Getting2Alpha
Getting2Alpha
The Future of Consumer Tech Investing
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Intro: [00:00:00] From Silicon Valley, the heart of startup land, it's Getting2Alpha, the show about creating innovative, compelling experiences that people love. And now, here's your host, game designer, entrepreneur, and startup coach, Amy Jo Kim.
Amy: The first time I met Jeremy Liew was, appropriately enough, in a pitch meeting.
My partner and I were on fire with a startup idea that merged social media with neuroscience based brain games. Jeremy believed in us, seed funded our startup, Photograb, and helped us complete a sale to Lumos Labs. You really get to know someone when you're in the trenches together. My conversations with Jeremy are always enjoyable and enlightening.
Check out his thoughts on the relationship between founder and founder.
Jeremy: You've got to let the founders drive. You can't be that super annoying backseat driver that is constantly saying, Oh, it's traffic light. Stop. It's red. It's red. Oh, [00:01:00] you're getting a little too close to the, to the median, like pull in.
You've got to let the founders drive, but you know, a good passenger in a car can still be helpful to the driver. Oh, by trying to micromanage or try to grab the wheel, but by, you know, saying, you know, things like, oh, I think our exits in about three, you know, is that it's three down from now, like, that's actually a useful piece of information versus turn out, turn out, right?
So how can you help a founder who hasn't driven this way before is oftentimes the first time founder that's building a company for the first time. And, you know, tell them what's around the next curve that they haven't seen.
Amy: Join us and discover what a top tier Silicon Valley VC thinks about investing in consumer tech.
Welcome, Jeremy, to the Getting2Alpha podcast.
Jeremy: Thanks, Amy. It's great to reconnect.
Amy: Yeah, it's great to connect with you. I'm so excited to get a chance to talk with you. You've had quite the year or two, quite a whirlwind these days for you.
Jeremy: It's been, um, it's been a terrific [00:02:00] last 18 months for, for the firm.
And, uh, yeah, it's been, it's been exciting to be able to get some companies public and get some companies acquired. It's been terrific.
Amy: So give us a glimpse into your work life. Now, I know that every day is different, but just like pick a day last Thursday, what is your typical day look like? What is your life filled with?
Like, who are you interacting with? What kind of decisions are you making?
Jeremy: You know, the thing that I love about my job is that I get to meet entrepreneurs and hear about what they think, you know, the future holds. There's a, uh, author, Neil Stevenson. He says that the future exists. It's just unevenly distributed.
And I think that's right. And I think that encapsulates the job of venture capital really well, which is you can meet these entrepreneurs for whom a little bit of the future already exists. Um, and then my job is to try to figure out which ones have pieces of the future that are going to spread to most of the world and then to try to help them realize that, [00:03:00] uh, and it is super fun because living in the future is really fun.
Amy: What a great description. How did you come to be? Here to be doing this job to be, I know it's not all fun and games and easy, but it's kind of an amazing job. Give us the helicopter view of where you got started and how you got here. And I'm particularly interested in those pivot points along the way that really set your path in a certain direction.
Jeremy: It is an amazing job. I love what I do and I'm very lucky to have it. And I think that, you know, the way that I got this job really is a series of really fortunate events. Um, so I started out, uh, I grew up in Australia and, uh, went to university out there, worked for McKinsey, my first job out of college, and I had a great boss, uh, his name is Charles Kahn.
He decided to leave the firm to start an internet company back in 1995, and I didn't know anything about the internet, but I knew that he was a great boss. And so, uh, when he announced he was leaving, I called him and said, Hey, can I come? Uh, he said, sure. So, you know, that's what [00:04:00] led me to be working in the consumer internet space back in the mid nineties, which was pretty early.
And, you know, that was not a planned thing, but, uh, getting in early, you know, an industry that has seen as much growth as the internet has, uh, has really been fortuitous. So from that point, uh, I worked for the company that he founded city search, uh, for a couple of years. And, uh, eventually went off to business school.
And while I was at business school, CitySearch went public and merged with Ticketmaster Online, which made it a subsidiary of what's now called IAC. It was USA Networks at the time. So I spent my summer as an intern building Excel models for Dara Khosrowshahi, who was the head of strategic planning at IAC at the time, but now is the CEO of Uber.
And when I graduated, I came back and continued to work for him for a couple more years as VP of strategic planning. And through that process, um, you know, so IAC is a company that's run by Barry Diller and, uh, [00:05:00] for him, a lot of strategic planning involves, you know, what company should I buy or sell? And so through that process, I worked on the acquisitions of Expedia and Hotels.
