Kevin Ryan: Are the Best CEOs the Best Fundraisers & Why Ownership Should Not Be a Focus in VC|E1138

1. 0:00 – 0:40

   Intro

   1. KRKevin Ryan0:00

      There's actually a lot of VC money, tons of cash sitting on the sidelines. That money is not gonna be given back. That money is gonna be spent. Here's the thing that I don't think about, which is our ownership. Sometimes we're paying a big price, and we're paying a big price 'cause it's an incredible team and an incredible opportunity. If someone makes you an offer you can't refuse, don't refuse it. Take it.

   2. HSHarry Stebbings0:20

      Ready to go? (upbeat music) Kevin, I'm so excited for this. Listen, I've heard so many good things from so many people, so thank you so much for joining me, first off.

   3. KRKevin Ryan0:39

      No, very excited

2. 0:40 – 1:34

   Background

   1. KRKevin Ryan0:40

      to be here.

   2. HSHarry Stebbings0:40

      Now, this, I know is a weird question, but I just think we're so shaped by our early years in a lot of cases. When you think back to growing up, how would your parents and teachers have described the young Kevin Ryan?

   3. KRKevin Ryan0:51

      You know, in some ways, I haven't actually either progressed or changed that much from high school. So, you know, in high school, I was interested in, um, I was running student organizations. I was head of the student council. Uh, I did a lot of sports. I was very interested in public policy. And frankly, today, those are still a lot of my interests. You know, I have always been a CEO from a very early age. I was president of my fifth grade class and my sixth grade class. Um, so, you know, people wanted, thought I, I should be elected to do these things, and I love doing them. I love managing people. I love working with people. Uh, I'm still very interested in, in sports, in athletics, uh, and very

3. 1:34 – 5:09

   Early Signs of Exceptionalism

   1. KRKevin Ryan1:34

      interested in public policy.

   2. HSHarry Stebbings1:35

      Okay, so we both are in the people selection business. I have this weird thesis that the best people always show early signs of exceptionalism. No one comes out of McKinsey at 28 and suddenly becomes exceptional. They show it in their early years. Do you agree with that? And do you think that the best do show early signs of exceptionalism always?

   3. KRKevin Ryan1:54

      So we have to define exceptionalism, and we have to think about also not just a job. I think people make a mistake in only looking at the extreme. So yeah, like, oh, Mark Zuckerberg, age 19, you know, dropped out of Harvard, was entrepreneurial. You know, the vast majority of successful CEOs of, of companies are people who, you know, went to good colleges, did well, exceptional, exceptional in that way, may have done two years at McKinsey, um, but were truly interesting. They weren't necessarily crazy entrepreneurial. I'll give you an example. I was the first investor in Ualá, which is a mobile bank in Argentina.

   4. HSHarry Stebbings2:33

      Yeah.

   5. KRKevin Ryan2:33

      And there's a guy named Pierpaolo Barbieri. It's a... People thought a bank in Argentina is an insane idea. This is six, seven years ago. It's currently worth about $2 billion. I've been on the board since then. He is, you know, was Phi Beta Kappa at Harvard, did work at McKinsey, was truly exceptional, and then now is managing 1,500 people. I, I wouldn't use the McKinsey example that you used. I would say that no one just, you know, is a surfer for five years and then at 26 all of a sudden launches a billion dollar company. That doesn't happen as much. They, they show drive and focus and success before.

   6. HSHarry Stebbings3:09

      No, I, I, I totally agree, and actually, I, I didn't... Yeah, I, I love Pierpaolo. I think he's fantastic, and so that's incredible to hear. How do you think about the difference between luck versus skill? People often talk about it on the show, and I'm never quite sure where to weigh it. How do you think about that?

   7. KRKevin Ryan3:24

      It, like, it definitely plays a role. You know, because there are things that are out of your control, and the reason you know that's true is that, you know, if you have people like me who've started 20 companies, no one has 20 successes. They may have more successes than your average person, but, you know, it's, it's not a perfect process. You know, uh, and so there are some things out of your control, some things in the industry. If you remember, a long time ago, I started a company called Gilt, and Gilt, after four years, was doing $500 million in revenue. So crazy success. We did $175 million in revenue in our second year, which I don't think anyone in New York City has ever done. So you'd say, "Oh, God, you're killing it." What happened? Then everyone in the industry started discounting their merchandise online. So Marc Jacobs started selling discounted merchandise on their site. Macy's did, Farfetch did, everyone did. It became very difficult, out of our control, to make money. And so it ended up being less successful than you would have thought. And I didn't like the industry dynamics and so sold the company.

   8. HSHarry Stebbings4:26

      (inhales) Did that hurt?

   9. KRKevin Ryan4:29

      Yeah. Yeah, because after four years, we were worth a billion dollars, and at the time, you know, everyone invested in a billion because they thought it was gonna be worth two to three billion. And we ended up selling it for $250 million despite having an incredible product, an incredible culture, um, fantastic people, I'm s-... You know, I funded many people who came out of there. Zola is all ex-Gilt people. SecurityScorecard is my ex, uh, head of security, you know, almost worth a billion dollars. Uh, so many good things came out of it, but it, it definitely hurt. I put a lot of work into that and got less than I thought.

   10. HSHarry Stebbings5:03

       Kevin, bit of a weird one, but when I go across your career, there's so many incredible companies. I know it's hard.

4. 5:09 – 8:57

   Defining the Biggest Successes

   1. HSHarry Stebbings5:09

      What do you consider your biggest success?

   2. KRKevin Ryan5:11

      Unfortunately, there's a couple different dimensions. The, the monetary ex- uh, answer is Mongo by far. You know, Mongo's worth $25 billion. There's only two companies started in the last 30 years in New York that are worth $25 billion. So that is a, you know, big, big success, and still growing, and I think will be a $50 billion company someday. You know, DoubleThink was the most impactful for me. I was 32. I had never managed more than 40 people. You know, four years after the beginning, I was managing 2,000 people in 25 countries. We went public twen- 24 months after we started. We did 10 acquisitions during that time. I learned a tremendous amount and had an incredible experience. So that was the most impactful in setting up my entire career. Actually, Business Insider was probably the product I enjoyed the most, because I just love business news, I love media, and I love that challenge of, you know, if I said to you, "Uh, I'll give you a million dollars. You have two people. I want you to start a media company. You can never advertise."... right? You can never spend $1 on advertising. I'd l- but my, ideally, you'll end up with 300 million uniques, uh, go. I think you'd say, "That's awfully hard," and that's exactly what we did, and so, uh, that was very fulfilling. And then the final answer is Guilt was the most fun because I didn't know anything about fashion. And all of a sudden, my wife can't believe that three years later, I'm in the front row of the fashion shows in Milan, seeming like a super cool person when I'm really not.

   3. HSHarry Stebbings6:44

      On the business side, what was one or two of the biggest business lessons?

   4. KRKevin Ryan6:48

      So this doesn't apply to every company, but we moved faster than everyone else. And so we started the same time as some other people, but we were able to raise more money, people believed in what we were doing. We spent the money, we took the chance, but to open 25 off- uh, offices in 25 countries before your first country is profitable, in retrospect, is a bold move. Now, what was the result of that? If you were, uh, Procter & Gamble or Microsoft and you have operations in 50 countries, we had- at least had offices in your 25 biggest countries, and my competitor was only in six, who are you gonna work with? You're gonna work with us. The reason today, which is literally more than 25 years later, that DoubleClick, which is part of Google, dominates the world in ad technology is 'cause we won the battle of the first five years by moving faster and more aggressively, took chances, made some mistakes, and have never given up that position ever since.

