Sonali De Rycker | How I Became a Partner at Accel; Type 1 vs. Type 2 Mistakes | 20VC #902

1. 0:00 – 5:25

   Sonali's background

   1. SRSonali De Rycker0:00

      (instrumental music plays) Three, two, one, zero. You have now arrived at your destination.

   2. HSHarry Stebbings0:08

      Sonali, this is such a joy to do. I can't believe it's taken this long. I think we first met about seven years ago, uh, back when I was actually young and cool. But, uh, thank you so much for joining me today, and this is such a joy to do.

   3. SRSonali De Rycker0:21

      Harry, it's a personal highlight for me to actually be here with you finally today. And I, you know, I think you know I'm in admiration of everything you have and you continue to do at 20 VCs, so thank you.

   4. HSHarry Stebbings0:33

      That is very, very kind of you. I'm, uh, truly touched by that. But I do wanna start with a little bit of context. You've been in the venture game for a number of years now, so talk to me, how did you make your way into venture first, and then come to be at Accel, obviously for the last 10 years or so?

   5. SRSonali De Rycker0:49

      14, yeah.

   6. HSHarry Stebbings0:50

      14.

   7. SRSonali De Rycker0:50

      So, maybe I'll, if you will allow me, I'll take you back a little bit longer, because I think that history kind of always predicts the future. So, I grew up, uh, in India in the '70s and '80s, socialist India, and what I mean by that was, choices were limited. There were, like two choices of soap.

   8. HSHarry Stebbings1:10

      (laughs)

   9. SRSonali De Rycker1:10

      There were two TV stations. And, you know, means were limited too, so I always knew I had to be a "professional". So that was kind of the job career market. There wasn't much business at the time. And being a professional meant, at least in my house, from a very young age, I was either gonna be a doctor, or hold your breath, I was gonna be a chartered accountant. I had no interest in any of these two things, and I thought, I, you know, "I've gotta get myself out of here." So, I decided to, um, do that. The only problem being is I had no money, I had never been abroad, and I wanted to go to the US. So, I kind of camped out at a building, which I don't know if it exists in other countries. It was called the USIS, United States Information Service. I would literally go there every day after school, I would climb a ladder, I would pick up this big fat book with frayed edges about how to apply to America. I swear it must've been like five, 10 years over, out of date. I have no idea. I followed the instructions, and by some miracle, I landed up on the East Coast in America, of America with, um, a full scholarship at a liberal arts institution. So-

   10. HSHarry Stebbings2:10

       Can, can I just dive in there and just ask-

   11. SRSonali De Rycker2:11

       Yeah.

   12. HSHarry Stebbings2:11

       Were you very nervous? I mean, it's incredibly intimidating, as any young person moving across the world on your own. How did it feel? (laughs)

   13. SRSonali De Rycker2:21

       I don't think I've ever been bolder, more ambitious, more entrepreneurial, more scrappy, more resourceful. I feel like I was my startup. Does that make sense?

   14. HSHarry Stebbings2:28

       Yeah. (laughs)

   15. SRSonali De Rycker2:29

       And, and I was so completely confident that this was the only way that I could forge my own life. Um, I try to tell that to my 15-year-old kid, but, you know, my daughter as well.

   16. HSHarry Stebbings2:40

       (laughs)

   17. SRSonali De Rycker2:40

       That's a- that's another story. So no, I was not even slightly nervous. You know, I never, I didn't even know when I'd go home. So I had no idea when I'd be able to sort of afford to go back. It was really like a one-way ticket. But, it was, you know, it changed my life. It changed my family's life, so clearly the best move ever. And then, uh, fast-forward, I graduated. It was liberal arts, and you know, where I went to school, none of the big banks came. Uh, but I had a lot of debt and I had a student visa, so I thought, "Okay, I'd better get myself a job at something pretty stable." So I managed to get a job. This was in '95 at Goldman Sachs. And being kind of the scrappy person that I was while I was there, I weaseled my way into this group that ended up spending most of their time with young startup companies. Now, it was 1995, and I, and I happened to join them in a meeting with this business called Spyglass. Have you ever heard of that company?

   18. HSHarry Stebbings3:34

       No.

   19. SRSonali De Rycker3:34

       No. It, it was the f- one of the first Mosaic-

   20. HSHarry Stebbings3:37

       Oh.

   21. SRSonali De Rycker3:38

       ... browsers. This is-

   22. HSHarry Stebbings3:38

       Yeah.

   23. SRSonali De Rycker3:39

       ... during the browser wars. And, in fact it was the first internet software IPO. And when I walked into that room and I spent time with this founder, this company didn't exist a few years ago. It was growing fast, it had just gone public. I think the founder was wearing Birkenstocks, just as in contrast to like-

   24. HSHarry Stebbings3:54

       (laughs)

   25. SRSonali De Rycker3:54

       ... suited, booted people. And I got the bug. I was totally hooked. I thought, "I need to be part of businesses like this." And, um, I spent the rest of my time, I, when I was there just being part of teams that sort of touched if you will, tech or tech IPOs, et cetera, and let me remind you, this was the start of the bubble. And I think that was my decision around being in and around entrepreneurship and tech. Fast-forward, I went to business school, collected some more debt, collected some more degrees, did the immigrant thing. And while I was there, I did immerse myself in all things kind of technology, venture capital, entrepreneurship. I stayed out of trouble I think too, because it was really like the heyday. And that's when I decided I was going to be... I made two decisions really. One is that I wanted to do venture capital, and then this is the big one, Harry. I decided that I must be in Europe.

   26. HSHarry Stebbings4:43

       Huh.

   27. SRSonali De Rycker4:43

       I was in Boston, Route 128 felt super cluttered. In fact, it was so early that I thought it was cluttered back then. And then Silicon Valley was also completely full up. I was like, "What am I gonna do there?" So I said, "Let me go to Europe." It's the, it's ground zero. The ecosystem felt like it was buzzing 'cause I went back and forth and I met people. And, um, it really felt like it was the next frontier, and I joined a firm called Afers Venture. I had a great time. It was a difficult time because the-

   28. HSHarry Stebbings5:10

       (laughs)

   29. SRSonali De Rycker5:10

       ... the b- the bubble was slowly deflating. And, um, I moved to Accel in 2008 and I've been here since.

   30. HSHarry Stebbings5:19

       Now, the joy of me having the role that I do is I get to learn from incredibly wise people like you. We were talking beforehand a

2. 5:25 – 11:00

   How did previous recessions affect your mindset?

   1. HSHarry Stebbings5:25

      little bit about kind of what we're seeing in markets and-

   2. SRSonali De Rycker5:27

      Yep.

   3. HSHarry Stebbings5:27

      ... how it's impacting my frail nerves. Um, talk to me. How did seeing the booms and busts, I mean, you saw it first with, you know, the dot-com early in your career, and then in 2008, 2009. How did seeing that impact your investing mindset first? Before we get onto advice for me. (laughs)

   4. SRSonali De Rycker5:44

      Yeah, well, you- I'm sure you have advice for me. I think, I think we're much more aversion- in a version of 2000 than we are in, in a version of 2008. I sort of contrast it with sort of 2008 was more Wall Street, 2000 was more Main Street. I think this is a version more mainstream clearly. Technology is at the epicenter. But if you, if you, if you'll allow me, I'll give you two anecdotes that sort of I have imprinted, um, on my brain. One for each sort of downturn, if you will.... so in 2000, you know, I, I joined in, in the summer of 2000, the, the, the... it was choppy, right? We, we had a big downturn, but it really... the bubble deflated in 2002, and things were really grim at that point in time. And so I was asked to go work with a group of founders, mostly e-commerce founders. This is the time of pets.com, Cosmo, boo.com. It was-

   5. HSHarry Stebbings6:35

      Yeah.

