Archive for February, 2022

Swapping Stamps

Posted on February 3, 2022. Filed under: Uncategorized |

These days it seems that the majority of private financings I read about disclose the valuation of the round in question. It hasn’t always been that way. In fact, it almost never happened until 4 or 5 years ago. Without public valuation disclosures, the market of would-be talent and downstream capital in tech was deeply tuned to the brand stamp of whatever venture firm(s) financed a given company. Simply getting money was a news story and the TechCrunch headline was who gave it to you. Your VC’s brand power was a proxy for your potential enterprise value…and so it was really helpful, at a tactical level, to be backed by X, Y, Z firms.

Of course, today, that dynamic still exists, but it feels like the value of the VC stamp has declined as the enterprise value of the company has become a more prevalent public focal point. Now when I read about a company, I can put a number on present value and extrapolate out plausible future value from there…I couldn’t do that before valuations became public. The Techcrunch headline today is “Company X raises $200M at a $2B valuation”…oh and by the way…at the bottom of the article, the money came from firm X. That’s really different than it was. The market is now anchored around a signal that’s more directly measurable. Is it an optimization if that round was led by a tier 1 VC vs a spray and pray allocator like Tiger vs Goldman Sachs? Of course…but the headline, and the thing that cements a company’s position in the pecking order of market-perceived success is the number, not the name.

I’d argue that one of the most brilliant things Andreesen Horowitz did when they entered the market in like 2010, was not so subtly making their brand synonymous with high valuations. They came with high conviction, big checks, and if you got one, people just assumed the valuation was immense and that you had made it. And founders, of course, wanted to be perceived as having made it, so they sought A16Z’s money. Did people think they were good pickers? To an extent…but it was “A16Z = big number” before the market was comfortable publishing actual big numbers. They developed a new kind of stamp that approximated where the market’s attention is currently anchored today.

So anyway, I just find it interesting. Benchmark is still a stamp…and so forth…but weirdly Softbank’s high number has come to be more of one? In a multi-iteration game, and what recent months of turbulence suggest is that, the big number stamps may prove to be less enduring than the firm level stamps. We’ll see. I haven’t decided if the trend toward public disclosure of valuations accelerated the narrative around private capital as a commodity, or perhaps it’s simply a reflection of that narrative taking hold…but one way or another the number seems to have taken marketshare from the name…for now.

Bronzing Tina’s Shoes

Posted on February 1, 2022. Filed under: Uncategorized |

A few months ago our wonderful Associate, Tina He, developed the conviction to go all in on her Web3 project Station. When we hire investors at Pace, we are explicit that its is a ~2 year opportunity, and one of the key KPIs we have as managers is to set these folks up to take whatever next step excites them at the end of such a tour. Tina is a builder at heart. We’ve known that since Day 1. When she told me she was ready to take the leap it was emotional. This is someone I really care about, with whom I LOVE working, and in whom I invested a lot of time and energy. You might think the emotion i felt was loss…but it wasn’t. It was joy….yes, maybe the teary eyed kind of joy…but very clearly joy. There are few things more exciting to me than seeing someone self actualize and step into themselves, and that’s how I processed Tina becoming an entrepreneur. I still wanted to see Tina every day and work closely together, so we decided to transition her role into Entrepreneur-in-Residence late last year. We keep the same sync schedule, and see each other all the time, but now most of what we talk about is Station. I’ve gotten to know her cofounders and the broader Station community and truly believe they are up to something special.

Interestingly, with Tina’s new adventure, the Pace investment team has gone from three investors to two! Despite now managing $400M, we are a small team by design and always will be. I do find myself missing her contributions to our collective work as investors. I don’t see anyone filling Tina’s shoes. They are 1 of 1, custom fit, never to be worn by anyone else. Perhaps we can bronze them and put them on the Pace Library bookshelf that she designed alongside a Pace Library companion app that enables guests to borrow our books. Even as an investor, Tina was always designing, always building, always creating in a very user/customer centric way.

While I don’t see anyone filling Tina’s shoes, I do see myself working alongside someone else, with a different set of superpowers, in a similar capacity. Something I learned from hiring Tina was that there is no specific archetype that I’m seeking, but rather I am drawn toward visible demonstrations of original thinking, curiosity, and authenticity. I had been reading Tina’s newsletter long before I reached out, and that was my initial window into her brilliance. As i comb the internet today, reading, researching, etc…I find myself asking “would this person be an impactful member of our investment team?” There’s no timeframe on which I’m trying to fill a seat, but if I slide into your DMs and ask you if you’ve ever thought about venture capital as a career step, don’t be surprised. I’ve got my eyes open.