   5. HSHarry Stebbings7:44

      How do you think about the importance of first to market? Everyone often talks about it, but then some alternatively suggest you learn from the first to market and can out execute them being second. How do you think about that today being an investor?

   6. KRKevin Ryan7:57

      It's true that sometimes the, uh, the early bird gets the worm, but the second mouse gets the cheese.

   7. HSHarry Stebbings8:05

      (laughs)

   8. KRKevin Ryan8:06

      Uh, so (laughs) that- that can happen. Unfortunately, you never know. There are many, many examples where the first player who moves very quickly and gets critical mass, uh, is the winner. Now you have to see, is that a business where it matters? So in- in things like Uber, being five times bigger than Lyft ultimately does make the difference. And so it was worth it for them to just go, "We're gonna be number one or we're gonna die." In other businesses though, that's not true. You know, uh, y- you don't have to be, scale isn't quite as important, quality is important. And also you have to adjust all of this to the capital available. It's all fine and good when people give you a billion dollars. You know, Mongo, we lost a billion dollars before we had a profitable quarter over ten years.

   9. HSHarry Stebbings8:53

      (exhales)

   10. KRKevin Ryan8:53

       And so that's, you know, a scary number. A

5. 8:57 – 12:47

   Lessons from the Dot-com Era

   1. KRKevin Ryan8:57

      scary number.

   2. HSHarry Stebbings8:57

      Okay. Could- could Mongo-

   3. KRKevin Ryan8:58

      Yeah.

   4. HSHarry Stebbings8:58

      ... have existed in a down period? Because I guess it really lived in that bull period-

   5. KRKevin Ryan9:03

      Yes, it did.

   6. HSHarry Stebbings9:04

      ... from 2000, yeah.

   7. KRKevin Ryan9:05

      Um, it would have existed and we would not have been able to invest as much and not been able to grow as much. Today, I don't know that many companies outside of AI that, uh, where people give you a billion dollars to lose. But today-

   8. HSHarry Stebbings9:18

      Hm.

   9. KRKevin Ryan9:18

      ... you know, that exists in AI, it doesn't exist in a lot of other areas.

   10. HSHarry Stebbings9:23

       Y- so, I g- I have so many different areas I want to go to this.

   11. KRKevin Ryan9:26

       (laughs)

   12. HSHarry Stebbings9:26

       But you mentioned like financing availabilities.

   13. KRKevin Ryan9:29

       Yeah.

   14. HSHarry Stebbings9:29

       You went through the dot-com with DoubleClick-

   15. KRKevin Ryan9:31

       Yeah.

   16. HSHarry Stebbings9:31

       ... and I look old, Kevin, but I'm rather youthful-

   17. KRKevin Ryan9:35

       (laughs)

   18. HSHarry Stebbings9:35

       ... I must admit. I- I don't remember this as a professional. How was that and what were some business lessons for you from that, that you took with you?

   19. KRKevin Ryan9:42

       When two years ago people were, you know, complaining about it's hard to get money and things like that, I really felt like your- your grandfather talking about the Depression. Where like, you just don't understand, we had no food in the Depression. Because in 2001, 2002, there was just no money. And when I mean no money, no money. And so there were companies that went under that shouldn't have. Uh, everyone pulled back, you know, in, two years ago or last year, you know things were tighter, but the vast majority of our companies raised rounds, it was okay. Uh, so yeah, it was brutal. We did s- by the way, we did seven rounds of layoffs. We went from 2,000 people back down to 1,000, uh, doing layoff after layoff. 70% of our clients went bankrupt. If anyone's taking notes, don't do that. Uh, it's not helpful for your business.

   20. HSHarry Stebbings10:32

       What? The seven layoffs?

   21. KRKevin Ryan10:34

       No, the 70% of your clients going under.

   22. HSHarry Stebbings10:36

       Or the seven layoffs, no? Like-

   23. KRKevin Ryan10:38

       Seven, but then also, but that-

   24. HSHarry Stebbings10:40

       ... we always get-

   25. KRKevin Ryan10:40

       You have to do that when 70% of your clients go away and they don't even pay the last bill as well, so you eat, you know, tens and tens and millions of dollars of revenue you thought you had and then have to write off.

   26. HSHarry Stebbings10:54

       Do you not think we're gonna get worse from here?

   27. KRKevin Ryan10:56

       I do. I mean, right now the economy is very good. I think that there's, if we look over 30 years, uh, on average if the stock market's at an all-time high and unemployment is at an all-time low, if you said, "Are the odds that things are gonna get better or worse?" By definition, there's a reversion to the mean at some point. I don't plan for that. Things right now look, uh, pretty good, pretty stable. There's another characteristic in our business is there's actually a lot of EC money. You know, there's tons-

   28. HSHarry Stebbings11:25

       Mm-hmm.

   29. KRKevin Ryan11:25

       ... of cash sitting on the sidelines. That money is not gonna be given back. That money's going to be spent. We're only debating whether people are gonna spend it over two and a half years, which they were doing four years ago, or over five years, which they're probably gonna do now. But there's a lot of money out there that is gonna keep this industry going. And the second thing that independent of any macro factors you're talking about or thinking about, you know, most things happen at a micro level. So we started a company in assisted fertility. Assisted fertility is gonna grow. I can guarantee you that ten years from now more women will have egg freezing, more women will be doing IVF than they do it today. That's just going to grow regardless of the economy.

   30. HSHarry Stebbings12:09

       Right.
6. 12:47 – 17:47

   Market Timing & Future Outlook

   1. KRKevin Ryan12:47

      that, unfortunately, you have to assume it takes 10 years to build a really successful company.

   2. HSHarry Stebbings12:52

      Sure.

   3. KRKevin Ryan12:53

      And I can almost guarantee you that there's gonna be a recession during that time.

   4. HSHarry Stebbings12:58

      Mm-hmm.

   5. KRKevin Ryan12:58

      And I have no idea when it's gonna be. You know, could be next year, could be five years from now. It's just part of life. It's like saying, you know, I don't know, if you go sailing, I'm not a sailor, you go sailing for a month, you know, you're gonna have bad weather? Yeah, you're gonna have bad weather at some point. You know, if, if y- you can't deal with that, don't sail. So that's, I don't worry about that. What I worry about is, you know, we're big investors, for example, in the psychedelic industry. Is the psychedelic industry gonna be 20 times larger 10 years from now than today? Absolutely. We have to create the right products, navigate our way, and get there, uh, but if I get that assumption right, which sometimes you do, sometimes you don't, you have a much, much better chance of having success.

   6. HSHarry Stebbings13:37

      Are you a market-led investor or a people-led investor? It's just interesting when you said there about that. I do the complete opposite, because I'm like, "I have no fricking idea which markets are gonna be big in 2034." It's the job of the founder to show me the future, and my job is to select great people. Are you a market-led investor or a people-led investor?

   7. KRKevin Ryan13:57

      They're both really important, and if I said t- if someone comes to you tomorrow and says they're gonna start a new department store selling clothes online, I don't care how good that person is, it's not gonna work. Not a single one of those has worked in 10 years. Um, so the market is, is a factor.

   8. HSHarry Stebbings14:16

      (laughs) Question-

   9. KRKevin Ryan14:17

      Yeah.

   10. HSHarry Stebbings14:17

       Question for you. Do you not often get it though, where amazing people choose not great ideas?

   11. KRKevin Ryan14:21

       Yes.

   12. HSHarry Stebbings14:21

       And the thesis is that they will pivot to something adjacent that works?