   6. SRSonali De Rycker6:36

      ... you know, it was all about eyeballs. And so I was asked to sort of go into the trenches, and I loved it, you know, working with these founders, and really trying to figure out, "What do we do now?" There was no follow-on capital. There was not a dot, drop of money available. So you either had to get to breakeven, if you had a revenue model, or you had to, um, frankly, give the cash back. Can you imagine? Or you had to sell the business. So this is what I was doing, and I, and I... I was working with one particular company, an Irish company. The founder had done a nice job. He got the company to a few million in revenue, it was breakeven. We had decided, the founder decided, "Let me sell it to the wholesaler." So I was in the middle of trying to help him kind of... and represent the shareholders of sell the company back to have kind of an elegant outcome, a home for the business. I was in the middle of this heated negotiation, it was like a week-long negotiation, and my, my phone rang. You know, those days, it was, it was the, the front desk, and the, the, the receptionist said, "You have somebody on the phone for you. His name is David Bonderman." You know who David Bonderman is?

   7. HSHarry Stebbings7:31

      Of course I do.

   8. SRSonali De Rycker7:32

      So... now, by the way, I've never talked to David Bonderman since. He has no idea who I am, he-

   9. HSHarry Stebbings7:35

      (laughs)

   10. SRSonali De Rycker7:35

       ... no idea that he's telling... I'm telling this story. And I, and I thought I knew who David Bonderman, Bon-Bonderman was, clearly. And I thought, "Why is he calling me?" And I remembered he was a very small shareholder in the cap table of this company. And so I got on the phone, and he said, "Look, I, I can't talk for long. This is who I am. I'm calling from a satellite phone," so it was important enough to call me, a nobody-

   11. HSHarry Stebbings7:57

       (laughs)

   12. SRSonali De Rycker7:57

       ... you know, to kind of negotiate a very small outcome. I mean, we're talking about like, you know, hundreds of thousands of back or a few single-digit million at best. And he proceeded to ask me in excruciating detail what I was working on in terms of the sale. And Harry, the fact that this legendary founder/investor could call me to ask about a very small amount of money, I figured out two things. One is the world was bad out there, and the second one was, you know, that's how he became a legendary investor. Detail, the f- the... it really, the, the, the... it... the value for money, it, it sort of... it never left me. The second episode was 2008. Um, we were raising our early fund at Accel. Uh, we were in New York City. It was mid-September. You know where I'm going. We were actually at the basement of the Four Seasons. We were lucky enough to sort of ask, uh, LPs to join us there, and, um, people came. They were a bit late, and we started wondering, "Why everyone so late?" And, you know, we looked at the news. It was the day Lehman collapsed. And just seeing the LPs, it was, it was really a testament to our relationships over so many years that they, they came to the meeting. But it was a disastrous time, right? The bottom had fallen out of the market. The- everyone's portfolio value had come down, hence the value of your alternatives, including venture capital, was disproportionally high. That was hard. You know, of course we raised... it was our third fund, we raised it successfully. It was a great time to be partnering with great founders in Europe, so I feel so lucky and privileged. But I can tell you, both those instances, incidents, periods, taught me the value of the capital and the importance of being a fiduciary, if you will, to the founder, to the shareholders, to our LPs, and we just were talking about that, Harry, weren't we, before this, is that, you know, how you're a fiduciary. So, so those are my two kind of anecdotes. At a high level, what I'll tell you is what I really learned is that... probably two things. One is never stop investing. The minute you lose your confidence, you lose your right to exist, because if you look at the funds that were around in 2000, so many of them disappeared exactly for that reason. That's, that's one thing, and the second one is, really partner. It's not about just your investing mindset, it's your partnering mindset. You-

   13. HSHarry Stebbings10:18

       Mm-hmm.

   14. SRSonali De Rycker10:18

       ... have to partner with your entrepreneurs. And, and right now, uh, I'd love, you know, kind of what you think. It's such a confusing time for these founders, right? They... we told them, "Cut costs during COVID. It's a recession. Who knows? The demand is gone." Then there was money flowing through the system. Money had never been cheaper. It was all about growth. We said, "No, no, no, no, no. Forget that. Just grow, grow, grow at all costs." Like burn, doesn't matter about the burn, it's all about growth. And now the messages are like, "No, no, no, you gotta get to profitability," all within two years. It's almost psychotic. So it's just... it's really... it's almost unfair. So I think embracing, putting your arm around the founders you work with is, is, is the name of the game right now.

   15. HSHarry Stebbings10:59

       You said there about kind of

3. 11:00 – 12:50

   How do you think about time allocation across your portfolio?

   1. HSHarry Stebbings11:00

      finding a landing pad for the company where David Bonderman called you. I've honestly been taught by some of the greats, "Harry, respectfully, it's not worth your time getting cents back on the dollar. Just spend time on the outliers, given the impact they have on your portfolio value." How do you respond to that, and how do you think about like time allocation across the portfolio-

   2. SRSonali De Rycker11:22

      Yeah.

   3. HSHarry Stebbings11:22

      ... and bluntly, the worthiness of spending time with companies where it is-

   4. SRSonali De Rycker11:25

      Yeah. Really good question. Remember, I was, uh, a very young person. I don't even know what my title was at the time that I was doing all this. So, you know, in fact, I think it was a good use of my time, right? And I mean, look, what I will say to you, and I really believe it, we are in the... you know, we are in the business of partnering very, very early with founders, right? The majority of what we do is either seed, who knows whether it's pre-seed or seed these days, it, it all got sort of merged, or series A, and those are 10 to 12-year relationships. They're certainly 10 to 12 year funds, and I think you only stay in business for 30, 40 years, as we've done, is if you have the references and those relationships and, and you know very well about that, because you're at the epicenter of a lot of it. And I think we have kind of a commitment to par- to really be there for the highs as well as the lows. Now, maybe we can-... staff it differently, maybe we can support them in different ways. But I don't think you could just check out, it just, it's just not the right thing to do. And the question is then, how do you do it at a fun level, so you allocate your time wisely? Which is something we do spend a lot of time thinking about. Um, but, but I, I, I think the relationship with the founders matters a lot, because that's what we're in the business of doing, is backing them and, you know, backing repeat founders. Company number one didn't work, but company number two might be a blockbuster.

   5. HSHarry Stebbings12:46

      Yeah. No, that's, I, I totally agree with you in terms of kind of the long-term nature

4. 12:50 – 15:05

   Are managers going to be proactive in revaluing their books?

   1. HSHarry Stebbings12:50

      of the relationships. You also mentioned, um, 2008 and, uh, the day Lehman crashed, obviously. And I'm most interested by the book value that you mentioned there-

   2. SRSonali De Rycker12:58

      Yeah.

   3. HSHarry Stebbings12:58

      ... because we're seeing this now where I was on the phone with LPs this morning and they're like, (laughs) "Our private books are about to get obliterated." They're not yet, but they're about to. My question is, are we gonna see managers be extremely proactive in revaluing their books? Are they gonna be delayed in doing so? How do you expect this to play out in the next six months?

   4. SRSonali De Rycker13:18

      Yeah, so y- what I'm really surprised at, Harry, because I sometimes check where things are sitting, you know, because we're now, uh, gonna be soon in our 40th year, uh, we've always seen that it pays to be kind of a combination of conve- conservative and realistic. And so we always have had, you know, the, the... we don't make up our own way of accounting. It's, y- I think y- you, you know this in terms of the accounting methodologies. And so we're pretty proactive about taking down the valuations, but they're already sitting at pretty deep discounts. That's us, d- depending upon, we have various layers of doing the analysis. And, uh, I do think people will be proactive because you have to be, but it's gonna take time and it's going to happen much more on the companies that have to have an outside mark, right? In terms of doing, going around. And the challenge is that people are just not interested in going out and getting an outside mark right now. They'd much rather just put their head down and take the capital that they have and keep going. So I think you have to sort of really take a, a different view as to, is it gonna be about a multiple change? Is it gonna be about a business risk? There's two different things that are going on, there's contraction in multiples and then, then some, there are businesses that are being affected. I think we're mostly just seeing a contraction in multiples for the most part right now. And I think there's a little bit of a wait and see, especially given the divergence in the venture backeds.

