The Disruptors: From Moonshots To The Next Big Thing | Iconoclast Summit 2024
The Disruptors: From Moonshots to the Next Big Thing with moderator: Alex Konrad, Senior Editor, Forbes and panelists: Shardul ….
“for the next conversation the disruptors from moonshots to the next big thing please welcome moderator Alex Conrad senior editor Forbes and panelist shardul Shaw partner index vengers Leti paracha General partner M13 and Nial meta co-founder and general partner eniac Ventures I feel sorry for shardul he he did so well on our Midas list this year and yet we gave him a new firm name so we’re going to update that news today yeah you’re the top ranked investor at index ven lag Ventures ven leg Ventures the one and only well thank you so much for joining us um we have three awesome investors here um from very different I think style VC firms but all pretty established firms at this point um I promise we’re going to have this be an organic conversation but maybe we can just start with um you know the two sentences on your stage of investing um kind of your focus area because it’ll just give people context so Nal I’ll start with you can you just tell everyone what your focus is at ENC sure uh thanks Alex for having us good afternoon everybody uh co-founder of eniac Ventures we’re here in New York City we lead preed and Seed rounds in generalist Tech startups so these days AI is a part of everything but we’ve been investing in machine learning since the beginning of the firm uh which was 2009 hi everyone Latif paracha I’m a partner at M13 where a series a fund based between Los Angeles and New York uh we invest in software companies historically we’ve focused on uh fintech Healthcare Commerce and the future work we’ll also go into where our Curiosities take us but um really also focus on um adding a tremendous amount of Operational Support to our companies shuel index Ventures we’re a global multi-stage firm um presence in San Francisco London and now New York I moved here about two years ago um I focus on B2B Enterprise companies mostly infrastructure and security but our firm invests across all domains all geographies at all stages so aren’t you guys all lying and and you’re really just AI investors at this point I mean what what is or isn’t Ai and it’s been a big topic already today whether it was the CEO of carile it was node kosla um where where is AI relevant uh to your firm Nal or not yeah I mean I think even if it’s not a a native AI startup meaning AI is the actual business um every startup we look at uh essentially uses AI for some sort of efficiency so even if it’s a consumer brand um they’re using AI for to make their customer service teams a lot more efficient um and so at the end of the day you know we look at it as an incredible efficiency multiplier uh cost reducer so that these teams have a lot more incredible leverage and they’re a lot more Capital efficient but please say you’re not an AI investor well we we certainly are an AI investor but not only an AI investor I mean I think if you look at AI it’s a bit like saying you’re a mobile investor back in 2009 10 11 like yes that was true when it started but clearly it pered everything but we not only focus on AI so we um we actually uh have a big thesis on crypto and blockchains and believe despite the ups and downs and and some of the polarization of that industry there’s tremendous uh Innovation and given so many VCS are focused on AI uh only we do think there’s going to be tremendous opportunities for returns but also for real significant technical Innovation uh around crypto and blockchains Shel um obviously we’ve covered uh we put whiz on the cover of Forbes last year um one of your Investments um you also made the Midas list for data dog are those also kind of AI companies at this point are you an AI investor too we’re we’re not AI investors uh right you know we we focus on people and it turns out at different moments uh in different Cycles people might gravitate towards certain themes but this year maybe not like 2021 has been super active for us and if I look at the number of decisions we’ve made at the investment committee level half are outside of what I think each of us would describe as AI um fintech gaming U healthc care all have been uh interesting and thriving areas for entrepreneurs and so when I think back to whiz you know when we invested it was on my birthday before the team had a PowerPoint presentation when we invested in data dog and led the series a it was $110,000 in Revenue like it’s it’s not really a thematic investment as much as it is of a diagnosis of entrepreneurs that might go on to build a really compelling business interesting but before we keep going I’m just curious by show of hands how many people in the audience work in Venture Capital raise your hand if you work in VC all right so it’s a smattering but I say most people do not work in VC so let’s zoom out a little like how much is this AI conversation dominating or creating an outlier um around the VC conversation like if we were to strip out AI is this a good Venture environment is the money flowing Nal in your in your view yeah we we think it’s an absolutely amazing environment I think largely because there hasn’t been you know significant liquidity events since 2021 I think a lot of managers have not been able to raise new funds and so there’s a lot less at least we feel like at the seed stage there’s a lot less uh supply of early stage capital and so that leads to a lot less competition so it’s a good environment because it’s a worse environment it’s like it better for you it’s a better environment because it’s a shittier environment okay that’s correct right okay would you agree Li yeah I mean I I don’t think you can like say without AI That’s sort of like so hypothetical and not really grounded in what’s happening like the whole point of venture capital is to invest in like Breakthrough emerging technology what I mean by that is you know we see numbers like investment dollars by City And there could be a billion dollar funding around for one AI company in a city and the city says we had $1.1 billion doll go into startups this court but that really means 100 million for everyone else and then a billion for this one outlier company is that does that mean that ecosystem is doing well so I was just wondering if if if the conversation being skewed by the exuberance in that one area yeah it is but I I would say that’s that’s actually a good thing I