a16z Podcast - a16z Podcast: How Big Companies Can Get the Most From Silicon Valley

Episode Date: October 9, 2015

There is a stream of the world's largest companies coming to Silicon Valley looking for innovation. But how do they find it, and then, how do they bring it back home? a16z's Elizabeth Weil joins this segment of the pod to lay out what the Fortune 500 and Global 2000 are looking for in Silicon Valley's startup landscape, and how both sides -- big companies and small -- can initiate and nurture profitable relationships. The views expressed here are those of the individual AH Capital Management, L.L.C. (“a16z”) personnel quoted and are not the views of a16z or its affiliates. Certain information contained in here has been obtained from third-party sources, including from portfolio companies of funds managed by a16z. While taken from sources believed to be reliable, a16z has not independently verified such information and makes no representations about the enduring accuracy of the information or its appropriateness for a given situation. This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by a16z. (An offering to invest in an a16z fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation of any such fund and should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by a16z, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results. A list of investments made by funds managed by Andreessen Horowitz (excluding investments and certain publicly traded cryptocurrencies/ digital assets for which the issuer has not provided permission for a16z to disclose publicly) is available at https://a16z.com/investments/. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others. Please see https://a16z.com/disclosures for additional important information.

The content here is for informational purposes only, should not be taken as legal business, tax, or investment advice, or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Welcome to the A16Z podcast. I'm Michael Copeland. And I have here in the podcast room, tiny though it may be, Elizabeth Wheel. Elizabeth, welcome. Thanks for having me. Elizabeth is on our market development team, and you spend a lot of your time, most of your time, sitting in between kind of startups, the startup world, Silicon Valley, and big Fortune 500, global 2,000 companies who are coming through the doors all the time and who you visit.

And so I want to talk to you about how those two worlds come together. Here at the firm, and really throughout Silicon Valley, there seems to be this constant stream of big companies coming to Silicon Valley, either putting down sort of roots of their own, setting up shop, you know, to help them with research in automobiles and health care and, you know, in retail for that matter. Why do you think there's so many big companies coming to the Valley looking to learn? And I think that they are. There's no question. But what are they looking for? And how does that relationship really begin? I think there's a variety of stages. And I would say at the most nascent, it's just coming and

visiting. And now, you know, there's this term of coming to corporate tourism. But sometimes that is a way to start, get a sense of what companies are out here. And the way we look at it is come and get a sense of what the Valley is. Sometimes the company, the larger company, is really experienced and has been here and has already visited the types of tech companies that are peppering these streets. And sometimes they've never been. And this place is scary. And they want to come and see innovation. And so we try to elucidate and shed some light on what's going on in the valley. So why do they feel this sort of draw to the valley to begin with? I mean, we talk a lot about how software is seeping into every industry and honestly that's what we believe. But I mean, is that why they're coming and kind of

what are they looking for when they get there? If they don't even know what they're, or maybe they don't know what they're looking for. That is an entire spectrum, as you can imagine. But often it stems with knowing that their business is going to be innovated on and torn up by these smaller companies. They see more nimble teams, you know, fast, small groups of people being able to throw ideas up and absolutely take over a large part of their market share in various areas, and they know if they're not paying attention to it, this is going to continue to happen. Is it really a matter of physically getting on a plane or getting in your car or whatever it might be and coming out here in person? We like to meet people in person. I think this doesn't

have to be done. But by getting a sense of the vibe of the valley, I think you have more willingness to work within the constraints that are here. The larger companies that we see come out, they've put together an idea of what they're hoping to get from it. And usually they're getting even extra ideas that come from just being around or visiting a company. Often we have teams that give us a variety of areas that they want to meet companies in, and as far as innovation goes, and the different themes. But really, they want to meet the founders. the small teams, they want to talk about how do they hire great people? How do they set up a culture that really incentivizes great talent to stay and love and work at? And how do they really

grow and connect with just great business practices to work in today's age? How do they get here with an open mind and how are they able to sort of be comfortable with the startups coming in to see and or to learn from? Usually companies are already working with some of the bigger startups like the Googles and Facebooks and Twitters of the world. So spending a little bit of time with the people that they're likely just interacting with through email and things like that right now. But then coming and taking a deeper dive. And that step, what I like to encourage is the executive team has thought about what those innovation areas and buckets they want to push into are. And giving us those, often I try to get small teams and the leadership teams on the

