Wesley Chan: How I Created Google Analytics; The Founding Story of Gmail & Canva | 20VC #919

1. 0:00 – 0:20

   Intro

   1. HSHarry Stebbings0:00

      Three, two, one, zero. You have now arrived at your destination. Wes, I cannot believe it's been four or five years since we last made this happen. So much has changed, but thank you so much for joining me once again.

   2. WCWesley Chan0:16

      Oh, it's a pleasure to be here. It's always fun to do this with you.

   3. HSHarry Stebbings0:19

      Oh, it's

2. 0:20 – 4:12

   How did you get into venture?

   1. HSHarry Stebbings0:20

      so much fun. Uh, I enjoyed our dinner in London so much. But I wanna start with a little bit on you. So tell me, how did you make your way into the world of venture first, and then how did you come to found FPV most recently?

   2. WCWesley Chan0:30

      Yeah, I mean, i- it's always an accident, right? Everything in life is a, is a pleasant accident and, uh, you know, I found my way into venture when I was, uh, after t- you know, almost more than 10 years at Google. I had built some of Google's most interesting and, and, and, uh, and, and well-known products. You know, I started Google Analytics, uh, helped build the ad system, uh, helped build Google Voice, and helped bring in a lot of the, uh, the tech into Android. Uh, and after 10 years, uh, Google had ballooned to some large number of people, right? I think there were hundreds of people when I went there, and when I left, there were somewhere around 50,000, uh, or when I was thinking about leaving. Um, and in, uh, 2009, I basically went to Larry and Sergey, uh, and said, "I love you guys, but, uh, you know, I've been 10 years here and, uh, I, I miss the old days of being part of a very, very small team." You know, my best work on Google Analytics or on Google Voice was done when the team was less than 20 people, right? You could feed it one or two pizzas. Um, and it was like a Navy SEAL mission. Everybody believed in, in accomplishing the impossible, uh, and we, we, we, w- we, uh, we built something that the, the world needed and the world appreciated and, you know, every time I go and give a talk at a conference, everybody raises their hand when I say, "Have you ever used or are you using Google Analytics?" Uh, it's incredible. So, uh, on, uh, when I told Larry I was gonna leave and, uh, do a startup, uh, it was my dream, was to go be a CEO and, uh, build a startup and then found something to build, you know, great products. Larry just looked at me and said, like, "Wesley, look, um, I had to buy toilet paper when I started Google. I had to go and, like, you know, shop for, shop for p- paper towels and cleaning supplies and everything else, and, like, buy health insurance." And, uh, he looked at me and said, "You know, that might not be your calling, so why don't you go and think about doing investing? You were great at buying, uh, some of the, Google's most interesting acquisitions, uh, with, uh, with, uh, Urchin for Google Analytics, with, uh, Grand Central for Google Voice." Uh, helped with, uh, Android and YouTube, and he said, uh, "You know, if you're good at picking companies t- for us to buy and, you know, m- uh, and they turned in some of Google's most, um, iconic, uh, products and services, uh, you might wanna try your hand at investing, and we're starting Google Ventures. Corporate venture capital has been an utter distaste in the success and founders hate it because, you know, the, the, the, the interest of the company that's investing and the interests of the founders diverge, and I want you to go build a venture fund that I would take money from." And, uh, you know, I helped, uh, s- help build and start Google Ventures with David Crane, with, uh, with Bill Marrs, with Rich Miner, and that original group of, uh, of four or five GPs, and built Google Ventures, uh, and spent five years there learning the craft of investing from some of the world's best venture capitalists. You know, some of them were on Google's board, Mike Moritz and John Doerr, Bill Campbell, Brook Byers. These guys were legends in the business, um, and, uh, it was just wonderful to be able to spend five years building it. And then Google Ventures got way too big and, uh, so I left and joined, uh, my, uh, really good friend and partner, Aydin Cenk at Felicis Ventures, who, you know, built one of the most amazing seed funds, helped him build that. And then, uh, you know, as, as, as, as, as Aydin built up Felicis, it, you know, got to a size where I said, "I l- you know, I love you guys, but it's time for me to go back to my roots of being on a Navy SEAL sized team where I can go and make decisions quickly and work with amazing founders in a way that's authentic and legit to me." And that's, uh, w- sort of how we wound up, uh, starting FPV Ventures. It's Pegan, myself, and a couple o- folks. We're five people. We move really fast. Uh, you know, we decide on things in less than 12 hours sometimes. Sometimes we meet a founder and we say, "You're amazing. You check all the boxes. We wanna back you. Your mission's s- nothing short of incredible," give 'em a term sheet on the same day and, and, you know, m- uh, sign it that night. Uh, we're that type of nimble fund, and like I said, uh, I, I work best on Navy SEAL mission-driven sized teams where I can feed 'em with one or two pizzas, and, uh, when you have that, you can just accomplish very impossible things.

