Adrian Li talks about Growth and Monetization and David Sze on investment strategy and advices for those early in VC Careers
Adrian Li, Founder and Managing Partner @ AC Ventures & David Sze, General Partner @ Greylock
The Evolution of VC: Adrian Li of AC Ventures
(May 31, 2021 - 27 Minutes)
AC Ventures Founder Adrian Li reflects on some of the dramatic changes that have set into Indonesia’s start-up scene since he began VC investing in 2013, from the significant improvement in founder pedigree to the steady rise of Fintech as his favorite sector.
Indo Tekno Podcast - A biweekly podcast devoted to covering Indonesia's technology eco-system
Can Indonesia be monetized?
It's important to understand that companies are there to disrupt traditional incumbents through their better and more efficient models. It may take some time but like many other markets, the early stages of these businesses are to focus on adoption and growth vs monetization.
Which part of the internet space is monetizing well?
Most companies will not be pursuing profitability at this stage, however, FinTech and lending companies have been able to show tremendous growth. Commerce and social commerce have also been able to show huge monetization and while payments historically are difficult to monetize, they've seen an ability to do so once they achieve their required scale.
Which areas of the internet space have potential?
Adrian is confident that the Micro SMEs have the biggest potential; it's quite hard to drive a meaningful revenue thanks to their size. It is also too early for consumers to pay for content which would mean that digital-based-media models would have to rely on ads when it comes to monetization for now.
Will Indonesian enterprises pay for B2B SaaS services?
While the B2B SaaS models do have a lower total revenue cap, if you have a solid product and you can address some of the larger enterprises, they will pay for it. It may be more difficult but there have been companies that have progressed in addition to monetizing and charging for their subscriptions.
Has the target industry changed over time?
For Adrian and the team, they're still very much Indonesia-focused. They tend to gear towards business models which ride off long-term secular changes and those that can be disrupted using digital media, as they believe that these trends will continue for the next 5-10 years.
Changes in the ecosystem
Compared to Fund I, they didn't see much talent in Indonesia in relation to tech. There wasn't much capital, as well as a wide infrastructure for payments and logistics. While Indonesia is in some ways from receiving capital attention like India, it has definitely matured over the years.
Adrian's proudest value-add
Adrian is proud that each of the partners is always accessible to the portfolio and is always hands-on. Having been entrepreneurs themselves, they understand that investing in a company means standing by their founders and working with them as they each bring different networks and cultural considerations to the table.
One investment opportunity that is currently "out of this world"
While they've had their successes, they believe that the opportunity for financial inclusion and its impact is so big that it's the most interesting opportunity for their fund; particularly when it relates to the provision of financial services to consumers and the MSME segment.
Assumptions, and implications in the sector
Despite the dominance of some very large players in the market, COVID19 has driven the adoption of e-commerce into new verticals while making it one of the largest opportunities. As consolidation between the giants have also begun, Adrian believes that it will turn out similar to China.
Market share evolution in the logistics space
When it comes to logistics, Indonesia happens to be one of the most complex markets out there. Simply because of its geographic complexity, it won't be a winner-takes-all and several players will dominate across the ecosystem.
Lessons from China into Indonesia
In order to build large tech-enabled businesses, Adrian believes that you should start in the largest market. Localization is important in ensuring businesses can meet the customer's needs. Keep in mind that compared to China, Indonesia is an open market. But, the local competition is less intense and the government has placed policies to help support the economy.
Adrian's involvement in mentorship
While Adrian has been involved in a number of organizations, he prefers to focus on his own portfolio. His belief is that when you invest in a company, you're not just an investors but you are also a coach and mentor to your founders.
20VC: Greylock’s David Sze on His Biggest Lessons Working with Mark Zuckerberg and Reid Hoffman, The Rise of Pre-Emptive Rounds, How To Think Through Price Discipline Today and How Truly Strong Venture Partnerships Function
(April 19, 2021 - 42 minutes)
David Sze is a General Partner @ Greylock where he has led some of the firm’s most notable investments including Facebook, LinkedIn, and Pandora. David has consistently been at the forefront of innovation in the consumer landscape leading to his investments in Discord, Roblox, Medium, and more.
The Twenty Minutes VC - Venture Capital, Startup Funding, The Pitch
By Harry Stebbings - Founding Partner @ Stride.vc & Founder of 20VCMicrofund
How did David make his way into the world of venture?
David initially worked in startups including video games, electronic arts, and crystal dynamics before getting interested in the Internet and joining a search engine Excite. He was then invited by his business school friend, Neil Bush, to join Greylock with him, which he did in 2000.
David had been drawn to social and consumer since the start and fought to defend such venture portfolios while at Greylock. He was convinced they could get big returns and good businesses from them.
How did David's investments in Facebook and Linkedin challenge Greylock's investment strategy at the time?
Greylock used to only accept classic Series A deals, but David pushed for more freedom to invest up and down the stack within the same domain. He said that they had to go where the winners were, even if their preferred company chose someone else as their VC, or else they would miss out on people with more domain expertise, which they needed.