   5. HSHarry Stebbings14:45

      Yeah, no, I, I totally agree with you. I do want to know, k- you mentioned also the ac- the accounting principles that you have at Accel. I spoke to so many of your teammates before the show. Um, I even spoke to Jim and Arthur, um, who say hello and how wonderful you are. (laughs) Um-

   6. SRSonali De Rycker15:00

      Wow, you do get

   7. NANarrator15:01

      (laughs)

   8. HSHarry Stebbings15:01

      ... I really do. I, I just like talking to people, honestly. Um, but

5. 15:05 – 18:18

   How is it that you bring such cohesion and stability to Accel?

   1. HSHarry Stebbings15:05

      I was chatting to them, and pretty much everyone used the same word to describe you, which is the glue of Accel London. And I thought it was just a very striking thing that so many describe you in this way. What do you think they mean by "the glue of Accel London", and what do you think you bring to bring that cohesion and stability?

   2. SRSonali De Rycker15:27

      I think it's all of us, right? There's no one person who can be a glue. It's really a many to, to, to many relationship. I probably just like articulate it a lot, and I'm very loud, unfortunately. So maybe my-

   3. HSHarry Stebbings15:39

      (laughs)

   4. SRSonali De Rycker15:39

      ... voice gets heard a lot more. Um, you know, I think what we care a lot about, what we talk about, I talk a lot about, is creating an environment where you can really be the best version of yourself and do that authentically. Because everything else, and you've discovered this, is so, so hard. You have to be comfortable with yourself, and you have to really kind of exercise your voice and figure out how you can be the best investor with what you bring to the table. And so that's easier said than done. And, you know, you need to do that over a 10-year period because that's your commitment to your founders, that's your commitment to investors. And so what does, what does that mean in practice? It means there's a lot of communication. So constantly pulling people in, giving feedback, asking how they're doing, kind of keeping an eye on when you see somebody sort of is not kind of as active or as happy as they were. I remember I had a review once, and it was at the end of the year that I was given this feedback, whatever the feedback was, let's not talk about that. And I, and I, and I, and, and I thought, "Why are you telling me at the end of the year? If you had just told me, like, you know, in Q1, I could have course corrected, and then you wouldn't have had this impression for me-"

   5. HSHarry Stebbings16:51

      (laughs)

   6. SRSonali De Rycker16:51

      "... for three quarters." And that really stuck with me, and I kind of made a commitment, and we have a commitment that we give real-time feedback. And because of the way we, we mentor, we're actually able to do that. So that's one thing we do, it's a lot of communication. I think the second one, which I think shows a commitment to the talent and the people, we, I, we hired someone who's only responsible for talent for the team at Accel. A few years ago, uh, h- have you seen Billions?

   7. HSHarry Stebbings17:19

      Yeah, of course. I love Billions.

   8. SRSonali De Rycker17:21

      We thought that we needed a Wendy-like figure, you know?

   9. HSHarry Stebbings17:24

      (laughs)

   10. SRSonali De Rycker17:24

       But because it's all about if you're telling your companies to focus on culture, you're telling your companies to focus on talent, why would you not want to do that? And of course you can do that yourself, but it's not a side hustle. You need one person to really be thinking about it all the time in terms of how you can be world class. So I've had candidates tell me, "The fact that you have Chloe, that shows me how serious you are to sort of mentorship and commitment." And I think the final thing I'd say is one of the reasons, you know, I think I maybe have people say that is because I open up a lot. You have to be, to, to, to give, you have to get. And part of that is being vulnerable and being very open. And, and so I, I do that a lot. And I think you know because you, you've been incredibly supportive and thoughtful. I had a tough situation with my son, uh, for a, for a year and a bit, and there's not a person in this office who didn't know that and who wasn't supportive, because that's, that's how I do it.

   11. HSHarry Stebbings18:15

       Well, you know I think the world of you. But apart from that, my,

6. 18:18 – 19:30

   Is it easier to be vulnerable after you become successful?

   1. HSHarry Stebbings18:18

      I wanted to ask, like, do you think it's easier on the vulnerability side, bluntly, now that you are very successful?... like, you know, when I started, (laughs) there's no way I would have been as vulnerable as I am now. But y- you can be more and you're afforded more luxuries with seniority. Do you find that that's the case and is, is that the case for you, do you think?

   2. SRSonali De Rycker18:39

      That's a really, really good question, because that's what you do, you ask good questions. I think so. You know, I was in a conversation with my Harvard Business School lead professor, leadership professor, she's incredible, and, um, she also happened to graduate from the same undergrad as I did, and I was sort of going on about being authentic and being the best version of yourself, and she went, "So, Sonali, why do you think people can be authentic and be the best version of yourself? You're just lucky." So, yeah, I, I thought that was good feedback, which is like, it's not so easy, so you're right, it's not so easy. I don't know why I've always been kind of a version of this, so I, I feel that I push the envelope on that front. But yeah, I think it is easier when you're more senior, and that's great, because you can role model it, and hopefully you can change that, change that discrepancy, to be candid.

   3. HSHarry Stebbings19:28

      I, I do wanna ask, you know, I had

7. 19:30 – 21:43

   How would you describe Accel's culture?

   1. HSHarry Stebbings19:30

      Doug Leoni on the show, and he described Sequoia's culture as, uh, not a family, but as a team, where performance is number one. Um, and I, I thought it was, um, I thought it was brilliant as a product marketing message, honestly. (laughs) Um, and I wanted to ask you, if you were to d- kind of describe Excel's culture that you wanna build for Excel London in that same way, how would you describe it?

   2. SRSonali De Rycker19:55

      Yeah, so, you know, the, the sentence that, uh, we use is that we wanna be hyper competitive on the outside. It's all about being that first partner to these exceptional founders everywhere globally, but we're ultra collaborative on the inside. There are no sharp elbows here. It's not a star culture. It is a safe place, and there are written rules, there are unwritten rules, on the, you know, on the written side at a young level, if one of the younger investment team members identifies a great company, a great founder that we actually end up investing in, everybody gets a bonus, because that's sort of a way to hard code collaboration, and that's kind of the team spirit we want to bring. Unwritten rule, anyone here picks up their hand and says, "You know, we really need to work with this founder, we need to do everything we can to convince him or her," we will all drop everything to get on a plane. Actually that's the funniest part, the chase, and when we're all together, because as you know, venture can sometimes be a lonely business. So, I think it's these, it's the code of conduct, because we all know we're all very kind of aligned in terms of our mission. And I, I think what I wanna say, which to me is astounding, if you walk into our Palo Alto or SF office, if you walk into London, you walk into, uh, Bangalore, the vibe is totally the same, which is incredible. It's not homogenous, it's just a consistent culture, and the fact that we managed to create that, and it's the reason we can kind of collaborate globally, et cetera, but the fact that that exists without a CEO, some top-down instrumentation, any kind of top-down structure, just shows how frankly authentic it is, because it has to endure not only just time, but a lot of distance.

   3. HSHarry Stebbings21:42

      Can I ask,

8. 21:43 – 23:34

   How do you prevent yourself from becoming a bottleneck?

   1. HSHarry Stebbings21:43

      how do you prevent yourself being the bottleneck? And what I mean by that is, when you have great young people sourcing great companies, and they find something great, sure, but you're on 8, 10, 12 boards, you know, I'm on a ton of boards, I have a ton of other commitments, I can't just (laughs) drop everything and fly to Helsinki. It's- it's not that easy like it is for you. Like, how do you prevent yourself from being a bottleneck in decision-making consistently?

