This Week in Startups - E40: “Angel” Podcast: Jeff Richards, Managing Partner at GGV Capital shares lessons for founders & investors from 2008 recession & Dot-com bust, criteria for taking on venture debt, valuing companies in a down market & more

Episode Date: April 1, 2020

0:51 Jason gives some thoughts on quarantine & intros GGV's Jeff Richards 5:11 What will this crisis look like on the other side? Benefits of having a levelheaded approach 11:38 What has Jeff seen from his seasoned portfolio founders who went through the 2008 crisis? 16:21 What advice does Jeff give to first-time founders in his portfolio? 22:22 Investor panic & differences in opinion between independent & investor board members 25:50 What could inexperienced board advice be in a time like this? 30:45 What is GGV's typical check size, how many startups do they invest in per year, and how are their funds divvied up between early-stage & growth 33:26 Chances that current deals could be renegotiated? How can founders price themselves properly? 38:05 Jeff explains liquidation preferences 42:52 How should companies approach taking venture debt in a time like this? What is Jeff's criteria for taking venture debt? 51:11 If things are going poorly, what are some things founders can do to right the ship? Examples of great pivots that saved companies 57:58 What is Airbnb's roadmap from here on out? 1:02:12 Why Jeff doesn't get enamored with IPO valuations & why he is long tech 1:08:18 Thoughts on Zoom, anti-trust laws & more

Season 4 of Angel is brought to you by NetSuite by Oracle, the business management software that handles every aspect of your business in an easy-to-use cloud platform. Schedule a free product tour and receive your free guide, six ways to run a more profitable business at netsuite.com slash Angel. Assure is the leading provider of special purpose vehicles and fund administration, with over 5,000 completed transactions and $2.5 billion under administration. Angel listeners can get 20% off their first SPV at Ashore.com slash angel and LinkedIn. You already know LinkedIn as the world's largest professional network. It's also a better way to find great talent. Go to LinkedIn.com slash angel and get a $50 credit towards your first job post. Hey, everybody. It's Tuesday, March 31st when we're taping this.

You'll be hearing it a couple of days after that. And we're in the middle of day 22 of my quarantine. And it is the middle of the coronavirus panic and pandemic, both of those things. For those of you watching this, a decade or a year or 100 years from now, people, I think, hit peak fear last week or two weeks ago when we thought there would be millions of people potentially dying in the U.S. from this, 100 million people. could be infected and that the death rate would be 5%. And now with social distancing, we've got a couple of thousand people who've tragically died and hundreds of thousands who have been confirmed with COVID-19, but it feels like the end game is near.

Testing is coming. I am very optimistic about the future. and so we move forward and we're going to talk a little bit about what a post-coronavirus world looks like today and we're going to talk about how startups are going to get through the second order effects. Anytime we do this, we have the risk of the gentle, unique snowflakes in the world saying, my God, is that callous to talk about business at a time like this? Well, for those snowflakes, let me explain something to you. Business and jobs are what give people purpose.

in the world in many cases. It also gives them a roof over their head, medicine, and food to feed their families. So you cannot talk about human existence in this case without talking about people's livelihoods. It's obvious to everybody that life comes first, but livelihoods come right behind that. And so with that disclaimer, we'll start the podcast. If you do, in fact, want to cancel me, please, I'm begging you. Cancel me, I want to retire. This is an awful lot of work. But I'm feeling particularly optimistic today. I saw it today they were going to have some very affordable tests. We're all going to be able to take tests.

And we're seeing the numbers flattened massively. So shout out to the leadership in California, which did a great job of shutting this place down real fast when they thought social distancing would make a big difference. Hopefully, testing and tracing of people who are, in fact, infected is a great idea. and we'll probably be talking about that in the coming weeks. So with us today is Jeff Richard. He's a managing partner at GGV Capital. That's not Google Ventures, by the way. That's a different firm.

This is GG Ventures. Welcome to the pod, Jeff. Thanks for having me. You heard my disclaimer there at the top. And I see you're there in the United Lounge on your Zoom. You're not actually in the United Lounge. But it's empty there. It's clearly.

They miss me. They miss me. I travel about 200,000 miles a year. Really? Oh yeah, 220 last year. 220,000 miles. So that doesn't, I think United is like gold, then platinum, and then that makes you like a diamond titanium.

I don't know what they call global services. So they take very good care of us. This is the global services lounge at SFO. Yeah, my partners and I are all global services. You heard my quick preamble there. I'm in day 22 of myself quarantine. Quarantine. Oh, boy.

I'm losing my mind. How about you? How many days have you been locked up during this? Yeah, we're on week four for GGV. We sent folks home, so four weeks ago, went to work from home. You know, part of it was interesting for us. Half of our firm is in Asia. So we saw this play out in China starting in January and obviously Japan and Korea and Singapore and elsewhere. So I think had a little bit of advance warning on what was coming. And we're able to give some of that advance warning to our portfolio companies as well as our team. And then to your point that you just made on the opening, I think we're also optimistic about what the other side looks like because of what we're seeing in Asia where those countries are already on the other side of a lot of the

real challenges here with the COVID crisis. And when you talk about being on the other side for people who are here in America who are scared, and rightfully so, it's a pretty horrific, scary situation. perhaps people are in a panic, but that's also reasonable if it's the first time you've been through something like this. It is pretty scary. What does it look like on the other side? Well, something you just mentioned, I was just talking with an entrepreneur that I backed and sold his company a couple years ago.

And I said, you know, I feel like, so I'm 48. I don't know how old you are, Jason. But I've been, yeah, I was here for the dot-com bubble. I was here for 9-11. I was here for 0809. And I feel like when you go through these major crisis that reset the whole ecosystem, you know, in some cases for years, you have a much more balanced outlook, right? Like I share your point of view.

I think this is, you know, I certainly have never seen a pandemic. I never been a part of it. This is kind of a hundred year event. I keep having to explain to my kids that none of us have lived through this. But I know we will get through it. And I'm optimistic about what the other side looks like. And I don't think the other side is a, you know, immediate bounce back. When you have industries like travel and hospitality and hotels and restaurants,

you know, we're going to see millions of people lose their job. As you mentioned, tens of thousands, maybe hundreds of thousands of people that pass away because of this disease, which is, you know, it's brutal. And it's scary and it's crazy and affects all of us at a very visceral level because it's, because it is scary, but this country is pretty damn strong. And whether it's six months, 12 months, 18 months, two years down the road, I don't know what that looks like. But, you know, I was here.

I started my second company in 2003. That turned out to be a great time to start a company. Amazing time. You know, I was funding companies in 2009 and 2010. That turned out to be an incredible time to fund companies. So I've been trying to, as we're giving entrepreneurs, you know, advice and a very cold dose of reality about making the changes they need to make right now, we're also. telling them, hey, look, you've got a great business and you're going to have a great business

in 12 months. I want you to be there in 12 months to fight another day. So let's make the changes we need to make now and then invest in our customers, invest in innovation, invest in product, invest in our people so that whether it's July, September, January, whatever, we're ready to play ball because you and I both believe the tech industry is here to stay and the economy will bounce back. I just don't know when it'll happen. Yeah. And most of the time, it's a something like nine to 18 month rebound. So you get this, you know, two or three quarters of negative growth, of belt tightening, and then you start to see some signs of life. So in the economy, and it's likely what we'll see here. Is that your take on it or no?

