Transcript
WEBVTT
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Hello and welcome to the consumer VC. I am your host, Michael but
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and. On this show we talked
about the world of venture capital and innovation
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in both consumer technology and consumer products. If you're enjoying this content, you
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could subscribe to my news letter,
the consumer VC DOT sub stackcom, to
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get each new episode and more consumer
news delivered straight to your inbox. Our
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guest today is Subidas, who is
a partner at capital G. Capitology is
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Alphabets, independent growth fun. Some
of their investments include air BMB lift and
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dual lingo. We discuss capitalogies,
relationship to google, Google ventures and the
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advantages of a single LP. Sue
Me also spends a lot of time not
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only thinking about consumer opportunities North America, but also merging markets. So we
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focus on some of the differences between
billing a consumer technology company and a valuate
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opportunities in different regions around the world
and what makes technology transferable to other markets
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and also not transferable without further ado
here, sum Zumi, thank you so
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much for joining me today. How
are you? I am good, very
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excited to be with you, Mike. Thank you for having me on is
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it absolute pleasure. I really appreciate
you taking a time, so let's start
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the very beginning. To me,
what was your initial at action to technology?
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I'm probably an obvious VC and that
I wasn't sort of attracted a technology
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naturally when I when I was young, you know, I was sort of
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more of a in high school,
more of an arts person, really big
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theater Geek, and then when I
went to college studied book economics and theater.
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So not necessarily sort of a technologist
at heart. I was a somewhat
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of a Gamer and and took a
couple of coding classes in school. So
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tangentially involved, but not not super
kind of it wasn't sort of friends center
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in my life. What started to
get me attracted to the space was actually
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a few career experiences right out the
gate when I started my career. And
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so I I graduated in and around
the financial crisis and became an investment banker
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in two thousand and ten and then
worked in private equity for several years and
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I was kind of in the in
the media and telecom space, which was
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exciting to me because I sort of
had this theater background and wanted to be
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an involved sort of in the media
industry and at the time. I spent
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a lot of time with with companies
that will basically content companies and telecoms infrastructure
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companies, so things like, you
know, data centers and spectrum companies were
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sort of buying and selling spectrum for
a lot of the big tailcos and as
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we were digging into that whole space, what was sort of became clear to
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me was that all the value and
growth of these companies was being driven by
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consumption of content and data on the
web, which was sort of obvious at
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the time, but really on mobile, which was kind of the new back
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then, and so I got it
early sense of like a bottoms up signal
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of like where the world was going
and kind of the the impact that technology
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could have. And going back to
my theater background, I sort of know
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how to tell a good story and
so I was like here's a story that
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is interesting to me, and so
that's really what started, would piqued my
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interest in technology, and I started
to paying a lot more attention to the
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world of the Internet and was happening
out here in the valley. Why?
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I like better capital, private equity, and how did you end up at
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capital g? So I was at
this private equity firm and sort of a
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had this you know, Aha moment
of the future is mobile and that's that's
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going to determine a lot of sort
of our behavior patterns. But at the
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same time it was clear to me
that this sort of private equity business model
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was not well built to invest in
companies that we're going to sort of drive
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these innovations. You know, we
were looking for cash positive businesses with leverage,
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etc. And we just didn't understand
sort of hyperscale companies that were,
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you know, burning money and that
was that was something that we struggled with
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and so as I became increasingly convinced
about about the future, I started to
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think about where could I go to
to start to learn about this space and
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kind of be more of a proactive
participant. And frankly, Mike, I
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had no connection to the west coast
or the valley. I didn't really even
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know much about the venture capital industry
at all, and so it's funny to
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admit this, but I basically looked
all the big technology companies and I was
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like, I'm going to go get
a job at one of these places and
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I'll sort of figure it out,
and sarendipitously Google at the time had just
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started a growth investment fund back in
two thousand and thirteen and through a bunch
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of different connections, got connected to
Jesse weather, one of my partners now
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at the fund. Started having a
bunch of conversations and eventually did two interviews.