   13. KRKevin Ryan14:26

       No, because, yeah, there are examples where that happens, and you assume a good founder will do that. But if you are going into an industry that ends up just not happening, you know, you can't pivot and you won't be able to get the money to do that. If you're gonna pivot into something that's slightly different, that's okay, but you're not gonna start a lab-grown meat company and then decide to go to solar energy. That's just not gonna happen. So you've just got the industry right or wrong, and that will happen. E-commerce, there's been probably net, you know, no value created in five years. Same with media. Uh, you know, with the exception of actually podcasts, hardly anything has worked in the last five years in media. So that's why it's not as simple to say, "Just back good people." Um, you're looking for a combination of a very good person and a thesis that you believe in, ideally a sector growing, or an opportunity to create a better product.

   14. HSHarry Stebbings15:17

       How do you prevent past mistakes or challenging markets, how do you prevent them from impacting future decision-making? So like for instance, I hate ad tech.

   15. KRKevin Ryan15:28

       Yeah.

   16. HSHarry Stebbings15:28

       It's a fricking hard market. Respectfully, I hate media. It's so fricking hard to make money in media.

   17. KRKevin Ryan15:33

       Yeah.

   18. HSHarry Stebbings15:33

       But I could be wrong, Kevin.

   19. KRKevin Ryan15:35

       Yeah.

   20. HSHarry Stebbings15:35

       There could be something great. How do you prevent past impacting future?

   21. KRKevin Ryan15:39

       I'm not sure that we do or I do or anyone does, and I see it all the time when we have a company going out and we approach 10 VCs, and three of them will say, "I invested in this sector eight years ago, and I lost all my money. I'm out." And they haven't even read the deck yet. And, but I'm not saying I don't do that as well. I mean, when I've had a bad experience, I think it sometimes does influence my thinking. I try intellectually to not let it happen, and I think I let it happen sometimes.

   22. HSHarry Stebbings16:07

       Do you know which companies will get funded fast and well when they go out? I'm just intrigued. Is it the ones you think, or is it actually a wide dispersion?

   23. KRKevin Ryan16:15

       You have a sense of two things ahead of time. One, you'll know whatever fundamental numbers, how they're doing, which, that helps. I mean, you know, I don't have any companies going out that have quadrupled their revenues in the last year that don't get funded. The second thing you know is you gotta have a sense of how your CEO does at fundraising. 'Cause there are, you know, I've had examples of CEOs who are incredible CEOs, great managers, visionary, but just don't present that well, are dis-confident, and, you know, are worse at fundraising than they are at running the business. And they'll, they get penalized often in the market for that, especially in the beginning when it's less about numbers and more about the vision. So, those two things you know, and then sometimes you're, you're surprised. I mean, I have one example of a company that just couldn't raise money, and I, I thought it was gonna be, uh, easier for them than, than it turned out to be.

   24. HSHarry Stebbings17:07

       Do you think the best CEOs are the best fundraisers?

   25. KRKevin Ryan17:10

       Generally, yes, because if you, if you can (laughs) raise a lot of money, it increases (laughs) your odds of doing well, dramatically, and allows you to make some mistakes. In the long run, people will figure out if you're, you know ... Uh, e- every round that goes along, it's more about the business and a little bit less about the CEO. 'Cause obviously, if one guy shows up right now with a PowerPoint, there's just a person in a PowerPoint. So I'm really, you know, that's it. If we're in the, uh, r- round B, we are s- the investor's looking at, you know, the unit economics, uh, turnover, churn, there's a lot of things that are gonna help that, that

7. 17:47 – 21:52

   Insider vs. Outsider Founders

   1. KRKevin Ryan17:47

      fundraise.

   2. HSHarry Stebbings17:48

      When we think about that early founder analysis, do you prefer a founder who's an insider to a business, someone who's worked in that industry for years and is approaching it with relatively large levels of domain expertise? Would you prefer the naive outsider who's approaching with a fresh perspective?

   3. KRKevin Ryan18:06

      It's gonna be a little more in the middle there. So, uh, I would say that a lot of the people we back are first-time founders. We would never, almost never back someone who comes from Procter & Gamble, a large company, and seems like a smart person but they don't know startups. I once looked through the top 100, uh, consumer internet companies, and the one pattern was that most of the people...... who are very successful, had actually not come from that vertical. But they had come from another startup. And in the same way that, uh, Henry and I had not been in media, thought we could do media different, a- when I went out to ask people at The Wall Street Journal about my idea, they all said it was a terrible idea, because they were too close to it. And so, you know, the guys from Airbnb, did they come from the hotel industry? No, they didn't. They came from outside and as a consumer thought, "Hey, why can't we do it better?" Did the guys from, you know, Uber come from the taxi industry? No. So many, many, many examples, the vast majority of examples in the consumer space. I will tell you that in the B2B space, there aren't that many people that c- come into enterprise software and worked in enterprise software. So it's a little bit harder there. And actually when we started Mongo, the reason we had trouble f- uh, raising money, even though we had already had a very successful company, was because people said, "You've never done a database before. You have, you, three of you have ad tech backgrounds. It's not the same thing. You've never done true enterprise software that you, you know, uh, sold to a bank. We're not gonna back you."

   4. HSHarry Stebbings19:40

      I loved having Dav on the show, by the way. He's a fantastic person.

   5. KRKevin Ryan19:43

      Oh.

   6. HSHarry Stebbings19:43

      I, I remember he said something to me that really stuck with me. He said that good news travels incredibly fast and bad news travels incredibly slow. And as a leader, you must always remember that.

   7. KRKevin Ryan19:54

      Yes.

   8. HSHarry Stebbings19:54

      Thought it was very insightful.

   9. KRKevin Ryan19:56

      No, Dave's d- Dave's done a great job at Mongo. Um, you know, when he took over, uh, we had 50 to $100 million in revenue. And today there's 2 billion in revenue. It's just enormous. It's scale. And he has really scaled.

   10. HSHarry Stebbings20:10

       You mentioned the difference between consumer and enterprise there. Sorry, my mind jumps around, but it's a Friday, so just-

   11. KRKevin Ryan20:15

       Yeah.

   12. HSHarry Stebbings20:15

       ... r- roll with it, Kevin, you know? Uh-

   13. KRKevin Ryan20:17

       I mean, like, I'm not focused.

   14. HSHarry Stebbings20:18

       Oh great. Uh, so I always say now, um, you know, I was in, uh, quite a few of the consumer breakouts and they led to precisely fuck all returns, but, you know, good brands at the time. And I laugh and I say to my LPs now, "I learned something, which is consumer is fun, but enterprise makes money."

   15. KRKevin Ryan20:33

       Yep.

   16. HSHarry Stebbings20:34

       We haven't seen anything really great in consumer in the last five years. You think that will change in the next five years, or do you think incumbent advantage is so embedded now that enterprise is just where we make money?

   17. KRKevin Ryan20:47

       I think it's less about incumbent advantage than it is that it's just an extraordinarily mature business. So unless there is a step function, you know, where consumer businesses came in was when all of a sudden mobile came and Uber made sense. You know, when the internet came, that made sense. Uh, we may have, well, we're gonna have some consumer businesses in AI. We don't know five years from now if Google's gonna be the number one search engine. Uh, e- if there's a chance, that's a disruptive technology that allows it to change. So, uh, I just think that media and, uh, and e-commerce are both sexy and accessible industries. So 50,000 entrepreneurs have gone after them. And so the, the next guy right now just probably isn't gonna come up with a good idea. Whereas in the B2B that you're talking about, there are some things that have changed fundamentally, either because they're science driven, you know, there are breakthroughs in regulation or in science that are allowsing, allowing, I don't know, gene editing or psychedelics or something else. And so that's different than just another consumer

8. 21:52 – 24:51

   Concerns on AI Advantages & Startup Competition

   1. KRKevin Ryan21:52

      application.

