Invest Like the Best with Patrick O'Shaughnessy - Jess Lee - Designing Investment Products - [Invest Like the Best, EP.284]

Episode Date: July 5, 2022

My guest today is Jess Lee. Jess is a partner at Sequoia Capital as well as their Chief Product Officer. Before becoming an investor, Jess co-founded fashion app, Polyvore, and was an early product manager for Google Maps. Most recently, she founded All Raise, a non-profit that is changing the gender balance in tech. Our discussion ranges from Burning Man to Marvel to Sequoia’s mobile app and I hope that Jess’s passion for delighting users rubs off on you. Please enjoy my conversation with Jess Lee.   For the full show notes, transcript, and links to mentioned content, check out the episode page here.   -----   This episode is brought to you by Canalyst. Canalyst is the leading destination for public company data and analysis. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com/Patrick.    -----   Today's episode is brought to you by Brex. Brex is the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest-growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business? Learn more at brex.com/best.   -----   Invest Like the Best is a property of Colossus, LLC. For more episodes of Invest Like the Best, visit joincolossus.com/episodes.    Past guests include Tobi Lutke, Kevin Systrom, Mike Krieger, John Collison, Kat Cole, Marc Andreessen, Matthew Ball, Bill Gurley, Anu Hariharan, Ben Thompson, and many more.   Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here.   Follow us on Twitter: @patrick_oshag | @JoinColossus   Show Notes [00:02:35] - [First question] - Why more investment firms don’t have a product mindset [00:05:22] - How to approach building a productized version of capital  [00:08:00] - Ways Ampersand measures success and judging their own performance  [00:08:49] - Driving reasons that Sequoia wins deals beyond their brand name [00:10:28] - How her work as CPO at Sequoia has changed her investing approach [00:12:28] - Everything she’s learned about community and its relevance to business  [00:17:48] - What the gold standards are for studying strongly built communities  [00:19:42] - What it is about Comic-Con that works so well from a community standard   [00:21:18] - The role that scarcity plays in communities writ large [00:23:10] - Product mindset and customer obsession  [00:24:33] - Knowing when it’s okay to begin expanding  [00:28:12] - Rates of change in her investment progress and dollars going to female founders [00:29:36] - Systemic bias and what’s driving a lack of funds towards female founders  [00:32:26] - How she applies community building lessons to All Raise [00:33:20] - The internal learning culture in Sequoia that others could adopt and benefit from [00:37:01] - Which Marvel superheroes her Sequoia partners would be   [00:39:05] - Seeds of motivation for Arc and what it is [00:44:31] - The best ways she’s seen companies manage and support human capital [00:45:36] - Biggest mistakes made when managing human capital  [00:46:42] - What working on Google Maps taught her about product development  [00:48:42] - Someone she admires and has learned the most from in All Raise   [00:50:02] - Measuring success at Sequoia over the next ten years   [00:52:20] - The kindest thing anyone has ever done for her [00:53:42] - What it was that made the people who believed in her take a chance on her  [00:55:03] - Things in pop culture today that most has her attention

This episode of Invest Like the Best is sponsored by Canalyst. Canalyst is the leading destination for public company data and analysis. Founded by a former byside analyst who encountered friction sourcing, building, and updating models, Canalist is now used by over 400 institutions, including the largest money managers globally, and by a number of guests on the show. With detailed company-specific models and data on virtually every public company, canalyst clients are able to ramp up faster, update models instantly, and incorporate the highest-quality fundamental data into any workflow. If you're a professional equity investor and haven't talked to Canalyst recently, you should give them a shout. Learn more and try Canalyst for yourself at canalyst.com slash Patrick. That's C-A-N-A-L-Y-S-T-com slash Patrick.

Today's episode is sponsored by Brex, the integrated financial platform trusted by the world's most innovative entrepreneurs and fastest growing companies. With Brex, you can move money fast for instant impact with high-limit corporate cards, payments, venture debt, and spend management software all in one place. Ready to accelerate your business, learn more at brex.com slash best. That's bR-e-x.com slash best. Hello and welcome, everyone. I'm Patrick O'Shaughnessy and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, stories, and strategies that will help you better invest both your time and your money. Invest like the Best is part of the Colossus family of podcasts, and you can access all our podcasts, including edited transcripts, show notes, and other resources to keep learning at join Colosses.com.

Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaunacy asset management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Clients of O'Shaunacy Asset Management may maintain positions and the securities discussed in this podcast. My guest today is Jess Lee.

Jess is a partner at Sequoia Capital as well as their chief product officer. Before becoming an investor, Jess co-founded fashion app Poly4 and was an early product manager for Google Maps. Most recently, she founded Allraise, a nonprofit that is changing the gender balance in tech. Our discussion ranges from Burning Man to Marvel to Sequoia's mobile app, and I hope that Jess's passion for delighting users rubs off on you. Please enjoy my conversation with Jess Lee. Jess, I was thinking about an interesting place to begin our

discussion today and I tried to respect what's unique about you, which is this really interesting vent diagram of product building and product thinking and investing. And so I thought maybe we'd begin right there at the intersection of those two things, specifically around products that investing firms offer. So if you ask most people, especially at early stage where Sequoia or private markets where Sequoia focuses primarily when it makes its first investments, they would say that the product is capital. You're giving money to companies. You get a great team or a board member or whatever in exchange. And it's a very simple product. And then most investment firms work that way. Why do you think more investment firms, especially ones that make direct investing where capital

is part of the product? Why don't they have more of a product mindset, like actual products like the ones that they're backing themselves when they're outlaying capital? That is a great question and one that I found myself wondering as a founder. I met so many VCs when we were pitching my company, Polyvore, and it felt like a lot of the firms just offered money. And then if you were lucky, you got Capital Plus, a really great board member. And I just found myself thinking like, oh my God, I do so much as a founder. There's so many things I don't know about company building. I wish there was something else, something more out there. And so after my founder journey and I came to Sequoia, I found myself thinking about that a lot. I do think there's a way

to apply the product mindset to venture capital and to investing. And if you think about Sequoia's customers, our customers are the founders. And if we want to be great, we need to be customer obsessed, just like our greatest founders, our customer obsessed. And then you need to delight your customers. You need to be innovating. We need to be doing things differently. You have to have the better, unique, compelling value profit. So we think about that a lot. And actually, in addition to being an investor, right? Spent about 70% of my time investing. I'm also our chief product officer.