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Is a funny story. I interviewed
as square back in two thousand and
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thirteen and I interviewed with capital G. Didn't get the job at square and
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so ended up at an ended up
at capital g and really my thinking at
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the time was was not very sophisticated. I was like it don't really know
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what this is, but worst case
I'll tell people I worked at Google for
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a couple of years, was close
to kind of folks that are driving the
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space and and learn a bunch of
stuff and then figure it out from there.
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So, you know, moved out
to moved out to the West Coast
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back in two thousand and fifteen and
then have been with with capital G.
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Sin's amazing. Would love to hear
a little bit to about the origin of
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capital G as well and the relationship
with Google, because I know that the
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Google it's a single LP structure of
a firm and also kind of understand as
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well, because Google ventures obviously very
wellknown early stagepenture capital fund. Why it
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also just kind of understand if there's
a relationship or kind of how with with
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Google ventures and kind of just were
you kind of see yourselves in the market.
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So first on capital G so we're
alphabets independent growth fund and our mission
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is to invest in sort of of
the leading technology companies in markets where we
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see significant opportunities for innovation. So
we've invested in companies the likes of lift,
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Arapy and be Robin Hood, snap, credit, Carma and I atic.
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And then our strategy is is not
only to support our portfolio companies with
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our own resources in network, but
also to leverage Google and alphabets resources to
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help our companies scale and grow.
And we're typically investing in companies sort of
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at the growth stage, which we
define as post product market fit. Series
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Bethrough D is kind of the typical
stage. As I mentioned, we got
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started in two thousand and thirteen and, you know, now invested in fifty
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plus portfolio companies. So that that's
a little bit about us. And then,
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as far as the GV question is
concerned, we are both independent funds
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backed by alphabet. They focus more
on the early stage and we focus more
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on the growth stage and really we
operate very, very independently. You know,
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folks off and ask if there's a
relationship where they fund companies and then
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we back them. That's not the
case. We're sort of very independent and
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operate kind of with our own mandates. What's your definition of growth past,
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you know, beenture Coppel? Where's
that kind of line? I think that
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would be helpful for for listeners.
So typically at the early stage of a
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company is is sort of a vision
and a problem statement, a thesis about
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how to solve that problem and a
team that's, you know, working to
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do that. And the early days
of a company are really about trying to
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find product market fit, I.
Find a way to deliver a solution to
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customers and provide value. In our
view, the growth stage really begins after
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that point in a company's evolution.
Right, you've sort of you've built a
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product and you've demonstrated that you're sort
of providing valuable service to a set of
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customers, and now you're really in
the second layer of your kind of development,
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which you have to sort of scale
the business. And so, as
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growth stage investors, we ask very
different questions than sort of early stage investors.
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Right so an early stage investor might
ask, is this a big market?
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Is this the right team to back? Do I think they can get
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to product market fit? At the
growth stage? Principally, the three questions
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that we're asking is, well,
how big could this market actually be?
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Do I think that this company and
this team can scale to a broader set
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of customers within that market opportunity?
And there's a whole subset of questions that
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come out of that. And then
the third is, is there a business
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model here that can drive value both
to customers but also to the company in
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question itself? And so we spend
a lot more time on those three questions
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and answering those as part of being
growth stage investors as compared to kind of
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the early stage when your focus more
on product market. That makes sense because
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I'd imagine when you're doing some a
lot about, you know, market sizing
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and some is actually kind of a
debate on the show depended on who you
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ask in terms of does it make
sense to market size when you're so early,
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because it's pretty tough. Like I'm
thinking, you know fit that came
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out the wearables was a super small
market. So it's tough to really know
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how large that market could be when
it was, you know, fairly new
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at the time and they and they
of course did, you know, very
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very well capturing with their technology,
a captrit that market, and I'd imagine
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that at the growth stage you can
becoming a lot more accurate since the market,
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if it is, you know,
a new market. We've also also
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had a debate on the show of
if there are truly new markets. But
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if it is a new market,
I'd imagine at the growth stage you can
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get a much more clear idea,
like an estimation or statistic in terms of
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how how large that mark could be. It's a really good question and one
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that we think about a lot.
So I think the answer is that it's
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it's not all together obvious even at
the growth stage, and I think there's
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sort of two variants of this.