phone to just talk about what is going on in their business. Are you interested in cloud security and are you using Hadoop right now? Are you already working on the Pinterest platform? Have you been interested in the sharing economy? Things that seem so basic to people that are ingrained in the Silicon Valley, but are so foreign to these larger companies. Okay. So I've come out. I've brought the right people. We've met with companies, startups that, you know, sort of fit the bill in. I think might help my business. What's the next phase then? How does that then progress? I think the second thing is coming with a clear framework of these areas of interest. So once you've done that, then I think the third step is really having some clear budget attached to it. And the

partnerships that we've seen work out the best are when you know that this is a trial and things might fail, but that's expected. But when a startup is seeing that they will actually get some revenue from taking on a large corporate client and partnering, things go a lot quicker, a lot better, and usually you start to see some fast results. I think also for the large company to keep in mind is startups can't always ingest your entire business or footprint or do exactly what needs to be done. So have in mind maybe a subproduct that you can trial with a company, or say, two geographic locations that you're going to do a pilot rather than the entire United States.

And be prepared for it to not work? I think the best way we've seen some of these partnerships form is being optimistic, of course, that it is going to work and setting up the relationship with that in mind, but not everything does. And you should be willing to take a chance on some sort of interesting technology or trial in hopes that it will work. I would say that's a lot more on these creative partnerships. Some of the partnerships we see on the enterprise side, though, these companies are there at a place where they can scale, and it is able to be a clear partnership that

will have a great, great outcome. There is my sense that big companies are not as scared of working with startups as they used to be, because there's plenty of startups who actually do work at massive scale because of the cloud, etc. Yes. I think the teams we're seeing, they know that startups have done it better. They've done it more efficiently and they've leveraged the services that are actually going to be taking us into the future. So they know they need to start working with them or they will fail.

On the flip side, if I'm a startup, what do I need to be prepared to do differently if I'm working with a large company that, you know, and it's an experience that maybe I have had. You know, often I view my job as a translator, and I think it's just as hard for the portfolio companies to work with, it's just as hard for the startups to work with the Fortune 500 as it is for the Fortune 500 to figure out how they can, they can do something smaller with a startup. Being that language translator means the startup might need to get their head around working at a different pace, or they might have to set clear boundaries where they aren't going to change their business model, but they are willing to do a few custom tweaks for these larger

companies. Often, the Fortune 500 are running on old, old systems. And sometimes there's something that you would never expect to have to do to make an integration work. And sometimes those little pieces need to be figured out. Right. What are you seeing trend-wise that these big companies are coming to the Valley looking for? I mean, what do they tend to want when they come and maybe that's they they know it but what do they tend to walk away with yeah so i spend my time mostly focused on the consumer side versus versus enterprise and some of the large buckets we see on the consumer side right now and those these have evolved over time digital content is one uh customer engagement is huge uh in addition employee engagement has

become a hot topic and a lot of these you know consumerization of the enterprise tools and things that are taking over now. Also, some of the platforms, the social platforms are still not totally clear to the Fortune 500 and how to utilize them, how to find and get the best ROI. Also, this online, offline collaboration piece. I spend a lot of time with CPG companies and still being able to put the clear attribution on what's going on in that overlap of online and offline is a huge question right now. Well, describe that a little bit more for us. what is the online offline confusion I suppose yeah right now take a even take a procter and gamble for example we they might be spending a lot of marketing dollars

online digitally and you know about their products because of of seeing them on the web and you actually do go to Safeway and buy that product or if you're my case you Amazon Amazon Express Amazon Prime or Amazon Prime or Google Shopping Express shows up daily So somehow I am learning about their product. It's been marketed to me. I put it in my cart on Instacart because I know about it. But how do they make that correlation? Right.

And some of these creative partnerships and some of this online offline has been really hard to show a clear ROI to the retailer. So how do you actually close that loop? Okay. I've started these relationships. I'm trailing things. It's actually working pretty well. You know, look, I'm in business with some of these startups. Is there a next step?

Do I get more serious with startups? Do I start a venture arm? Do I buy them? Do I invest in them? Like, how do you see that evolving? I think it depends on what the end goal is for the company. Often, the large corporate really just wants to get up to speed. And we see this, especially in the enterprise side of the business.