That's literally my job is to be customer obsessed. For a founder, I often think, what could we offer? There's some parts of the business of your company where you're really innovating. You're inventing new technologies. You're building products that customers ever seen before, new UI patterns. And then there's like a bunch of things that you are doing that other founders have already done before where you do not need to completely reinvent the wheel. say comp philosophy or the best way to do a ladder for your career levels or how to run a really good one-on-one,

how to have an exact team, your hiring process for engineering. You're always innovating at the edges of some of those things, but there's some things I just wish someone had told me from the early days. So those are some of the things we think about at Sequo and try to figure out how do we turn that into a product for the founders. How do you think about tackling just one of those? You could choose the example. It could be the one-on-one meeting or something. What would a product-ized version of, we're going to help you get better at one-on-one meetings look like

with the consideration that a great board member, I think Rulov talked about this when he and I did an episode together, is really about those goals in the crucible moments, the big, strategic, hard, hairy problems. Running great one-on-one meetings probably is not what a lot of the best investors are spending their time like coaching their founders on. Maybe some are. When I think a product,

I think of something scalable and someone's time isn't scalable. So when you start to think about the atomic unit here, and this isn't just in venture, it could apply in any sort of equity and it could apply in kind of any kind of investing because there's always counterparties. How do you think about that? What do you go do? What is step one to say, okay, there should be something better here. There isn't.

Let's do something about it. We try to think about a portfolio of products that work. There's some things that are evergreen, like core foundational company building concepts, founder-led sales, how to do it well, how to write a great culture deck. All those kinds of things are really important to get right from the early days. And for that, we have programs like ARC, which is our take on an accelerator, but it's eight weeks of programming curriculum. You get a lecture created by Sequoia taught by a Sequoia partner that boils that concept down into a simple framework. And then you get a talk by someone from the field who has applied that and can tell you

the real example of how they applied it at their company as an exec or as a founder. And that's eight weeks. Actually, this week, we're running the European cohort, the first class of this. They're in Stockholm right now, went to visit Klarna to sort of see, here's an example of greatness. This is what a great company looks like, how far they've come, talking with the founders and the exec team. There's that. That's sort of scaling the level of ambition, the core concepts. And then there's something as tactical as, should I give out the title head of or VP for my first. And that is an article you can find inside of AmperSand, which is our founder, mobile app and portal. And you can look up all kinds of very tactical questions. And then there are things that are

constantly evolving, like the best growth marketing tactic right now. That's always going to be changing as the platform shift, whether you're growth hacking TikTok or Instagram, cacks are going up and down. So for there, we try to connect you in community, who are the right people you need to know in the network. And so Ampercent also has a DM function, a direct of all the people in the communities. You can reach out and actually find that expertise, or we set up a lot of events. You can just decide to attend any one of the events and talk to various experts or ask questions. When you think about something like Ampersan, I haven't personally seen, so I'm guessing at what it feels and looks like, how do you measure success? So if that's a product

sponsored by you, and it's obviously different than it's not probably a direct revenue generating product. How do you think about judging yourself as to whether or not you're doing a good job? Is it just usage and engagement? How do you decide, like, the new features to have? Usually the arbiter is commercial success, and this is a little bit removed from that. So how do you decide whether or not you've done a good job? Just like any good product team, we look at the metrics. So we track Dow mouth on a regular basis.

We look at what percent of posts get replied. We look at the DM activity. We obviously don't read the DMs, but just knowing are people talking to each other, are people reading the new content? So we look pretty carefully on a daily basis in our Slack channel. it posts like here are the metrics for the M-Prasand app. And do you get the sense of a big believer that like everything, like the arc is towards more competition,

that providers of capital are going to, the winners are going to do more valuable things for their partners? Do you get the sense that this is a driving reason that Sequoia might win deals or see more deals or some input into the funnel of great investing that this drives it relative to say the obvious Sequoia brand name being arguably the best in the business? How much do you think it drives outcomes in investing versus drives outcomes in supporting companies? I think they're all interconnected.

I think a lot of the reason that people choose to work with Sequoia and our style is not for everyone is a lot of us are former operators. We don't take very many board seats. Each investor does one, two, maybe three investments per year. And we try to work really hard for our founders. And it's not just the board member, but it's the firm. It's the product. It's all of it.

And so we are deeply, maybe more deeply involved. And so the better we are at helping you. And that could be through the board member, through Roloft, sharing an anecdote from his time as CFO at PayPal or Alfred talking about what it was like to compete with Amazon at Zappos and how they outsmarted or out innovated. And so sometimes it's that. And sometimes it's that little piece of advice that you got in an article that you read because we had the library of articles at your fingertips or sometimes it's actually just connecting you. like maybe you came to our founder event, Basecamp, or heard a great piece of advice on stage from Elon Musk. It's all interconnected. The better the firm is at helping founders, the more we become a magnet for other great founders of the next generation. How has your work as the CPO of

Sequoia changed or driven your investing views or investing behavior as an investor at Sequoia? The part of the product role I hadn't talked about is the investors are also our customers. So we have a data science platform that we use to help us with all parts of our job. And if you think about investing job, it's sourcing, picking, winning, and company building. We talked a little bit about the company building side, but we also help on the rest of that. So we, on a nightly basis, are pulling signals from all over the place to try to figure out what companies are inflecting, automated due diligence, comparison across, you know, to try to figure out who's the emerging category leader. That helps across all parts of the business. I can maybe share some examples.

