Name: MPW Summit 2023: Investing In Today’s Climate
Uploaded: 2023-10-11
Duration: 14 min 50 s
Description: Mar Hershenson, Founding Managing Partner, Pear Ventures Jess Lee, General Partner and Chief Product Officer, Sequoia Capital Moderator: Terri Burns, Investor; Board Member; Co-chair, Fortune Brainstorm Tech

Mar Hershenson, Founding Managing Partner, Pear Ventures Jess Lee, General Partner and Chief Product Officer, Sequoia Capital Moderator: Terri Burns, Investor; Board Member; Co-chair, Fortune Brainstorm Tech

MPW Summit 2023: Investing In Today’s Climate

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Mar Hershenson, Founding Managing Partner, Pear Ventures Jess Lee, General Partner and Chief Product Officer, Sequoia Capital, Terri Burns, Investor; Board Member; Co-chair, Fortune Brainstorm Tech

The venture capital markets. OK. Um So it hit new highs in 2021 breaking records in the United States and around the world. According to CB insights, global venture capital financing reached $621 billion in 2021 which is more than double the previous high, which was reached the previous year in 2020. But times have changed an endless flow of cash, an abundance of IPO offerings seem to be behind us. However, that doesn't mean there aren't opportunities knocking money to be made and the possibility of new unicorns waiting in the wings. So what are the best strategies for investing in this climate and how can we keep important principles such as diversity and inclusion and investing in companies with female founders, front and center. We are joined to discuss this by two leading women in VC Ma Hinson is founding managing partner at pair ventures and Jess Lee is partner and chief product officer at Sequoia Capital. They join investor board member and Fortune Brainstorm Tech co chair, Terry Burns for today's conversation. OK. So the market is tough right now. We've seen a lot over the last year we've seen layoffs, interest rates. SVB LO Lots has happened in the market. Jess, I want to start with you is now a good time to be investing in technology start ups. Yeah, it is definitely a very tumultuous time in the world in the market. But I actually think that now is one of the best times to be investing. I think there's, you know, the world moves in cycles and there are two cycles that are happening and intersecting at the same moment. The first is the capital market cycle. And you know, we see this boom and bust and it's happened multiple times across in the venture industry. We've seen it at Sequoia over the last 50 years. But the founder of Sequoia used to have this license plate and it said Baruch, which is German for like sort of crazy times. And it was a reminder that after the crazy times, the 2021 era, everyone's sort of throwing money at everything. There's a sharp correction and it's actually in those moments after the baroque times where some of the best companies are created because you've got all the capital flows away, the tourists leave the market and the founders who start companies in those eras where there's no money, no good reason. That's not glamorous anymore. All the parties are gone are the people who are the missionaries, not the mercenaries who don't care about the market. They're like, I just have this burning problem I need to solve. And so they start companies then and that, that burst after the 2000 crash or the 1999 dot com bust that bursts paypal, Google Yahoo in the 2008 era that bursts doordash stripe airbnb. And so I think we're seeing that. So that's one cycle that's happening. We're in the most fertile time for founders then the other cycle that's happening, the technology cycle, we've got the semiconductor industry that, that proved drove a lot of interesting companies. Then we had the internet and era which you know, Google and Yahoo, then the mobile era Instacart and a bunch of other companies. And now we're entering the A I era. And what's really interesting is these are overlapping at the same time. So I think we're going to see some very, very interesting companies started. So I would say now is probably like genuinely the best time to be investing. OK. Well, I definitely like to hear that we're all actually early stage investors. Mar I want to ask you as an early stage investor during what is, you know, a fertile time as, as Jeff said, how do you think about revenue and growth for early stage companies? What is it that you're looking for? Um Maybe I'll put it in perspective. I invest so early days. Um maybe a couple of people or three people uh many times there is no revenue and a lot of times there is no product. So I, I am what I call a, I know it's scary. I am, I am what I'm called a whiteboard VC or a spreadsheet VC. So there's no spreadsheet that I can look at and be, let me look at your projections. So a lot of people are like, well, how can you invest like that? Is it just God? And there's definitely more than God that goes into that investing. We are really trying to figure out what is the potential of that founding team to build a company that you know, can be a large company, high growth, positive unit economics and that. So how do you do that when there