You know, there's companies that are building
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in in markets that are pre existing
and kind of replacing a precedent service because
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there's some new technology innovation. So
as a result, you know, in
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the software world you sort of have
a company that was built on Prem now
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the clouds around and you replicate that
service on the cloud. There it's sort
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of easier to say, Hey,
there's a specific market size and profit pool
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that exists and it's transitioning to to
kind of, you know, this new
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form factor. Or there's some vertical
niches where it's easier to tell a market
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size. Right. There's there's only
so many restaurants in the US, and
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so if you're building restaurant software,
you can kind of Tell Hey, this
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is probably going to be the size
of my market. What's challenging specifically about
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consumer companies is they're very rarely kind
of fit those two paradigms. Right.
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It's sort of it's sort of all
about creating a new behavior pattern with consumers
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and sort of expanding the market.
And so, to give you a tangible
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example for this in our own portfolio, you know, we invested in Robinhead
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at the series d round and it
was very hard, even at that stage,
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when it was a fairly sizeable company, to no kind of how many
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accounts they would have long term.
And I can say that we were off
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in that estimate by a fact,
by a significant factor. And you know
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now that all that said and done, all that to say that I think
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you know, and this is why
I love the growth stage as an investor,
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especially in coming from the private equity
world, where it's got an analytical
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component. You do have more information
as a basis to make decisions and make
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forecasts, but you still have to
have that sort of mental pliability to say,
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Hey, this could be much bigger
or smaller, change in ways that
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are hard to predict and you're still
kind of basically making a venture back.
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Yeah, those are all, you
know, really good points that I appreciate
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you saying. It's still tough,
even though it sounds the companies that you're
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looking at our farther along than the
ventures usually early stages. is so really
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hard to get a read and I
imagine that in the case of Robin Hood
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that you said, it was a
good thing that you were off in terms
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of what you're off by. So
that's that's great. And also I know
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that you know, obviously we're talking. Before you invest in emerging markets,
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you also invest in companies that are
built in the US, like like a
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Robin Hood. How do you think
about invest not lumping into emerging markets all
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in the same kind of one category? But what are maybe some of the
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some of the things that you think
about when looking at a company that's building
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maybe in emerging market verse the US
pop what are some of the differences and
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some of considerations that you have to
keep in mind? There's a few that
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are quite material over the years that
have sort of that have sort of come
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up. One thing that folks offen
thing when they're looking at companies in the
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emerging markets as they say, Oh, there's these are huge markets because they're
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sort of, you know, billions
of users in these markets, and that's
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certainly true, but the sort of
gdpeeper capita and and more specifically, the
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dispersion of wealth looks very different than
in the US or or other developed markets.
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And so as an entrepreneur you have
to think really hard about what customer
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segment you're going after kind of in
an emerging market and being really crisp about
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that to make sure that there's sort
of, you know, the potential to
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actually build a business around that customer
in the long term. In the US,
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you know, you can get away
with sort of being less clear about
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that at the beginning because, as
you know, there's ways to kind of
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build a business model over time.
So so that that's one big difference.
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I think that that you know,
that comes up early. The second is,
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you know, the canonical advice for
for startups, as you know,
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be extremely focused, be the best
one thing, iterate quickly on that thing
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and provide a lot of value.
And I find that that advice can be
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actually quite counterproductive in the emerging markets. Right there's it's often the case that
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you can't necessarily build a big business
off of a single service, and so
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early in a company's evolution you have
to start to think about building multiple products
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as a way to both hook and
monetize customers, and that's a very different
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sort of way of building a business
than sort of we've learned in the US.