On the sourcing front, one of our partners, Bogumil, led an investment in a company called Infurcost. InfraCost has a open source component. And so we were able to see in GitHub that that company was inflecting. And so Bogumel was able to reach out maybe one month sooner, maybe before they were raising, and was able to establish that relationship. We look at all different kinds of signals. on the picking side, we have a lot of benchmarks at this point on how well different companies are doing. So for Sunday, we were able to see that their retention rate as a D to C subscription product was really best in class. And so that gave us a lot of confidence. That gave Stephanie this confidence to like, okay, I feel pretty good about this investment. Similarly with GOM,

we were looking at their reviews and ratings data across them versus competitors. And we kind of got the sense that they were the emerging category leader. When we invested, it wasn't like, entirely clear on winning. The founders like knowing we have this data and can use it to help them. So when I was working with Ironclad, I shared some of the data science analysis that we've done. And to this date, I still share sort of the NPS data, the ratings review data that we have to help product team and to help the CEO. Obviously, I'm going to ask about a word here that has become maybe even eye-roly.

It gets used so much, and that's community. It's a word that I know has been really important across your career as a founder, having built a business in this space, but also some of these things you've already described, Amper Sam, the application that connects people, base camp, the event that connects people. There's lots of ways, obviously, that Sequoia is famous for doing this. And community is something that feels like it's become aspirational for everybody. Like everyone wants to have a community that they started or something. And we also know at a base level, like, it is incredibly powerful.

Otherwise, why would we care? Maybe you could give us sort of a master class on how to think about the idea of community and what it means to business. Local community is one thing, your neighborhood, your school, your whatever. Why has this become such a hot issue for seemingly everyone in the business community? I mentioned open source.

Like that's one area where it does seem to really work and thrive. A community around a project can be a key way of evaluating that project. It seems like everyone wants one of these. Everyone wants to build a community business. Give us your take on everything you've learned as a builder in this space.

I think the reason community is so relevant for business is that it's the ultimate growth engine. You're always worried about your KAC and how expensive it is to run an enterprise sales team, how difficult it is to acquire paid customers on Facebook or Instagram. And if you have a community, which basically means a group of customers who love your product so much that they're willing to talk to their peers about it, that is free word of mouth marketing. That is zero KAC. And so I think the best companies in both consumer and enterprise know that and really cultivate that obsessed, loyal group of community members. And those customers are loyal to the brand. They give you feedback when they

don't like what you're doing. They're your ear to the ground. They're your greatest advocates. It's really, I think, a secret weapon. It's something we did really, really well in my company at Polyvore was despite not being the most well-known or biggest community side, in a space like consumer where there's very little longevity. Brands go in and out of favor so quickly. We had a very loyal community. And I remember maybe it was 12 years after we started, our acquirers, acquireer shut down polyvore.

And my Instagram, my DMs, I even got snail mail from community members who were really upset for something to have survived 13 years and for people to be that mad about it going away. It just made me realize we weren't the biggest in the world, but we had some real loyalty. people were really mad that, and what they're mad about was not just the functionality got taken away, it was that their friends got taken away and their way to access their friends. So that's the other

big part of community. It's not just loyalty to the company. It's like loyalty to each other and the sense of belonging. So I think that's why it matters from a business perspective. Most people think about it from perhaps the consumer side of things. Like I work with the wing and with Maven and with Otter and those are communities of women and women tend to be maybe more community oriented, but it also applies to the enterprise. I work with a company called Ironclad, which is digital contracting platform. And the main customer are legal teams. And you think about legal teams, lawyers are maybe not the highest on the totem pole

inside of an organization. They're not the biggest buyers with the biggest budgets. People are often complaining about the lawyers saying, hey, you guys are slowing down our sales contract. like why do we have to put all this protection and why can I just sign this deal? And so the lawyers are doing this really important job, but they don't have a lot of budget. They're not the most loved. And that underserved user, that is a really big opportunity to surprise and delight with a great product, grow loyalty and have that group, which is very small, all talk to each other.

And that's what Ironclad did. Jason is a former lawyer. So we had a lot of affinity and deep understanding. He actually created the open source seed docs that while he was a lawyer that pretty much all the founders use now. And he realized there's a lot that could be done in contracting if you used product. And so he created ironclad and he began with just dinners, just helping the legal community hang out, share their issues, maybe even commiserate a little from being beaten up by the sales team so much. That grew and grew and grew and fast forward today, he has a chief community officer. That's not a title that you see much in enterprise companies, but that's how important community is. They have a community platform where the legal teams can hang out and talk to each

other, solve each other's issues. They still do lots of events. And then even borrowing even further from the consumer playbook, they're big on TikTok. They have a guy named Alex Sue, who runs this account legal tech bro. It's really funny. And it's just him commiserating about how tough it is to be a lawyer inside of the enterprise. And that draws eyes. eyeballs. Yeah, I was going to say, I'm going to go look it up. Sounds hilarious. It's hilarious.

It's really funny. I think there's a lot you can borrow from the consumer playbook and the community playbook and then bring that to all kinds of companies. I really like the definition of community being a group of people who would be mad if you went away. That's like such a simple, beautiful, elegant way to think about it. As you've studied companies that have done this well, whether you're an investor or not, who are the gold standards?

I've mentioned the open source companies. I think there's some open source communities that are just incredibly, like DBTs comes to mind, like the incredibly powerful communities of people that have been galvanized around whatever it is. What are the best ones that you've ever seen? And what features do you think make them the best? You know what I tell people is to go study Burning Man. Okay, let's get into that. Why?

So there's this really old paper. I think it's called the power of community. And it talks about how you need four like different elements to community. I think it's government, economy, religion, and media. And I think Burning Man does that really well. The religion piece is you're supposed to have like an ethos, a shared ethos and a way of doing things that's sort of just known. You have to have an economy. There has to be a real sharing of value between the community members.

Burning Man, that's obviously like fruit and water and whatever you're bartering, literally a bartering economy. The ritual is the burner code, the principles, little rituals that you do, like, I don't know, do a angel in the sand and just all the dressing up, but you feel like you belong to the religion of Burning Man. You exchange value and you give and you get out of the community. The media part is there has to be some relic or media about what this is that gets out into the world. So it draws other people in. And so that's maybe the photos that you see of the crazy costume. and like, well, that looks kind of fun. Maybe I should go.