   2. SRSonali De Rycker22:10

      I think the reason we- we've done such a nice job in terms of really nurturing gene- kind of many generations is because we're all good at delegating. Um, you know, at the, at the end of the day, you have to empower the right individual to be able to make those decisions, and help them, support them, help them win, but there's a time to start, right? So I think for the right person, they'll be on the plane, and they'll be m- h- making the call with, uh, you know, with the team if we can't be there, one of us can't be there, but I think i- you know, so we'd only empower people maybe earlier than they think they're ready, but they're ready, if that makes sense, because we've seen it, we have pattern recognition. And it's the second thing is what I said, we genuinely drop things to support people. There's nothing more important than the team here and the team winning.

   3. HSHarry Stebbings23:05

      Do you know, I, I remember when BeReal was happening, and Giulio called me from Andorra, and I said to him-

   4. SRSonali De Rycker23:12

      Yeah.

   5. HSHarry Stebbings23:12

      ... "Wh- where are you, buddy?" And he goes, "I'm in Andorra." I said, "But do you know where, where the founder is?" "No, but it's a small country, so I'm gonna start knocking on doors."

   6. SRSonali De Rycker23:21

      (laughs)

   7. HSHarry Stebbings23:21

      (laughs) I was like, "Gee..." (laughs)

   8. SRSonali De Rycker23:22

      And it was during the lockdown. I didn't even know where Andorra was, but we made it, and it was fun.

   9. HSHarry Stebbings23:27

      I thought it was hilarious. It was the most funny call. I do wanna talk about that, 'cause you said about kind of the delegation and the ambition of the

9. 23:34 – 27:02

   How do you find talent when hiring?

   1. HSHarry Stebbings23:34

      younger team members.

   2. SRSonali De Rycker23:35

      Yeah. Yeah, yeah.

   3. HSHarry Stebbings23:36

      They've also gotta want that, and be as ambitious internally, and so I wanna talk about talent detection a little bit, 'cause time and time again you've done incredibly well building this junior team, and so l- if we think about like what to look for, when we spoke before, you said to me, "It's not about can you work a spreadsheet or produce a waterfall outcome scenario plan," very good for someone like me to know, um (laughs) , so, so when you're in those interviews, what are you looking for, and what qualities do you really want to uncover and tease out?

   4. SRSonali De Rycker24:06

      Yeah. So, I think we, you know, w- we just, we figured out a while ago that we don't have the operator pool here back in sort of the late 2000s, um, and there's a lot of investor talent but it's later stage, and given we're trying to be the first partner, that didn't work either, so we really had to figure out the, the kind of, the homegrown, um, nature of talent, and it's, it's what the track record was in the US too.And, you know, I think we did pretty well in the early days, and we did do ext- exceptionally well, maybe not on... Spreadsheet is a very tiny component of it, but, you know, the analytical rigor, the clarity of thought, or, you know, just being able to distill the facts down to a few elements, if you will, kind of a lot around the IQ side. And we thought when we made mistakes, we were, what we were getting wrong was kind of the emotional characteristics, and really the who as opposed to the how or the what. And so we started to think about, you know, we wrote it down on, on our, on the whiteboard actually. It was like a little bit of a group exercise, and we actually talked to Arthur and Jim about it. Arthur in particular had himself written it down. Can you imagine when he started out? Which I thought was, was exceptional. He shared it with us and it more or less matched, thank goodness, because I don't know what he would have done-

   5. HSHarry Stebbings25:21

      (laughs) .

   6. SRSonali De Rycker25:21

      ... if it hadn't been. And we realized that, you know, what, what really mattered, and it seems so obvious, but we weren't testing for it, we weren't asking for it, like resilience. Most of this business is rough, you know? You have to reboot yourself so many times. Especially historically, it was mostly bad news, because the companies that didn't work would shut down, and then, you know, the good news, it took ti- it took longer for great companies to percolate. Uh, we weren't testing for like reflective, how reflective you were, how self-aware you were. You have to be the person sitting at the side of the founder. It's, it's not about being the star in the room. It's really about building those relationships, being able to persuade. So how do... how self-aware you are in terms of how you change your tune, how you work with people. It was about how persuasive you are, because you're always persuading someone, right? You're persuading the founder to work with you. You're persuading your partners this is a great idea. You know, when you're doing a follow-on capital investment decision, there's persuasion. So, you know, we started asking questions around that. There's no magic, Harry, in terms of the question, but when you, when you ask someone, for example, you know, "What was the most surprising negative feedback that you got? And why do you think you got it?" The, the, the, the, the person will tell you something that you're never gonna find out.

   7. HSHarry Stebbings26:36

      Hmm.

   8. SRSonali De Rycker26:36

      So, that was a really interesting question for me, because I, uh... you shortcut like a whole bunch of references that you end up doing to find out that answer, because they'll tell you. If you ask someone what, what do they think the biggest mistake they've made, and we're not talking about investing mistakes, it's sort of super personal, so then you go into a really deep-

   9. HSHarry Stebbings26:57

      Can I ask...

   10. SRSonali De Rycker26:58

       ... you know, area. So th- these are the kinds of things that, uh, we started to do.

   11. HSHarry Stebbings27:01

       Do you find

10. 27:02 – 32:20

    Advice for young investors seeing their first downturn

    1. HSHarry Stebbings27:02

       people actually engage with that, though? They are, and like when you said those things, I immediately thought of things that I would answer. But like-

    2. SRSonali De Rycker27:08

       Yeah.

    3. HSHarry Stebbings27:08

       ... if I was in an interview, um, and I was like, you know, uh, uh, starting out in this g- industry, I'd probably give like false answers. Do you know what I mean? Not "I work too hard" style. But do you find-

    4. SRSonali De Rycker27:18

       (laughs) .

    5. HSHarry Stebbings27:18

       ... people do actually open up and engage, or are there things you have to do to make them feel at ease to engage in a way that's productive for you?

    6. SRSonali De Rycker27:27

       I think-

    7. HSHarry Stebbings27:28

       (laughs) .

    8. SRSonali De Rycker27:29

       ... the smart ones figure out that this is a real conversation, and they've got to give it their all. And that's the other thing, by the way, Arthur said, is, "You cannot convince people to be an investor."

    9. HSHarry Stebbings27:41

       Hmm.

    10. SRSonali De Rycker27:41

        They really need to want it, because it is so hard over a long term. So, you know, it really... And I think the individuals that we've met, that I've met, who really want this, who crave it, who, you know, are dying to be part of a, a business of partnering with these founders, and it's so exciting to them, I think they give it their all and they really engage. And if they don't, that's telling you something, right? That's like you're not really getting to them. And maybe have a follow-up meeting, but generally, I feel like you get a lot out of it. Look, it's not perfect, but it helps us a lot to really distill kind of characters and-

    11. HSHarry Stebbings28:13

        And-

    12. SRSonali De Rycker28:13

        ... traits.

    13. HSHarry Stebbings28:13

        ... you mentioned the resilience there. You know, we're about to go through an interesting kind of macro environment and changing times for our business. And there's a lot of young people who've never seen a recession or downturn before who are gonna have some pretty bad outcomes that they've never had before.

    14. SRSonali De Rycker28:27

        Yeah.

    15. HSHarry Stebbings28:27

        Uh, we talked before about... I'm very open in the show too about e- the company of mine that's not doing very well. If you're advising me, and you're advising a generation of young investors out there who haven't seen this before, about resilience and about what to do when a company goes bust and how not to lose confidence, what would your advice be?

    16. SRSonali De Rycker28:45

        I'd, I'd do two things. The one is, and I think this is important, is I'd really lean in onto your, in, into your early stage businesses, right?

    17. HSHarry Stebbings28:57

        Right.