We bought in CitySearch and Ticketmaster completely. Match. com, we sold the TV studios, movie studios, and the TV channels. And that was the transformation from USA Networks to IAC. IAC. And throughout this process, a lot of the companies that I was working on acquiring ended up reporting to this guy, John Miller, who was the president of IAC.
And in 2002, he left IAC to go be CEO of AOL. And so I thought very highly of John, and I went with him, and I was SVP of Corporate Development and his Chief of Staff. This was a very tumultuous period at AOL. You know, the dial up growth curve had peaked, and we'd start to see the move towards Broadband and that really dramatically disrupted a wealth business model.
So it was a really interesting time to be there. So I spent a couple of years in the corporate development role [00:06:00] before dropping into an operating role. And I was general manager of Netscape and ran that business for a couple of years. Uh, and that brings us to about 2005 where, you know, the, the bubble had burst about five years earlier and there hadn't been a lot of, uh, investment in consumer companies for a while, people had really gone back to enterprise and infrastructure investing, but there were these greens, uh, sprouts starting to show through on the consumer side.
And I had a couple of conversations with some business school classmates of mine who encouraged me to get back, uh, to the Valley and to get into venture capital, which I did, I joined Lightspeed back in 2006. And I've been here ever since.
Amy: That's a great story. The thing that really strikes me, well, there's a couple of things.
One, there's a theme where you've worked with a great leader and then followed that leader into something really innovative that taught you a lot. So it sounds like that's something that you know how to do. Is finding somehow you found and worked with [00:07:00] several great leaders. A lot of people say they never had a good boss.
How did that work out for you? Were you looking for that? You happened into it. I mean, in a sense, that's what you're doing now is. Finding great leaders. So how did you develop that skill?
Jeremy: I wish I could tell you that it was a skill. I think that, you know, as I said before, sometimes you just get lucky and you get to work with some extraordinary people and, you know, and in the absence of knowing exactly what you want to do, you know, using the heuristic of following great people is, is, uh, is not a bad alternative.
So that's what I did because I really, when I was at McKinsey, I was working for oil and gas companies and for banking companies. And so. I didn't really have a clear perspective on technology. And if Charles had gone off and started a pulp and paper business, then I'd probably be working in pulp and paper, but he didn't, he started an internet company.
And so that's what led me to, to this path. And I wish I could tell you it was because, you know, I'm really good at identifying, but I think I just got lucky.
Amy: Yeah, there's some level where it's all about the people. [00:08:00] So you've worked at the forefront of innovation for many years as both an operator and now as an investor.
What do you wish you'd known 10 years ago that you know now about how to innovate successfully?
Jeremy: You know, I think one of the things that leads people to be successful earlier in their careers is they develop really good intuition. So through your 20s and through your 30s, you can use your intuition as a good guide in consumer for what is going to be popular in the future.
It's already growing in popularity. As you get older, you become further and further removed from the generation that's always the tastemakers, and you can't rely on your intuition anymore. Sort of navigating that transition from, you know, Being successful because you have good intuition to recognize when your intuition is going to mislead you and that you should actually have to look for new sources of information and insight, whether it's people who have better intuition, whether it's data or some combination of the two.
That's a difficult transition. At least it was difficult for [00:09:00] me. And it's also a humbling one because the things that made you successful earlier in your career are not working for you anymore. And you have to find other ways.
Amy: Yep, that's such an interesting point and it really leads into my next question, which is you now see so many teams and you invest in some of them and then you see how it works out.
So you have this, your own data set to build your intuition. What are some of the really common mistakes that you see entrepreneurs make when they're in the early stages of bringing their idea to life? Pre growth, but when they're finding product market fit, what are some of the things that you really wish they would not do that you see commonly?
Jeremy: I see a lot of people who have the eyes are bigger than their stomach syndrome.
Amy: Oh, yeah .
Jeremy: You know, there's a lot of great ideas and a lot of great projects that the company is able to develop That could be the next big thing Breakthrough and there's a oftentimes a really strong temptation to try to [00:10:00] pursue all of them at once because they're all great ideas.
None of these are bad ideas. The challenge, of course, is that in a world of limited resources, it's hard to do, you know, one or two things. Well, let alone 10 things. Well, and if you try to do 10 things, and it's almost certain that you won't do any. And so that process of prioritization and of like, deciding what not to do is often hard for right ambitious, hardworking, hard drive entrepreneursrs who have historically been able to do everything they wanted to do.