Those, I think, are some of the key elements to building great community, but I think Burning Man does it like no other. Government, there's also the laws and the code. I mean, in some ways similar to religion, but the religion is a little bit more of the rituals of it. Have you been to Burning Man? I've actually not been to Burning Man.

My Burning Man that I go to each year is Comic-Con. That's another fascinating potential community. So I've never been, but maybe describe through those same lenses or through similar lenses, What is it about, why do you go? What is it about that system that works? I just really love pop culture.

I love Marvel. I love Star Wars. I'm a fan. I watch quirky sci-fi shows, The 100. And a chance to sort of escape into those worlds and then learn about the makings of the show and like the people behind it and the actors. That's just what I love.

I'm a fan, like the ultimate fan. If you look behind me, literally my comic book collection. I see Captain America Shield. dead center in the bookshelves. I just love it. I go each year and it's a huge hassle. To get into anything, because there's 100,000 people there

and only 7,000 seats in Hall H, which is the hall where all the big panels come, you have to line up overnight for 30 hours with a group of people. And no one wants to stay 30 hours. You have to rotate people in there, literally shifts. You bring food, you camp out,

you sleep overnight. You're dressed in full cosplay. It's just a little bit of an ordeal. There's like little rituals around it. Some people need to escape to go to the toy place to buy all the hot and toys. We want to get into the panels. And so you bond. We form this group once a year to go to Comic-Con and hang out and just feel like the energy of the crowd together in that hall and really just geek out about things.

And in the line, you're next to some random people, but you know you are there for the Marvel Cinematic Universe panel. And so you can talk about it together and hang out. And you just kind of make friends who are in the culture. You mentioned a couple of scarcity things there for Comic-Con. What role does scarcity play in community? In Comic-Con, I would say it plays a big role. Getting into Hall H and doing all of that, going through that ordeal, that's definitely not for everyone.

But at the same time, you can families bring their four- and five-year-old kids and just roam through the exhibit hall. So there's always, I think, a pass-in to any community of seeing what it's like a little bit on the edges. Let's wander the halls of Comic-Con and just look at the exhibits. And then there's for the true believer in a circle, hardcore nerds like myself. There's another experience. Those are probably better examples than we'll ever come to with a business community.

I'm thinking like of Salesforce annual Dreamforce conference or something. But in business, what are the best examples that you've ever seen? And how do they strike the balance between commerciality, meaning I can draw a direct line from this thing to revenue or something versus smarter, longer-term plays of, no, no, the benefit here is we're cultivating a pool of demand that is differentiated. Say a bit more about some of these ideas applied to business-specific communities. I think the best communities and the best community builders are really oriented around the needs of the community and not just the needs of the business. I think that's one thing ironclad

does quite well. The early community dinners, the rooftop law series, it was not webinars on how to use ironclad and why you need to use it. It was, different people, different lawyers in GCs talking about topics that interested them. And people attended, not because they wanted to learn about Ironfly, but because they wanted to meet the other members in the community, learn a little bit about some interesting law topic commiseration. Maybe there was some conversation about contracts here and there, but it was not about that. And I do think the best community builders are really oriented around like, what does community want? It's almost like there needs come a little secondary. So it seems like then maybe it's about persona identification

first. There's something that unites in each of these examples, maybe Burning Man accepted, but certainly lawyers. It's a category of people that probably have similar problems and similar experiences. Is that true of the best businesses that you've worked with or investments that you've made, that they just do a really good job of identifying who the customer is and understanding the customer and not trying to be a product that serves 10 different groups? Yeah. I think that goes back to our earlier point of product mindset and customer obsession. I think the best founders are customer obsessed. They talk to their customers all the time,

and then they're good at picking out, this is who we serve right now. And yeah, sure, maybe one day we'll serve everyone, but right now this is who we're focused on and we have to get this group so delighted and so happy that they tell their friends and then the base expands little by little. But Eric Juana and Zoom is actually pretty famous for this.

When they started, they said no a lot to customers. I think he might have stiff-armed. I think it was either Oracle or Cisco all the way till IPO. They just said no to the really, really big customers till post IPO because he just wanted to be sure that they would be happy and that he could serve them well. And there's in all these stories of companies that have expanded too quickly and lost that core and tried to be everything to everyone. And I think that's one of the classic startup mistakes.

How do you avoid that mistake for a founder? What advice would you give them to know when it's okay to begin expanding? I think you need to talk to customers every week. That never stops being part of your job. You really have to have your finger on the pulse and know soon whether that enthusiasm is beginning to waver or not. You can track your NPS data. You could instrument the heck out of it.

There's a great tool called Sprig that literally lets you push the customer NPS question or a series of questions out constantly and then categorize using AI the result. So I would just really instrument the business. And then just it's a cultural thing. It's the metrics thing. It has to be a personal obsession of the CEO, too. As you think about your own investing, like so many at Skoy, you have extensive operating experience. And now 70% of your time is spent making investments.

What are the formative experiences or lenses that inform how you make, you personally make investment decisions? What are the things you look for in companies and why those things? What about your experience or background led you to those criteria? Yeah. I think my experience as a founder is what's shaped my investing lens the most. I was a female founder running a company targeted at women. And I just remember my fundraising experience and my company building experience. It felt very lonely.

There weren't a lot of other female founders that I could talk to. And there weren't a lot of investors who got what I was doing. I don't think I ever pitched a single woman. And I would often get these comments like, oh, is women's fashion a big market? let me ask my wife about this. I started to resort to this parlor trick of taking like stacks of fashion magazines and like slamming them on conference tables to try to get attention. Also to get them to look at me instead of my male co-founder, even if I was someone talking.

And I would say this single issue of Vogue magazine, the September issue, makes $100 million in a year, which is about the same as like enterprise SaaS company you wish you invested in would make $100 million in one year. sadly that's no longer the case anymore given what's happened with the media industry. But that's what I did at the time. And people would be like, oh, draw their attention. And they would equate at least the dollar amount to realize like, oh, you know what? Women are 50% of humans and 100% of us wear clothes. Maybe that is a big market.

