the reason that venture can be compounding in the advantages and why it's a stair step distribution and not a linear one is like, yeah, that access to retro coming out of the Instagram team is it's a good thing to have.

41:17I think Instagram was actually kind of the first deal that put Josh originally on the map for it. And he's done a great job of building a group of individuals around him. And you also meet the people that work at both, I would say, FounderFund, Amplify, and Thrive. And all of them, they have probably a style to them that I think is consistent, an intellect to them that's consistent to their own firm and their own individual. And I think ultimately that's what a brand kind of is, is like we're in sort of the service provider business in some ways. And so building a brand is a group of individuals.

41:54And we talked about how earlier you don't think that there's a hollowing out in terms of like, you know, this AUM aggregator machine and then this kind of like small solo capitalist or whatever specialist thing that there will be these. I don't know if these are right names, but CRVs and Mayfields and all these dozens and dozens of other firms at 500, 700, you know, Maveron, whatever, 300, just kind of in perpetuity and they're not going anywhere. Do you think also that there won't be this kind of like consistent bifurcation in returns where the same firms crush it forever and sort of the rest don't?

42:29Like how much social mobility is there in, in sort of which firms are, are at the, you know, sort of the, the upper end of power. That's a great question. I, I, by the way, I would say, I don't know in the hollowing out in perpetuity. I, I, I just think that the death of the middle tier was greatly exaggerated over the course of the last couple of years. I would think so in that, like when you're small and you go all in on something, it's much more likely to lead to random success in distribution of returns. What USV has been able to do of consistently pick new domains to go very deep into and pick companies out of that, not blanket it, not index it, but surgically pick opportunities within new, I forget what the thesis is or whatever they call them, I think is really impressive.

43:24Even still, if you pick that 100 % right, if you have three of them, you're going to be weighed down by the other two, right? And so I think the true outliers of returns in general have to come from people that are all in, like over the course of, you know, the people that were long tech over the course of 2021 and the hedge funds were the ones that totally outperformed everyone else. It's like, yeah, if you pick the right asset class at the right time with risk off, then you're going to be more likely to generate the absolute generational returns. So I think in that regard, just the proliferation of people that are investing will lead to the randomness of distribution.

44:00I guess a question is, if you lop off the whatever, the people going all in on a single theme, will it lead to that mobility? And it's an interesting question. Ultimately, all logo sizes on a website look the same, right? And so being involved in these companies, it does matter what stage you get involved in for the limited partners 100 right the relationship matters as well uh for the references uh and and what you actually did in that regard um i'm not sure it's so uh i think brand perception in some ways has more on the founder side has more to do with do you have those logos or do you have those relationships and on the LP side has more to do with when you got in and so there's these two different constituents that we're sort of talking about and I think I think that that there's going to be more randomness and mobility in the from the LP vantage point but probably not from the founder vantage point yeah one thing I haven't because I haven't been to through a ton of cycles I haven't really appreciate until recently talking to younger founders is just how much kind of um like every five years is kind of this new generation and so i was talking to this group of really hot ai founders and um they asked me about you know uh kind of investment styles and i brought up bill gurley and they were like who's bill gurley uh and i was like oh what investors do you admire and they're like and this is a commercial for them i think right yeah sargo locky it was like oh interesting just like how these generate like the stories don't get exactly told.

45:43And well, and Gurley's a perfect example of one. I probably could have come up with him as well as someone that I really looked up at in the industry from coming from a finance background, but still doing the craft of BC. Well, it does make you feel old when people don't know the people that you grew up idolizing. It definitely makes you feel old in that regard. But then And also there's these moments in time. We play an iterative game that is venture. And it's over and over again that you're simulating it out and you never want to locally optimize for any single decision. Yeah. It makes me appreciate folks like Elad and Keith Raboy, Elad Gill, who are able to kind of stay relevant every new cycle.

46:30They just continue to be with the next great sort of entrepreneur. Totally. totally i i uh i mean not to not to just keep uh kissing fenton's ass but like it's also one of the things that i admire about like the ability to do twitter and new relic or whatever it is right to do uh things at the consumer side and then things at the heavy enterprise side as well like and then air table on the sort of plg bottoms up thing it's like you're not singularly indexed to these one things. My mentor at Battery was a guy near Jaggerwall who's an amazing investor, very underappreciated for how good he is. But he did Glassdoor and Wayfair and then this laundry list of amazing enterprise software companies, Kupa and Braze and AmpliCood and Workato and Dataiku.

47:20And it was like the ability to bounce back and forth from Wayfair and Glassdoor to this is just really impressive that people can do that stuff. And you joined Redpoint 2018? 17? No, December 19. That was a time where people were raising big funds. You could have gone out and raised your own fund. Is that something that you considered? Or how did you think? If not Redpoint, I probably would have raised my own fund. I actually, that was probably the default path. Funny enough, Redpoint turned me down for a job in 2013. I have a pass email from my partner now, Elliot, saying, you know, I forget exactly what he was very gracious and magnanimous in his past.