Amy: Wow. Yeah, that's a good one. So when you see all these teams and then you choose to work with just a few for you as an investor, what are the signals that you're looking for? What is it that pulls you in? And also what are the red flags that push you away?
You know, you're talking, talking, talking. You see something you're like, nope. So what are those signals for you?
Jeremy: Yeah. What we're looking for in a team. So again, I believe that consumer technology is popular culture and looking for teams that build [00:11:00] products that could become part of popular culture. And that requires a couple of things.
Firstly, it requires widespread appeal. So, I mean, there's two niche. Too narrow can never become, you know, widespread and popular unless culture is changing. And if culture is changing and they're on the forefront of that, then that could be an opportunity. The second thing that I look for is that they're building habits so that you see people using their product many times a day, many days a week, many weeks a month, and for a long time.
Uh, and that habituation is again, one of the key drivers. That we're looking for oftentimes with popular culture, young women are the early adopters of popular culture. And so if you see a product that over indexes on young women as users, that's something that I think is really positive, not because the park is aimed at young women, but because the park is aimed generally.
But young women have really adopted it early on. And then finally evidence that it's actually working and that there is part of market fit. And for a subset of people, they are using it incredibly. Yeah. Absolutely. Frequently and for really long periods of [00:12:00] time. So engagement, retention and growth and the founders have to have some sort of unique insight as to the why of it.
They kind of just stumbled onto this thing that works. It's great to get into something that works, but inevitably companies have twists and turns. And unless you have some sort of Guiding star, North star, some intuition about what it is and why it's working. You won't necessarily make the right decisions on product in the future.
And so that unique insight that they have that others don't share suggests that this wasn't a fluke accident and that they will continue to be successful.
Amy: So can you tell me a story about a founder in a team you chose to invest in that had those qualities? And maybe other things didn't look normal at the time or didn't like, maybe other people might shy away from some things, but given that you're looking for those qualities, what's a story that kind of brings that to life?
Jeremy: Sure. Uh, so let me talk a little bit about, um, Alex Chong, the CEO and co founder of [00:13:00] Giphy. So Giphs have been around forever. You know, it's an old file format and, you know, the idea that the world needed a Giph search engine. It wasn't obvious, um, why now was the right time to do that, you know, in the mid 20, I think it's probably around 2013, 2014, when GIFs had been around for so long, but it was clearly growing, people were continuing to use it on a regular basis, and I, I, I didn't really understand why, uh, what was this unique insight?
And his unique insight was that, you know, as the world is transitioning from social networks to messaging as the primary kind of online communications mode, this really dry text based medium for communication lost a lot of the warmth and humor and human connectivity that you had in real life. You know, people have always been trying to solve for that, you know, whether it be the old, you know, ASCII signatures that [00:14:00] you would put on the end of your emails or in your usenet posts onto the AOL buddy icons or emoticons or emojis.
The trouble with all of those is they're all fixed alphabet, and that means that there's, you, you can't capture all the nuance of human relationships. The way you would say, you know, I love you to your wife, to your daughter, to your best friend. Those are nuances that can't be captured with the limited fixed alphabet of an emoji keyboard.
And yet, GIFs allow you to capture the whole catalog of movies and videos which are The sort of cultural currency with which we all kind of share. Um, and so you can capture the difference in those nuances by sending different gifts from different movies of different clips to your wife or to your daughter or to your best friend, and it can become very clear.
And so that insight was unique. It explained the growth and [00:15:00] habituation that we were seeing, explained the, um, the average user base, the user base was primarily young and female because they were the people who are using messaging, uh, and therefore adopting new behaviors that were native to messaging.
And so, you know, that was a bit of a transformational thing that we did not understand. It was a piece of the future that existed today. Uh, and we invested in, and we've really seen that future come to pass.
Amy: You just blew my mind. That's awesome. So part of what you're saying is that when you're building something innovative, you really need this pretty rare blend of very strong vision and insight into the why and the cultural changes.
Plus. A way to gather and shape your product with market feedback. So you give people what they want and need as a investor, as a mentor to these teams, how do you help teams navigate that? Cause it's really tricky.
Jeremy: It is tricky. And you know, the, and the core is you've got to let the founders drive. You know, you can't be [00:16:00] that super annoying backseat driver that is constantly saying, Oh, it's traffic light.