I don't know. I mean, I think industries like travel and hospitality and the restaurant industry. I mean, if you're a small restaurant, I live in Pleasanton here in the Bay Area. If I run a single restaurant here in Pleasanton, can I survive for six months if I'm closed? That's going to be tough. So I don't know how that plays out at a very localized level, particularly in the restaurant industry, hotels. In Asia, didn't everybody. But like big corporations, Fortune 500, the tech community, I think is going to be fine. But in Asia, didn't everything reopen in the 60 to 90 day window or 90 days after for sure?

Yeah. If you look at China and Japan, this crisis really hit them. I'm hard at the end of January, right around Chinese New Year. We're now at the end of March, so 60 days later, they're back. The restaurants are open. Kids are going back to school at the beginning of April. They're obviously restricting travel because that's how this virus spreads. And those countries have taken more aggressive measures in terms of tracking people who have fevers and using apps to do that.

But yeah, they're essentially back in business. And so that gives me a lot of hope and a lot of optimism. We're not dealing with it the same way in our country. And so I think that's a risk point. But you look at the way the Bay Area has dealt with it and you have to be proud. I mean, so far, so good. Now, the worst may yet to come. But so far, we've certainly avoided like what's happening in New York, which is terrible right now. Yeah, there's a doctor from UCSF who every day posts. I follow him on Twitter. He's great. I follow him too. And I had to reply to him because I was a little confused because he said, today we have 13 COVID-plus patients. And I was like, is that 13?

additional or you're saying 13 total. It's 13 total. And, you know, he's like seven or nine of them have been in the ICU each day. And essentially, the ICU is empty here. And so there is something about catching this early and there is something about the density of the city that comes into play here, subways, et cetera. So I think there's a lot to be optimistic about. I'm an optimist. I think we've done more testing than they did in Asia from what I understand at this point. And now, I don't know if you saw today, the FDA approved like a two-minute test or something. So there's going to be a really cheap test available for everybody to take it. Seems to me like if we do and we do the tracing where if somebody is positive,

you can just trace everybody who is with them. Boy, we could be back to work sooner than anybody anticipated, I think. I can see these restaurants opening up again in May and June. It's very regionalized, though. You know, we've all seen the video of the folks in Florida on spring break. Oh, my Lord. I mean, that was what, three days ago, four days ago. So, I mean, I've been locked in my house for four weeks and there's people partying

on the beach in Florida. So right now it feels very regional in the way this has been dealt with. You're not hearing much about the Midwest at all. Maybe that just hasn't happened yet, but I'm certainly not hearing much about cases in the Midwest. So I'm with you. I'm extremely optimistic. I am certainly not a doctor or a medical expert. I'm barely qualified to put a bandaid on my kids.

But I'm optimistic by what I see. And I'll give you as a proxy two weeks ago. ago when the market kind of hit a bottom, you know, I personally invested more money into the stock market then than I had in the last four years combined. Me too. Yeah, I picked up names like Crowdstrike and Splunk and Blackstone and, you know, companies with big balance sheets that tend to do well in an economic recovery. And I'm bullish on, again, I don't know if that's 90 days out.

I don't know if it's six months out, but I've been through enough of these crises to know that on the other side, things are good. And when you talk to founders, you've done dozens of phone calls with founders. What do you hear from, let's start with the seasoned founders. They've done this before. This is their second or third company. When you call one of those founders, tell me what is it that they say they're doing at this moment in time? And what is their perspective?

The seasoned founder. And then we'll get to the unseason founder. Yeah. There's a wide spectrum. So I have a couple of founders who have, this is probably their second or third company. And, you know, starting three or four weeks ago, they were head of the game plan. They were already moving into work from home mode. They had revised financial plans that they were presenting to the board.

They had scheduled board calls. I mean, this is literally three weeks ago. Right. So I think, you know, and all of those folks, so the other thing that you see from those folks who were on their second or third company and have been through a couple crisis, just like you and I, they're optimistic, right? So their mindset is, hey, I got to make some changes in the near term to make sure. I have a company in 12 months, but man, I'm pretty freaking optimistic about what the future looks

like. We just need to figure how to get through this. And they're on top of it. And I think they're also willing to take an aggressive set of actions now because they know the longer they wait, the more painful it is for them and for their company. Whereas the rookie mistake is to sort of, you know, rip the band-aid off slowly, which is sort of what we're doing as a country to our economy. So I definitely have been just, and I tweeted out a couple weeks ago, I've just been blown away at how prepared, how smart, how confident, how calm a lot of our CEOs are. And maybe we're just lucky to work with some really great ones. But it feels very, they feel much more prepared than they were in 0809.

That's the, that's the comp that I have. I feel like in 0809 people were not prepared for the changes that were coming. Yeah, 0809, people were, okay, let's take a wait and see approach, the very slow Band-Aid removal. And then this time around, people said, okay, this is going to be an extended shutdown. We saw what happened in China. Okay, three months, nobody goes to work. Economy takes a 25% hit. That means that we should see a 25% hit, at least in our revenue.

So let's figure out how many months of runway we have. Okay, I'm going to take a 50% cut, pay cut as the CEO to put it out there and make sure people understand that I'm taking the brunt of the pain. and I'm going to do 10% cuts across the management team and then 5% cuts across the board and lay off this many people. Like that was a phone call I had with somebody. And I was like, oh, wow, I don't have to give you the speech. I don't have to give you the talk.

No. No, and I think the other thing is it happened so quickly. Yes. If you remember, 0809 kind of happened over like a six to nine month period. And so there was a lot of debate of the severity and is this happening and who's a good impact. And this happened so fast that I don't think there's any debate. And the other thing that I've had the conversation with founders around is forget valuation, forget growth rates, forget all the things that we cared about 90

days ago, because nobody's going to look back at 2020 as an investor in 2021 or 22 and say, gosh, what happened in 2020? Nobody's going to say that. Everybody knows what happened. So just acknowledge it, deal with it. And the faster you deal with it, the better position you're in. All right. When we get back from this quick break, I want to talk about the first time founders and what you have to walk them through is going to happen and what the right course of action is in a crisis. When we get back on Angel. What do companies like Ring, Hint, and Tocovus have in common? Well, they all use NetSuite to accelerate their growth. Successful companies know that in order to grow faster, you must have the right tools. If you want to take your company from $2 million to $10 million

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It's also the last system you'll ever need. NetSuite, business grows here. So here is your call to action. schedule a free product tour right now and receive your free guide the six ways to run a more profitable business at netsuite.com slash angel. That's right. Go to net suite.com slash angel. Nextweek. Thanks again to NetSuite for supporting independent media like this podcast. All right. Jay Rich Live is with us. He's at Jay Rich Live on the Twitter. Jeff Richards is here. He's a managing partner at GGV Capital. And he's been doing that for Over a decade, we were talking about the new founders, the first-time founders. Boy, this has to be terrifying for them to already have the inherent anxiety that comes from being a first-time founder on top of being a first-time founder in wartime. A wartime CEO as a first-time founder. Not easy.