   2. HSHarry Stebbings21:53

      The thing that worries me with AI, honestly, Kevin, is I just think that so much of the advantages accrue to the distribution that incumbents have, and a better product does not lead to a winning product. And I think W- Google will bake in so many features that existing application layer startups are building, that they just slowly get eroded over time.

   3. KRKevin Ryan22:11

      So I completely agree and I, uh, b- I'd use the example, a better example for me is that's at the consumer level is more like Salesforce. So we've seen 20 companies saying, "We're gonna build a new product that uses AI, that allows you to contact your sales, sales, uh, your, your potential contacts." But the, the truth is that Salesforce is gonna incorporate that in.

   4. HSHarry Stebbings22:31

      Mm-hmm.

   5. KRKevin Ryan22:32

      And, you know, a large company with 1000 person Salesforce is not gonna easily switch off to a startup company. And so I have confidence that Salesforce will incorporate AI into their product. Maybe it's six months late, maybe it's a year late, but they're gonna do it. And the switching costs are so high. And that's true of the pharma industry, that's true of the banking industry, that's true of everything. So I, I agree with that.

   6. HSHarry Stebbings22:54

      Yeah, that, that, that's my, uh, so it, it actually goes to one thing that I actually always like. I love huge markets with no competition. I love it how many founders go after Stripe or Shopify.

   7. KRKevin Ryan23:04

      Yeah.

   8. HSHarry Stebbings23:04

      And I'm always like, "Really? You chose Toby Lut-

   9. KRKevin Ryan23:06

      (laughs) .

   10. HSHarry Stebbings23:06

       ... Thun Nicolellisons as the weak founders?"

   11. KRKevin Ryan23:08

       Yeah.

   12. HSHarry Stebbings23:08

       That's an interesting assessment.

   13. KRKevin Ryan23:10

       Yeah.

   14. HSHarry Stebbings23:10

       Do you agree with me or do you go, "I like competition, it shows a big market"?

   15. KRKevin Ryan23:15

       Look, you, you want a big market, you'd like to have as little competition as possible. Um, it's very hard to find that. You know Pierpaolo starting a mobile bank in Argentina. Guess what? We didn't have as much competition, but there was geopolitical risk, you know, all kinds of risk. And he's been remarkably successful. But that's why it's gonna be a $10 billion company, because he went after a big market and there wasn't a lot of competition.

   16. HSHarry Stebbings23:41

       Has your investing style changed over the years, Kevin?

   17. KRKevin Ryan23:44

       I'm not sure it's changed dramatically. The one thing I've changed, you know, when I was, had a small team, we weren't industry focused. So now that we have a 24 person team, I am a big believer in having more industry focus. So for example, we have, you know, five or six full-time people in healthcare. And so we're really seeing everything. We have relationships with payers, we have relationships with hospitals. There's a whole bunch of things that make us a more valuable investor. Two, in, in 2021, we did not focus on robotics. And, uh, we saw probably 20 robotics deals just randomly. Then I brought on a now a two person full-time team on robotics. They have visited Stanford and MIT and Georgia Tech and Carnegie Mellon, been to robotics conferences. We saw a thousand robotics deals last year. That makes you a better investor...... when, when, if I show you the fifth company that is making salads, you, that just makes you a better investor than seeing one and having to figure out how it works, what is the salad industry like. It br- puts you up to speed. So seeing everything is

9. 24:51 – 26:54

   Value of Investors in the Early Stages

   1. KRKevin Ryan24:51

      helpful.

   2. HSHarry Stebbings24:51

      Do you think investors add value? You mentioned there about being a more valuable investor. I just had Trey on from Founders Fund who was like, "Investors don't add value." How do you think about that?

   3. KRKevin Ryan25:01

      So, um, having been on both sides of that, you know, easily 90% of the value of a company comes from the CEO and, uh, the team. Now having said that, making sure you have the right CEO, which is the board/investor's responsibility, is the single biggest decision. I mean, you know, if you said, "Why is Mongo a very successful company?" You could say, "Well, because Dave's been running it for the last seven years. I let the previous CEO go and hired Dave because we were getting to a new phase, and the, and the, and the board as well," and I think that single decision, you know, was extremely important and well executed, even though Dave has done obviously 99% of the work. Um, the other thing I would say is in the early stages of, uh, a company, the investors play a much bigger role. So, you know, we've had companies that, uh, well, you know, we start so many companies, we're early stage, uh, often you have a, a CEO that has literally never raised money before. So when we get them in front of 50, you know, venture capital firms, that is adding value. When they are hiring a CFO, uh, for the first time, because they were head of business development, they'd never actually managed a CFO before, having a perspective on that is important. The other thing I would say, I had incredible investors at DoubleClick. Uh, Bain and Greylock, for example, I had just remarkable partners. When you are CEO, you are too close to the business. That is your job. And so some distance is often helpful, because they would come to a board meeting and, you know, they've worked with 20 CFOs or seen 20 sales plans, and so they just had a slightly better perspective. And once in a while, I'll be like, "You know, that's a good point. I had not factored that in. I was too close to it." Um, but my point remains, 90% of it is having the right CEO and the right

10. 26:54 – 35:13

    Significance of Serial Entrepreneurs

    1. KRKevin Ryan26:54

       team.

    2. HSHarry Stebbings26:54

       So I love serial entrepreneurs for the reason that you don't need to teach them how to fundraise. You don't need to teach them how to hire a head of sales. They've done most of it before, and they've fucked up before as well, which means they should have learnt the lessons last time. Now, they'll make new mistakes, of course, but they won't make some pretty obvious ones. How do you feel about the, you said earlier, "We like to back first-time founders." Am I wrong in terms of my thesis on serial entrepreneurs and that heavy preference there? And how do you think about that?

    3. KRKevin Ryan27:25

       Yeah, so in, again, if we look back at consumer businesses, you know, out of the top 25 companies, how many were serial entrepreneurs? Almost zero.

    4. HSHarry Stebbings27:36

       Two?

    5. KRKevin Ryan27:36

       Almost zero. Yeah. You know, so the energy level of someone working 80 hours a week, feeling slightly nervous that they don't know how to do the job, you know, listening to other people because they've never done it before, there's a lot of value in that. By the way, you'll see in enterprise software more of a pattern of repeat entrepreneurs, also on average, slightly older. You know, you don't, 24-year-olds have trouble starting a database company and building up an enterprise sales force, meeting with the CEO of, uh, of, or the CTO of Goldman Sachs to close that deal. It, it really doesn't happen that often.

    6. HSHarry Stebbings28:14

       Okay.

    7. KRKevin Ryan28:14

       So i- industries are different. It depends whether the industry knowledge, experience, and credibility is extremely important to success. And in consumer, it isn't, because I just go look at your app and I like it. I don't really care whether you're 10 years old or 50 years old.

    8. HSHarry Stebbings28:30

       What do you think is the biggest determination of whether a company gets product/market fit from zero to one? Everyone always says speed is the single biggest determinator or determining factor. Do you agree with that?

    9. KRKevin Ryan28:43

       No. No, I don't think that speed is the most important thing. You do need to get out your product, you know, pretty quickly, but it has to be pretty good. I mean, if it's terrible, we'll never hear from you again. It needs to be good enough that some people are using it, it's starting to grow, you're getting feedback, and you're gonna make it much better. Um, by the way, you know, a- and it depends on the product, you know, if you use a database and it's, it doesn't function and you lose all your revenues, then we're in a lot of trouble. That's a much more mission-critical product, and so it just can't be terrible. So for example, we had no revenues after three years at Mongo, which is not great, 'cause we had to go slower, it had to work, it had to scale, it had to be secure. Whereas for consumer apps, it can be, you can have, you can make mistakes.