   3. HSHarry Stebbings3:57

      You're clearly not in the UK, 'cause our appetite would not, uh, serve one or two pizzas. We'd need at least one per person. But, uh, I, I love that approach, and there's no more exciting time than those really, really early days. I do wanna start, I spoke to Don Stalter-

   4. WCWesley Chan4:08

      Yeah.

   5. HSHarry Stebbings4:08

      ... before the show, a mutual friend of ours.

   6. WCWesley Chan4:10

      Yeah, yeah, love him, yeah.

   7. HSHarry Stebbings4:11

      He said

3. 4:12 – 9:18

   Product insights from time at Google?

   1. HSHarry Stebbings4:12

      that I had to ask this one, which was, in terms of the very early days at Google, working with Larry and Sergey in particular, what are the one to two significant product insights you have from that time?

   2. WCWesley Chan4:24

      Yeah, it was re- it was really s- i- interesting. I still remember pitching Google Analytics and, and, and working on the ad system early on, and they'd just look at me and say, "Why are you s- wasting your time on this?" Um, they always would s- push me and say, "Wesley, you gotta go work on something that changes the world. Life is too short. This is not big enough." And, you know, when you're 21 and you sort of hear this, like, you just, like, your heart just breaks, right? You're sitting there going, "I've just spent the last, like, two weeks coming up with this proposal and doing all this research," and you're like, you know, at this, uh, uh, executive meeting with Larry and Sergey, the founders of, of the company, and they just pooh-pooh the whole idea and say it's not big enough. And that was the most, you know, amazing, um, experience. It stung in the moment, but it's, you know, one of the most defining moments where I look at this and go, "Is this big enough to go change the world? Is this something worthy of, you know, Google and worthy of my time at Google," right? Um, and it was one of those things where, uh, th- every time I would bring them a, um, a product or I'd work with or mentor other product managers or mentor other engineers that would, you know, sort of say, "I wanna go build this," I just look at this. I'm like, "You know Larry and Sergey are gonna rip you apart and ask the question, 'Is this big enough for the world?' And if you can't answer that question with a straight face, then y- you're not gonna get this through. Like, no chance he's gonna fund it or approve it or let you go do this." And it's one of those things where, as, m- you know, it affects my investing, and I look at things like Canva or, like, P- Plaid or Gusto, companies that have done well, but, like, you know, were not obvious when I did the investment, and I said, "Are," y- I look these founders in the eyes, "Are you doing this, and is it worth your time, and is it big enough for the world?" And if they could answer yes with a straight face, I'd be like, "I'll back up the truck. Of course I'll back you," I mean, w-You know, I was, I was able to write the first check in the, you know, companies like Robin Hood or, or Plaid, or, or Gusto, or, or Flexport and, you know, because the founders had this dream of building something that would go change the world. And so, that is one of the re- one of the most, you know, unique product insights I, that I, uh, that I had at Google, was build something the world wants and that's big enough for the world. I still remember, I, I, I was, um, I was helping out my friend Brian Murkalski, who was the product manager of Gmail before it launched, right? And I still remember sitting in on the, on the product meeting with Larry and Sergey, and, you know, the whole team comes up to, to Larry and Sergey and says, "We're gonna change all of, uh, of how people do email." And if you remember back in the days there was Hotmail and Yahoo, and they would give you 25 megabytes, right? And so they had written on their deck that we were gonna give everybody 200 megabytes. That's almost 10 times more than Yahoo or, um, or, or Hotmail was giving at that point, right? And this is, like, long ago when storage