Like, you just want to be running on the efficient systems that will take your business forward. on the consumer side, one partnership that we saw take off was with Instacart and a CPG company. And the CPG decided to pay the shipping for, paid the delivery fee for an Instacart purchase if there were a certain amount, a dollar value of items in the cart. And they saw a great conversion of increased basket size, as you can imagine, and actually overall basket size for Instacart. So things like this where by trialing, you realize this really could scale and then you could start to theme it for different times of year and larger things. So taking that first trial and extrapolating what works really can start to lay the foundation for a great partnership. Yeah, and these companies, it sound like they get more and more enmeshed if things work. Definitely, definitely.

And some of the systems that our portfolio companies are solving, they're moving a large part of their business. to a certain platform, for example, or a technology system that that company has built. And these can be super successful after the main integration is done. What's the recipe for disappointment? You know, if you come in thinking X or Y as a large company, or even on the other side, if you come into the sort of the beginning of this relationship as a startup thinking something, you know, how do you both sides get disappointed? I think when there isn't a clear list of what they hope to accomplish,

It can be very high level and broad, but I think there needs to be some desire for action and outcome going forward. Some of the worst scenarios we have are when the Fortune 500 comes and learns a lot, but then there's no desire for a next step. And the best thing has been having a clear leader assigned to who will be that follow-up point. And does a leader need to be the CEO, the CMO? Well, I think when it's not in that C-suite, it works the best, actually. I love seeing the executive buy-in at the top, but then a clear person to be handed off. If this is the digital mobility team and that startup company falls directly in there, assign who is going to be that follow-up point of contact.

Often it comes with a quick call right after, and then maybe an on-site visit, and the company gets further and further ingrained and more comfortable working together, and when there's actual people that are assigned to that outcome, I think it works the best. The large companies come out here to learn from startups, it sounds like I'm from Silicon Valley, but what can Silicon Valley and the startup world learn from these large companies? I think startups are set to gain a lot from working with large companies. I mean, first, to be honest, is what that logo on your slide can do. When you're working with a large company, it shows that, A, that you actually are a real

company that can support something bigger, but it also starts to give you a little track record of success. Secondly, these Fortune 500s have spent so much time growing in a variety of areas and things that you can be learning from them. We see this every single day. And it may make you open your mind a little bit differently about doing business in a certain place or a part of the market that you didn't know you could tackle and take on. And these big companies have experienced so much over time to grow and maintain the positions that they're in. They have spent so much time building a world-class brand, and often our portfolio companies are struggling to both put themselves on the map and figure out how to navigate the larger world. Great learning that they

can take away from these bigger companies. Have you seen that sort of the gap, whether it's cultural or otherwise between the Fortune 500 is as wide as maybe some people believe, or is there common ground usually that's easy to find and people get comfortable with each other fairly quickly. There is common ground, but there are a number of cases, a number of cases that there is a huge difference in vibe, culture, environment, and experience. How do you sort of, how would you describe that? Some of the things that seem so shocking when, you know, I've spent my entire career in the Valley, things that seem so, oh, of course to us.

Like, yes, we use Google apps and Google for our email. And we got into a conversation about Slack and how it can make you more productive and efficient and teams would be able to collaborate so much better. And this big company said they could never put Slack into an organization where it stands now. They're still on Outlook and they're not able to log in remotely. they also aren't allowed to access websites like Facebook and bring open that tab. And things that seem so normal to my business are foreign. Are foreign to these Fortune 500s. And that is not all of them.

Right. But there are some of these cases that make you squint and say, man, it's good to have met these edge cases because it does frame your perspective in an entirely different way. As these relationships and business relationships are succeeding, Do companies get a better sense of how to innovate themselves, big companies, I mean? I mean, and is that something that, if that's what they're coming to learn, do you think that they truly are learning that? I think it's a start. Right now, so much of the company needs to shift to really be able to be as nimble as say we are out here. But I think it's a start by spending some time with some smaller companies.

I think that just puts a different pace into your work. It also puts some willingness to take on some risk, too. And the culture that we've been set up with, it's okay to fail. And it's okay to try a partnership that might not work. So I just, I think getting into more of the mentality here, kickstarts things. And it just shows that if we do spend some time, some great things can come of it. Well, Elizabeth, I know you have to go translate between big companies and small companies right now. So I appreciate your time.

And thanks for joining the podcast. Thanks so much.