    10. HSHarry Stebbings29:32

        Did you question whether it would work, three years in, no revenues? I, I can't remember how many years you said earlier, but, you know, nine or 10 years in, no profits.

    11. KRKevin Ryan29:41

        So nine years in, yeah, I knew it was working and there was no problem. Three years in, we were nervous because, uh, we just, we couldn't charge for it yet. It was getting better and better. We knew the industry was very big. We knew there was an opportunity. We knew Oracle was too expensive and we knew that a non-relational database was a good idea. But, you know, we could also just run out of money at some point. We didn't have incredibly successful fundraises during that time. Uh, but what you could see is that, if I showed you one chart, which is how many people are downloading the Mongo database, that was just a straight line going up, to the right, all over the world. And as long as that kept happening, we thought we were onto something.

    12. HSHarry Stebbings30:21

        Do you agree that companies die more often of indigestion and starvation? I hear it often, Kevin, and I think it's bullshit. I'm like, "Do you know how many companies die 'cause they run out of cash?" A lot. (laughs) Like... (laughs)

    13. KRKevin Ryan30:33

        Well, by definition, companies only die 'cause they run out of cash. The question is, why do they run out of cash? They run out of cash because...Sorry, we have a, a alarm going off here. I don't know if you heard that, but... (alarm sounds)

    14. HSHarry Stebbings30:46

        Don't worry. It's the company running out of cash. (laughs)

    15. KRKevin Ryan30:49

        (laughs) Exactly. Um-

    16. HSHarry Stebbings30:50

        They're pulling the pull cord. (laughs)

    17. KRKevin Ryan30:52

        Yeah. So, um, why do they run out of cash? Because they don't have pr- product market fit, uh, because investors are looking at the numbers, looking at the team, and saying, "I'm not gonna put money in here."

    18. HSHarry Stebbings31:03

        It's a tough one. It happens. I do wanna discuss the new fund, speaking of investors and putting money in. So can you share the news with us that I think came out yesterday? So that's out there.

    19. KRKevin Ryan31:14

        Sure. Yeah, no, we've, uh, first time, you know, we've been investing, uh, really, my money in a, in a different structure for the last decade. And, you know, we have, uh, 120 companies in the portfolio, uh, have made many investments, started over 20 companies. But we just announced that we, it's the first outside fund with outside investors. So we raised a $250 million fund to continue doing what we're doing, uh, and continue to both start companies and invest in companies, largely on the East Coast, in New York, but not only, heavily healthcare, heavily tech, robotics and social impact. So super excited, and, uh, it's, uh, it's a great time.

    20. HSHarry Stebbings31:53

        Okay. How do you do resource allocation between incubations versus investments?

    21. KRKevin Ryan31:58

        So what I like is being industry focused. So the team in healthcare is doing both, and they, they... I'll give you an example. We looked, decided to look at a vertical, 'cause we're doing deep research all the time. We're much more research-driven than other firms. A person on our team started l- being interested in the shipping industry. So shipping industry is a enormous industry that needs a lot more technology. So she spends two months, interviews 50 people in that industry. What does she come away with? One, a new idea, because realizes that there's a lack of a procurement marketplace, and so we started a company in that space, uh, called Portchopp. And because she was at multiple shipping conferences, which most of us have not been at, she ran across a company that people were saying great things about called BoxHub, which is a marketplace for containers based in Toronto, which we never would have known about, and we invested in that as well. So it stems from if you know the industry and know the players and know the opportunities and know the holes, you both can start companies and invest in companies.

    22. HSHarry Stebbings33:02

        My worry with incubations, and t- tell me I'm wrong, the best founders won't want to be like a hired gun CEO to an idea that they're brought in on. How do you respond to my concern there?

    23. KRKevin Ryan33:14

        Well, l- let's not forget the data, which is that, you know, Business Insider was one of the most successful media companies ever started, MongoDB one of the most successful databases companies ever started. Exactly another formula you just said can't work, where we started it and brought in a CEO. The question is are you bringing in a great quality CEO? And the answer is yes. Uh, and then are you, uh, incenting them correctly and making sure that it works? So we've never had a CEO resign. My psychedelic company, I think, is one of the most valuable psychedelic companies started in the last four years in the United States, Transcend. So many t- I mean, Gylt was a big success. These are all examples where we have done that very, very successfully.

    24. HSHarry Stebbings33:56

        Kevin, why do so many incubators fail where you've succeeded?

    25. KRKevin Ryan34:01

        So one, in some cases, they've tried to do too many companies and just tried to crank it out. Second is a level of execution. You know, you've got to have money and expertise and credibility. You know, that CEO who comes in is gonna be sitting there thinking, "Yeah, I could maybe start my own company. One, I have to love this idea. Two, I have to feel like you've done a lot of research and are way up to speed. Three, I've gotta feel like you're gonna add value." And so hopefully some of these people are like, "You know what? Kevin and the team have a lot of experience, have had a lot of success, can help me and increase the odds of, of my, uh, company working." The vast majority of companies that people start don't work. Our hit ratio is much higher than your average entrepreneurs. And so, uh, and we give people plenty of equity so that they are incented. Um, and so, but it's still not easy. I mean, we don't have 100% success rate.

    26. HSHarry Stebbings34:53

        So t- on the too many, how many do you like to do then? What's the right amount for you?

    27. KRKevin Ryan34:57

        So it's bottoms up, but we, uh, historically, last couple years, we're doing somewhere between six and eight companies a year. But we have multiple industry groups and multiple people. So at any one time, people here, one person can be working on one idea or one research

11. 35:13 – 49:40

    Why Do Many Incubators Fail?

    1. KRKevin Ryan35:13

       project.

    2. HSHarry Stebbings35:13

       Okay. How do you do resource allocation between new projects? And you have to be efficient with financing, cut it, inject more when there's milestones hit. How do you think about efficient resource allocation between those projects?

    3. KRKevin Ryan35:25

       Look, that's just a judgment call, because you're, you know, looking at very different ideas. So, you know, sometimes we do, we just did two or three months on a fintech idea and just didn't get conviction. And so, you know, we're not gonna do it. But that's a judgment call at the end of the day. I mean, look, how do... it's like asking as a, uh, entrepreneur, "How do you have conviction to do this?" You just get to the point where you're like, "I know this is gonna work, and I want to devote the next five years of my life to doing this." And sometimes you get it right, and sometimes you don't.

    4. HSHarry Stebbings35:56

       Do you think you pull the rip cord soon enough on the ones you do quit?

    5. KRKevin Ryan36:00

       When we start a company, we don't bail out on the company, but we put a mi- million and a half dollars in, we hire a CEO, if we've made the decision to go forward. Now, then the market decides, because nine months later, they're gonna go out to raise money. And I would say four out of five times, they go out and successfully raise a round, and someone has an outside lead investor. And once in a while, the market's like, "No, we hate your company, and," or, "We hate your CEO, and we're not gonna invest." So that's what determines it.

    6. HSHarry Stebbings36:31

       Has that ever happened, and you've gone, "I disagree with the market. I'm gonna keep putting money in"?

    7. KRKevin Ryan36:37

       Yeah. Once, um, I can think of one time where... What we'll do sometimes is do a bridge round, and we'll say, "You know..."... we just need six more months 'cause we'll have a launch, we'll have customers, things like that. And so we have more confidence in the market. And then sometimes there, we were right, and then sometimes there, we were wrong.

    8. HSHarry Stebbings36:55

       Kevin, can I be blunt? And please do forgive me if it's too personal.