was really, really expensive and hard drives, you know, cost, like, you know, th- a thousand dollars a gigabyte or something crazy like that, right? And so Larry just walks up to the whiteboard, writes out 200 megabytes. He said, "This is what you guys wanna give to people, right?" And he goes, everybody in the room nods and says, "That's, that's amazing." Like, we know it's gonna cost a lot of money and it's gonna be amazing, but we have these amazing algorithms to compress data and everything else. And he crosses it out and writes two gigabytes. And back then, two gigabytes was gonna, like, was insane, right? Like, you know, you look at the cost of storage, it would've bankrupt the whole company. And everybody just like in the room just gasp loud and says like, "Oh my god, two gigabytes. How the hell are we gonna pull that off?" Right? And Larry's like, "I don't want you to be coming back to me until you've figured a way to do two gigabytes of storage on their email for everybody." That's, that's, that's massive num- uh, order of magnitude difference. And he goes, "That's the product feature that people will go towards." And everybody just freaks out and says, "Oh, they're gonna store their porn and their MP3s, and they're gonna store their video files on, on Gmail." And Larry just like, "You can solve that problem by just blocking the file types, not letting people do that." And he says like, "The other non-obvious insight is that people are not gonna fill up two gigabytes that quickly, right? It's gonna be only like, you know, 0.1% of the users that are gonna fill it up and, like, use it as a storage system and you can block that too." And he goes, "By the time people fill two gigabytes, like, this cost of storage with Moore's law will have dropped massively." And I'm sitting there going like, "Holy cow, we, you know, we, we could actually pull this off, right?" And, you know, Brian and the team went back and like, were down two gigabytes and figured a way to do this in such a way that, you know, it, it's, that was the offer. And remember, everybody freaked out, like, you know, when they launched it, like, uh, invites only. They were selling on eBay for thousands of dollars to get access to Gmail. And it was one of those things where I just kind of looked at that and went like, "Boy, like this is an order of magnitude difference." And like watching that firsthand and live in that room of like, you know, creating in, you know, what is today the most used email system in the world and watching that sort of origin story sort of happen in that room when they decided between two gigabytes and 200 megabytes, I was sitting there going like, "Holy cow, what if founders could pull this off," right? And that informs my investing. I ask founders and I tell the story, "What's your two gigabyte moment?" Like, you know, you're telling me something that's incremental. And I'm looking for the two gigabyte when everybody else has 25 megabyte moment. That was Canva, right? Like, you know, like, you look at Photoshop, you look at Office and you look at these other companies and Cl- uh, Mel and Cliff, the founders of Canva, figured out how to pull it off by building something that wasn't just incremental, it was revolutionary, right? You look at Plaid in the same way people were, you know, looking at logging into bank accounts and having to do those stupid, you know, direct deposits and like, you know, write down the, the 16 cents and the 42 cents that, you know, people would have to deposit and it would take two weeks to go figure out how to, like, create a bank account. They imagined that and did it instantly by like, you know, using, uh, by building a product that allowed people to sort of sign on and onboard quickly. I mean, these are revolutionary changes for a lot of the products that happened and those are the ones that, you know, I invest in and the ones that have served, you know, both the world, the founders, and, you know, my, my, my, my investing track record, uh, pretty damn well, right? So, you know, I look for those things that are the two gigabyte moments.