But through that experience, it just really drove home for me that the people who make the investing decisions and their life experience, biases, who they know as customers, really impacts what problems in the world get solved and which customers get served at all by technology. And that filled me with immense rage. I was like, it's really hard for us to raise money because people don't think this is a problem or don't see a lot of women's problems. Even though we control 80% of household purchasing power, we make 70% of healthcare decisions. And so that was a big driver for me to even go into venture in the first place. I want to solve that problem.

And it's a huge investment thesis of mine. And so I would say a larger thesis I have is there's underserved customers everywhere. You know, you have to be a little contrarian to make money in investing. You have to either see opportunities other people don't or opportunities other people underestimate, if you're willing to take risk on things that maybe haven't worked before. And I just saw firsthand as a female founder and working on a product target women that, hey, there's big businesses out there that people don't think are big businesses. And those underserved customers, if they are served, become wildly deliriously happy.

And then you get that going back to the community point, a community and this incredible moat of community that leads to word of mouth growth. On this issue, how would you describe or grade the progress since you started investing to now? Has this gotten better? Is it a little bit better? Give us a sense for the rate of change. Yeah. When I started and then when we started tracking the numbers at all raise,

which is sort of a nonprofit that I co-founded with 30 other women in venture that came out of this age. There were 9% of Czech writers at VC firms were women. And now it's about 14, 15%. So it's definitely gone up in about four years. Sequoia's 25% women investors now. It's definitely moving in the right direction. How true is that on the founder side as well?

So we were talking to Roxanne Petraeus about this. And the stats, I'm going to get them wrong, but it was like mid single digits percent. of VC-backed founders were women, but it was even smaller percent of total capital, which is a bit of a lagging indicator because most capital goes into later stage deals, but it's maybe the former stat's a better stat to focus on, whereas a more current stat. But it was like 4% or something insanely low. What about that same question there? Yeah.

Sadly, the dollars flowing to female founders has not gone up. It's been about flat. It goes back a little bit some years had a little bit, but it's basically about the same since we started all raised four years ago. Because that's sort of the next chapter for all ways. How do we really step up and help the female founders? What is driving that insanely low number? I do think who makes funding decisions impacts it.

And then there's just systemic bias. And I think the best way to overcome that is to have those great counter examples. The more there are companies like figs or Stitch Fix run by women, targeting maybe this underserved consumer, non-obvious, very capital efficient action, because they had to be. Like, those are great winners. And the more of those there are for founders, the more FOMO there will be.

So I think that's the path forward. We have to help probably queen make some of these women. How does this bias persist? To me, in my operation as an investor, I haven't seen it because it just seemed silly and crazy and all the things that I think most sensible people would say about it. But it's obviously still there persistent. It has some source.

What have you learned about the source? of it or what perpetuates it. I'm trying to get like the most root level here, not the surface level thing on which you put a band-aid. What do you think it is? How is this a thing? I think there's a lot of different factors. One is maybe you can't be what you can't see. The fewer big successful women's CEOs and leaders there are, the younger generation is like, oh, maybe that path is not for me. I think it's definitely changing, but that's part of it. And then I think there's just a lot of bias. You invest in what you know and what you understand. And so for all those people who said, always women's fashion big thing, it's because they just weren't the ones reading the magazines or buying the products

that way. In my investing, I've tried to identify top down, who are consumers that are vastly underserved. One train of thought is women often become the chief caregiver of the home, as well as the chief medical officer of the home. You kind of end up making a lot of the doctor decisions for the kids or being the one to drop off or decide what to do or maybe you stay home and don't work to take care of the kids. And that burden tends to follow women. That's actually really big economic opportunity too. So I think there are really interesting businesses to be created that might be a little contrarian at the intersection of serving these customers and creating an economic opportunity. I work with a company called Maven. It's the largest telemedicine network for women's health

and family health. So it helps with past parenthood, fertility, IVF, pregnancy, postpartum. I use it extensively when I, through two kids. And it's an incredible work benefit for employers who want to keep women and have them come back to 46% of women don't return to work after pregnancy. That is a huge bet on that thesis. On the caregiving side, I work with a company called Otter that helps you find care from other parents. If you use All Raise, Maybe as another example to talk about the power of community, how have you built that with respect to those ideas that you talked about earlier to make this a strengthening, growing body of people that care about some set of things together?

Tell me how you've applied the lessons of community to All Ray specifically, so we can learn a bit more about it. We gather people and put them together in rooms and just try to get them to help each other and try to help them with their careers. And that's it. It's not about All Raise and how to be. how you can help all raise. It's really like how can all raise help you. And so one of our most successful programs is actually really simple. It's just a cohort program. And you meet regularly

with people who are at the same stage, GP or associate, just with your group. And out of that, magic happens. Deal flow, new jobs, great investment opportunities. It's actually pretty simple. From the community at Sequoia, obviously you get to work with some of the world's best investors of this type. How does learning happen inside the Sequoia community? So I know you mentioned some examples already. Someone observes something, turns it into a lecture or some piece of media, let's call it, that can be enjoying and consumed. But what is the culture of learning like internally at Sequoia in a way that you think other investment partnerships could mimic or benefit from? I think the reason Sequoia has been successful for five decades has a lot to do with culture.