are two people in a room uh pitching an idea and I think there's maybe two a access that we use to evaluate a company, one is really the character of the founder. So I think, you know, different venture funds have different tastes and that's good because otherwise we would all invest in the same companies. Um but we have, you know, ambition or, you know, wants to win. I think I like people that really can't sleep at night. It sounds horrible, but that's kind of that tension uh every day. And the second thing which is a little more subtle, but it's really important for what we do is how deeply you know, the customer on the market, right. So many times we will invest in people that are in their early twenties. And, uh, you know, a lot of folks will tell me you're crazy. This person has no experience, but some of these people have been working on their company even if they don't know it for perhaps 10 years. So, um I don't know if you guys know Canva, which Melanie Perkins, the CEO, she was a graphic designer from being a teenager since she was a teenager. And then she went to college, started teaching Adobe Photoshop, started a company selling um year book soft software. So it would be easy to make yearbooks. And finally she started Canva at the age of 20. So, but, but when she was 20 she had already been working on her company for a year. She had figured out what was the real problem if you actually wanted to design something? So that's what we're looking for. It's a little subtle but uh you know, it's important. So in a moment, I want to see if anyone in the audience has, has a question or two. But before that, you know, this is a room of smart, powerful women. Um some of whom might be interested in investing. What advice I would love to hear from both of you. Would you give to folks in here who might be interested in angel investing or, or getting active in the investing market for start ups in some capacity? Actually? Can we do a quick poll? Um you know, I think what's really special is this is a room full of powerful and probably more wealthy and you know what you do with your, your money and, you know, a money is power in a lot of ways where you place those bets in the world and where you, you know, what problems you want to see solved in the world. Like I think angel investing is a really powerful way to do that. But I'm curious who here is an angel investor is invested in, in a, could be an S and B A tech company. It could be anything great. Half, that's great. It looks like about half be great to see the other 50% maybe also participate. But um advice wise, you know, I, I think Mar shared some of her, her thoughts on um you know what to look for. But I think another thing is you're, you know, you're looking for someone who is contrarian and right, and that can be kind of hard to pick out. And so I think if you focus on an area, you know, particularly well, where you have a perspective on like what is a unique thesis or theme that you believe in a problem, you know, particularly well, where you can be helpful to the founder if you're ac ro and there's a lot of CS in the room, you know, you control a health care budget, right? With your employers, you pick a lot of the software that, you know, is deployed to your department. So I think finding an area where you have like a little bit of that contrarian thesis or an idea of what customers want. So, you know, because I think it's hard to invest across everything and then I would just meet a lot of founders in that given space because it can be kind of hard to tell in the beginning. You know, maybe you're an optimist, you love everything and you end up spending a lot of money on things that don't work. But once you've met five founders that are doing something in kind of a similar space, you can start to tell because we're better as humans, we're better at relative assessments. Like knowing this is better than this, then this is great. And it's the only spaceship company I've met and it's fantastic versus like if you meet five of them, then you can kind of tell. And so I do think it's important to invest the time, meet a lot of people before you make that cut that first check. Well, II, I want to say that there's so much wealth in this room, but it's not just money, it's actually know how. And I think a lot of the founders, you may write a small check, but they're gonna get a lot more out of you if you spend the time helping them build a company and you have an impact. I mean, I think the, each of the companies, I think that we invest, the investor um can really make a, you know, a big impact on that company. So, in a way, I would say angel investing is really hard. Um I would consider almost a type of philanthropy and it's a great way. So if you want to back more founders that you believe in, that's a way great and then actively help them. It's actually a great way of being a participant of that wealth, right? Um I think Malin who's one of the co chair here runs Operator Collective, I was sitting next to somebody earlier that was got into investing through Operator Collective and she basically brings operators into investment um industry. And, you