    18. SRSonali De Rycker28:57

        Uh, uh, the vast majority of what we've done is seed investing, pre-product or definitely pre product/market fit, or even if there's product/market fit, it's super early. I think the joy there in terms of really supporting those entrepreneurs, you've already made those investments, right? So it's not about investing decisions. Working backwards to what you need to get to. I think you need to keep that joy alive, if you will, during tough times, to remind yourself what, what, what good looks like, what's possible, kind of the infectious enthusiasm around building something. So I think you need to really lean into those situations. And we all know the great companies get built in a downturn, and I think a lot has been said about it, but it's truly, uh, a special time to be kind of partnering with your entrepreneurs that you've already backed. So I think that, for the psychol- psychology element, is incredibly important. Of course, it's incredibly important for them. And I think the, um, you know, these t- the, the, the, the... we all know it's not about the type one mistakes, frankly. It's all about the type two mistakes. So candidly, yes, you could lose some confidence, but it's about distilling what you've learnt and moving on. Because the worst thing you can do, and you know, uh, uh, I've experienced it, is just, you know, you go into a rat hole and you feel like you feel a bunch of regret. You think, what did, you know, what did you get wrong? But the key is to extract some learning, uh, from that situation, and make sure you keep investing. The worst thing you can do, as I said before, is be frozen and stop investing. You always have to be meeting those entrepreneurs, because that's how you get out of it. You get out of the funk.

    19. HSHarry Stebbings30:38

        ... I told you I just used this for advice. In this case, honestly, I-I don't think the process in terms of the investment decision was wrong, and I didn't think the business was bad. It was a change in macro environments and capital markets, which meant that a business that would have normally succeeded in a prior 13-year bull market no longer succeeds in a downturn. I kind of leave going, "Well, do I have any lessons?" And that makes me feel quite guilty.

    20. SRSonali De Rycker31:06

        Well, you know, I- I- there are some situations where you can do all of the right things, where the entrepreneur does all the right things. Go back to what I said was a bull market, grow fast, go- go- go big or go home. And, uh, you know, money was flowing into our system as we- as we- as we know why for a number of years, and especially the last two years. So- but- but- but- but Harry, you have learned something. You have learned that capital was cheap for a while, but it's not forever cheap. So you think about the business models you back next. The role of what the cost of capital plays and the unit economics will be front and center. And the other thing I've learned in some of the situations I've been involved in is that actually, you know how you do a memo, we do a memo because that's sort of part of being a responsible investor, um, for a, you know, over a long term period. It helps you articulate your thinking. And we always, uh, you know, you write down, oh, there's regulatory risk, or you write down there's funding risk, or you write down there's geopolitical risk. But you just write it down.

    21. HSHarry Stebbings32:02

        (laughs)

    22. SRSonali De Rycker32:02

        I now have deep respect, you know, I- I learned that over the years, if something can go wrong and in a long enough period, it actually might go wrong. So don't just write it down, absorb it, internalize it. So maybe there was no learning, but I- I- I- I- I'm 100% sure that you've learned something coming out of it in terms of

11. 32:20 – 34:20

    How to stay ambitious during a economic downturn

    1. SRSonali De Rycker32:20

       the capital-intensive business models.

    2. HSHarry Stebbings32:22

       What worries me is it kind of prevents us being ambitious. We're gonna see a reversion to high margin enterprise SaaS investing, actually. We're gonna see a retrenchment away from emerging markets, we're gonna see a retrenchment away from capital-intensive businesses, and then what are we left with? SaaS and enterprise? I- I get it, fine. But it- I don't know, it just saddens me because that's the takeaway that you have.

    3. SRSonali De Rycker32:45

       Yeah, and you know, it's true that after, um, in 2000, because of the trillions raised, there was that... all that infrastructure laid down, which meant that the Amazons and the eBays could do well. And then web 1.0 started and then, you know, the rest you know. In 2008, though, all that money came in, but there was... it was the App Store and then it was cloud all happening at the same time. So these waves just carried you through. I- I'm not worried about us losing confidence, not backing the outliers. I mean, you know, we invested in Spotify in the end of, uh, early of el- early '11 is when we were talking to them. It wasn't kind of the most obvious time either and it was an incredibly bold plan. I think these exceptional founders absolutely are there, they have the confidence, they have the attention now. And yeah, maybe they're more capital-intensive, less capital-intensive, but there is enough dry powder, Harry, right now. I think it's like the numbers are two, three, 400 billion that is out there in venture capital at the moment in dry powder. So I think, you know, the trends, the secular, long-term secular trends are not going anywhere, right? You agree. Digitization, AI, et cetera, cloud. The founders are there. It's never been more vibrant. You know, after 2000 it was B2B and B2C. Do you know what that meant?

    4. HSHarry Stebbings33:58

       Yeah.

    5. SRSonali De Rycker33:58

       It was back to banking and back to consulting.

    6. HSHarry Stebbings34:01

       (laughs)

    7. SRSonali De Rycker34:01

       All the founders disappeared. There was, it was dry. It was like watching paint dry. It's- this is the opposite of where we are today. I think there's a lot to be excited about. And the good news is, I think you can maybe focus talent, concentrate talent again in some of the really great businesses versus this fragmentation of talent that happened.

    8. HSHarry Stebbings34:18

       Do you know what worries me though, actually?

12. 34:20 – 37:35

    Will economic downturn cause price inflation at seed stage?

    1. HSHarry Stebbings34:20

       And I'm just free flowing here, but it's like, actually, I speak to a lot of the big players, your Co2s, your D1s, your Durables, your, you know, SoftBanks of the world, your Tigers, and all of them are going, "Fu- (laughs) 500 to a billion, no way are we doing these growth rounds anymore. Wow, we can pay 50 instead of 25 at seed and put in five on 50? Great." And I think we're gonna see the migration of capital from growth to super early and then actually price inflation at the seed like we've never seen it before, ironically.

    2. SRSonali De Rycker34:49

       Yeah. Yeah.

    3. HSHarry Stebbings34:49

       I'm concerned about that. How do you think about that?

    4. SRSonali De Rycker34:52

       Yeah, I don't know. Do you think that the entrepreneurs, the early entrepreneurs, and we talked about us doing seed and A and being there in ground zero and partnering with them when things are not good.

    5. HSHarry Stebbings35:03

       I-

    6. SRSonali De Rycker35:03

       Do you think they're gonna work with... after, with- with- with funds that are totally passive?

    7. HSHarry Stebbings35:10

       Yeah, I do. I- I do. I had this argument at dinner last night with someone and they were like, "No, they want to partner with a VC." Honestly, they don't really. If you give them five on 50 versus five on 20, they'll go, "Great, thank you." That- (laughs) that's really-

    8. SRSonali De Rycker35:28

       You know, Harry, I- I ha- I have more faith because you know what? I'm seeing situations, um, and you're seeing them too at the later stages that the- some of the, um, crossover hedge funds, call them what you want, you know, it's not easy to work with them when things are not going so, so well, right? And they're nowhere to be found. And I really believe that entrepreneurs talk to other entrepreneurs and i- if anything, you- you want someone to call. I literally... I- I'm in a couple of these situations right now and the founders tend to call their- their ground zero investors even after like, a cap table or series A, B, C, D, E, F. You know, it just... it- it tends to be the case that they wanna be able to... there's alignment around being early, frankly. And I think that, um, that never goes away. I mean, just the other point I wanna make, because the reason you might take this capital is because they'll come later-

    9. HSHarry Stebbings36:23

       Mm-hmm.

    10. SRSonali De Rycker36:23

        ... but it's not so obvious that they will come later, right? And- and it's... so that's... because people are not investing anymore and I think that's something that the- the founders care a lot about. And maybe just a related point to a previous question around these capital-intensive businesses not getting funded. One of the reasons there was such capital intensity was because of competition, because you had...... you know, so many companies in the QSR, like in the delivery space, and I can keep going to 10 other spaces. And now maybe there'll be a couple, and back to the concentration of talent, there'll also be a concentration of capital. So maybe that's, uh, that's not always a good thing, but I think largely it's not a bad thing, it's the way it used to be. Um, but I digress. My answer to you on the other question is, I, I believe that it reverts to relationships, and founders care about... not all, but, but a lot do, and enough of the great ones will.