What have those phone calls been like? Yeah, I think, well, first of all, as you mentioned, there's a lot of anxiety as a founder in general, right? It's a very lonely job being a CEO, particularly when you're 25, 30, 35, and you've never done it before. I think the hardest thing for me in the first few weeks, and again, I'm four weeks into this. The first few weeks was just convincing them that this was real. This is going to have major shocks to your business. This is going to, you know, I have one founder who's a first time founder. ahead of plan, you know, January, February, business is going great. We're well capitalized. We've

got 18 months of runway. I don't quite know how this is going to impact us. And my advice to him was, look, based on what I'm seeing, it's going to have a major impact on your business, just not seeing it yet. And when he said, well, what are you thinking? And I said, well, my advice is assume an 80 to 90% hit to bookings in Q2. That was like a pause. Wait a minute, a 90% drop in bookings. And I said, yeah, for two reasons. One, a lot of companies just aren't going to buy anything in Q2. There's going to freeze spending. Two, you have everybody in work from home mode. It's hard to get things done. And so then that probably cuts your top line forecast for 2020 by 50% plus. That was much more aggressive than what he was thinking and what other first-time founders were

thinking. So I think part of your job as an experience board membered investor is to give them a dose of reality and be honest with them in a very calm way. But based on your experience, get them to And then because the thing that I remember in 0809 and I also remember as a founder in the dot com bubble, it's hard to see how everything's correlated, right? And people talk about diversification and there's oil and gas and there's this and then real estate and stock market. When a market craters, everything's correlated. Unemployment goes up. People stop spending.

They get nervous. There's a panic that sets in. And that will have an impact on your business. And so, you know, trying to say to them, hey, look, as a first step, let's freeze hiring. As a second step, let's come up with a set of scenarios that model out different impact. to revenue and growth. And then let's really understand cash flow in the expense side, because what a lot of founders don't think about is if I'm, if I'm projecting that I'm going to add 10 million of new bookings this year, and I'm a SaaS business with 72% gross margins,

that's $7 million of cash that I'm expecting to come into my business and I've factored into my runway. So if I take out that $10 million and I make it four and I've only got $3.5 million coming in or two and a half in cash, all of a sudden that 18 months of runway just became 10 months. And so that, working through the mechanics of that with first time founders has been where we've put a real focus. And again, I've talked to, you know, 35 CEOs over the last three weeks. And the experienced ones, we didn't really have to do that. And I would say the other thing is a lot of experienced founders hire a finance exec early on. Your inexperienced founders don't. And if you don't have a finance exec right now, it's hard. If you're doing these models yourself or with your co-founder

who also runs engineering, not easy. Yeah. And a lot of time founders are not even looking at their bank account, they don't know their cash balance, and they don't understand the cash side of the business is super important because you run out of cash, then there's no amount of planning that can solve that. And funding just might not be there. I've been telling folks, yeah, I know you're working on your plan B. I'd like to see plan C as in cockroach mode. And, you know, how do we survive this in cockroach mode, which is just keeping the lights on? So the business is here to hire people later. Right, which is doable, right?

It's doable. Why do people have an aversion to even making the plan C? They don't even like to make the plan C, let alone getting a founder to execute plan C. Why is there so much resistant to plan C cockroach mode? Because I don't think that's been the mentality for the last five to 10 years. And you got a couple things. One, your average founder who's sub 35 years old was pretty young in the financial crisis, probably not running a company or a senior executive at a company, number one.

And number two, a lot of their board members weren't investors in the last financial crisis, right? What percent of GPs of VC firms were GPs 10 years ago, probably half? Yeah. So you got a whole industry full of folks who weren't here, you know, for you and I, 0809 feels like yesterday. but for a lot of folks, they were in high school. So they've just never seen this scenario. And the analogy I give people, I love to ski and I've been skiing all my life.

When I get to the top of a bump run that I've skied 100 times, I'm just like, great. I know exactly what to expect, right? You know, I might fall, might hit a bump, might crash, hit my head, whatever. But if you've never skied that run before, it's pretty fucking scary. And that's where I think a lot of folks are. They just got to the top of a black diamond that they've never skied before and they're a little nervous. And unless you've got good people around you, and this is where, you know, obviously to talk my own book, I think working with experienced investors that have been around for a while, our firm,

you know, the partners in our team have been working together for 12 to 15 years. There's a lot of trust. There's a calmness. We have trust with our LPs. We know who we work for. We work for our LPs. We have to do the right thing for them. And then we have to be empathetic and give sound, calm, balanced advice to our founders. But if you've never been through that personally and the people around you've never been through it, it's hard. And so I am, you know, I am seeing some investor panic as well. And that's not helpful. It's not constructive. Really, investor panic. So people are panicking about their portfolio. They're panicking. They're going to lose their jobs or not be able to raise their next fund or maybe even they're scared to call their LPs and get a, do the next capital

call. Describe the panic. Yeah, I don't know. I just see it on, I just see it in board calls, right? So we're doing, we're doing a lot of Zoom board calls where you've got six, you know, three to six investors on a call and the varying perspectives and reactions. And, you know, it's not uncommon for me to get off one of those calls and have the CEO call me and say, hey, this guy's driving me crazy. You know, he's panicked. I'm trying to run a company with 500 people. I'm trying to show up for work every day and make shit happen. And he's at his bunker somewhere, you know, in an undisclosed location, panicking. And it's just not helpful. It's not constructive. And I think that's a little bit aware having been a founder and a CEO and an operator is helpful for me because, you know, I know the last

thing I want is somebody calling me at all hours panicking. So I just, I just think there's, there's a lot of value in experience, a lot of value in independent board members. We've been saying for years, we want our founders to fill those independent board seats. Well, guess what? Now is a time when an independent board member can be invaluable, right? You get an independent board member like a Jeff Epstein who was the CFO of Oracle and I was on a board with or a Matt Thompson who runs worldwide sales for Adobe and I was on a board with. Like, these guys, you know, because they're running businesses on their own. They're not just an investor who's worried about his position in the company. They're trying to, they're trying to stay calm and give good advice about how to manage

through a crisis. Explain why the motivation of the board member, their concerns, matters, because you did sort of mention there, the independent board member. Explain what an independent board member is when you, and how you pick them. And then why does that create that difference of opinion maybe from the person who's got the skin in the game as the investor? Yeah, it's a great question. And they're not always different. But let's say at a series B, a typical board structure might be two common seats, which might be the two co-founders or a founder and CEO and another senior exec, two investors. And then you'll have a fifth board member who's an independent board member, which is somebody who's not affiliated with the company and not an investor.

So you might go get an executive from another tech company or somebody who's an industry expert or somebody who can be a great advisor to the team who becomes that independent board member. And that person, you give them a stock grant, usually a quarter point to a half a point of the company. So they have some skin in the game. But their job is to give objective advice, right? What's the right thing for the business? What's the right thing for the team?

What's the right thing for the company long term? That advice can sometimes be slightly different than your investor board member who owns 20% of the company and has, you know, 10, 15, 20 or more million dollars invested in the company and is very focused on preservation of capital and return of that capital. And so sometimes those agendas can be a little different, particularly when times are good, everybody's agenda tends to be the same, right? Yeah. Let's keep growing. Up into the right. Keep going. It's when you get a little, you hit the bumps or get a little chaos that I think you see the differences of opinion come out. And I am very active in asking our series A,

ABC companies to try and add independent board members because I've seen them create so much value for these companies and be such a great sounding board for those founder CEOs. In the worst instance, a board member with $20 million at stake from their $400 million or $600 million fund in a startup that's hitting choppy waters, that's in the turbulence, that's in the mud, in the muck, in the soup, what are they thinking? If you were to like actually disconnect their words and behaviors, but actually get right into their brain and understand what they're thinking when the startup's in the soup. What are they thinking? Well, they is me since we happen to. Yeah, but I'm giving you permission to think about the other one, not you. But you can do yours how you

we write as somebody. We write a lot of $20 million checks. Look, I think the thing when you've, so I'll give you two examples. One is, I think if you take an experienced team like ours or some of the other large funds in Silicon Valley that have folks that have been GPs for a decade plus and work together, there's a lot of trust that people will make the right decisions and do things that are in the best interest of the firm, the fund, and the LPs. And ultimately, that's who we work for is our LPs. It may be in a newer firm that doesn't have the track record, hasn't returned billions of dollars of capital to those limited partners, you know, may feel a stronger sense of urgency to drive exits. So sometimes you get a misalignment where somebody's

says, gosh, you know, it's panic time. We have an opportunity to sell the company for, you know, there's $40 million invested. We just had an offer to sell it for $40 million. Let's hit that bid and take our money back. When that may not be the thing for the company, long term, you know, we hit a rough patch, but who's to say this isn't going to be a company that's worth $10 billion? And we actually have to think about the employees, the customers, the rest of the shareholders around the table. So I think, and I'm also, you know, not shy about giving that advice if that is the right advice. Hey, guys, future doesn't look bright. The category we're in just got destroyed.