Investing $500M in Facebook was considered insane at that time, and people were concerned Greylock was doomed.
How does David reflect on his own relationship to price and price sensitivity?
Price discipline is important. There are 3 questions to ask before making a decision:
Does this have the ability to run a huge outcome?
Does this show potential to be a winner-takes-most or winner-takes-all kind of business?
Do you have the right leader and right people in the team?
If all answers are yes, then you can be more flexible with your decisions along the way.
Having worked with Mark @ Facebook, Reid @ Linkedin, David @ Roblox, what are the commonalities of these incredible founders?
VCs need to be founder-friendly and to support the founders, even if it’s through tough love by pushing them further to their limits. Founders who succeed see value in others and know how to extract learning from them. They understand their purpose and focus, are always curious, and easily adapt new lessons to evolve and change for the better.
How does David do this in the compressed fundraising timelines we have today?
David brings to the table his connection with the founders, his understanding of their journey, his sympathy for them, and his willingness to help them expand to build meaningful relationships with his founders. They still do important things together despite having less time to increase time efficiency.
What does David do to build relationships of trust and vulnerability with founders?
Trust isn’t always the core of it all. David compares the relationship to that of marriage — don’t get too wrapped up in the wedding because it’s a long-term marriage. He encourages companies to always check on their VCs and partners to make sure they do want to partner with that VC in the long run, for good or for worse.
How does David evaluate the rise of preemptive rounds today?
David actually thinks it’s dangerous because people will get extremely burned when the music stops eventually. There needs to be a dialectic between the individual and the team, and it’s a delicate balance. The decision might be the team’s to make, but the individual has to take ownership and advocate for their own deal. Ask tough questions, do the necessary research, and come back with answers.
What does David believe Greylock has done well in terms of creating an environment of safety within the partnership where people can really challenge each other?
Greylock has had the culture of understanding that teams evolve over time, and the most senior in the team now will be replaced by juniors in the future. That’s why even people new to the partnership have the power to say things, even if the seniors’ voices have a weight to them. Every partner is empowered to say what they mean, do what they say, own what they decide to do, and work together as a team.
For Greylock to succeed, the individuals need to be successful first.
The more experienced you are and the more confident that you are right, the less you should say, and the quieter you should say it, so people will actually lean in and listen.
How does David evaluate his own style of board membership today? How has it changed over the years?
When David first started out, he was trying too hard to be in control and making things happen simply because he thought they should. Now, he believes in empowering, supporting, encouraging, and educating with perspective instead of forcing things to happen. However, there still are some cases where he needs to be more aggressive to make his point; that’s why building a trusting relationship between VCs and founders is so important.
What are David’s thoughts on doing a successful generational transition?
Senior partners need to know how much their voice can influence or overpower newer partners without meaning to, so they need to ‘get out of the way’ before it becomes damaging. The ultimate goal is to become ‘obsolete’ because that means success for the next generation, and it’s the definition of success for Greylock in the long run.
Greylock started with 3 founding partners, chose one of them to be the CEO who stepped down after a year because he realized that wasn’t how he wanted Greylock to run, and stayed CEO-less by encouraging successful generational transitioning.
For younger VCs, what is the difference between those that succeed and those that do not?
People fail when they don’t understand how to navigate the dialectic between team and individual, usually by not listening to feedback or not learning. Another reason is that there’s just too much uncertainty ahead.
What is David's biggest advice to those in the earlier years of their VC career?
Learn how to ask questions. Listen. Know how to assert yourselves and take risks. Having the ability to do the work isn’t enough because you still need to put down some bets, make the call, and have the right instinct to decide.
When it comes to placing the bet, is it the head or the heart?
David has 3 steps:
Heart: Fall in love with the idea, founder, or a combination of the two and what it could be.
Head: Do the research, crunch up the numbers, and find all the data you can.
Heart: Numbers can be manipulated, so it’s back to the heart to make the call.
There are only 2 things you can control: what journeys you go on, and who you go on them with. Choose the ones you can see yourself going through the highs and the lows with.
What are David’s takeaways from companies that didn’t work out?
Being founder-friendly didn’t mean backing everything they said but helping founders be better and encouraging them on their instincts when they’re good. Challenge them and get them to think about their processes but in a supportive way. Both successes and failures are always obvious in retrospect. It’s just a learning process where experience matters.
How does David think about his vulnerability to be good at this business?
Humility and paranoia. The chance of failing is much higher than it is to succeed — if you don’t stay humble and don’t have some sort of insecurity, you won’t be successful.
There’s a lot of randomness and luck involved in this business. A company that gives you 10% or 20% predictability can still fail 80% of the time.
Thanks for reading. Reach us @Twitter/ @Facebook with tips and feedback or by leaving a comment on our post here. Remember to share if you like what you read.
If you are hungry for more of Podtakes, do check out our Archive here for more.