   3. HSHarry Stebbings9:15

      Can I ask you, and this is where the joy of the show when you're

4. 9:18 – 11:29

   Do you worry about missing out on smaller deals?

   1. HSHarry Stebbings9:18

      off schedule, in terms of like the, is this big enough, often some of the best companies are built on insertion points or wedges that are actually quite small. Uber, black cabs in San Francisco, uh, you could even look at Tesla, which is, you know, actually in the early days, the customer segment they were going after was incredibly small compared to what it is today especially.

   2. WCWesley Chan9:37

      Mm-hmm.

   3. HSHarry Stebbings9:37

      Do you worry that you're gonna miss out on the wedge smaller insertion companies-

   4. WCWesley Chan9:41

      So-

   5. HSHarry Stebbings9:41

      ... by having this requirement first?

   6. WCWesley Chan9:43

      So, I mean, the wedge on Gmail was that they l- they limited the invites. That was the magic, right? Like, it wasn't open to the world and everybody who used got two gigabytes. They had an invite only service for, you know, north of almost six plus months, right? And so, so, but th- the team knew what they were building and what they were going after, right? There was no questions about th- the two gigabytes was possible and that's w- what they were gonna... That was the launch offer, and that was what eventually, you know, it was open, it was open to the world, everybody got. And so y- you know, the, the, the difference between founders who build the features rather than products, you know, this is something Bill Campbell used to say, "Wesley, you should be building something that's a product and not a feature." Um, and I always look at the engineers that I had the privilege of working with, I'm like, "Guys, are we building a feature or are we building a product? If it's a feature, it's not worth our time." Um, same with the founders, you know, I had the privilege of working, right, with, you know, like, like, "Are you building a feature or are you building a product? Let's go make sure we're building products, right, that people want." Um, this goes back to the, to answer your question, the founders know that they're building a product. The product may not be what it looks like at the beginning when they launch, but, like, you know, I'm pretty sure Elon knew what his vision of conquering the world of electric cars was when he built Tesla. It wasn't one like this thing where, like, you know, he started and said like, "Oh, I'm only gonna stop at the Roadster and, you know, just build that piece for rich people and, like, charge, you know, 500 grand per car." He was gonna go and build the electric car that for the masses that was like $30,000, and that's what he did with the Model 3, it just took him like 10 plus years, right? So, the founders un- clearly understand the vision, they understand timing. You know, Canva did not start out as what it is today. Like, it is, you know, amazing today and it's gonna get even more amazing as, you know, they execute on their 100-year plan, right? But every founder that I invest in that are building products have the 100-year plan where they're gonna go change the world, right? You know, Flexport didn't just start out as a import/export piece of software and stop there. They had a h- you know, right, had a 100-year plan. So it's one of those things where, you know, I've, I've, I've, I've, I've told this to my team as we invest, "What the hell is a 100-year plan that the founder's articulating?" If the founder comes to me and doesn't have a 100-year plan, I don't wanna... I don't care. I don't wanna be involved.

5. 11:29 – 15:08

   How far out should founders plan?

   1. WCWesley Chan11:29

      Uh, we don't just do wedges, right?

   2. HSHarry Stebbings11:31

      Do you not think that things change so much that actually planning so far out i- can almost be futile? Do you not... And I, I almost think sometimes it can be limiting. Uh, when I look at what-

   3. WCWesley Chan11:40

      Oh, that's true for my life, right? It's true for my life. I don't plan more than three years, you know, in advance and I don't even plan more than three days in advance. Like, half the time people ask me to like commit to these vacations or dinner parties and I have no idea what the future will hold for me, right? But the truly visionary founders, Larry and Sergey, Cliff and Mel at Canva, you know, uh, Brian Peterson at Flexport, they have 100-year plans. They may not, it may not, it may not work out the way they envisioned it to, but they know what the world looks like in 100 years and they plan to go build a company that will, you know, adapt it and make that happen, right? That is the big difference. They know.

   4. HSHarry Stebbings12:09

      W- we have this really interesting kind of qu- question here, 'cause we're speaking about the visionary founders that you know, but then also the markets that they're knowing about and wading into. And I spoke to Victoria at 4Leesus, who you obviously worked with.

   5. WCWesley Chan12:19

      Yeah, I know her, yeah.

   6. HSHarry Stebbings12:19

      And she said that w- she said that you once told her the market always wins. And I've had so many guests on the show who say, "It's all about the founder. It's all about the founder. That's the only thing that matters." We both hear this all the time. How do you weigh markets?

   7. WCWesley Chan12:33

      Yeah.

   8. HSHarry Stebbings12:33

      How important are they?