It's not going to come back. The economics of our business aren't good. They never have been. We should think about taking that offer. And I always tell founders, look, I will, you know, I have a fiduciary duty to our limited partners, but I also have an obligation to you to be supportive of you and what you think is the right direction for the company. I will give you objective advice.

And when a guy like Mike Lazaro at Buddy Media comes to me and says, hey, based on what's going on in social networking world. I think it's time to sell buddy to sales force. And I said, I think that's the right decision. But I've also had founders where I've said, gosh, let me give you some balanced advice. We happen to be in a rough patch right now, but I'm really optimistic about this business and the long term for the company. Let's talk through the pros and the cons and make the right decision. So sometimes you get folks who may not have the best interest of the company long term in their mind because they're an investor and they're thinking about that preservation of capital.

All right. When we get back from this quick break, I want to talk to you a little bit about that board composure and then board members who can't keep their composure in board meetings when we get back on Angel. If you are an accredited investor, you need to understand what a special purpose vehicle is, an SPV. An SPV is something I use all the time at the syndicate.com in order to syndicate an angel investment.

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largest one in the world, in fact, with over 4,000 members. Assure is the leading provider of special purpose vehicles. Those are SPVs and fund administration with over 2.5 billion in AUA. That's assets under administration. And over 5,000 completed transactions. transactions. We're like 130 of them. So they're doing this for a lot of people. They're doing it at scale. They're doing it professionally. And they're doing it with great customer service. They've developed an innovative software system called Glass Board to automate the entire investment experience from entity formation to IPO. It's slick and it's beautiful. And Ashley, who manages my syndicate, loves the interface. Not only do investors love it, but founders love it as well as it

keeps their cap tables nice and clean and nice and simple. You can get 20% off your first special purpose vehicle, SPV, by visiting ashore.co slash angel, a s-s-U-R-E-D-co slash angel. All right, Jeff Richards is with us. You can follow him on Twitter. J. Rich Live is his Twitter handle. He's a managing partner at G-G-G-V-C-CAPT. Jeff, just to get people a little bit of context.

How many startups do you invest in in a typical year? And what's the typical check size? So, let's see, as a fund, our current fund, we're on Fund 7 is $1.9 billion our fund. We have about 450 million of that earmarked for CDNA. So in any given year across the U.S. and Asia, Latin America, Southeast Asia, we're probably investing in 40 to 50 C'd and A stage companies. And then the other 1.5 billion is for kind of series A through X. Typical check size on the early side is anywhere from 100K to 8 million. And then in the larger fund, it's anywhere from 5 million to 35 million. And we've made some larger bets. We've had a few 50 million dollar

investments. And today we've got a couple that are over 80 million, 80 to 100. And are you slowing down, doing the same or speeding up into the second half of the year in Q2 into the rest of the year? What are you talking about with your partners? Is this a good time to find value in the market and have less competition? Is it a good time to pause and be cautious if you had to pick one of those too. I think, well, I'll give you an anecdote. I have two companies that are signing term sheets this week on new financing. So sort of goes against the mythology on Twitter that everybody just pencils down right now. Those are both new rounds being led by new outside investors, which we're doing follow-on investments in. So I'm psyched about that. One of those is a series C, 40 million dollar financing.

The other is a series B, call it 15. So there are deals getting done. You know, from our vantage point, having been through a number of crises, we love investing in a downturn. The trick is you got to sort of, A, spend time with your portfolio companies first. So we got to figure out which of our portfolio companies are well capitalized. Fortunately, a lot of them have long runways. A lot of them just raised capital in the last six to nine months. And so go through that, which we've now systematically done. We've got every single portfolio company in spreadsheets and we know exactly how much runway they have and what they hit to their business is going to be, both short term and long term, or at least what we think it will be. And so we're focused there first, right? Let's

make sure our portfolio companies can weather the storm. Portfolio triage. Yeah, yeah. And then I think the second part is for companies that have been in those ongoing conversations, how do we help them get those deals done? So I spent a lot of time over the last two weeks on those two deals, trying to get those, you know, make those and or help those investors. Sorry, go ahead. Yeah, I'm trying to ask you about those two deals. Was there any moment in time you thought they would be retrated based on the new economic outlook because obviously those deals were going on for at least six weeks, I'm guessing, maybe even 12. Both of those are conversations that have been going on for one of them's six months and one of them's

three months. So if the people involved in those conversations said, hey, the world has changed, we need to change the valuation here or change the dollar amount. That would seem logical, but it would also feel maybe uncomfortable to have that conversation. Did that come up in those deals? And do you think that's a fair thing for a VC to do? And how should a founder respond to that? Well, look, my advice to founders on one of those deals, we just really agreed to terms last week.

So post-crash. And my advice to the founder several weeks ago was, hey, look, your public comps just went down by 30 to 40 percent. So if you thought you were raising at 100, we should now be thinking 60 or 70. And that's okay, right? I mean, the analogy I use is like Twilio was at 15. in July of last year. It's at, you know, 80 right now. Twilio is a great company. I own the stock. I love the company. I think Jeff Lawson is one of the greatest CEOs in Silicon Valley.

Should his company be worth almost less than half what it was nine months ago? I don't know. But when the market shifts as a founder, you just got to shift and move with it. And so I think adjusting your valuation expectations a little bit is a smart thing to do. I had another founder who right at the beginning of this a month ago, we did a follow on round. And he said, I don't really care about valuation. I'll just take a slight mark up to the last round, even though it was a year ago, because I want cash on the balance sheet to hit the gas through this crisis. So I think the experience founders are the ones that are saying, hey, there's been an adjustment in the market. I'll just make an adjustment. It is what it is. Stock prices go up and down. The folks that probably

will have a harder time raising are the ones that raised at really high valuations a year or two ago and are sort of still mentally trying to hang on to that when the public market just shifted. And there's a very high correlation between the public market and the private market. I was going to jump into your question about retrating on deals. You know, I think people who care about long-term relationships are able to manage those conversations in a way that all sides feel good. So I have not seen anybody retrate on a deal, but I've definitely, you know, there's a balance as you're going through the process with those new investors.