    11. HSHarry Stebbings37:19

        No, listen, I, I hope so, and I think you're absolutely right. I think also, especially for founders that have experienced great partners and great board members before, you definitely see them appreciating the value. So, I hope so, and so I (laughs) I will take your optimism on it. I do want to ask, we,

13. 37:35 – 39:30

    How has your investing style changed over the years?

    1. HSHarry Stebbings37:35

       we mentioned kind of like investing styles and like what I learned from like this challenge that I'm going through. When we think about your investing style, how has your investing style changed over the years, Sonali, and are there points like this one will be for me, my first company not going well and probably going bust, where it really changed how you think?

    2. SRSonali De Rycker37:54

       Yeah, so, you know, one thing that, um, I really honestly could not say I understood is how great great was. I mean, yeah, we read about it, we all knew about these gr- incredible businesses. I read the Facebook memo, but I'm not... I wasn't on the Facebook board.

    3. HSHarry Stebbings38:17

       (laughs)

    4. SRSonali De Rycker38:17

       And so it was, it's only when you're confronted with it in reality that I think you realize what uncapped, kind of exceptional greatness looks like. E- and I think Spotify is a, a great example where we invested, it was unfortunately not, not the first money in, um, shame on us. But when we invested, it was sort of 70-ish million in r- gross revenue. I mean, it's 10 billion now. And, um, it was about a million and a half paying users, so still tiny in a world of, you know, where, where it could have gone, and we had no idea that it could get as big as it ultimately got. Yes, we dreamed, et cetera, but it was never at the same kind of range of what it eventually, of what Daniel like was able to achieve with that business. So I think it's only when you see it close up that you really start to believe it. And, you know, learning is all about seeing. So I think that's probably was my big learning in terms of how uncapped this business can be. People told me, but it's only when you experience it do you, do you believe it?

    5. HSHarry Stebbings39:25

       Can I ask you, given that the best are so uncapped in many different ways,

14. 39:30 – 41:00

    Is there any point in doing outcome scenario planning?

    1. HSHarry Stebbings39:30

       and that's something that I've learned from doing a series called The Memo, where, you know, everyone pegged, say Twilio at three billion and, you know, points last year it was 60 billion. Consistently, we always underestimate the size of our winners. Is there any point in doing outcome scenario planning in that case? Do you-

    2. SRSonali De Rycker39:43

       None. Totally none. You know, the, the truth is that when you have conviction, and this is my other big lesson, when you have complete, unadulterated, visceral conviction around a founder and what they're doing, just, you know, just find a way to partner with them, just find a way. And, you know, I, I... it's great, we do the work, you know, we're, we're, we're very thoughtful in terms of, um, prepared mind. This is what allows us to do that. I, I'm sure when you had founders, Jim and Arthur, they talked about prepared mind, which just for the, for the benefit is, uh, it was a term coined by Jim and Arthur after the quote of Louis Pasteur, which is, "Chance favors the prepared mind." And you have to have luck, you have to have serendipity, but you better be able to recognize what good looks like, you know, to, you know, recognize what makes for a great founder in a certain business, right? Because it's also about where the, the space is. And I think when you have the magic of that founder and the magic of actually being prepared in some way or fashion around the category, it's really explosive. A- and I think that's also been a big learning, is you can do all your outcome analysis, it doesn't really matter, especially if you invest as early as we do.

15. 41:00 – 44:47

    Lessons on Reserves

    1. HSHarry Stebbings41:00

       Can, can I ask, in terms of reserves, um, what have been some big lessons for you on reserves? Like, you know, I think ProRata is quite a lazy one. I always think like, you're always... you should either be all in and want to lead the next round, or not in at all. Um, h- what's been your lessons on like effective reserves management deployment decision-making?

    2. SRSonali De Rycker41:19

       Yeah. I- the, you know, the challenge in this last cycle, um, was that the follow-on rounds came so quickly-

    3. HSHarry Stebbings41:29

       Mm-hmm.

    4. SRSonali De Rycker41:30

       ... that it was really hard to make the, the, kind of the, the, the decision around, okay, what worked, what didn't work, et cetera, versus what, um, what we used to do, you know, if you, if you rewind a couple of cycles ago. Um, I don't think it's as simple as all in or nothing. For one, the founders are looking for our support over a long-term period, if that makes sense, and I think we take that role that we have on the board and the cap table very seriously, and our support matters. That said, you know, we're very much, for an initial investment decision, we're very much a conviction, not a consensus organization, right? It's all about, um, we get around the table as in prepared mind thinking, you know, you have to be first. That's the way we think about it. But it's by the intel- intellectual integrity, honesty, lay it all out on the table. But when it comes to a follow-on, we think of the company as we. That's also the reason when it doesn't go well, there's no like finger-pointing, there's no naughty corner. It's our company, we collectively made the decision even if one person had the conviction. But we all ask the hard questions, there was real debate, there was real transparency, there was real trust. But we take the decision as a we, we'll really, um, look at it together. It's no longer just about what the, the-... the, the individual on the board. So we have some heated debates around follow-on, which is very important, by the way, because, you know, that's where a lot of your capital, um, goes in, in- into the companies. And I think we do believe that if we really are fans, we buy up, because it's the- it's only gonna get more expensive, right? You'll never get the ownership and that- that is the important element of our business, is getting the ownership when you're partnering solely with these founders. Um, but we do have some heated debates. I mean, if you look at the last cycle, Harry, like the biggest mistakes were people just putting a lot of pro rata money in, or just following and, and supporting companies to get your outliers. But then if a lot of your percentage of your fund goes into companies that actually don't return capital because you've just been supporting them blindly, you have these- you know, you have the return here and then you have the loss here, and it adds up to a pretty average fund. So you gotta think very hard about that follow-on capital, which is why, for us, it's, it's the "we" versus just somebody, you know, believing in it.

    5. HSHarry Stebbings43:56

       And also, and I mean, I'm getting this now, which is like, the opportunity cost of that capital in this interim stage that we're in. I've got a couple now where the op rounds are coming, but they're still kind of priced at 21 pricing, and I've got-

    6. SRSonali De Rycker44:07

       Yeah.

    7. HSHarry Stebbings44:07

       ... kind of 2, 3 million pro ratas. And I'm looking at it going, "Well, I have a very limited fund size. I would rather actually have that 2, 3 million across three deals, or, you know, nine in total, to deploy in depressed pricing that we'll see over the next year than in this 21 pricing that's coming now." Do you see what I mean? I think people forget the opportunity cost of that capital.

    8. SRSonali De Rycker44:27

       Yeah, totally. But, but, but at the same time, it's either you believe or you don't believe. Um, does that make sense? And then if you believe, you should allocate funds and actually even buy up, but this is a great time to, to buy ownership in the right companies. But yeah, if you, if you think the pricing is out of whack, um, then it doesn't make sense to, um, to go deeper.

16. 44:47 – 46:58

    What do you do when you lose faith in a founder?

    1. SRSonali De Rycker44:47

    2. HSHarry Stebbings44:47

       What do you do when you lose faith in the founder, when you don't trust them anymore? I've had this, and I don't know what to do either.

    3. SRSonali De Rycker44:54

       That's hard. See, another lesson I've learned, because it's happened to me, and I spend all my time before I invest in something... We talk a lot about, we always ask when somebody's presenting, "Well, who's the founder?" In the room, or when somebody's talking about partnering with someone investing in a company, we say, "Who's the founder? How do you feel ab-" And we all know this, we talk about it. But I think the questions around the founder, around their ambition, it's something that is the core piece of the discussion when going in. I only mention that because if you put a spotlight on that, you can maybe make less mistakes. The speed at which we all went in the last cycle wasn't conducive to that- to some of those discussions, but we can still try, and we did. I think when you lose faith in the founder, I think it's very hard, because as we all know, it's all about backing the founder. And I think you are able to have open discussions with the founder to, to ask them, you know, "Where are we going? Um, what do you think?" I think you have to be open if you feel like you have the support of the board and you actually can have an open, non-defensive chat with the founder. I've certainly had to do it. It's not easy. The way to mitigate that is not get into that (laughs) situation in the first place. But I think we owe it to our LPs, we owe it to ourselves to be able to have open and authentic discussions. And by the way, there's very few of those discussions that happen. It's become a cheerleading market, and I hope that goes away with this current cycle, but it's pretty dis- it's pretty dismaying to see where the market had got to. It was like fragmented cap tables, party rounds, and a lot of cheerleading.