47:59But we kept in touch for six years after that. And I thought that I wanted to go start something. And that was, I think, mostly the path that I was going to go on. And they convinced me, hey, why do that when you can come here and not have to build a brand from scratch and instead inherit a lot of success? That was definitely the fork in the road decision for me. And I don't know what actually tipped me into it. Maybe it was just a risk aversion. It was a fear of not being able to raise that fund. It was, uh, I don't know, but it definitely, they sold me very well. Uh, I'm a big hip hop fan and they all wore, there's some fancy restaurant in California or San Francisco.

48:37I have no idea what it is. And they all wore Wu-Tang, uh, Christmas sweaters, uh, to this, uh, to this dinner. And I was like, all right, this is a place I want to come over and work at. And so it was, it was actually pretty quick. The whole thing was, I mean, you could say it was six years since they passed on me, but the whole thing was, uh, was like two and a half weeks, which is, which is funny. Amazing. And when you think of your superpowers, is it a combination of domain expertise and sort of a compounding sort of like networks? Or what do you think about? I think this is a weird thing to say because it's kind of circular in that I'm going to say it and then it's less true because I've said it.

49:14But I think I'm overly self-aware and overly self-critical and overly, I don't know, apologetic or trying to be diplomatic about what I know and what I don't know. And so what that means is I'm constantly living in paranoia that I don't have the answer and that someone else knows better than me. And so what that leads to is some level of, one, humility with working with founders. Like there is not an answer that I feel with 100 % certainty, like here's the way you need to do it. But I give like, here are the options and trade-offs. And I am not dogmatic in the way that a founder has seen a singular experience or an operator has seen a singular experience or two or three and be like, this is how you have to do those things.

49:59My answers are always like, listen, I really, really think you should do it this way. Or I don't know, but let me try to get you to someone who does. And so I think that that's the single thing that I feel most confident in. The way that manifests itself is constant insecurity that other deals are going on that I'm not going to be out in front of. Other people are going to resonate with founders in ways that I'm not. other industries I don't understand that I need to. And so there's definitely a level of insecurity and motivation that comes out of knowing that I don't have the credentials of other people.

50:37But I think just an awareness of what my role is as an investor and as a board member and as an advisor to companies, I think is the single thing that I can sell the best and is the most true. I've been an advisor my entire career, right? And so never have I had the ownership of needing to make a decision. You could say that's a make a decision about like actually operating a company. And you could say that's a good thing. But in my mind, I think it allows for a lot of nuance and humility in talking to founders about what their options are. And also, I have hundreds of things to draw on either from companies I've worked with, or just like being a student of venture and technology and all that stuff.

51:18And so I will try to give the best advice that I possibly can across the holistic version of events that have occurred in history. And it also seems unlike many investors, you're also a student of finance. Yeah, I think that's right. I was an investment banker once upon a time. I don't know if I have particularly good product, artisanal design eye, and I'm not an operator, and I am not a salesperson. and like I'm a finance, apologetic finance guy, self-deprecating finance guy, but very much like I really appreciate the world of hedge funds and how they operate and the public markets and all that stuff.

51:55And so I feel like venture is such a weird asset class and hedge funds are just so black and white. And so the score is kept every single day on how you're doing and how you're not and what's right and what's wrong. And so I very much appreciate one, not to operate in that arena because I don't know if I have the intestinal or psychological fortitude to stand up to the markets every day like that. But two, yes, very much like that's where I come from. That's what I started. Yeah. Well, I was going to ask if you've thought about also going earlier, much earlier stage, but maybe the description that you just gave perhaps explains.

52:28Yeah. And also, I think really early stages is really hard in that like, let's say you're an amazing early stage investor and you hit on 200x investments, right? Well, when there are 100x investments, one, they're really working and the ball is going really far. And the best founders might not need that much help in their journey alone. Maybe they do, but let's say that they don't. And so you end up spending 95 % of your time on just total shit shows that, hey, the companies aren't working. You did eight investments that aren't working. Therefore, it's consuming 95%, maybe 99 % of your time. And then 1 % of your time, you get to enjoy that you made this great decision and the ball is going really far.

53:13And so the power law, back to the book itself, but the power law, the asset class, I just think psychologically, I wouldn't be equipped to deal with the amount of failure that comes from being successful in early stage. I just think psychologically, it would wear me down and like needing to go to board meetings over and over again where the things aren't working. It would be tough. I think the people that do that, yeah, they have a level of optimism and ambition. I think I'm probably a, I don't know if it's optimistic, cynic or cynical optimist, but there's definitely cynic in there somewhere.