And the same thing you hear from founders, culture, each strategy for breakfast, culture is the most important thing to get right. That's actually true at Sequoia as well. And there's two parts to the culture. It's performance and teamwork. And performance is around the scale of ambition to have the best fund in any vintage to innovate. We're paranoid. We want to reinvent when necessary. That's quite powerful. And it's led to a lot of innovation from the Sequoia Capital Fund innovating on the financial structure, to being allowed to create an engineering team of our size inside of Sequoia, to the Scouts program. And not every experiment works. We've shut down things that haven't worked. And so there's that. And then there's also, I think, the teamwork pieces and what you mentioned,

learning is really important. It's very much an apprenticeship model. Our team's pretty small compared to a lot of firms, their investing team. And each person is apprenticed to someone. And, you know, I joined. I worked very closely with Brian Schreier. He met with me every Monday debriefed on every partner meeting. I shadowed other partners at board meetings and got to see all the different styles of company building, right? Because we're all very different. It's a diversity of styles. And so I got to see Alfred's lens on the numbers and say, this is the number you need to care about. That is a leading indicator of this huge mess that you're about to uncover. Or Sean can really connect you. He's got like an incredible network and might be able to get you to

that one person, and we all leverage each other's superpowers and strengths. But being able to shadow, we're very explicit about let's do debriefs after each meeting so that what one person picked up can be shared with everyone else who might be newer. Now people shadow me at boards. And it's just that rigorous culture around teaching and learning and training the next generation and empowering. There's a spirit of generosity. You hear sometimes at other firms about like, oh, I found this investment and then the senior person snipe did for me. It's almost the opposite. When I got to Sequoia, Rulov found what he thought was a great investment. He's like, this is great. Do you want to work on it? And that's just how we roll. And it makes people want to stay. It makes people want to work there.

That's combined with a high level of paranoia too. There's this constant like, are we good enough? Sequoia has very high imposter syndrome internally. Is that cultivated? Like is paranoia something that just the nature of the people there so it's baked in automatically, or is it something that's actively cultivated? Both, both, absolutely. Any success we have today is because of work that was done 10 years ago from an investment perspective, certainly, the investment that we made in a public. Yeah, quite literally, right. Company that IPOs today, that investment was made 10 years ago. So we have to continuously monitor and just make sure that we're ahead of the game. You know, we monitor our founder NPS successfully. We

look at what competitors are doing. We are constantly questioning, is it good enough? Every week, we're, I think, five weeks into the ARC program in Europe. And each week we're debriefing on, like, how we make it better next week. It's just sort of this relentless customer obsession. You showed me the Captain America Shield earlier. And then you mentioned superpower. So I have to ask a fun question as a quick aside. Sure. If you had to say which Sequoia partners are which Marvel superheroes. What pairings come to mind? Wow.

Well, I definitely know who I am. Okay, who are you? We'll start there. Mantis, which is who I dressed up as for Comic-Con. She's the one with a natural EQ, but is super weird. That's me. I can tell you the superpowers of all of our partners, but it's the mapping back to Marvel characters that makes that very far.

You must map to Marvel. That's the rule of the game. Okay, okay. Rulaf is the Incredible Hulk. He has got this Bruce Banner side where he's just like an incredible genius, is capable of understanding sectors and industries to a really insanely deep level from like MongoDB to Instagram to 23 and Me. I mean, he's intellectually gifted, but at the same time he has this other side that comes out.

that's powerful and emotional and very strong. That's probably Rula. I think I would say Alfred is Spider-Man. Spider-Man is secretly everyone's favorite. At one point was an underdog and underestimated, but is really smart. Spider-Man, like, invented his suit and all of that stuff and is loved around the neighborhood.

You have no idea how much Alfred is loved internally and by his founders. So that's probably Alfred. I would say Pat Grady is Captain America. He's got a little bit of that Boy Scout, good human, moral compass, all-American thing going on, smart, great leader. Yeah, yeah, he's definitely Captain America.

Yeah. Man, that might be all I got for you to think about that. That's way more than I expected. So we could stop it there. I mean, I'm really into these characters and making those mappings, it was very important. I'm glad we take a quickest. side. Coming back now to something like ARC, which I know as a new program sounds like it's brand new in Europe,

feels like a product. Back to where we started the conversation of the blending of investing and products and product building, maybe use ARC as a case study for me to help me understand your product mindset. What was the seed of motivation? What was the prime moving insight or something? And then how did the story unfold from there? Why do this? How did you do it? Using it as a case study, sounds fun. I'd love to learn more about it. We're in our first class of Arc right now, but it's actually been four or five years in the making. It started at first with curriculum and a cohort program we designed for our series A founders. And so the first version, we worked with a professor at the GSP, Garth Sloaner, and Ruloff was deeply involved.

And we wrote 10 weeks of curriculum around the various company building concepts. and tried it out. And it got great reviews. And then we thought, okay, how do we take this from maybe Stanford GSB style case studies to a little bit more hands-on? And so the next iteration, we started to work more with the earlier stage founders. And we turned the case studies into frameworks of like, here is actually how you break down this case study into a framework that you applied for your own company. Instead of talking about culture at Zappos and why I was important, let's break down the culture of Zappos and break that down into a framework for what is a great core value. It's usually there's some pithy value statement.

Deliver Wow is one of Zappos, deliver wow. Then there's the behaviors. What does that mean? It means customer service is excellent. It means you can return things. It means we go above and beyond. And then what's the legendary story that goes with that? And for that, it's the story that goes legend of the customer service person who stayed on the phone for 10 hours with someone and got them a pizza and let them return their shoes one year later.

That is actually how people absorb culture. It's not whatever poster you stuck on the wall. It's that story that exemplifies that behavior. And so we broke that down. We work with founders to actually write out their culture. And then in this iteration, I think we've expanded and we're adding new different types of learning. And so in addition to that framework, which might have been a deck at some point, a little bit of applying it yourself, there's actually a workbook, there's company design cards. And we folded this all up into a concept we call company design. The founders are the ones who are building the company. We're not company builders, but maybe we could play a role in helping them design or architect or apply the right design paradigms to their company. And so we think about that in terms of the core foundational concept, some of which are evergreen,

some of which are more tactical and evolve over time. Think about community. Think about mindset. I think that's maybe the biggest innovation of ARC this time around is, well, two innovations. One is it's an open application process, which we never had before. Before, you know, you would figure out some way to get in touch with a Sequoia partner. Now this is an open application. And so you can apply, send in your pitch deck.