    4. HSHarry Stebbings46:39

       You would be- you would be amazed at the kind of, uh, middle-aged men that I sit on boards with, who go, "Harry from the podcast. You always seemed so nice. And then like, you ask quite tough questions in person."

    5. SRSonali De Rycker46:50

       (laughs)

    6. HSHarry Stebbings46:50

       "Gosh, I'm glad you're here, 'cause otherwise, we'd have to be really mean." (laughs) I'm like, "Oh, fuck."

    7. SRSonali De Rycker46:55

       Let me put it on you.

    8. HSHarry Stebbings46:56

       Nightmare. Uh, can I- can I ask, in

17. 46:58 – 49:45

    Type 1 vs. Type 2 mistakes

    1. HSHarry Stebbings46:58

       terms of like, mistakes that you've made investing-

    2. SRSonali De Rycker47:00

       Yeah.

    3. HSHarry Stebbings47:00

       ... are there any that stand out to you? I've made some. (laughs) Some crackers. Um, are there any that stand out to you, and what were some big takeaways for you from those?

    4. SRSonali De Rycker47:11

       It's always about- always about the type two, right?

    5. HSHarry Stebbings47:13

       Yeah.

    6. SRSonali De Rycker47:13

       Y- yeah, you're asking me type- we feel- it's- it's the ones that you let get away.

    7. HSHarry Stebbings47:17

       So sorry, type one versus type two. What does that mean? So like-

    8. SRSonali De Rycker47:20

       Oh, okay, okay. So for me, it's false negative versus false positive. The false positive, it doesn't work out, you can only lose one times your money. But the false negative, when you say no to an outline- outlier business, right, to a founder that creates an exceptional business that could have returned the fund multiple times over, that really hurts.

    9. HSHarry Stebbings47:40

       (laughs)

    10. SRSonali De Rycker47:40

        And so those are the ones you really have to learn from. I think the one- the one mistake I've- uh, I made two mistakes, I think, that, you know, and I really- I try to go back and really, uh, learn. And we actually do this as a group. We put all our- the companies down that we got wrong, and we really figure out why we got it wrong as a group, and we try to learn from each other's mistakes. So that's- there's real vulnerability there, and I think that allows people to kind of admit and put their hand up too. Um, but- but what- what we do is we, uh- you know, where my mistakes have been, one is I- I kind of fixated on market size. It's so silly, because the great founders, they just create adjacencies, they change user behavior with beautiful products, and I completely got that wrong, because the markets, they look small. Clearly if it's very small, it's very obvious, but generally speaking, founders can do some magical thing in terms of creating multiple products, or, you know, just delighting users in a way that they- they- they- they- they kind of buy things that they never thought they ever needed. So, I think that's been one piece of it. The second one is, I really underestimated this bull market. Maybe it goes back to sort of the fact that I grew up in kind of post the 2000, and then of course in 2008. I just- there was just no focus on first principles in the business, and if you ask Accel, we really care about-We care about kind of enduring businesses and legacy, if that makes sense. Companies that will go public, companies that will be remembered, you know, the likes of the Atlassians, and the Slacks, and the Dropboxes, and the Facebooks, et cetera, of the world, and many others. Uh, we f- we care about that, and as a result, sometimes we do ask questions around, "Well, what are, what are the, what is the first principle of thinking on the business here?" And where that trips you up is where you think, it's exactly what we talked about, if it's gonna take a lot of capital to get there. And I think I personally just misjudged how much capital was available for the entrepreneurs who could fundraise really well. I really got that wrong. So it would have been better just to be early in some of these great businesses.

    11. HSHarry Stebbings49:41

        Can I ask, uh, you know, I have many insecurities investing. What do you think your biggest

18. 49:45 – 54:14

    What are your biggest insecurities?

    1. HSHarry Stebbings49:45

       insecurities are today, 'cause I think a lot of people bluntly look at you and look at the incredible track, look at your position, and go, "No insecurities." And I think we all have them, and it's humanizing. What do you think yours are today?

    2. SRSonali De Rycker49:58

       (smacks lips) So you know what's really, um, just beautiful about this business, but also quite difficult, is this learning curve is so steep. It never, the slope never goes down. You're learning every day. I was like, "For 20 years in, you could stop learning a little bit," right? You're always making mistakes. You'll always have insecurities. So, oh my god, there are, I think there are, there are so, so many insecurities. It's, um, it's probably around the fact that I don't know if I can always get it right in terms of the exceptional founder. I mean, that really hurts. At the seed stage, I spent a lot of time with seed companies, as you know, because we exchange notes and that's so much fun. It's, um, it's difficult to get it right. And-

    3. HSHarry Stebbings50:48

       But, but you... I'm sorry. I, I'm (laughs) I'm giving you advice back here, not... in a patronizing way in any way. You know you don't have to, though. And what I mean by that is, you know, you cannot be in every... I know we wanna be in every $10 billion, $20 billion business.

    4. SRSonali De Rycker51:02

       Right.

    5. HSHarry Stebbings51:02

       But you don't have to be. It's just a case of, how many can you be in? And anything that takes you away from being in the next Drew Houston or next Daniel Ek or you name it, you, you wanna remove. But you don't have to be in every one.

    6. SRSonali De Rycker51:18

       No, yeah, absolutely right. Yeah, so that's, that's the answer. So, good answer, Harry.

    7. HSHarry Stebbings51:23

       (laughs)

    8. SRSonali De Rycker51:23

       Answer your own question.

    9. HSHarry Stebbings51:25

       Sorry. No, I, but I totally agree with you and I totally get that. Uh, can I ask one final one? What are the biggest challenges of firm building? You obviously know me now, building the firm with 20VC, but you're, you know, 10 chapters ahead with so many more learnings. What are the biggest challenges that you think people should know and what it takes to build a successful firm, really?

    10. SRSonali De Rycker51:45

        Yeah. So, it's, um, it's interesting because I think it's, uh, uh, the timing, um, is quite unique in terms of European venture, right? We both know that. If you just kinda go back when we started out in 2000, we made a commitment to start Accel here because it wasn't just about Silicon Valley. It was our first step in going global, and then India was 2008, which has also been very successful. Um, so it took a lot of conviction. But you will know very well, Harry, that there were many folks who came here, and m- everyone, other than Accel, left. And if you ask us why, you know, we stayed, it was like, "Why, why, why, why did we have the commitment? Why did it work well?" And the answer is that we figured out the structure of, how do you do global well, is that you have boots on the ground, you have local decision-making, you're investing in entrepreneurs, you're inv- it's a relationship business. You need to be able to make that investment decision sitting across the table and, you know, not from thousands of miles away. So, we got that structure right, but it took a lot of blood, sweat, and tears to kind of evolve how we do global great, but local decision-making very well too. So, that was sort of a structural consideration, if you will, that has really stood the test of time, and we're kind of very proud of what we've achieved. And I think that was always a challenge in terms of what we're trying to do here. Maybe the second challenge is, um... I don't know how relevant that is to what you're doing at 20VC, but I'll tell you for us what it was, is really honoring our commitment, which is on, on the tin, which is great founder, great ambition. We will back you no matter where you are. So it meant going very early to Russia, to Vilnius. We went to back Ilka and Supercell in Helsinki. The only thing before that was Supercell. I mean, was Nokia, excuse me. So we've invested in 40 cities in Europe from London, which is not easy, right, to pull off. It means the way you structure your team, the way you think about thematic investing, the way you think about covering the ground. And to do that, being the early investor, being sometimes the first investor, was not trivial. So, I know these are more sort of structural as opposed to talent answers, but th- these are two things that we thought very hard about, and we feel like we got, we got right in the end.