know, there's a lot of venture firms that have, you know, we call them Industry Council consider just as another name, but basically brings it operators into their companies because they're so valuable for them, right? I don't think we can do a company on our own and we need everybody. So I think um the first to your point, I think um being calibrated is so important, like the first year you're like, oh my gosh, everything is great. Um But, you know, just get involved, I think with a venture firm or an angel group or something to get your, you know, foot in the door and I think you can learn it pretty quickly because everybody here is super smart I would also say tap the power of the network, right? Um Mar and I are co founders of a nonprofit called All It was co founded by 30 women, some of who are in this room. And our CEO page is, is somewhere around here. Uh But it is hi page. Um It's, it's a nonprofit to level the playing field for women in tech on the VC side as well as on the founder side. And so, yeah, I think it's been very powerful to see the community come together and I'm sure there's a lot of, if you're a VC in this room, I don't know, raise your hand, like talk to any of us about investing or, or, you know, coveting, you know, I think you, you learn from other people and, you know, we have a power. I mean, I think what's so special about this conference is the convening power of really great women to build networks. Any questions from the audience, questions from the room? I'm curious to know you mentioned Jess um the idea of having a contrarian view and I, I agree, I think many folks would agree that having a contrarian view and being right, that's the winning combination for investors. Um I think we all know some folks who are contrarian for the sake of being contrarian. But anyway, um what's your contrarian view? I'd love to hear from both of you. What are you seeing in the market? That's your contrarian view right now. Um You know, it's funny, I don't think this would be contrarian to this audience, but it was, it, it felt contrarian for a long time. I was the founder working before this on a company targeting women and I would go into these rooms of V CS and people be like, oh, is that an important customer? Like, what is that? Is that a big market? And I was just shocked by that response. And so I came into venture with this like supposedly contrarian thesis that women are very important customer. We're the, we're the chief, you know, medical officers of the home. We're the Chief Financial Officer. We control a lot of the household purchasing budget, whether it's the groceries on Instacart or CPP or whatever it is, we make a lot of important decisions for the family and for the home and we have a lot of buying power. And so one of my contribution was invest in companies that target women as a consumer. Um and one of those is Maven Clinic. The founder Kate is speaking later this week, but her idea was like, well, women, you know, one in four hospitalizations are maternity related. And it's crazy that after giving birth, we get one checkup after six weeks. Like I think I got more frequent checkups when I broke my wrist, right. It's just crazy how health care treats women sometimes. And so her hypothesis was, let's build a telemedicine clinic, wrap around support for maternity fertility pediatrics. And let's sell that to employers. And it was so contrarian, she could not raise money, but she eventually, she made it happen. And now it's the largest telemedicine network for family health. And it was so crazy to me that that was so contrarian, but you know, she's done very well well. Um I, I'm an engineer by training and I am happy to say that there are some industries that have traditionally not been loved by venture, but today, uh they're getting a lot of attention, some of, you know, semiconductors, climate defense, I think the three of them. Um it's interesting because there is a big pool from uh industry and there's also a big support from government and they're solving major existential problems. So you take a look at semiconductors. Um you know, you have NVIDIA growing 100% year over year and it's 35 billion in revenue. It's like it's a mega company. Um And at the same time, 90% of our chips are made in Taiwan. It's a huge national security issue. So the government, you know, released the chips Act of 50 billion invested in semi. There is so much, you know, I think I have it for 10 years. I had not seeing any semiconductor companies and all of a sudden there's a couple every week in my inbox. So people are seeing like there's more companies after that same with climate. I think you cannot, you know, go on media and not hear about some disaster and saying there's a tremendous amount of interest from young folks to get into, you know, address that problem and also government support. So I think it's a trend, you know, same as A I and this is a big transition. There's these three other things that are happening around us that are geopolitical industry driven, etcetera. So lots of opportunities for us. Lots of opportunities on that note, Mar Jess. Thank you so much for taking the time. Thank you.