   9. WCWesley Chan12:35

      Yeah. The market always wins. I hate to say it, right? Uh, but the, but it is also true that the founder is equally as important. I have Founder... uh, you know, I, I, I watch Founders who don't have a good sense of the market, but they're brilliant founders. And they launch a product that the market isn't ready for, and then it goes to zero. It's a money loss, right? The market will beat up a great founder. But the best founders understand how to adapt to the market and find the bigger piece, right? Like, it's, it's sort of how Clif and Mel were misunderstood. "Oh." A lot of people passed on them because they said, "Oh, I don't, I don't get the market." Right? You're a Photoshop competitor, they're more funded, and you know, only so many people are using Photoshop. In the market back then, the people who use Photoshop were like professional designers, right? Or like people who were like advanced and would, were willing to take a class. And Mel's actually unique insight, 'cause she was like a yearbook teacher in her, in her, uh, in her high school, was that like, you know, people shouldn't be taking four years of yearbook class so that they can like, you know, learn how to use Adobe products so that they can build, you know, a yearbook in the last and final year of high school, right? And she said like, "There's gotta be something easy, where like you could get started just by like logging in, and not having to like take a class to learn all these advanced features of like how to lay out, you know, and edit photos and whatnot." But everybody misunderstood her market as a, as a tiny market because like, you know, there was competition, it was Photoshop, and in fact, uh, she created a whole new market of people that wanted and cared about design. And that's what Canva targets, right? That was the genius that m- you know, Clif and Mel had, was the market's bigger than anyone ever imagines. So yes, the market always wins, but the truly visionary and incredible founders are the ones that understand that there's a new market to be created, and they go create it, right? There wasn't much of a market for electric cars when like Elon, you know, started, um, Tesla. In fact, like, you know, almost, you know, the c- company almost bankrupted them twice 'cause his timing was off, and like, you know, he was selling, you know, $500,000 cars with the Roadster. But he truly understood that everybody wanted one and created the Model 3. Look at the market now, right? Same with Larry and Sergey at Google. The two visionary founders truly understood the market. Back then, every investor nearly passed on them because they said, "Oh," like, "we, we, we have, um, there's, we, we have 15 other search engines, you don't need another 16th one. And by the way, what the hell are you guys doing? It's a blank page with two buttons and a colorful logo. I don't get it. There's no market here for this. Everybody else is like, you know, doing sports scores. How can you compete?" And look at Google today, right? They created their own market. And in fact, they had such a unique insight that the, that the market did not appreciate the Punch the Monkey ads and the horoscopes and the sports scores because all those were designed to keep you on the damn site. And Larry and Sergey wanted to get you off Google as quickly as possible and then they won out the market 'cause they had the unique insight. Yes, you know, market always wins, but the truly visionary founders know how to create it or adapt it or like figure out the right market to go into, right? It's the ones that don't know how to figure it out that like have problems. So, you're equally right that both of those are important.

   10. HSHarry Stebbings15:07

       So for me, there's three

6. 15:08 – 19:25

   Three types of markets

   1. HSHarry Stebbings15:08

      different types of market scenarios. There's market creation, creating a new market or user need or behavior that it doesn't exist before. There's market expansion, which I would put Canva in, which is like their word design, there's the word people who cared, but it massively expanded the TAM to a lot more people involved and included. And then there's what I call like market theft, which is like, um, almost Robin Hood-like in some ways. You could say that's market expansion. But neobanks would be involved with a lot of that, which is like stealing customers from incumbents because they provide shitty services that are outdated in many ways. Do you have a preference for which type of market you favor?

   2. WCWesley Chan15:42

      So, I love all three of them. Um, but where I've, where I've, um, where I've done the best, uh, is when founders come to me and say, "Oh," like, "this market doesn't exist yet and we're gonna make it happen." That's, that, that, that, that's the goal, right? Like, you know, when you, when you have a founder that has unique insight and says like, "I can create this. The time is right, the technology's right. I have the people who want my back to go make this happen." And they go create the market, right? That's where, that's where, that's where the upside is. I mean, like my, my, my outlier returns, uh, the companies, um, that I've had the privilege of working with, um, are ones that create new markets. Now that said, you know, I've got quite a few companies that have done well and, you know, like you, what you call the market theft, right? Like look at Gusto. You know, look at the incumbents that they were working against. It was terrible. Payroll was, you know, hideous. And they said like, "We're gonna create a better experience. You know, $4 a month per user." And, and, and, and, and, and they've nailed it, right? Like every small business I know is using Custo. We use it. So it's one of those things where, where I, um, you know, there, there's ways to win in all three, but the ones that, you know, I, I, I've had the best, uh, success and are, are ones where we create new markets, but that doesn't mean that, you know, I haven't succeeded in the other, you know, two that you've articulated.

   3. HSHarry Stebbings16:48

      I find market sizing hilarious because I mean, in the first two-

   4. WCWesley Chan16:51

      Oh, I don't do it. I don't do it. I don't actually, you know, look at to say, "Is the market big enough?" I just say, "Does the founder have a unique insight on a market that hasn't been created yet, or that, you know, they're about to expand into?" And if the answer is yes, you know, that's where we back up the truck. Most found- most founders come up and give me this crazy slide. "Oh, here's the TAM and here's like, you know, some, some Gartner report that does it." And I just look at this and go and I'm like, "I don't believe this."