    9. KRKevin Ryan36:58

       (laughs)

    10. HSHarry Stebbings36:59

        How much have you invested before this structure of your own?

    11. KRKevin Ryan37:03

        Yeah, about-

    12. HSHarry Stebbings37:03

        This is a lot of-

    13. KRKevin Ryan37:04

        Yeah, 250 million.

    14. HSHarry Stebbings37:07

        Have you told your wife? (laughs)

    15. KRKevin Ryan37:11

        (laughs)

    16. HSHarry Stebbings37:11

        Don't worry, yeah, the guilt group got you a lot of bonus points, dude. You're fine. Um... (laughs)

    17. KRKevin Ryan37:16

        Yeah, yeah. No, look, I, you know, I've devoted my career to this sector, and so, you know, the re- our returns have been, been extraordinary. Uh, things have worked. Uh, things are good, and this is incredible. There's nothing more fun in life than going after a new area, psychedelics being an example, super interesting, ahead of the curve, starting companies, investing in companies, and then, and seeing it work. And, uh, and I've done that for a long time, and really, really enjoy it.

    18. HSHarry Stebbings37:44

        How do the deal structures look? You mentioned a million and a half there. Is there a standard deal structure or does it depend on a per company basis?

    19. KRKevin Ryan37:51

        It depends, but you know, roughly the, the team and CEO are probably gonna get around 40, 45% of the company. And then we will have the rest because we came up with the idea, put in the money, did all the work, uh, and everyone gets paid from day one. So we, in order of magnitude, it's gonna be that.

    20. HSHarry Stebbings38:10

        Why do you invest as well? And what I mean by that is like your ownership when you invest, like on a good day, is like 50. I'm, I'm guessing here, but like for any investors, 15 would be good. When you have 50 or 60 in the incubations, is it an efficient use of capital to be an investor?

    21. KRKevin Ryan38:27

        It is, because one, as I said earlier, the, the time you spend learning an industry gives you an advantage in investing. Secondly, you actually can't invest that much money in incubations. If you and I start a company tomorrow and we build a seven-person team to build this, I mean, th- that's a million and a half dollars. So, and I don't have enough ideas. I wouldn't be able to come up with 30 ideas a year. So you've already done the work in a sector. You find out about credible opportunities. You're seeing deal flow. I mean-

    22. HSHarry Stebbings38:59

        Is a year long enough? I'm sorry, I didn't mean to interrupt you, but if you think about bringing a team together, maybe take three months to hire people, three months to ramp them. Gosh, that's six months of execution. That's not very much.

    23. KRKevin Ryan39:10

        Yeah, and then at that point, depending on the company, often we're able to raise money outside, but um, often we put in another million and buy ourselves another six months or nine months. You know, ideally, the product is out. Some companies are using it. You can sense that it works. You've got a sense for pricing. Now we're just gonna debate how big a opportunity is it?

    24. HSHarry Stebbings39:32

        Tell me, how do you think about price? I'm intrigued. You've invested in like so many businesses now.

    25. KRKevin Ryan39:38

        Yeah.

    26. HSHarry Stebbings39:38

        Peter Fenton once said to me, "Price is a mental trap."

    27. KRKevin Ryan39:41

        (laughs)

    28. HSHarry Stebbings39:42

        How do you think about price and your own price sensitivity?

    29. KRKevin Ryan39:44

        Here's the thing that I don't think about, which is our ownership. Meaning, you know, if you were gonna buy a piece of an apartment and you said, "I really wanna own 10% of this apartment," uh, does that mean, and you have a certain amount of money, that means you're just never gonna buy a really good apartment, because the price is higher. So if I see three startups that just started six months ago, one of them has an incredible team going after an incredible market, that company is worth more than the other ones. And if I put a million dollars in, I'm gonna get less of that company, but that doesn't mean it's a worse investment. At the end of the day, you're just trying to figure out is this gonna work or not? And you know, sometimes we're paying a big price, uh, and we're paying a big price 'cause it's an incredible team and an incredible opportunity.

    30. HSHarry Stebbings40:28

        I get you. I also worry about dilution. I've had quite a few investments which ended up being amazing, but because of the capital that went in, you got-
12. 49:40 – 59:05

    Challenges of Liquidity Management & Knowing When to Sell

    1. KRKevin Ryan49:40

    2. HSHarry Stebbings49:40

       Doug Leone said recently to me that we have turned from a high boutique, uh, high margin industry to a low margin commoditized industry. Do you agree with that transition statement?

    3. KRKevin Ryan49:53

       No. Um...

    4. HSHarry Stebbings49:55

       (laughs)

    5. KRKevin Ryan49:55

       What, what is true is that when you are a late stage investor, uh, writing $50 million checks, that you are what we used to call private equity. So you're competing on price, there's already an established board, you're not adding that much value. It's just a different world, you know. You know, it's changed so much. When Apple went public, when they went public, they raised $9 million in the IPO. And, uh, so it's very different today. In the early stage business that Union Square Ventures does, that we do of, you know, the first check-in, um, that's not a commodity business. You have huge wins, you have some, you know, a bunch of losses. And by the way, I was on the board of Yale and on the board of the Yale Endowment. So we were the lead investor in many of the best firms. And as you know, in VC there's a huge difference between returns that, let's say, a Benchmark and a Greylock have, and all, 90% of the rest of the, uh, industry.

    6. HSHarry Stebbings50:58

       100%. My fear is that we, we've just seen, like, multi-stage firms commoditize seed so efficiently that everyone has a seed strategy. I'm always asked by LPs, like, "Which funds on the West Coast should we do?" Because meet everyone, Harry. And I'm like, "Honestly, Sequoia, Andreessen just come in and bid up every great round at seed. You might as well just be in Sequoia and Andreessen."

    7. KRKevin Ryan51:21

       No. We don't see, in, uh, the last, you know, 20 seed deals, uh, they're not in there very often. They don't, they're not, they don't have the coverage of the, you know, $2 million checks. And also, a lot of entrepreneurs are very nervous about taking their money. On the West Coast, people just take their money regardless. But here, here's the risk. If a huge fund puts a million dollars into your initial round, and if they don't lead the next round, your company's dead. Whereas if a seed investor invests in your first round, it's understood that you're gonna go out to someone else. But the negative signaling that occurs, and it's happened to me. I had a big, big, big firm, uh, join in, everyone was very excited, and then they lost faith partly because the guy who invested in our company left the firm. And they were like, "Ah, we don't really, we're not really into it. We're gonna pass." And then the company was dead.

    8. HSHarry Stebbings52:13

       Dude, getting orphaned is the worst thing in a portfolio.

    9. KRKevin Ryan52:15

       Yeah.

    10. HSHarry Stebbings52:15

        I completely agree. But the, the, the cha- So I'm with you 1000%, but I always get multi-stage investors push back on me obviously. (laughs) Everyone has to defend their corner. But they say, "Oh, rubbish, Harry. Every round gets preempted today. And of course Index does not call up Sequoia, who've done the pre-seed or the seed, and say, 'Oh, are you gonna do the A?'" And so the signaling doesn't exist because of the prominence of preemption rounds.

    11. KRKevin Ryan52:43

        There's, I, I think you're being misled by the 10 supposed hottest deals who get preempted. That's not where the industry is. The vast majority of things are not being preempted. They're going out, they're raising good rounds. Uh, they take a couple years to be really, really big. That's the meat of the industry.

    12. HSHarry Stebbings53:02

        I agree with you. Do you think venture's more competitive than it has ever been?