And I'm playing a role as kind of, you know, brokering the conversation between the founder and that other investor of trying to get balance on both sides and get, you know, what's a reasonable evaluation of reasonable terms. I have not seen anybody come in with with more like private equity style terms. We want liquidation preference. We want this. We want that. So I'm thankful for that. If this, you know, if we are in a really dire situation in 30, 60, 90 days, you may see more of that. But I think right now, most of the deals you're seeing get done right now are deals that have been conversations for 60 or 90 days. And, you know, if you're dealing with tier one investors, you would hope that they would, you know, believe in their long-term reputation and brand

and stick to the commitments they've made. Yeah, we were dealing with somebody who's not a tier one with a portfolio company. And I was like, you know, this isn't a tier one or tier two firm. You might want to think it through, you know, non-US firm as well. And they said, well, we want to change the valuation. And as a deal, that's whatever, four months in the making. And then the founder didn't want to change the valuation, but they took the investment and they split into two tranches. So they do half now and then they have the option to do the other half

by the end of next year. What do you think of that kind of a solution? I think you're going to see a lot of creativity. I can't speak to that situation, obviously. But, you know, look, at the end of the day, my advice to founders is always, it's like anything. Think about it as a win-win. Come up with a structure that works for you and works for your investors. And I don't, you know, I personally, my feedback to founders is like if somebody has conviction in you, they should have conviction in you in good times or bad times. Now, the valuation expectation might change because the, you know, the market just changed. But, you know, when we invest in a company that we really believe in, if we're committed to investing, a lot can change and we're still going to be

investing with the company. So I haven't seen that yet. But look, you and I have both been through cycles. We know that things change. If we're in a crisis for three or four months, we're going to see a lot of funky stuff. I would go back to what we talked about earlier, which is I think, you know, this is where experience comes in. This is where brand comes in. This is where working with good people comes in. Having good people around the table matters. And I think it, you know, going through a downturn with good people is a hell of a lot more fun than going through a downturn with people you don't trust. Explain what the liquidation preference is for people who are hearing that term for the first time because you haven't seen that on many term sheets in the last decade.

But we did see them in 2008. That's for sure. Explain what that is? And when I was raising money, when I was raising money in the 90s, it was typical to have a, you know, two, three X liquidation preference on your company. So basically what that is is it just says if you have a company and I put $10 into your company, most private financings today in Silicon Valley would have what's called a one X liquidation preference. So if the company sells for $20, everything's fine.

We're all going to split the proceeds based on ownership. But I get my $10 back. I have a one X liquidation preference. if the company sells for $10, then that $10 would come back to me. So it's a little bit of a kind of a downside protection and what's called a preferred security. So the money that comes into a company is buying preferred shares. The founders and employees usually have what are called common shares. When a company goes public, all of those convert to common and it doesn't matter.

All the liquidation preferences go away and all the terms go away. You know, I learned the hard way in the late 90s that raising money with any funky terms beyond a one-ex liquidation preference is not fun. and in my opinion creates a giant misalignment between investors and management teams. And so I am pretty dogmatic about asking teams to try and do whatever they possibly can, even take a lower valuation, but to raise money on clean terms because I just think it creates better alignment all around the table. In that situation, the company, let's say, gets sold for $100, you have a three-ax liquidation

preference on your $10. How does that math work? I just don't do that deal. But the person who gets it gets $30 back as a minimum. Yeah. Yeah. Yeah, they get $30 back as a minimum and likely have a bunch of other terms. It's just the problem is it just creates a misalignment of incentives.

In a scenario where everything doesn't go perfectly, you've got people managing to different outcomes, whereas what you really want, if you have clean terms in a company, everybody's shooting for the biggest outcome they possibly can. And we're seeing this now with venture debt. So a lot of companies, a lot of private tech companies have venture debt. And there are good actors in that space and there are bad actors in that space. But at the end of the day, what I try to tell founders is if you have a fund that has provided you with venture debt, at the end of the day, if your company sells for $200 million or $20 million, if you have $20 million of venture debt, all they care

about is that you sell for $20 million plus the return on their venture debt. That's it. They have no, they don't have any economics in the upside. And that is something that a lot of people weren't thinking about over the last few years as they were kind of adding in venture debt to some of these companies, in some cases, to avoid raising money at a lower valuation than where the market, you know, where they thought they should be, but where the market really was for their company. So I'm a little worried about that. I think that could play out with some ugly scenarios over the next six and nine months. Yeah. So when we get back from this final break, let's talk about, we kept it very upbeat and positive here. Let's talk about scenario planning for, hey, the venture debt

goes belly up or the company needs to lay off a large number of people, how to handle that. how to land the plane as safely and as gracefully as possible when we get back on agents. Hey, everybody. Instead of me reading you copy in an ad about LinkedIn Talent Solutions, I thought, you know what would be a great idea? Who made LinkedIn Talent Solutions? Who's the product manager? Give me the head of product.

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Happy to be here. And of course, anytime. All right, we got Jeff Richards with us, managing partner at GGV Ventures, a giant fund. And they invest from the seed stage all the way up to right before your IPO. But not public equities, all private. No, all private. We were talking about the venture debt thing. seems to me that a lot of young founders looked at venture debt as extra months of runway,

and we're using it to extend their runway, and now here we are, maybe covenants being broken or venture debt being the last bit of fuel in the gas tank, what do you think is going to happen? You said you're a little nervous about it. I'm a little nervous about it as well. What happens in these scenarios if a company has 10 or 20 million in ventures? your debt and they're out of cash. And how do VCs look at those companies? Yeah, I think, look, if you're working with what I would consider a Tier 1 lender like a Silicon Valley Bank or WTI,

you know, Silicon Valley Bank just came out this week and said that they're kind of running their own version of the government program and giving people some leniency on their... Six months. I read the same email. Yeah. So like six months. Yeah, which is great, right? Yeah. So I think in those cases, you're going to find a very constructive conversation between the venture debt provider and the company because everybody wants the company to survive and succeed. But you have folks that have raised funds that do venture debt. So all they do, they're not a bank. Silicon Valley Bank is taking deposits in and then lending off of those deposits on mortgages and venture debt and things like that. If you're raising a fund, you're very focused on, again, you loan somebody 20 million,

you want to get 20 million back plus interest. Whether the company sells for a billion dollars or or 30 million. It doesn't really matter to you as long as you get your 20 million plus interest. And I think that's, you mentioned covenants. Those deals usually come with covenants, whether it's growth rate or cash balance or revenue or margins. They have a variety of terms. And when things are going well, a lot of companies and founders and CEOs will do those deals because they think, well, what could go wrong? It's just extra runway and my company's doing great. They don't really, nobody had scenario planned. You know, as Brad Gersner said the other day on CNBC about the airline, business. He said, nobody planned for a world where bookings went to zero. And so if you apply that to

the startup landscape, nobody in January had a financial scenario where they said, hey, we're going to grow 100 percent this year. But we might only grow 10 percent. Almost no company would have had that plan. And so they just aren't prepared for what could be challenging conversations if their last six to nine months of runway are on venture debt and not equity capital. Equity capital, your investors, the money's in. They're not taking the money back. unless the company gets acquired or goes public. A venture debt provider has terms where they're supposed to get paid back that money plus interest. And so it's just, I think it's going to make for some challenging conversations because the market just did a hard reset on everybody's

financial plan for this year. I'm wondering, and I have this conversation with my founders, why are we considering venture debt if the business is going well and we have venture capitalists interested? What is your rationale for doing this? And they're typically, rationale is because we can. And that doesn't seem like a good rationale to do almost anything, right? It's like, sure, yeah, and you could have another three shots of tequila because you can. It doesn't mean that you should have the seventh, eighth, and ninth shot of tequila. That could be the ones that get you in trouble. So explain to me how, what's the good use of venture debt and how should a founder actually make a decision about venture debt other than, you know,