   5. HSHarry Stebbings17:12

      (laughs) Do you believe it's an effective-

   6. WCWesley Chan17:13

      In fact, in fact, the ones, the, you know, Harry, the best companies... Sorry to interrupt. The best companies are ones where the founder says, "There's no Gartner report. There's no McKinsey and estimate on what the market sizing is. We're creating it." Those are the ones where I sit there and I'm like, "Ooh, I'm, let me in, let me get involved. How do I, how do I, how do I write a check?"

   7. HSHarry Stebbings17:31

      Do you think it's an effective exercise for founders to do? 'Cause I've tweeted this before, very similar thoughts, and people go, "Well, Harry, fine, but it's still an effective mental exercise for them to do." And I'm like, "Is it, really?"

   8. WCWesley Chan17:45

      Well, the, the, the more important exercise is the ones where you can truly convince yourself that you're creating the product and not the feature. The, the challenge for, for many founders that I've, I've heard pitching, this is not a knock on them, it's just something that, you know, folks, you know, maybe are taught in business school or I have no idea where they get this from. But they come and they said like, you know, "I, I, I..." It's like, they come and they say, "The market sizing for cars is $3 trillion." And then they come and they show me a pitch for air conditioning knobs. I'm like, "Well, the air conditioning knob market is not $3 trillion." And then they go and they sort of like conflict those two things and go like, "Oh, like come invest in my air conditioning knob company for the, for the car. The market size for cars are 3 trillion." And then they conflate those two markets and then they convince themselves that like, you know, they're going after a $3 trillion market and then they do this crazy math in their head. It's like, "If we only get 1% of the market, we're a $3 billion company." And I'm like-Ooh. Like, I, th- that's a lot of jumps in your head for, like, you know, turn a car comp- to turn an air conditioning knob into a car company. Now, there are truly visionary founders, like Elon Musk, who can go and sort of say, "Ooh," like, you know, "I'm gonna start with the air conditioning knob and eventually build the whole car after it," but those are rare. So that's, that's that, that's, that's the fallacy of market sizing, right, is that people conflate that, uh, people conflate the, the, the feature part of their thing f- uh, and the market size for that feature for that of the product, right? And that, that's, that's, that's the, that's a fallacy where, where founders get, get, get screwed on their, on their, on their, uh, on their, you know, sort of dream, um, because they don't truly understand how to migrate from the feature to the product, or they were never out creating a product in the first place. So, it's not so much market sizing. It's like, are you really creating a product and not a feature?

   9. HSHarry Stebbings19:16

      Okay. Uh, p- f- I'm, I'm so with you. When, when I get the 1% and we'll be a $10 billion company, I always go, "Uh-huh. Good. Good. Yeah. I like that idea too." Um,

7. 19:25 – 22:19

   Outcome scenario planning

   1. HSHarry Stebbings19:25

      uh, tell me, I, um, uh, kind of aligned but different, outcome scenario planning is another model that a lot of VCs do as well. What does this take for it to be a $10 billion company? How big can we project this outcome to be to determine whether it's worth or not? Do you do outcome scenario planning today when making investments?

   2. WCWesley Chan19:42

      We do a back of the napkin, uh, planning, right? So, you know, look, uh, I can only do maybe 20 at most core positions in my fund. We have a $450 million fund we raised. You know, a lot of, uh, a lot of our LPs are charities and foundations. I think, like, you know, 80% plus are, are, are charities and foundations, and you know, the rest are our friends' kids' college funds, right, that we're, that we're managing. You know, one of the nice things about being a, a, having such a, uh, having companies like Canva, uh, that yeah, I've invested in, uh, previously allows me to, to be picky about who our investors are, right? And I have to make the money. So, I have to look at this, this, every investment that I do and sort of say, like, "What has to come true for this company to return the fund, if not more?" And so, sometimes I don't even know what the steps are, right? But like, you know, I, I have to, like, at least convince myself and look my, every one of my charities and foundations whose endowments that I manage in a straight face going like, "I think this company has a chance of returning the fund." And then if you get, like, four or five of them, you return five X the fund, right? And that's, you know, sort of, you know, my- my hit rate's around, around, um, 30%, right? So, you know, one out of every, you know, three or four companies I've, I've hit, you know, are a billion-dollar plus, and I've been an early investor. So, you know, if- uh, you know, you do 20 plus companies and you have like a 30% hit rate, you know, you, that's like six companies. That's a, you know, 6X fund return or if, like, you know, you do the math. Um, but w- my point is that for that to come true, I have to convince myself that the company can return the fund. And so that's, that's where we have to go and instead of doing scenario planning or, or outcome planning, we sort of say, "What has to come true for the world to say this company is highly valued," sort of thing. And sometimes I predict that I'm way off, right? Like, I'm, in fact that's the, that's where, um, you know, companies like Google, like, no one in- expected it to be worth, you know, trillion plus. Like, I still remember in the early days when it was a couple hundred people, we said we were happy if the company was worth over a billion dollars, right? And you know, it's a trillion dollars now. So it's one of those, uh, you know, two, um, it's one of those things where, where, um, you know, we, we, we go through just to convince ourselves that there's a chance that it can happen. And that's, that's the case, then, um, you know, we'll do the investment. Now, there are companies that very, very, very, very hard to do that, right? And that's why we have, we, we, we don't invest in them. You know, I'll give you an example. Like a, a, a, a restaurant. Do the math. Like, you know, there's very few restaurants, they're usually chains or like, you know, private equity firms where they're va- valued north of a billion. So there's sectors or markets or areas where like we just can't, you know, when we even look at the math and sort of do this, do the, you know, whether you call it outcome planning or like, you know, sort of, you know, understanding what the, you know, possibility returns are, like they just don't return the fund. So, we- we- we- we tend to sort of, you know, wish the founder much l- uh, luck and give them a big hug and sort of say like, "You know, this is not, you know, something I can go back to my children's hospitals and, and whatnot and say that we can, we can make them