mean if you look at the macro environment and you look at I know there’s a lot of probably macro people in the room and so I don’t want to speak out of turn but where where rates are and everything else like I actually think AI as a trend has huge imp huge implications can really be the the actual reducer of inflation in a way that isn’t like I’m going on a bit of a tangent here but like it’s not Jen Powell it’s actually through technology so I think that’s a massive Trend that that is very optimistic and one that we should Embrace so there’s probably some noise in the data City by city but overall I think what AI is um enabling both a macro level you know top down and then Bottoms Up in the things that we’re investing in is incredibly important yeah I I disagree with respect I outside of AI we’re seeing extreme competition uh again in gaming in fintech from Israel to Seattle to Germany France like name your geography name your stage we’re seeing extreme competition outside of AI whiz which you alluded to just announced a billion dollar fundraising a couple months ago and so there’s an enormous amount of capital available for the best companies in large categories and I think in difficult periods like the one we’re in from a macroeconomic and um geopolitical standpoint you know you find entrepreneurs who are really on a mission who are put on Earth to solve a problem so I think it’s a wonderful time for entrepreneurs it’s a beautiful time to be an investor to desite what we see as extreme competition yeah I’m going to agree with uh shardul on the point of um I think right now the best Founders know it’s the almost like one of the best times to build maybe since the early 2000s in the sense of um all of the different platform shifts that are happening the access to Capital the capital efficiencies and we’re seeing a growing number of uh we call them human unicorn Founders but serial Founders who have built multi-billion dollar market caps that are all of a sudden you know building again right now Latif is there a industry outside of AI that you see just really ripping or there’s just a ton of momentum among a bunch of companies maybe not just one or two companies or is there an area that that excites you the most um I’ll I’ll double down on my crypto comment earlier I think um we are seeing tremendous uh Innovation um around actually G gaming is a is a huge area of of focus where you’re seeing actually the ability for end users actually own their their their gaming assets and moveing them between games and there’s a lot of activity we’re seeing and that’s both here in the US uh a lot of it is also in Europe so you know crypto gaming and then also I think payments is a is a huge area of focus that there’s this kind of narrative of what has crypto done um and if you actually look at the history you know stable coins uh which you know if you take a very ethnocentric approach and you say here in America like yeah we don’t need to use stable coins but if you’re in a high inflation environment like at turkey or Venezuela or Lebanon pick your pick your place they’re incredibly important and um so so payments is just you know what makes the world go around and I think crypto has a huge role to play there I saw some data that showed that in Turkey 5% of their GDP is transacted in stable coins you just think about how long they’ve been around that’s a tremendous uh I think tremendous data point that there’s something here that’s really working so we look at payments um we’re we’re investors in a company called code from a very a prominent founder who is trying to finally solve Marco payments you know why should you have to pay whatever to to to Forbes on a daily Bas or monthly basis when I can pay for Alex’s you know article on a one-off basis pay you instantly like there’s all these things that should happen that just don’t happen in the world that I think crypto can solve so we’re spending a lot of time there and as a generalist fund you know there’s these crypto Focus funds and they’ve done you know great but as a journalist fund we think it has a a huge role to play within a portfolio of companies that also focus on AI in other areas that’s interesting I mean so shardul like when you have a big company like a data dog or a whiz in you know data observability uh and and cyber security does that mean that sector is like covered for you like you know because because you see this company break out years after you studi the category you made the investment or do you try to double down where you know where you look for then more companies in an area where you’ve had success yeah look I I’ll answer it in two ways um so data dog for those of you that don’t know it’s a it’s a public company it’s $40 billion plus market cap um I’ve served on the board for over a decade and so I think my challenge with data dog is is very human I formed a lot of bias right um the opinions I hold around the product that’s required to serve a set of Enterprises is really challenging to unwind when I meet a net new entrepreneur I’ve tried to um leverage that learning and that bias as I approach a new company like whiz which is only four years old it’s the fastest growing software company of all time but I’ve I’ve tried to be really open-minded about what else can exist in different ways to serve the needs of customers so Security in my view is is a a an approximation to crypto in terms of a rising tide that is facilit ated a lot of value and value exchange um in our industry if you if you kind of rewind the clock 10 years ago there were probably four public security companies of any relevant scale um at that time pelto networks had5 billion of total um market cap today they have $5 billion of gross profit and in February they touched a hundred billion do of market cap crowd strike is a $70 billion company zscaler cloudflare checkpoint are all 15 billion plus businesses so security has exploded and and I think it would be really naive and and limiting as an investor to view that whiz has conquered them all I think within Cloud itself there are opportunities around identity and data outside of U products I think there’s a huge opportunity for insurance um I serve on the board of a company called Coalition which serves a different segment of the market as well as outsourc Services um and I serve on the board of a company called expel in that area too I think uh you know you make an interesting point on like pattern recognition so you had an