    13. KRKevin Ryan53:07

        Yes. Look, the, the reason one should be concerned about venture today is that, um, there are, there's probably four times as much money in funds today as there was in 2017. And the question is, are there four times as many opportunities? And I don't think there are. I think it's shifted. There's more opportunities in AI, but frankly far fewer opportunities in e-commerce and media as we discussed. I think there's actually even fewer opportunities in straight enterprise software.

    14. HSHarry Stebbings53:39

        Mm-hmm.

    15. KRKevin Ryan53:39

        You know, does Bank of America need new software products this year that they didn't buy last year? You know, they've already purchased a lot. So I think there's just a bubble of money. There's more money than the industry needs. A- as we discuss later, they'll spread it out. Uh, but, and, and, and unlike in the hedge fund industry, our money doesn't leave very easily. It takes a long time. It's sticky. Now, you'll see Tiger, which had a fund that was, whatever, 100 and now is, is now 50. Um, so you'll see new funds being smaller, but that takes time to work through the system.

    16. HSHarry Stebbings54:14

        Are you worried about the illiquidity? You know, I'm looking at M&A markets thinking, "For the red." (laughs) I don't think IPO market is gonna open in '24. I know we've just seen Rubrik go out, but I think it's one of few, for sure. Um, are you worried about the illiquidity and how do you think about that?

    17. KRKevin Ryan54:29

        Yeah, I do worry about it and there's nothing any of us can do about it. It makes no sense to me that, you know, you just can't take a company public. Even though your numbers are 70, better than 70% of all publicly traded companies that are already public, and yet the banks and everyone will be like, "Yeah, yeah, you can't go public. There's no opening for that. It's just closed." It would be as if the, you're selling your apartment in New York City and everyone's like, "No, no, no, sorry. No apartments are gonna be sold for the next two years."

    18. HSHarry Stebbings54:57

        Well, so I have so many VCs on the show who say like, "Oh, that's complete rubbish, Harry. You can always take a company public. You just might have to change your perspective on the price that you're willing to go out at." Is that wrong?

    19. KRKevin Ryan55:07

        That is wrong. Um-... if your company's growing at 60% and profitable, yes, you can always go public. But at the margin, it is not easy to take companies public. There's not a lot of appetite. Look, you know many, many companies that'd be very happy to be public, and they're not. And they're not, because they either can't do it or, uh, somehow we just have not opened that up. For 15 years, I've wanted to solve this problem that we need a way for companies that are, you know, $100 million and growing at 20% to be able to go public. And that doesn't exist.

    20. HSHarry Stebbings55:41

        What are the main reasons why companies plateau? 'Cause you see quite a lot of companies that kind of 40 to 60 million in revenue, and they're j- they're sitting on a billion, a billion and a half valuations and you're looking at them going, "It's probably 500."

    21. KRKevin Ryan55:55

        Um-

    22. HSHarry Stebbings55:56

        Wh- wh- why does that happen and what do you think will happen to them?

    23. KRKevin Ryan55:58

        So one, if they've plateaued their growth, they're not worth 500. Um, you know, they're not at all. I mean, 10 times revenue for a company that's not growing that much is, is not gonna fly in today's market. That company's worth, you know, maybe 200 if they're starting to be quite profitable. Yeah, look, but that's normal. You should expect that out of every 100 companies that start, whatever, 20 go out of business after two years, a certain percentage get to 10, 20, 30 million, a smaller percentage get to 50, a smaller percentage get to 100. Uh, it just keeps funneling down. That's normal. Not every market is a trillion dollar market and not every product is gonna get, you know, 30% of its market.

    24. HSHarry Stebbings56:37

        Can I ask a final one before we do a quick fire?

    25. KRKevin Ryan56:39

        Yeah.

    26. HSHarry Stebbings56:39

        I- you've mentioned, you know, some incredible wins and, you know, accumulated personal wealth. I have a lot of founders on the show who talk about challenges with their relationship to money. How has your relationship to money changed over time?

    27. KRKevin Ryan56:54

        So actually, you know, surprisingly little. I don't focus it on that much. You know, five years ago, uh, my... the only car I owned was a used minivan. Um, I'm not that into stuff. I am into experiences, so great travel, uh, things like that, I'm absolutely willing to spend money on. Uh, but, uh, no, I mean, it's been a long time for me that I haven't had to worry about money, but I also just don't spend money to spend money. And so I don't have any problem with it all, I have no concern about the relationship with money. I mu- I... Some people are so focused on money, which I'm not, that once they made money, they didn't know what to do. Whereas for me, that changed nothing. I enjoy what I'm doing. When people ask me, sometimes, you know, I'm at a col- a business school, they'll say, "Why are you still doing this?" And my answer is, does anyone ask a really good NBA player who's 32 and who's made a ton of money, "Why are you still playing basketball? Why don't you retire?" Like, no one would ask that question, right? Because he would say, "Yes, they do pay me a lot of money, but I love what I'm doing and I can't think of anything else I'd rather do. So I'm gonna do it as long as I can and then eventually it'll end and I'll do something else." And that's exactly how I feel.

    28. HSHarry Stebbings58:12

        Final, final one before the quick fire. Has New York lived up to the hype and wha- like Europe has, has not, if we're blunt, and I'm happy to admit that, and people say New York hasn't either.

    29. KRKevin Ryan58:24

        So Europe, so New York City has so outperformed the expectations, people have already forgotten it. So in 1996, the number one question I got running DoubleClick was, "Why aren't you in Boston?" Boston is the tech center. You're giving me a perplexed look 'cause you can't even remember that-

    30. HSHarry Stebbings58:44

        Um, I was born in '96, Kevin (laughs) .
13. 59:05 – 1:02:27

    The Changing Landscape of Venture Capital

    1. KRKevin Ryan59:05

       now, is there a chance that there'll be more tech jobs in New York than in San Francisco? And that, uh, we are now s- some quarters competing for the amount of money?" You would have said, "S- I'm sorry, that's impossible to imagine." And so New York has grown faster than any other city. It's still not, it still doesn't have as many big wins as San Francisco, but don't forget, the big wins are from 15 years ago. So we talk about Mongo and Datadog, they started in 2007. So what we're trying to decide is right now, are more and more smart people starting companies in New York? Absolutely. Are there five times as many venture capital firms? We hardly had any VC money. But, uh, when I went out to raise money in Silicon Valley in '97, they said, "We will not invest in you unless you move to San Francisco," which we weren't willing to do. Today, every one of those firms that turned me down for that reason has an office in New York City, so that's the trend line. So yeah, New York is killing it and will be the number one, uh, company clearly, uh, 15 years.

    2. HSHarry Stebbings1:00:08

       What other $10 billion companies are there but Datadog and Mongo?

    3. KRKevin Ryan1:00:12

       Uh, so Etsy is in the same category and just give you some context, five years ago, there was not one publicly traded company in New York City startup that was worth more than 3 billion. Now we have two at 25 or 30, one at 10, more on the way. Uh, so these things take time, but yeah, I mean, I mean I was just in the Google office, they have 15,000 people in New York City and I remember 20 years ago people saying, "Oh, but there, there's no tech talent in New York. You can't, you can't start an enterprise software company here," but somehow they found 15,000 people.

    4. HSHarry Stebbings1:00:44

       Do you worry about the centralization of AI talent in San Francisco?