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I think the the sort of technology
companies in China have been much more
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have built in that way much better
than sort of we have in this country,
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you know. So those are a
couple of the main ones on the
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customer side. The third is more
on the sort of infrastructure side. So
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the reality is you're you're starting to
build companies with a lot less sort of
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precedent infrastructure in and around you,
and so oftentimes you have to sort of
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vertically integrate and build that infrastructure yourself
and I mentioned, I spent a lot
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of time in the fintext base as
an example. If you're building a lending
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company in the emerging markets, it's
not enough to find customers, underwrite them
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and give them money. You also
have to find a way to bring capital
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into the market, because security securitization
markets don't exist in the same way that
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they do in the US. And
so you're in the very early days of
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a company. You're playing this balancing
act of both trying to build a product
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for customers but also trying to manage
a very different kind of institutional side of
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the business and and that's a different
skill set and is a broad skill set
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required to build a company. And
one more which I think is interesting is
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the education systems in a lot of
these markets look very different. Tend to
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be much more specialized, and so
when you hire folks, you often have
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to hire four very specialized skill sets, which means early in a company's journey
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you have a much bigger organization than
you do in the US, and so
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founders have to transition quickly from being
builders to becoming managers and finding ways to
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stay nimble at despite sort of having
a large population. So those are some
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of the things that I think about, Mike that are sort of very different.
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And you know, all of that
to say, I think it's incredibly
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difficult to build businesses in emerging markets
but also, if you can get it
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right, extremely rewarding, because it's
you build real competitive advantages over time and
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you earn the right to do a
lot, and I think that's why you
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see this sort of you know,
over the last decade we've started to see
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some really kind of amazing companies be
built all over the world and I'm a
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strong believer that, you know,
that's only going to continue over the next
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decade. There's another interesting trend actually, just sort of that's changing more recently,
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which is, you know, I
think if you looked at the last
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decade in emerging markets, it was
sort of, you know, the idea
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was copy the models that are worked
in the West and and bring them to
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these markets, right, and that
was a successful approach for many entrepreneurs.
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But the other really interesting trend,
specially from a consumer standpoint, is that
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now you have an explosion of data
and mobile available in these markets in a
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way that even it's hard to conceive
of for us who are living in the
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US, and so you're starting to
see completely new behavior paradigms and I think
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what's going to be really interesting over
the next decade is actually the net migration
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back of learnings and business models from
the emerging markets back to the develop markets,
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and I think that's going to be
a really fascinating thing to watch.
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You you sort of saw that in
China. Initially, would sort of the
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rise of social commerce, which was
really a had no precedent kind of in
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the US, and now you're starting
to see companies in the US that are
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starting to build live stream and social
experiences and I think you're going to see
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a lot more of that and a
much more sort of globalized technology world than
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we've experienced thus far. I also
kind of wanted to know to when you
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started your career you understood how powerful
blobile was. That was when the mobile
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revolution was happening. You know,
two thousand and ten, two thousand and
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eleven. What do you think is
the next cycle going to be? Is
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it a web three in Crypto?
Is it the Meta verse? Is it
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something else? I mean, how
do you, as an investment you think
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about these large macro becauseummer try like
the mart large macro consumer platform which might
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come out, you know, once
ten or fifteen years or so, and
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we're almost at that kind of spot. Well, we certainly aren't that spot.
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What do you think about what's next
and like a macro level for the
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consumer? It's a great question and
when that we're all thinking about all the
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time. You know, I certainly
am a big believer web three, in
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crypto. I do think, and
I think that the potential there to dwarf
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what we've seen with mobile is extremely, extremely large, because I think it's
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sort of has properties that are are
very interesting and unique in that sort of
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enables creators, enables creativity, enables
engagement in a whole different paradigm and it's
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sort of, you know, I
think Christison's uses were it skew morphic.
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It's sort of it's hard to predict
even kind of all the things that could
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come out of this. I'm bullish
on that, but I think, to
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be fair, what's holding that ecosystem
back is sort of the underlying infrastructure has
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not been figured out yet. And
then and the costs are extremely high and
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scalability is an issue. But but
I'm certainly very bullish on on that trend
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overall. The other one that I
think we're not talking about as much but
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I think is going to be huge
is digital health. I think the potential
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to track data, capture data,
make recommendations based on that data, change
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the value chain of how medicine happens
is a huge opportunity kind of in the
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next decade and a lot of that
innovation right now, you know, sits
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in kind of the farmer world,
but you're starting to see the first innings
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of that getting, you know,
sort of becoming real consumer technologies and again
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I think that's sort of that's sort
of, you know, a ten x
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sort of impact, but a hundred
ex sort of impact on how we live
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our lives. And I spend some
time in healthcare and when you're on the
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inside you're like there's so many barriers
to this stuff working just from a reimbursement
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standpoint and kind of getting out to
market. But the underlying technologies are evolving
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in a very rapid rde and I
think there's there's a lot that's going to
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happen in that in that space.