investment that you know obviously was very successful trying to there’s a a trend of like you know if you’ve done enough deals you have enough pattern recognition and actually I think that’s a fairly dangerous framework to to fall into because things that were successful in the past are maybe not going to be successful in the future in terms of a type of profile of person or or industry so I think to your point I think it’s tough to do but you have to like basically unwind that and try to get the entrepreneur to show you a vision of the future and then just really kind of back that back that Vision kind of get an Insight that gets you excited it’s true it’s so hard to listen that’s basically the job now Hall you were saying backstage that um correct me if I’m wrong you were looking at adtech again which I find interesting because there are some investors out there and Founders who were in sort of the big adtech boom of maybe at this point what 15 to 10 years ago and they at least for a while said never again like it’s played out it’s miserable I don’t want to do it why why go back is that a contrarian take yeah I think their recovery took many years you know uh they had to go through their own kind of personal Journeys to uh to want to build attech again but I think you know we’re definitely re excited about attech I think there’s uh I was mentioning kind of three platform shifts that that we look at right now one is obviously driven by AI uh the other is in streaming and connected TV and the third is in mixed reality um whether or not you know the Apple Vision Pro was was a flop or not there’s significant investment both from Apple and meta um into that entire uh Medium as a future of of human machine interaction and so with all these platform shifts they’re going to require uh and mandate monetization layers and so what’s interesting at least what we’ve seen um in a few Cycles it’s it’s always kind of in and around the same Founders you know the founders that built the the web 1.0 and Web 2.0 great adtech companies or the mobile 1.0 great adtech companies are now building again and so actually uh I’d say three of of my last kind of five Investments have been uh these attech Founders that are now running towards uh these new platforms it it’s interesting I I feel like Venture is supposed to be um kind of a contrarian business where you want to back the companies before the category becomes obvious but we have seen sort of a collapse of um time Cycles where we can have like mic micro cycles of hype or or mini Hypes like maybe we’re back into a crypto more optimistic cycle now after what like a couple years of negativity so if if if all of that shrinks what what where becomes the the alpha for you guys or or the place where you can maybe get a leg up on on other smart people trying to back similar companies is it is it mostly an access game for you guys is it mostly a conviction game a discovery game maybe each of you can answer that Latif we could start with you well on on hype Cycles uh we spend a lot of time with the firm talking about them and our annual meetings we put them up and we kind of show where various Trends are crypto is a unique hype cycle because it basically it’s I can’t explain why but it does this thing where it actually repeats over and over so you go through the peak of inflated uh expectations the trough of disillusionment and then you come back to the other side and usually it happens once in a W for technology but in crypto it just kind of does one of these which as an investor actually makes it interesting because you can kind of see where we are in a cycle and and invest in that cycle but um I think each of these um technologies have that and they play a huge role in capital formation and talent formation and so it’s pretty uh pretty critical to your to your point on like how we think about the edge or where to go I’m increasingly of the view that like trying like I used to we used to debate Tam at the total addressable Market at the firm and I really just moved away from that I I think it’s a bit a bit of a dangerous framework so um we’re actually looking for net new markets or net new breakthroughs that can create a market so for example we um invested in a company in the beginning of 21 called form which is uh a Healthcare company in the Obesity management space this was long before you know gp1s were were a thing but the the founder put up a slide and he said Hey look half of America is obese and 10 years ago the uh the medical association basically classified it as a disease so it’s going to spawn innovation in Pharma it’s going to spawn innovation in medical schools and because of that um if you look at chronic diseases they go from typically they they kind of ASM toote and they scale at like 65% of treatment rates in obesity it was sub 1% so you had this massive kind of New Market that was going to be created and I saw that I saw the founders background and you quickly cut the check and so that’s we think a $500 billion New Market and we hope we expect our company to be one of the market leaders there so that example is just to show I think if you can find a new market and ride that ride that wave ride that tail one that’s what we’re looking but then is it is it finding the deal winning the deal or having the guts to do the deal that your peers are passing on like like which is the most important well the kind of you can’t it if you can’t it but and and I to the point of wow this deal no one else is looking at I don’t I think the market is very competitive and so it’s very hard to for for that to be the case um I think it’s a combination of those things and then you know if you’re on the Midas list you can that clearly uh or You’ got great great companies that clearly like is a it’s a point that Founders really will will look to or whatever your track record is that’s important what your firm value ad is is very important so we spend a lot of time with our propulsion model which uh my partner Christine is here who runs brand for us and we have other partners who really come Hands-On and really focus on um you know supporting the company so I think it’s a combination of those things and in the case of form I got on a plane on a Sunday in covid with my mask on and sat in a very depressing room at Logan and gave the guy a term sheet and I can promise you there was no one else doing that so it’s all those things that I
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