    5. KRKevin Ryan1:00:48

       No, I think, uh, San Francisco absolutely has an advantage in AI. It stems from the fact that, you know, I, I, I just started a company in material science AI and, you know, the university that dominates that space is Berkeley. And so Berkeley and Stanford, uh, are stronger than New York, than Columbia and NYU and they've had companies and deep talent, so...... absolutely San Francisco has an advantage in that area. But we're seeing, you know, t- 10 companies a week starting in New York. They're starting all over this country. Many of the smartest people are doing AI and it will distribute more. What I always tell people when I'm traveling internationally and they used to ask me, "Which cities are gonna dominate in your country?" It's no, there's, it has nothing to do with tax policy, has nothing to do with anything. I say, "People who went to the top 20 universities in your country, where do they wanna live? Where are they gonna move? That's gonna be your tech center." And guess what? That number one place those places people want to move is New York City. San Francisco is still a great place and, you know, has, has history and, uh, many things going for it. So it's an amazing, incredible place. But I'm not seeing the tech talent in Miami, and I don't think it's gonna get there. Uh, I'm not seeing it in Chicago. Uh, I'm not seeing it in DC. You know, don't forget, 15 years ago, the number one, uh, internet company on the, on the East Coast was AOL, based in DC. Is DC the tech hub that New York City is? Not at all. The super smart people from Harvard, Yale, Princeton, MIT, they wanna live in New York City.

    6. HSHarry Stebbings1:02:23

       I could talk to you all day, Kevin. Uh, I-

    7. KRKevin Ryan1:02:24

       (laughs) .

    8. HSHarry Stebbings1:02:25

       ... am mindf- I am mindful of time.

14. 1:02:27 – 1:09:50

    Quick-Fire Round

    1. HSHarry Stebbings1:02:27

       Um, so I wanna move into a quick fire round. So I say a short statement, you give me your immediate thoughts. Does that-

    2. KRKevin Ryan1:02:31

       Yeah.

    3. HSHarry Stebbings1:02:31

       ... sound okay?

    4. KRKevin Ryan1:02:32

       Sure.

    5. HSHarry Stebbings1:02:32

       Slightly weird and out there one. What's the secret to a very happy marriage?

    6. KRKevin Ryan1:02:37

       You know, it's, it's, uh, first of all, it's putting the time in and the commitment. I've been married for 32 years. Uh, it's, you know, it's friendship at the core and a common purpose of, you know, hopefully if you're doing it, raising kids. Uh, and we've been very lucky. Uh, I have three kids in our 20s. That's a big part of our lives. It's been amazing.

    7. HSHarry Stebbings1:02:58

       How do you bring children up with such financial success, to be humble and also hardworking and ambitious?

    8. KRKevin Ryan1:03:06

       You know, you have to install that from day one and understand and treat them that way too. I was, you know, with friends of mine and they said, "Maybe I shouldn't have given my 18-year-old a $75,000 Porsche." And I'm like, "Yeah, of course you shouldn't." You know, my kids don't have any of that. They graduated from college. They, they have to make it on their own. They ha- they hopefully go to good schools. They, they... You're installing that from day one.

    9. HSHarry Stebbings1:03:32

       (laughs) yeah, th- that Lamborghini was not, not a good thing. Uh (laughs) .

    10. KRKevin Ryan1:03:37

        Yeah.

    11. HSHarry Stebbings1:03:37

        Uh, tell me, what have you changed your mind on most in the last 12 months?

    12. KRKevin Ryan1:03:42

        You know, I thought there was gonna be much more of a recession. Um, other than that, you know, my, my opinions don't change dramatically 'cause I really have to have this 10-year perspective, as I was saying earlier. So it doesn't change day to day, my industry focus, things like that. In the last, you know, five years, I've become much more interested in healthcare. That's one big thing.

    13. HSHarry Stebbings1:04:02

        Why do you think there will not be such a big recession that you thought would happen?

    14. KRKevin Ryan1:04:06

        The combination of the stimul- the fiscal stimulus, what the Biden administration has done which it doesn't get credit for, uh, combined with the Federal Reserve, has been remarkable management. You know, I read the French press and they talk about Bidenomics and how do we compete with this? Ca- c- compete with it 'cause it's so effective. And our French companies are setting up factories in the United States and creating jobs. So I think it's been remarkable management between those two. No one's... There's not a single economist that thought this was gonna happen.

    15. HSHarry Stebbings1:04:36

        Will Trump win?

    16. KRKevin Ryan1:04:38

        Um, look, it's go- either way it's gonna be 50/50. I think Biden's gonna win, but, you know, it's, it's actually gonna end up being out of our hands. You know, if either one of them has a huge health issue, that could do it. If there's a, um (laughs) , if there is a, uh, something happening from a geopolitical point of view that goes horribly wrong, that could change it. Um, I think that the s- substance and the success of the economy at the end of the day, uh, combined with the fact that the Democrats are winning every single election that is occurring across this country, and outperforming since the Roe v- v. Wade uh, decisions, means that at the margin, the Democrats are gonna win.

    17. HSHarry Stebbings1:05:20

        What's the biggest piece of startup advice that you think's most BS? Like, the most commonly said that you're like, "Ugh, I can't believe this is still a trope"?

    18. KRKevin Ryan1:05:29

        I don't know if I have a good one there. I mean, uh, uh, my general question to most startup advice is, it depends. You know, there are some companies that should spend more money, there's some companies that don't have product market fit, they should slow down. Obviously you should hire good people, but, you know, everyone's trying to do that. You know, move fast, yes, but if your product sucks, that's not good. So, you know, startups and business are a series of decisions and compromises that are situation specific. And so it's each... It, uh, it, that's where judgment is important. And that's where I do think investors and good CEOs play the role.

    19. HSHarry Stebbings1:06:05

        What's the luckiest thing that's ever happened to you?

    20. KRKevin Ryan1:06:09

        Oh, by far it was... I mean, financially, it was working with two other co-founders and starting Mongo. And-

    21. HSHarry Stebbings1:06:17

        But was that, uh, uh, is that luck, though?

    22. KRKevin Ryan1:06:20

        Well, look, I had... It was my CTO... I was the CEO of, of DoubleClick and the CTO and I, uh, wanted to start... We started companies together. We had started one or two that didn't work, and then we started Mongo. But the intellectual and execution of Mongo came more from them than from m- me. They built the product. I think I, I benefited even more than I deserved to. Um, you know, making the decision to get involved with the internet in '96, which, you know, I thought was gonna do well, but, you know, I, I've had other thoughts over time that I thought were gonna do well and they didn't, and that changed my life and my career.

    23. HSHarry Stebbings1:06:55

        What do you know now that you wish you'd known the day you started investing?

    24. KRKevin Ryan1:06:59

        The judgment of seeing many things work and not work, um, is help... It makes you more decisive on just feeling like, you know, I'm just not feeling yet, and trusting probably my gut feel a little bit more. If it just doesn't feel right, it doesn't feel right.

    25. HSHarry Stebbings1:07:15

        Penultimate one. What are you most concerned about in the world today?

    26. KRKevin Ryan1:07:18

        Trump.For me, the single thing I'm worried about, I'm actually... You know, the, the, the world from a safety and security point of view is, is actually okay. I'm obviously very biased on this, uh, but the single thing that I'm concerned about is Trump winning on multiple dimensions, giving away, uh, Ukraine, um, you know, Supreme Court justices, p- very, very, very poor execution of every aspect of government, uh, a level of corruption that I think would follow. So that's the single thing that worries me the most.

    27. HSHarry Stebbings1:07:50

        I think the thing that worries me the most is we've seen the normalization of corruption across so much of government, why we're almost not surprised anymore.

    28. KRKevin Ryan1:07:57

        So I don't agree. I don't think there's a single example in the cabinet of Biden after four years that you can point to where we could point and say, "I think that's actual corruption."

    29. HSHarry Stebbings1:08:09

        I, I suggest you look at the UK government. (laughs)

    30. KRKevin Ryan1:08:12

        Uh, okay, that's... I, I'm, I'm sorry, I'm not commenting-

Episode duration: 1:09:50