Stop. It's red. It's red. Oh, you're getting a little too close to the, to the median, like pull in. You've got to let the founders drive. But, you know, a good passenger in a car can still be helpful to the driver, not by trying to micromanage or try to grab the wheel, but by, you know, saying, you know, things like, oh, I think our exits in about three, you know, is three down from now, right?
That's actually a useful piece of information versus to now to now, right? So how can you help a founder? Who hasn't driven this way before it's oftentimes the first time it's building a company for the first time and you know, tell them what's around the next curve that they haven't seen like, well, you know, at this scale, we should probably start thinking about a CFO because, you know, I've been right getting to the level that we need to make sure that we're.
Being conscientious about our expenses and we're starting to ramp revenue and you're making sure that our financial planning and analysis is accurate around that is going to be really important. So we should probably start about thinking about [00:17:00] adding CFO in the next 6 to 12 months. That's a useful piece of advice that could be helpful.
Or asking questions, you know, we talked earlier about how oftentimes there's a tendency to want to try to do too much and really sort of drawing through the implications of that and the resource implications and the hiring implications and then asking if we should be trying to do for priorities or if we should pick 2 for this quarter and push the other 2 off to another quarter.
And if we're going to do 2, which 2 would they be? You know, it, this can be surfaced with really simple questions. If you ask somebody what's important and someone tells you everything is important, and you say, okay, you're in here, who's the best engineer that you have and which project do you want to staff her on?
Like that actually tells you what's the most important project in a way that is much more clarifying than, you know, stack ranking a bunch of, you know, a bunch of ideas. Cause that can be really difficult for a founder to do.
Amy: That's great. That it really gives me a clear image of how you see your role.
And that analogy, uh, it just really [00:18:00] brings to life the difference between a bad passenger and a good passenger and who you want in your car when you're on an icy road.
Jeremy: Well, yeah. I mean, like, you know, you have two directions that you can be irritating as a passenger. One is that you can, you can try to be a backseat driver.
And the other one is you could just fall asleep and not talk to them at all. Right. And so you've got a long car drive. Um, it's actually kind of nice to have someone to talk to along the way. And to me, that is the role of a good board member, whether an investor or not, is to be a thought partner to the CEO, to be there, to engage in conversation when, when, uh, asked to provide input on the important decisions, like should we take the highway or should we take surface, but not to tell them what to do, just to have someone to talk to, to help them think through the decisions.
Amy: So as you go through coaching teams. Seeing teams getting pitched all the time. What's new and exciting in design and tech these days. That's interesting to you. Which trends are you personally following both personally, but, you know, [00:19:00] in your work, where, where is your focus in terms of that edge?
Jeremy: I think you have to be open minded around tech because, uh, you know, especially in consumer, it's hard to predict exactly what is going to happen and when it's going to happen.
I think of our job as editors, not writers. You know, we aren't supposed to come up with the creative visions. We don't necessarily see what's going to happen next, but we need to be able to recognize that greatness when it's pitched to us. And so there are a lot of areas that I find new and exciting, but in many instances, I'm looking for the founders to come up with those ideas and explain them to us.
I wasn't looking to invest in a gift search engine. I wasn't looking to invest in a disappearing messaging app, but we were open to those ideas. You know, and then we had these founders who could demonstrate they had product user fit. They had a little piece of the future working around them today, and they could explain through a unique insight.
Why this was going to become much more widespread in the future. So, [00:20:00] broadly speaking, I think we're kind of between waves right now. Um, you know, we've seen the smartphone wave come and crest. Uh, we've seen the, you know, Facebook app wave come and crest right now. We're waiting for the next platform. It might be voice enabled.
It might be a R. It might be V. R. None of them have the combination of scale plus the ability for developers to make a living right now to create a new platform. That's going to drive a new generation, but they're all good candidates. And the interim, we will continue to see stuff that comes out of left field.
That is, uh, you know, whether it's the creation of new brands, digitally native vertical brands for otherwise, or. new channels for customer acquisition that will birth products that are, you know, well suited to this new channel. You just got to keep an open mind.
Amy: And often as with Giphy, it looks like a toy at first.
Jeremy: Yeah, I think that's right. You know, if you apply old models, everything looks kind of unusual. I think [00:21:00] games in particular is, is a great example of that where, you know, game developers have gotten. used to this sort of higher fidelity, more polygons, more realistic model of game creation, you know, as the consoles got better and as PCs got better.