I can. Yeah, I think, look, I've run into that a lot and as to you. And look, I think venture debt is a useful instrument. And my criteria is, do you have a CFO? If you have a CFO who can manage venture debt, credit lines, other financial instruments beyond equity, which is fairly straightforward, then I'm generally okay with it as long as it's a reasonable amount of venture debt. If you don't have a CFO or a finance exec to manage that, it can get complicated.

number one. So that's one of my lipness tests is just, hey, if you're in early stage company and you don't have a finance exec, you shouldn't be playing with debt. It's just, it's just a complicated instrument that's a little bit hard to understand. But when you ask the question of why do they take on venture debt instead of equity, you know, it's not uncommon for us to see a scenario where, let's say I'm a software company and I did five million of revenue and my forecast for next year was 10 and I raised money at 100. And instead of going from 5 to 10, I went from 5 to 7. And instead of the next year being 10 going to 20, now I'm going from 7 to 11. And so it's hard for me to get VC interest at that same valuation of 100 million or higher. I've got people who might give me money

at a lower valuation, but I don't want to take that. And so, oh, over here, here's this other pile of money that I can take without having to reset the valuation on the company. And it looks fairly safe, but I may not really understand the terms. And that's that pile of capital that comes from venture debt. And so it avoids any reset on valuation. It avoids any hard conversation about dilution. And it looks fairly attractive until you have a change in the market and the strings that come along with it can be challenging. And I think we're just going to, we have a lot of companies that have just never dealt with that because things were going up into the right for 10 years. Nobody, again, nobody had modeled out a scenario where, you know, their top line revenue for this year.

You know what it's like, to use your favorite analogy? It's like taking that lift, that only services the double diamonds on the back of the mountain. And you're like, yeah, when we get to the top of the lift, we'll know how to navigate a double diamond. And you're like, yeah, you might want to have done the diamonds before you chose to get on that lift. But it's almost like the signs right there. If they don't have you around the table or me or somebody else, and nobody tells them, hey, that's dangerous capital.

It's almost like they got on the lift and there was no sign. You know, when you go to squad, there's a sign at the base of immigrant that says, you know, there is no easy way down from the top of this lift. And what I find is there oftentimes is no one counseling those founders as to the complexity of these different equity instruments and, or not equity, the debt instruments. And I just think it's going to be challenging. So look, most of our companies that are series BCD have some venture debt. They have credit lines. But they also, most of them have a CFO. I think if you're a series A company and you're running your company on venture debt at this point and you don't have a CFO, it's, it's, it's,

going to be a little tricky. It's going to be a little challenging. And that's exactly the scenario I'm in with some companies and founders who, you know, like they're taking this extra two or three million dollars in venture debt on top of their six or whatever. What's the right ratio? If you were to just pick a number that seems very safe, revenue to debt, yearly revenue, whatever you did this year, your run rate to debt. So I'm doing a million dollars a month right now. I'm doing $10 million a year, $12 million a year. Let's just say it's $10 million a year for easy math, what would be a reasonable amount of debt for a company on a $10 million run rate? Well, it all depends on your gross margin.

Because if you have an 80% gross margin, then you have free cash flow to fund interest expense on debt. If you have a 20% gross margin, and this is sort of what's happened in the last few years, as people have gotten enamored with non-tech companies that were raising venture capital, mattress companies and direct-to-consumer companies and real estate plays that were not tech companies that had 20, 30, 40 percent gross margins that don't generate enough free cash flow to be interesting to cover interest expense or, frankly, to be valued at, you know, 10x revenue like a software company. So a $10 million software company that's valued at, you know, 150 or 200 million and had its 80% gross margins that can afford the interest expense on that debt,

you know, can probably use a little bit more leverage. A company that has low gross margins, you know, should have less debt or maybe no debt because they're just not going to be be able to afford it. You just can't afford. You don't have enough cash flow to pay the interest on that debt. And that's the calculation that a lot of people don't do in their in their minds. Tell us if the company, it's clear that the product market fit is not strong. It's moderate, modest, moderate, something like that. There's no investor interest. You've tried many times. you're not even getting tier, you know, DEF investors interested. And you're down to a couple of months runway.

What should have founder do in that situation? They've been at it for three years. Just the product market fit is not there in a strong way. They got a couple of months of runway. What's the proper way to land the plane? Yeah, it's a great question. I would say there's two steps to that. One is getting everyone into reality about that,

because I have certainly been in the situation where, you know, I have seen that that was the setup and had to convince others around the table that we weren't really heading in the right direction and that the market we thought was there wasn't there for some reason. And that's okay. We get it wrong. We get it wrong a lot. It's one of the most humbling things about being in venture capital is you're wrong a lot. And it's very painful. So that to me is the first step is getting everybody around the table to agree that, oh yeah, we actually have a real problem in the market we're going after. There are some teams that see that. In Pippen's, as you know, famously companies like Twitter and Slack that have pivoted out of an original market

and into another one and ended up being worth billions. So I'm always optimistic when a founding team comes to me and says, hey, this market over here doesn't look great, but we love this one over here. I actually had that experience with Blue Chi, a company that was on the board of was in the data business, internet data and switched into software and ended up selling Oracle for $425 million. So you can pivot and some of the best companies come out of those pivots. But if you don't see that opportunity and the team hasn't figured out some alternate scenario. You know, one is let's get in reality. Two, how much cash runway do we have? And could we, do we have enough time to get into an MNA process? An MNA process typically takes six months. And so unfortunately, sometimes we see

companies get to, you know, three to six months of cash and say, well, it's not working out. Let's go sell the company. Well, at that point, it's often too late. And so the earlier you can sort of figure that out, the better and the more time and the more runway you have to figure that out and potentially getting your company acquired. The problem with that is in a down market, those deals don't happen, right? So everybody thinks, oh, if the market shifts and we're kind of in a tough spot, we'll just sell the company. Well, in a down market, the buyers don't buy. So you can land the plane. It becomes much harder. You can, but it becomes much harder. And then the third one is you cut and become cash-operative. And we have seen companies do that.

And I think you're going to see companies do that in this period of time. I think you're going to see some 30, 40, 50 million dollar SaaS businesses that don't grow this year and cuts cash flow positive. Now, the question then will be, well, where do you go from there? If you have a $30 million cash flow positive software company growing at 20% a year, what's that worth? And I don't think we know the answer to that yet. There are some private equity firms that have spun up and some SPACs that have been spun up to go acquire those companies. I think you will see that. I think we'll see, you know, Joe Lamont, who founded Trilogy, is now doing that. Vista, obviously, is doing it at a much larger scale, and then you're seeing some SPACs that are being set up to go do that.

So I think you're going to, I think you're going to see. Explain what a SPAC is. Everybody saw Chimov through this SPAC, IPOA for any, they wound up being Virgin. Virgin Galactic, yeah. Galactic. Explain what a SPAC is. And are you enamored in favor of or indifferent to them? I'm indifferent. I think they serve a purpose. So I think like what Chimov and Adam did with Virgin Galactic was brilliant. It seems like a great transaction for everybody involved and made a lot of sense. They've been popular. It's a special purpose acquisition company. And essentially you create a vehicle that goes public and investors buy shares in that vehicle with the assumption that you have a two-year timeline to go acquire another business.