We use data science to help a screen, but we ultimately, we do look at every single application, a partner inside of the way it looks. And then on top of that, we added a little bit more of these community and mindset elements that trip to Klarna. So you can just see, like, this is what greatness looks like. What's your scale of ambition? This is what it could be one day, like just pushing people a little bit. And so those are some of the things that maybe that's the case study of ARC and how it's

evolved over time. But it's been five years in the making through many iterations of the product. I think that's another part of what you do in product. Like you iterate. You ship an MVP, you iterate constantly, incessantly until it's better and better and better. And then you try to do bigger, bigger things along the way. I can't remember what the exact ratio was, but I heard this funny recipe for great company building that split things into like stuff that you have to do that's completely innovative and new,

stuff where you're improving in some meaningful way on the existing way of doing some things. And then some large percentage where it's just like, just do it the best way that people have figured out to do it already. Like don't reinvent the wheel. Yeah. It's a community that I forgot, the ratio. that the person, I think it's a Mark Pinkett's thing. If you think about those three things, what would your recipe be? If those were your three ingredients, what do you think that recipe looks like for the companies

that you've worked with? I think there are one or two or three things that really, really matter where you have to innovate and delight. What those three things are varies from company to company. And then there's so much core people stuff. Over time, your job as a founder becomes not just product, but it becomes people. It's almost like the product that you're working on is actually the culture of the company

and the board chart and the people and all the management. There's a lot where you do not need to innovate too much because it's not like human psychology has completely changed in the last five years. People are still motivated by, they want autonomy and mastery and purpose. And so you need to figure out how to solve for those three things. It's not like that changed suddenly in the last year.

So those are the areas where we really, really want to help you apply the best of. to allow you to innovate on products, essentially, technology. In the areas of autonomy, mastery, and purpose, I think that's the Daniel Pink Drive framework for thinking about professional motivation, or I guess just any motivation. What are the best ways you've seen companies respect that? So again, if this is one of those things that's in the category of, we kind of know how this works, do these things, and company gets better, what do you think those things are?

Like, what are the best practices that you've seen for managing that group of people on keeping them motivated. Part of it is selection on the way in. Are you really hiring great people? And then do you understand that great people often move on to do other great things? Some founders I get very, very mad when their early great people move on and they're like, you're dead to me. That just has never made sense to me.

People have ambitions of their own. Do you celebrate people who leave to start their own companies? or go on to do different things or decide that they want to be at an early stage company forever. So they leave your now late stage company to go in an early stage company. How you treat people on the way out or just your whole attitude to that process, I think reflects a lot. Everyone always asks about what to do. What about what not to do? Like what have been the biggest mistakes, blowups, blunders that you've seen when it comes

to this management of human capital and the organization? I think one of the biggest mistakes first-time founders make that I certainly, made is just not making expectations clear. Like, I used to look at some folks on the team and be like, why are they not doing their job? Or like, why did they do it this way? It makes absolutely no sense. They're just not doing a good job. And then I would learn something like how to do a better operational framework or how to set OKRs or how to clarify customer persona.

It was like, oh, it was actually my fault. I did not explain what their job was or what expectations were or what goals I was trying to hit or who our customers were. And so there is an art to doing your internal storytelling of who your customer is, what the expectations are that it's not like you walk out of the womb with that and you learn it over time. And that's a lot of what we try to teach founders in art. Here are the parts that you need to make really clear and how to communicate it really well so that your team can even know what their job is. You think all the way back early in your career to the time you spent working on Google Maps. What do you take from that experience? And I ask it in part because

it's such a ubiquitous product that literally everyone has used. That's a fabric of our daily lives. And if you step back and think about it, it's like one of the most remarkable things that exists on the planet. I can't believe it exists. What do that teach you about product? My favorite project inside of Google Maps

was this thing called My Maps, which I think has not been touched for many, many years, but still Google has not been able to get rid of it. It's this feature that lets you create your own map. You can bookmark your favorite restaurants, draw out a route. And it was at the time, innovative because Google hadn't done a lot of user-generated content. YouTube wasn't part of the picture yet.

It wasn't a thing. This was in 2006, maybe. We had this tiny little team, I think five people inside of maps. And we just went off and built this thing where anyone could make a map. And we released it. And it just exploded like wildfire. I remember we thought we were being dozed, but it was actually a wildfire in SoCal and some radio station had made their own map of here's the safe zones, here's where the fires are,

all this information. And it was getting so much traffic. We literally thought someone was attacking Google Maps and trying to take us down. And that really showed me the power of community. It showed me if you give people tools and then empower them, the results can be quite surprising. And I just remember what that small team was like. We were so passionate about this project. we were so below the radar of management because nobody cared about this feature. But that allowed us to work really, really fast with a lot of passion, a lot of user testing. And it was incredible experience. And that's part of why I decided I wanted to do startups next.

Was that a little tiny startup. I love that. Nobody's been able to get rid of that feature. I'm sure that code's really old and sucks, but people want to make their maps. And if you took them away, people would be really mad. Yeah. Who else inside of Allrays specifically, what other investors, have you, learn the most from and what have they tell you? There are so many incredible women inside of

all raves. Someone I really, really admire and I've spent time with is Karen Nortman at Upfront. She's based in L.A. She is such a generous spirit. And she has this way of bringing people together across industries to do really interesting things. So she created the women's soccer team, Angel City. She sent my kids soccer gear to put a point on how generous she is. Right. She goes above and beyond, treats people really well. She's loved everywhere she goes. And so she was able to pull together and co-found in her spare time a soccer team with Natalie Portman. Really cool jerseys too. Yeah. And really galvanize this energy down in L.A. and around women's soccer and to bring together. There's a lot of tech people involved in the soccer team. There's a lot of celebrity

media people involved. But she just builds bridges across different communities. And I'm sure that's going to turn out to help her. I know it has help her career-wise, but she's just someone I really admire for generosity and for her community building power. If you now think forward around both your investing in product roles at Sequoia, how do you think about measuring success, let's say, over like the next 10 years? If you're forced to define, success. And I asked this question reluctantly because I'm not a big, hairy, audacious goals person. I actually think they're counterproductive most of the time. But if you had to define what a great 10 years hence, I guess I'm especially interested around product because

investing, the answer is a number and returns and being the best. What does it look like? How how would you define it? As a board member and a community builder and a product builder, I think I care about what my founders would say about me, the ones that I work with. Would they say, yes, Jess, Sequoia shifted our trajectory? Obviously, they did the heavy lifting, but there was that crucible moment, that difficult decision where I got maybe pushed one way or another or a lot of piece of advice that shifted the trajectory of a company just a little bit, a few degrees here or there to get us to where we needed to go.