So those are the two that I you
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know, that I think about a
lot and I get very excited about but
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you know, I think there's there's
a bunch of things also that are subtrends
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right. I think if you if
you think about just drones and that that
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potential to change the supply chain.
What could that do the consumer experiences vre?
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Obviously we haven't talked about that sort
of part of the metaverse and are
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and so I think there's a number
of potential platform shifts, but the ones
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I get excited about are definitely the
crypto and digital health trends. That are
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possible. We say time and time
again on the show and maybe to throw
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away that that we should be saying. But you know, once you have
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product market fit, then you really
is the beginning of the growth stage and
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you know all the scale and growth
happens. How do you think about the
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term product market fit? When you're
evaluating companies, for consumer companies in particular,
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we think a lot about the frequency
of connection and the level of engagement
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of each interaction and I think if
you're building, if you have aspirations to
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build sort of a, you know, very large scale consumer company, we're
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folks are reorganizing their lives to interact
with you, typically you tend to have
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one or both of those things in
spads, and so we think a lot
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about it, about that. And
then, you know, the other thing
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that we look at to evaluate product
market fit is does that intensity of connection
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drive, you know, referring behavior
or sort of new customer acquisition and advantage
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and new sort of customer acquisition.
So those are some of the we were
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talking earlier about how the growth stage
things become more quantitative. That is definitely
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one thing. Testing product market fit
can become a lot more quantitative at the
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growth stage because you can look at
the behavior of the existing customers of a
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company and say, I can tell
how how much these customers love this product
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or don't. So that's typically,
you know, the way at the growth
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stage that we sort of evaluate that. That that kind of piece. What
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are some of the more unique customer
activisition strategy you've seen from companies that they're
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actually able to scale with? I've
been surprised by how little attention this gets.
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is as sort of companies scale.
The prototypical company that consumer investors always
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when I invest in is, like
you often heard here, the term poll
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versus push, right, so it's
sort of we want to invest in pull
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companies where, yeah, there's a
lot of organic momentum. There's a virality
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and what you were saying sort of
the virality continues forever and we have huge
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companies and those companies are great and
very rare and special. But I do
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think that the competencies around scaling marketing
are critical for all companies, including those
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that sort of have that kind of
level of virality. And you know,
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typically what I see there is that
early on companies find product market fit,
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they find a channel that's working.
You know, most part of your an
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APP based product. It's going to
be it's going to be facebook, and
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you know there's there's a sense that
you can kind of scale, but there's
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nothing Christmas around kind of how you
build out a paid marketing organization over time.
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And some of the things that you
know over the years that I've sort
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of started to think about is,
you know, three or four factors that
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are pretty critical for paid marketing.
So one is to really understand like in
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what context is your product really kind
of sell? So are you best position
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to market on contextual channels like instagram
or or kind of query based channels like
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Google, and to really think about
what is the messaging and kind of what
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channel best suits your sort of growth
needs. The second is sort of the
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depth of the channel. So I
think companies, especially the early stage,
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often way over estimate how deep the
channels are in any one given channel and
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don't diversify quickly enough. And then, you know, there's there's a lot
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around the quality of marketing executions.
As an example, just a number of
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creative tests that you're running on facebook
with different creatives and messaging can have a
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huge impact on your end state cost
of acquisition and you know, we often
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see that folks don't invest enough in
that kind of in those capabilities. And
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then the final is conversion funnel,
right, and kind of playing around at
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that over time. So I know
I'm just kind of roundabout way of answering
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your question, Mike, but sort
of the way I sort of think about
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it is our companies building those core
building blocks that allow them to scale across
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many channels and are they continuously testing
new channels? Right? So I think
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that sort of core big platform pay
channels are interesting, but now there's a
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ton of stuff you can do around
influencers, affiliates, testing Ott and Youtube.