So you then spend two years trying to go find a company to acquire, and you essentially, that company becomes public through your vehicle. And at the time that you announce the acquisition, shareholders in the SPAC can decide whether they want to own that company or not. So it serves a purpose, which is it gets companies public that otherwise might not be able to go public. You know, TBD, how much value is created for the SPAC owners versus the shareholders and some other things like that. But I think they serve a purpose. But you're going to, I think you're

going to see a bunch of those that have been created over the last few years that go out and buy some of these SaaS companies in particular that are in, you know, like in the marketing software space, there's 500 software companies that probably don't have another round of venture financing coming for them. And so if you have a vehicle, you could go pick up a bunch of these at reasonable multiples and turn it into a, you know, a public company. And I think that's an interesting outcome. But the founders that quickly can figure that out and perhaps cut to cash flow positive will have a lot of leverage in that conversation because they won't have to take the first offer that comes their way.

Because they'll be profitable and they can say, yeah, let's talk next year. Yeah. And the valuation of the company may not be exciting for the investors that came in at 100 or 200 or 300 or 300, but the founder can say, look, I didn't have a choice. You guys didn't want to give me additional capital. there was no third party willing to give me capital, so I cut the cash flow positive. Now I have a $25 million SaaS business growing 20% a year. It's clearly not worth two or 300 million. But if we live to fight another day, maybe we get creative along the way and can figure something out, an engineer and exit

that gets some reasonable return on our capital. What you don't want to do is just put your head in the sand and say, oh, whoa, is me. We've got a crisis. I'm going to run out of cash and we're just going to hit a wall and die or rely on an M&A outcome that may not be there. What's the most meaningful when you've had as an investor to you personally? Well, number one for me as I joined the right firm, I know that's kind of a cheesy answer, but I got lucky and joined a group of people that, you know, have been doing this now. We've been doing it for 20 years and had built a good franchise, had built a lot of trust with our limited partners.

And, you know, I think we're pretty maniacal about the way we work with founders, the trust that we have with each other and the focus that we have on delivering returns for our LP. So I got lucky with that. That's the biggest win for me. You know, on a personal level, I was an early investor in Buddy Media. That was a great outcome with Salesforce. I was an early investor in a company called a Puriio, which we sold a WIPRO for over half a billion dollars. We've got some unbelievable companies in our portfolio today, companies like HashiCorp and a firm and, you know, Airbnb and Wish. What happens with Airbnb during this? This has got to be the most challenging member of your portfolio. They basically are in the travel business, and that's the

hardest hit. And they could have gone public last year. The window was open, and now the window's closed, I think. How do you look at an investment like Airbnb? How do you deal with that? Yeah, I mean, obviously the travel sector globally just got crushed. Demosished. Yeah. I mean, like I mentioned the other day, I spoke to an airline executive the other day that told me the burn rate on headcount alone in the airline industry is $150 million a day. And the bookings just went to zero. Nobody modeled that. There was no model for that.

So I think the entire industry, whether you own hotels or you're in travel or ride sharing or your Airbnb, we just had a tsunami that hit and everybody's trying to figure out what to do about it. I would say with Airbnb, one, I think they created a category. They have an unbelievable brand. They have incredible trust with their guests and with their property owners. And so I think that franchise has a ton of value. You know, the question of how do you navigate an unprecedented economic tsunami, like I just said, is TBD. I think they're doing a lot of the right things. I mean, you saw that they're providing shelter for hospital workers, which I think is incredible. So how do you try and make lemonade out

lemons and navigate through it, obviously incredibly strong shareholder base. Yeah. Very well capitalized. And you know, as well as I know, IPO markets come and go. I've been around when the IPO market was closed for 12 months and I've been, I was around when it was we were taking, you know, ridiculous companies public in 99 and 2000. So the IPO market will come back. I mean, if you look at the companies that went public in December, bill.com and data dog are

both trading above their IPO price. So to me, you know, you've got companies at Cloudflare and obviously. You see Slack and Zoom and others. But even the base technology companies that went public over the last six months are trading above their IPO price. So to me, that's a very positive signal that when the volatility in the market calms down a bit, we have demand for great tech companies with high growth rates. And you'll see companies like HashiCorp and Snowflake and Confluent. And a lot of the names that we all love that are private tech companies will have a chance to go public.

So I don't worry about the IPO market coming back for companies like Airbnb and all these other tech companies. I think the question is, how do you, if you're in the travel sector, whether you're booking.com, you know, or even companies like Google. I mean, Google, a huge percentage of their revenue comes from travel. Yeah, travel clicks. People are doing a lot of searches there. My thesis is this is going to create a pent-up demand. People, especially the over 50, 60 crowd, are going to go yolo crazy when they're out of

this confinement because we've never been confined like this as adults. We've always had the option to go to Cabo for the weekend or, you know, Tokyo skiing, Tokyo or go skiing in the Alps, whatever it is. Like, it's always been there. And then when it's taken away, you start to think, oh, wait a second, it's going to be taken away when I'm dead too or when I'm unable to ski. I need to go to Hokkaido. I need to go to the Alps. I need to experience that. I think we're going to see people go Yolo crazy Q4 forward and bookings.

Everything is going to be off the chart. That's my belief because I'm sitting here going stir crazy. I want to go back to Tokyo. I just had to cancel my spring break trip with my kids. And as I was just this morning, I was canceling the flights. And I literally had the thought of like, gosh, I wonder if I should go ahead and rebook now. Because there's going to be so much demand once the gloves are off. And we say it's okay to travel again.

So I agree with you. Because if I'm thinking that, there are certainly tens of millions of other people that are thinking that as well. So again, back to, you know, IPO market will reopen. People will go back to traveling. They love companies like Airbnb. They trust that brand. And Airbnb was going to be a direct listing anyway, was the rumor.

And so a direct listing, if they don't need to raise capital, they've got such deep pocketed investors, they'll be fine as well. It just might be at a slightly different valuation than people expect. And I don't, you know, we are not, we don't get enamored with the IPO valuation. We just look at as a marker. I mean, if you look at, take your pick, we were early investors in Alibaba group. that company is worth, you know, hundreds of billions of dollars today. Nobody looks back and says, gosh, why did they go public at $68 a share? That doesn't make any sense. You know, we were investors in Zendesk. We took Zendesk out in a crappy market for SaaS companies. I think it had about a $650 million market

cap, you know, before this crash, Zendesk was valued at $8, $9 billion. So IPOs, you raise $75, $150 million at a marker. And then it's about what you do from there. And so where Airbnb or any other company goes public, honestly from our vantage point. And we as a firm historically have held those positions for an average of two and a half years post IPO. So we are, you know, we have a Glenn created a saying, hashtag go long. We are very long term in our investing. And we constantly give advice to entrepreneurs. Don't worry about the IPO price. It's a dilution event. It's a fundraising event. Focus a hell of a lot more on where you are in two or three years. That's the way we look at it. And in many cases, especially for the later stage investors, is more money made post IPO than there is pre. Oh, I mean, you look at

company like Ring Central, Ring Central went public at like a two or two and a half billion dollar valuation. Today it's worth 15. So if you were a private investor, you made a good return. If you got out at the lockup, you missed an 8x. Yeah, 7X on with almost no downside. Yeah, with almost no downside. So, you know, look at Square. I mean, Square was trading at $9 for a while, shot all the way up to 95 or something. Now it's back in the 50s. But people have made a fortune post IPO on high growth tech companies. And I think you'll see, that's why you see companies like Datadog and Bill.com and others that are trading above their IPO price because people look at the growth rates, you look at the net dollar retention. They factor in that there will be some impact from

the economy and unemployment. But long term, these are stocks you want to own, in my opinion. Yeah. And it's, it's very easy to buy shares. It's very easy to sell shares. It's very hard to hold shares, like psychologically, like being a holder of a large amount of, Uber shares, like watching a $15, $45 swing in a 30 or 60 day period. I think it was very difficult for people. I had friends of mine who were early in Uber as well, texting me, calling me, what am I doing? What am I doing? I said, I'm holding these shares for 10 years.