    11. HSHarry Stebbings54:10

        Final one, and I'm slightly throwing a grenade here. What do you make of the

19. 54:14 – 56:57

    What do you make of the big US players coming to London?

    1. HSHarry Stebbings54:14

       big US players all coming to London? We've sat on a panel before, and we agreed on this-

    2. SRSonali De Rycker54:17

       Yeah.

    3. HSHarry Stebbings54:17

       ... and another delightful participant didn't agree, and I still think he's wrong. Uh, but my question to you is like, everyone's like, "Oh, all the US, you know, teams are in London." How do you respond and feel about that?

    4. SRSonali De Rycker54:29

       (smacks lips) I think it is sign of a maturing ecosystem, right? We all know, um, how vibrant and exciting it is here, and it truly is, right? I think, uh, th- the, the downturn here is not gonna change the fundamental of the great entrepreneurs in terms of what they're building. So, I, I think it's a sign of the fact that it's a very interesting market to be in, and how do you say you're a global investor if you haven't figured out Europe properly? So, it had to happen. Um...But the reality is, it takes decades to build the capillary networks, the relationships to, you know, to really honor that commitment, as I said, to the founders, which is what we've been doing. And what surprises, is, me is that there are... I've heard some verbiage around, "Well, Europe has just happened, and we've discovered it. Isn't that interesting that we've discovered it?" And, um, and that's surprising to me, because we all know it's been two decades of hard building here. And I think the, you know, the first, second, third generation of founders, they will know exactly who's sort of put in the blood, sweat, and tears.

    5. HSHarry Stebbings55:35

       (laughs) Sorry, I remember when that piece came out. I mean, we're going to edit this out, but the way... I'm friends with the head of marketing at Sequoia, and she was just like, "Oh my god, we've tried so hard to make friends, and we just shot ourselves so badly."

    6. SRSonali De Rycker55:50

       Right.

    7. HSHarry Stebbings55:50

       Um, let's not-

    8. SRSonali De Rycker55:51

       But then an answer to the question, I mean, an- another way to, I think, you know, how you do decision-making in early stage investing is critical to making it work. You really need to be on the ground. You need to be across the entrepreneur. It- you need to make decisions there. The partnership needs to be there. That is-

    9. HSHarry Stebbings56:09

       Do you need, do you need to have a separate fund structure? We have a lot of other firms who have people on the ground, partners on the ground, but not a separate fund structure.

    10. SRSonali De Rycker56:17

        You know, I don't know if it's about the fund structure, your XL, whether you're an XL wherever you are. I think it's about the local decision-making that is just absolutely critical, and clearly the best way to do that is to have the vehicle that allows you to do that in a seamless way. But to me, it's less about the, kind of the backend to it. It's much more about, how do you make sure you can be agile and dynamic with the, with the, with the entrepreneur?

    11. HSHarry Stebbings56:42

        Yeah. No, listen, I, I totally agree with that in terms of decision-making. I do want to move into my, I could talk to you all day. I want to move into a quick-fire round.

    12. SRSonali De Rycker56:48

        (laughs)

    13. HSHarry Stebbings56:48

        So, I say a short statement, you give me your immediate thoughts. Does that sound okay?

    14. SRSonali De Rycker56:52

        Yeah, let's do it.

    15. HSHarry Stebbings56:53

        So I, I need to read more (laughs) . I-I'm still failing on this task.

20. 56:57 – 57:25

    What's your favourite book and why?

    1. HSHarry Stebbings56:57

       But what's your favorite book and why?

    2. SRSonali De Rycker57:00

       Absolutely my favorite, The Fine Balance, Croydon Mystery. It's just, it was set in, uh, the emergency India in the '70s, and it's like a very tough tale of everyday people, and the injustice, but the elegance with which they l- live your life. You know when some characters stay with you? Those characters have stayed with me. It's an incredible book.

    3. HSHarry Stebbings57:19

       Wow. Uh, that's a first recommendation also. I mean, thank God, normally we live in the world of sapiens, so I'm thrilled to have something

21. 57:25 – 57:48

    What's your biggest strength and weakness?

    1. HSHarry Stebbings57:25

       different.

    2. SRSonali De Rycker57:25

       (laughs)

    3. HSHarry Stebbings57:26

       Uh, tell me, what's your biggest strength and your biggest weakness? 30 seconds each.

    4. SRSonali De Rycker57:31

       I care a lot about people, so I'm always trying to help. Biggest weakness, I'm a worrier.

    5. HSHarry Stebbings57:39

       (laughs)

    6. SRSonali De Rycker57:39

       Look how much, I'm an Indian mother. I worry.

    7. HSHarry Stebbings57:42

       I, I did actually get that from a couple of teammates (laughs) . They were like, "Yeah, everything she worries about."

    8. SRSonali De Rycker57:47

       Really?

    9. HSHarry Stebbings57:47

       Yeah, yeah, yeah.

22. 57:48 – 58:30

    Hardest element of your role today?

    1. HSHarry Stebbings57:48

       Um, what's the hardest element of your role today?

    2. SRSonali De Rycker57:52

       You know, you asked about f- team building. It's about ensuring that we have, and that we keep, the highest concentration of just the greatest talent in the venture business. That, that's the goal. That's hard.

    3. HSHarry Stebbings58:04

       What three traits would you most want your children to adopt?

    4. SRSonali De Rycker58:08

       Well, that's nice, Harry. Empathy, independent thought, be independent, and the third one is, I would say, they should be kind of responsible. Responsible to everybody around them; their team, the environment, their mother-

    5. HSHarry Stebbings58:28

       (laughs)

    6. SRSonali De Rycker58:29

       ... parents.

23. 58:30 – 58:50

    What advice do you often give but have a hard time following yourself?

    1. SRSonali De Rycker58:30

    2. HSHarry Stebbings58:30

       What piece of advice do you often give but find hard to actually do yourself?

    3. SRSonali De Rycker58:35

       Okay, I always tell people, "Don't have regrets." It's over. Put a line in the sand, move on. But then I find myself going and unpacking the past and f- thinking, "Why did I do what I did?"

    4. HSHarry Stebbings58:49

       (laughs)

24. 58:50 – 59:08

    What do you know now that you wish you knew when you started?

    1. HSHarry Stebbings58:50

       What do you know now that you wish you had known way back when you started with your first role in venture with Atlas many years ago?

    2. SRSonali De Rycker58:58

       Oh, how, it's what I said, how exceptional great founders can be, and how incredibly ambitious some people are and what they can build.

    3. HSHarry Stebbings59:07

       Um, final

25. 59:08 – 59:53

    Most recent publicly announced investment

    1. HSHarry Stebbings59:08

       one (laughs) , um, what's the most recent publicly announced investment, and why did you say yes and get so excited?

    2. SRSonali De Rycker59:15

       I think the, the fun one is BeReal, um, and the reason is because, I mean, you should tell me, but, uh, we're lucky to be in it together. But the founder there is, uh, Alexei, is really recreating social identity. I mean, it's such an important thing he's doing. I have a 15-year-old daughter, so this matters a lot to me personally. It's also very bold. And, um, yeah, it got me to Andorra to visit a two-person company.

    3. HSHarry Stebbings59:40

       Sonali, as we said at the beginning, this is like seven years in the, in the making. Uh, I'm so grateful to you for joining me today, and thank you so much for, for being so willing to move off-schedule and, and be so accommodating with my questions.

    4. SRSonali De Rycker59:51

       Thank you, Harry. That was great.

Episode duration: 59:54