53:48And I think that's hard to be if you're an early stage investor. Yeah. Maybe let's end with this question. Let's say we're having this conversation seven years from now or 10 years from now, do you think, what do you think is the biggest thing that's going to change in the asset class? Is there something fundamental about how the asset class operates that you suspect to be different or, or it just the types of players look different? I don't think we're like 20 to 30 % overfunded in the asset class. I think we're like, like three, four, five X overfunded in the asset class. Like, I really think there's that amount.

54:17And the reason I think that is because, uh, maybe AI will provide a life boat for a lot of these very big funds and will drive bigger returns and all that. But it's weird in that the feedback loops are so long that you have the success and you ride it up and the most money is made at the end of the bubble or the biggest funds are raised at the end. And that's also when the opportunities are the most limited until a new cycle occurs or new attack vector occurs. And so I think that this digital transformation, this software eating the world, this, you know, whatever, next generation of consumer e-commerce, social and all that stuff.

55:05I think we're going to continue to have legs to that. And I'm optimistic that things like defense tech and healthcare and biotech and AI can provide new returns and vectors for people to operate in. but if you just look at the way asset classes run out uh i i think if if that that former bucket is getting longer in the tooth and the latter bucket is uncertain it doesn't make sense for the amount of dollars that have been raised to be what i don't know what the number is but i would guess 2021 dollars were 5x what 2017 dollars were or something like that and that ratio doesn't make sense. It actually might even need to be lower than what 2017 or 2018 dollars were.

56:00And fund structures aren't built to deal with that. And so I think that we're going to see that has to play out. And it's going to play out over a long period of time. And people are not very quick to raise smaller funds as we've seen. But it feels like an inevitability that the asset class is going to be a fraction of what it looks like today. And I actually think that's a good thing. I think it leads to you think about that the biggest companies uh generally they're fairly capital efficient through a lot of the journey and that's true of i mean even facebook raised a ton of money but like they were actually fairly capital efficient throughout their early stage google was that way right uh all the big software companies with the exception of snowflake ish uh viva salesforce uh atlassian adobe workday service now we're all like fairly capital efficient and so i do think there's new vectors like we talked about andrel or spacex or whatever there's companies like that that are going to be much more capital intensive than it has been in the past but uh i'm not sure the amount of capital is commiserate with what we currently have there were the ai companies are raising a ton you know i and i am the most uh it feels like none of the lessons of 2021 were learned and we're truly learned from people.

57:14And I don't know how much of that is, hey, the tech is so exciting and so real. And I think there's going to be so much GDP value created from AI. The valuation assumptions, and you go back to the way the markets evolve, it's like the returns are generated before people realize the opportunity. And then the initial people pile in and they get along for the ride. And it turns out that some of them do well and some of them do horribly. But then the later and later in the cycle, you get the worse and worse the returns get along the way. And the big lesson is that it's a lot easier to predict, and this is true back to railroads and telephones and electricity and oil and PCs.

58:07it's a lot easier to predict who the losers are than who the winners are. And so I think with all this AI thing, there's going to be some randomness that occurs in all of the returns and all that. But we'll see exactly what the venture returns look like. And it's never a full blanket of like 15 companies or 50 companies that do really well. It's just not. You go back to the internet bubble and it was Amazon and it was Google and it was eBay and it was PayPal and it was Yahoo. and like, you know, we can say Facebook even a little bit after that. And we can come up with more, but the vintage of 1996 to 2002, 2003, the vintage of companies, there were not 50 companies that created a ton of equity value.

58:49It was like seven, right? And if you go back and look at mobile, most of the equity value is actually captured by Apple and Google. But then you look at like the Instagrams and the Ubers and the WhatsApps, and you go through the people that created a TikTok and you go through the people that created a ton of equity value in mobile and it wasn't 50. And so that's the one thing with all the valuations and all the rounds that are going on right now. Maybe you get in one of those and nothing else matters, but I'm, I'm skeptical that people have learned the lessons. Even with AI, the question, you know, is it going to be new companies like with Internet or a bunch of incumbents like with mobile?

59:25And you know, you know what mobile CRM was? It was Salesforce, right? You know what mobile Adobe was, it was Adobe, right? And that's one of the things that I think remains to be seen. I do think that the technology itself is going to shift the underpinnings of how a lot of these businesses will work. People seem very up to the task to deal with the challenges. I think everyone's kind of read Crossing the Chasms and Innovator's Dilemma and whatever all these books at these companies. Some will mis-execute, some will not. And so I do think there's going to be new ground for people to try to capture in AI, but I'm not sure it justifies raising 500 posts with zero revenue or whatever, or a billion, but you know, so we'll see how it all plays out.

1:00:11Well, let's wrap on that. You've been generous with your time. If listeners have not yet checked out the Logan Bartlett show, it's a must listen, best investors, operators in tech, as well as just some of the most interesting thinkers. It's a must listen. Logan, thanks so much for coming. Hey, thank you for having me. This was fun. Turpentine VC is a podcast from Turpentine, the network behind Moment of Zen and Econ 102. If you liked the episode, please leave a review in the Apple Store or rate us on Spotify.