That's definitely one. Would they come to my funeral if I died? Do they care enough about me? and I care about them very deeply. We talk about not just resume virtues, but funeral virtues, right? Like, would they come and maybe you want to say a word? I don't know. And then I would want to look at the VC industry and see lots of firms innovating

and changing the way things are done, right? Like, we're not the only firm with the data science practice, but we're one of a few. And that really should be part of a lot of firms. Like, if you have the budget and the fees for it, that should be part of your practice. because otherwise you're just meeting other people in the Stanford GSB network. It's not that diverse. And that's not the best way to find the next great company in Austin or Atlanta or Toronto. You have to seek those non-contrary and non-obvious opportunities.

And if technology were a little bit more involved, if people weren't just using Airtable and Salesforce to run their firms, it's like the only piece of software. I think that would be great. And then I also think about the percentage of dollars flowing to female founders. I care about that a lot. Will you represented are the problems of women being solved in the tech industry? Wonderful set of criteria because they're very simple.

They're measurable. And there's a lot of ways that can be accomplished. I really like them. Just this has been a real pleasure. I'm so enamored with the way that you think about investing business as evidenced by the things that you've actually already built. And I'm sure we'll continue to build. And I'm looking forward to continuing to hopefully be able to call you and ask you

questions as we try to tackle some of these same problems. I think the unique way that you're approaching this is refreshing and very interesting. And I've so enjoyed our conversation today. I ask everybody that I talked to the same traditional closing question. What is the kindest thing that anyone's ever done for you? I think the kindest thing that people have done for me is just believe in me when it was like not obvious. A lot of people have taken career bets on me.

The power of that belief of someone who's really good saying, no, I think you could do that is really, really, really. powerful and life-changing for people. And several people in my career have done that. Marissa Mayer hired me as an APM at Google when I tanked in my interview. And I was like, I don't know if I want this job. Like that's probably not the best thing in the world to say in an interview, but she took a chance on me. Rulov and Jim at Sequoia took a chance on me joining Sequoia. Like, I'd never done a single angel investment, not proven at all as an investor. And they were like, you know what? Let's give you a shot. And it has not been a straight up into the right

journey by any means, but I always be really, really grateful for that. The power of that first believer is probably the kind of thing that anyone's done for me. It's such a common answer that it makes me ask a quick fall, which is maybe specifically at Sequoia, why do you think they did? What do you think it was that precipitated that bet? Because I'm amazed by the percentage of these answers that is some version of someone that took a bet on me when there maybe wasn't complete evidence that it was a smart bet. Why do you think they did in your case? The hiring spec at Sequoia is not too different from the hiring spec for founders, which is you need to have a spike somewhere. You have to have something you're exceptional at. It doesn't have to be the same thing across everyone.

That just has to be a spike. You have to be really great at something. And then you have to have a lot of grit. This job is not for everyone. Being a founder is not for everyone. And there's going to be moments where you're like, why did I do this? Oh, it's not working right now. And you just have to manage your own psychologist. and keep going. That was one of the things Jim Gets said to me. He was like, you need to be able to manage your own psychology. Every investor at Sequoia has had a moment where they're like, oh, none of my investments are going well.

This is not easy. Like, uh, maybe I shouldn't be here. How are you going to get through that valley? And I was like, well, you know, I ran a sumer social company for nine years. That was not very certain. And there were many near death experiences. And I was surprised that we got out alive. And so he was like, that's a pretty good answer.

I'm sorry you're doing this to me, but you're making me think of follow-on questions, so I got one more. You mentioned right before we hit record that we talked about Marvel, that you're just a pop culture junkie. What do you see in the pop culture landscape today that most has your attention? So I love Marvel and Star Wars, but I also love my trashy reality TV shows. There's a show called Love is Blind, and it's a show on Netflix that is about forcing people to fall in love without seeing.

each other. You are stuck in two rooms with a wall in between you and you just talk to each other. And you have to fall in love and propose to the other person. We have to find someone that you feel like you can practice. It's not just one person you're paired with. It's a selection. You date multiple people across many rooms. And then they follow what happens with those couples. And it seems like a contrived concept, although I have to say I almost debated starting a dating app with this very concept of getting to know people first before actually meeting or revealing pictures. to me that reflects this desire to return back to really getting to know people. It's like we're tired of this fake appearance-based, swiping on Tinder,

looking at people's perfect Instagram lives, and just really wanting to get to know someone. We've been trapped in the pandemic for so long and apart from each other. I think there's this desire to go back to real deep connections. with the decline of church as a gathering function, you're not knowing your neighbors as much anymore, kids just sort of being on social or in games. I think there's a real thirst to get back together in person

and to get to really know people. And so I think that is a big trend in consumer that I think about a lot. We had a party yesterday to celebrate my kids' end of school. And there was a moment when there was like a crazy amount of kids running around, jumping around and get in trouble or whatever. and all their families around. And I couldn't agree more.

It was weird to have the realization of how special this was because it's not been normal to be able to do this for several years. Just watching it was like really beautiful to watch and just fun and everyone's laughing and there's music on and whatever. It's a great closing thought. Not complicated, but something that we're missing. Yeah, but there's for community and for belonging. Amen.

Jess, this has been so much fun. So glad that we were able to do it. Thank you so much for your time. Thank you for having me. If you enjoy this episode, check out join colossus.com. There you'll find every episode of this podcast complete with transcripts, show notes, and resources to keep learning. You can also sign up for our newsletter, Colossus Weekly,

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