And then when Facebook came along, you know, as a gaming platform or when, um, mobile came along as gaming platform, this idea of like, well, how can that be fun? How can a one button game be fun? You know, how can a simulation, a lot of the Facebook games, the complaint was that they're not fun to play, but that's through a traditional.
Game development lens. So yeah, they, they felt more like toys than like true games. I think, you know, that analogy can be spread to any sort of new innovation where, you know, oftentimes the things that a new generation finds. Interesting and fun and chooses to spend their time with isn't something that's necessarily understood by people who used to trust your innovation yet their intuition and now they're older and their intuition isn't as good anymore.
And so you do have to look [00:22:00] at the data and you have to look to other sources to figure out what's coming and whether or not it might be impactful.
Amy: What's your focus these days? What's on the horizon? What's coming up in your world that you're excited about?
Jeremy: Well, uh, Consistent with what I was saying before.
I'm just keeping my aperture really wide and listening to the ideas of a lot of different entrepreneurs As they see those spots of the future of today and so, you know across some of those platforms I'm particularly interested in looking at audio first because it already has that The scale. Tens of millions of Alexa devices in homes, Google Home, and Apple also coming up behind them.
What we don't yet have is the robust developer ecosystem because it's really hard for the developers to make money. There's no advertising allowed within Alexa currently. Notifications is hard and discovery is hard. But those are all changes, they're not technology changes that are required. And so, um, I'm optimistic that, you know, some of those will change over the next few quarters.
And I think [00:23:00] because you put an always on environment with audio first, you have an opportunity, a circle ground for a lot of innovation. So that's one area I'm spending a lot of time.
Amy: I love the way you think about that. I love that. And I agree. I think just from what I see in my world with my incoming clients.
I would say that's also the trend that I see. So one more thing you mentioned, we're between eras. We're at the end of the Facebook era. Let's dig into that a little. Facebook's been in the news a lot lately, not just lately, but really throughout the last year with privacy issues and unintended consequences.
Of bad actors gaming their systems. What are your thoughts on that and how that plays into the narrative of this is the end of the Facebook era.
Jeremy: I'm not sure it's the end of the Facebook era, but I do think, I think in general it's really difficult to knock a giant down, but when a giant stumbles, it creates opportunities for startups.[00:24:00]
And we see some stumbles right now that will create opportunities. Oftentimes, just as with people, the strengths of a company can become its weaknesses for Facebook. The strength of that company was that it was creating the general record for your life, meaning that it was creating this sort of permanent historical imprint of everything that you did under your real identity.
And you know, that was what created the op. That was the strength of Facebook opportunity for Snap to develop through its ephemeral messaging, you know, a very different experience. Um, that allowed people to kind of take back some of the civility and fun was starting to get squeezed out of Facebook because everything was kept forever.
And so, you know, now that you're seeing Facebook running into some trouble around data retention and privacy and so forth, it's likely that that will create opportunities for new companies to emerge in, you know, in, in reaction to that. Uh, so I think you're right. I think it will create opportunities and we'll all be watching really [00:25:00] carefully to see what those companies are.
Amy: Exactly. So one more, I can't resist. What do you think about blockchain and crypto? What is your perspective?
Jeremy: I am long the opportunity in distributed apps, that public blockchains, I think we're really early in seeing the opportunity. I think that we're in a period of manic activity.
This is pulling in a lot of the most talented people in the technology space right now. And so you're seeing a ton of creativity. It's also pulling in a ton of hucksters who are out to, you know, make a quick buck or to defraud people. And so there are plenty of ways to lose money. Uh, in the investing in the, uh, crypto and blockchain space right now, but great companies are getting created and will continue to get created.
And, uh, it's an area that, uh, we are very bullish on.
Amy: Awesome. Thank you so much for sharing your perspective and your history and your [00:26:00] insights. This was, for me, just very illuminating conversation.
Jeremy: Well, it's great to talk to you, uh, Amy Jo, since we worked together on your company, um, gosh, it's gotta be 10 years ago now.
Um, I feel like I've missed hanging out with you. So this is, it's been really nice to reconnect.
Amy: Totally. Uh, really appreciate your time and hope to talk again soon.
Jeremy: Absolutely.
Outro: Thanks for listening to Getting2Alpha with Amy Jo Kim. The shows that help you innovate faster and smarter. Be sure to check out our website, getting2alpha.com. That's getting2alpha.com more great resources and podcast episodes.