So you can call me every week and I will tell you the same thing. I'm holding them for 10 years. I think it's going to be a trillion dollar company. I think it's a company for the ages. Period. That's my plan. I'm with you. That's the way I, everybody was asking me, did you sell any stock over the last 60 days in your

personal portfolio? And I said, I didn't. I just bought more of all the names I liked. Bye, bye, bye. I mean, I. I loved CrowdStrike. It got crushed. I bought more.

I love SmartSheet. He got crushed. I bought more. I love Twilio. It got crushed. I bought more. It's just a, it's a very empowering way to look at it. And having been, you know, I bought shares in Salesforce when I went public.

Yeah. I've never sold them. Yeah. I mean, if you love a company and you love a category and you look at a tent, like, One of the things we've talked about with our LPs is if you look at the last 10 years in the cloud space, there's been $2 trillion dollars of market value created. A trillion of that went to Google, Amazon, and Microsoft who are running the cloud platforms in Azure and AWS and GCP. And the other trillion went to SaaS and cloud stocks that went public. So two trillion of market value created in 10 years.

Do we think over the next 10 years there will be more or less value created? My answer is more. Of course. More people are coming out of the internet. More companies are buying software, technology is becoming more important. So if another $2 trillion of value gets created over the next 10 years, I want to be all in. I want to be in as many of those companies as I possibly can because they're just getting started. And the herd is going to be thinned in terms of companies.

So if the herd gets thinned, then where do the dollars go? Both investing dollars, worth advertising dollars, worth consumer spend, business spend. It's going to go to the winners. The winners win more when you come out of a recovery. And I thought this tweet was amazing. You did a really nice tweet the other day about Google's revenue. I'll pull it up for a second. But you did this, I guess yesterday.

Yeah, the V. It's going to happen again. It's going to happen again. Google's going to have their revenue contract and then the growth will grow again. Yeah. And I think like we know that's going to happen. Right. So why wouldn't you want to be long Google?

I just, you know, with the balance sheet that they have, the management team that they have, the position they have in the market, the only risk to me on Google, Facebook, Amazon, maybe Microsoft is government risk, regulatory risk. Other than that, these companies are, they're dominant, they have huge balance sheets. And then there's a whole- And Bernie's not winning so. And Elizabeth Warren's not winning. The country doesn't want socialism. They don't want to break these companies up.

And if you break these companies up and then China wins the day, is that what we really want as Americans? I mean, I know that there's a problem in terms of competition. I think those companies need to rethink how they approach competition maybe and be a little more collaborative maybe, you know, share the wealth like YouTube does or the app store does and keep thinking about how to make a sustainable ecosystem. But I mean, if you break up these companies, that just gives a clear path to China to take the crown. It's a very difficult nuanced situation, right? Yeah, I don't know about that. I just, I think there's a lot more

innovation going on in the market than people realize. Like, I mean, Splunk's a 20 billion. billion dollar company. Service Now is a 40 billion dollar company. Twilio is a 10 billion. Like these are these are companies that matter that are being built despite the the dom. Look at Zoom. Yeah. I mean Microsoft and Cisco everybody thought they owned that category and here comes a company out of nowhere that's suddenly worth 35 billion dollars. So what do you base that on? What is it about Zoom that made them so much better than Google's hangouts products, Skype's products and perhaps even Cisco's, although I don't know you can compare them to Cisco's big rooms. Those rooms are a different beast, but it does seem like they Zoom created a product that is transcendent.

What is it about that product? Yeah, yeah. It's funny. I have a texturing with a friend. I had some money I wanted to put into trust in the fall and I put it all into Zoom in the 60s. And he said, what's you're thinking? And he said, do you think it's a $50 billion company? I said, I think it's a hundred billion dollar company. Here's why. Number one, they have the best product in the So people don't realize how far ahead their product is than Microsoft and Cisco in terms of ease of use. So when it comes time for the average person to use the technology, it's incredibly easy to use. Number two, Eric is a phenomenal CEO and entrepreneur. He's empathetic.

He cares. He's smart. He's also Chinese. So he appeals to a global audience. I think the technology and the product and the company has a very global appeal that we've never seen before. And number three, the growth, the net dollar retention, I look at the use we have in our company inside of our firm. We're a global firm with five offices around the world.

Every year, our usage of Zoom has been going up. And so I look at that and I say, well, if every company gets on Zoom and starts using it and their growth goes up, this thing's got a long way to run. But I think people, and he tells this story about when he was trying to raise money from BCs and kept getting knows, everybody thought there was a ton of competition, right? There's Cisco and Blue Jeans and Microsoft and all these. And he just said, look, I'm building a better product. And he did.

So I think it's harder to do. Like you mentioned social networking. Like is it, it's a lot harder to pull a zoom in a category that already has fit. You know, look at Snap, right? It's been really hard for them to make gains against Facebook. So I think, you know, and then you got the app store with Apple, I think is a real challenging situation. I don't know how that gets sorted out over time.

I mean, you essentially have a massive hammer lock on distribution and and Google does on the That's one where I think antitrust could make sense. Like the fact that Apple doesn't allow alternate app stores to me feels like something that I could get behind them being forced to allow the Amazon or the Microsoft or the Google App Store to be on their platform or vice versa. Just like the idea that Apple could block Amazon video on Apple TVs or the Amazon could block Apple or YouTube on Amazon. It just feels like that's something where the government could put enough pressure on them to say, listen, come on, be realistic here. Yeah, we'll see. We'll see how. I mean, as you know, the rule of thumb around antitrust thus far has been is it good for consumers.

And it's hard to argue the app store hasn't been good for consumers. But if they change the way they think about antitrust, you could certainly see that be a target. I think you could make an argument that audible, not being able to buy audible books easily in an app. So annoying. It's so annoying. It's so annoying. Like, my God, Tim Cook, making me go to my browser to buy the book and then come back and download on the app is so dumb. And just like sharp elbowed to the point of stupidity.

Like let your audible customers buy a goddamn audible book in the audible app on my iPhone. Yeah. So dumb. Audibles owned by Amazon. So I don't know if people have a lot of sympathy for Amazon. I know, but I'm just thinking about the sympathy for the customers who can't figure out how to buy a book. Then you know who gets punished? The publishers and the people who have audiobooks.

I bet you they would sell more audio books if you could do it. Anyway, great job, Jeff, today. Continued success. Stay safe, you and your family, and look forward to hitting the slopes with you at some point. Be great. Thanks for having me on, Jason. All right, be cool, brother. Stay safe.

Take care. All right, everybody. Stay safe out there. Social distancing is critical. And we're all going to be back to work soon. And we do go back to work. Don't go back to work sick. Wash your hands.

And use a napkin when you touch the doorknobs or all that kind of stuff. Hygiene matters. And shave. And I'm going to shave when we go back to work. We got one more month of this and then we'll have people back in the studio. All right. Love you guys. Stay safe.

Bye.