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It's not sort of that one magical
thing sometimes, but it's sort of
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you know, the aggregation of all
these tiny marginal gains across many different channels
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that can actually lead to like differential
scaling versus your competitors, and I think
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those are those are skill sets that
you know, they're sort of not at
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it. You talk about them less
than a board meeting, because it's not
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the product and not the the you
know, the core things that are interesting
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for to talk about as a company
better critical to scaling and and something that,
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like you know, I I think
the founder should be investing in early.
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I love the fact that you really
pay a lot of attention in terms
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of the actual custom requisition and how
they're able to actually acquire customers. What
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I think about this whole notion of
like pulvers, push company, I think
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when I think a poll, I
think about search, just primarily because there's
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that there's that customer intent. They're
already thinking about how they can solve whatever
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problem that the company is solving,
which that's great, because all, there's
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only be so many people that actually
have that intent. And so as well,
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how can you actually convince people that
maybe not be, you know,
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searching for the searching or thinking about
that problem consciously? Right and, of
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course, obviously testing creative and you
never really losing that as part of what
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you need to do in order to
scale and make slight of sense in terms
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of how you actually think about about
scale. And so what's one thing that
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you would change about venture capital?
We still have a huge lack of representation
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in venture capital and I'm so bullish, post my experience in the industry about
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like the potential of technology to like
frankly change the world and also be a
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positive force for sort of wealth creation
for folks. But I'm also kind of
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stunned, you know, now,
having been in it for six years,
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about how concentrated that is within this
relatively small community. I think we as
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an industry have strides to make to
start to expand the opportunity set and you
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know, we talked a lot about
some of the work we're doing in emerging
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markets, which I see is,
as you know, part of that effort,
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but also we have a lot of
work to do kind of across demographic
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groups in the US itself, and
so there's positive trends there, but the
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baselines were so low that we've got
a long way to go to kind of
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expand that that opportunity set. What
is what book the ASPARATY personally, one
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book that aspired you professionally. So
the professional one is easy because I was
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given the one that I'm reading right
now. I'm reading the the Sam Walton
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biography. It is just an incredible
story, you know, sort of just
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like his love affair with with the
business of retailing and the passion with which
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he built the company. It's very
intoxicating and sort of like reaffirms, you
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know, kind of the business were
in, of trying to build, trying
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to find founders, were building iconic
company and you know, on the personal
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front, I'll say one for the
home team. I I love the the
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Bagwad Gita, which is which is
an Indian religious text but really kind of
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more of like a conversation between two
people about like about the meaning of life
387
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and and very powerful and so I
find myself going back and reading that often,
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never the full thing at one time, but just like passages of it,
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and I and it's very life affirming
and coming. So that's probably the
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personal one. But I thought a
question to use. What's the best piece
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of advice that you've sived? Back
in my private equity days, I had
392
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a chance to interact with Richard Persons, who is actually the former chairman of
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city group in Time Warner. He
was an advisor to the the fund that
394
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I worked for. We had lunch
a couple of times and he said something
395
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that really stuck with me, which
was, you know, in your career
396
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you want to be the person that
other people root for, and I think
397
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about that like all the time,
almost every week, and so we're trying
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to bring that ethos too. Two
interactions that I have with pretty much everyone.
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That's some Sillian piece of advice that
I've one of the more sailing piece
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of advices that I'm that I've gotten. So I love that. I love
401
00:29:04.559 --> 00:29:07.680
that. That's so true, so
true. Soue me, thank you so
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much again for your time. This
is so much fun, so much fun
403
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as well. Thank you for having
me on. Big Fan of the podcast.
404
00:29:14.519 --> 00:29:17.160
And there you have it. It
was terrific chatting with Suemy. I
405
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hope you all enjoyed it. If
you enjoyed this episode, I love it
406
00:29:19.200 --> 00:29:22.440
if you'd write a review on the
apple podcast. You're also welcome to follow
407
00:29:22.480 --> 00:29:26.720
me your host, Mike, on
twitter at Mike Guelb, and also follow
408
00:29:26.799 --> 00:29:41.119
for episode announcements at Consumer VC.
Thanks for listening. Everyone