8. 22:19 – 26:40

   Capital concentration limits

   1. WCWesley Chan22:19

      a lot of money on this."

   2. HSHarry Stebbings22:20

      So, 20 core positions, 450 million fund, we're looking at 20 $20 million checks if we do net of fees.

   3. WCWesley Chan22:26

      Yeah, yeah, yeah. 10, 10 to, 10, uh, 10 to 20. That's what we look for.

   4. HSHarry Stebbings22:30

      10 to 20. How do you feel... I had Brian Sigman on the show from Founders Fund. He said, "Capital concentration limits are the enemy of great fund returns." Do you agree? And how do you think about capital concentration on a per company basis?

   5. WCWesley Chan22:42

      Uh, uh, you know, I, I actually look at it slightly differently, and this is something I learned from my dear friend, Aydin at Felicis, which is w- we like more shots on goal. Like if you're in some company like Canva, right, you'll return 10X plus the fund easily, but you have to be in a company like Canva. And so, so the more you concentrate unless into companies, the less chance you have of finding c- company like Canva. That's the, that's, that's my strategy, right? Like, you know, and I started, you know, I helped to start the seed fund at GV so and Aydin also, you know, started Felicis as a seed fund. And so he and I have this preference for having more great companies in the fund than l- and, and, and we can always concentrate capital later on through, through other vehicles, right? You know, you're, you, you're quite, you're quite an expert at, at understanding, you know, the, some of those, those strategies in place. But like, we'd rather have more core positions that we get more shots on goal than, than to, than to, um, than to sort of say like, "I'll do three companies," and like, you know, pray that one of the three companies works, right? Like, you know, I'm, uh... If you do the odds, uh, in, in this business, you have to have just enough to get a high confidence of returning. You know, I studied electrical engineering when I was at MIT. Like, you know, when you study statistics and then, you know, you want a high confidence score and I wanna be able to go to my LPs and like the way I've constructed this portfolio, I have a pretty high confidence of returning the fund multiple times over on these checks. So that's why I prefer, you know, doing more companies than less. But you have to be good at picking and you have to be good at saying no.

   6. HSHarry Stebbings23:58

      Would you, uh, so how important is ownership then? And then would it not be better for you to do five to $7 million checks and write 45 to 50 of them and have that diversification?

   7. WCWesley Chan24:09

      Well, if, you know, series A rounds were done at five to $7 million, I would totally do it, right? But like, you know, they're, most of them aren't. ... like, you have to-

   8. HSHarry Stebbings24:17

      Sure.

   9. WCWesley Chan24:17

      Like, we have a $450 million fund so we can write and back founders all the way. Right? Like, the capital that we have is n-... uh, is designed for us to sort of go to the founder and say, "If you're raising 15 million, we're here to back you for 15. If you wanna raise five, we'll do five." Right? Like, you know, we're, we... there's no hard and fast rule that I subscribe to. Another thing I learned from, you know, Aiden, uh, you know, at Felicis. Like, you know, he, w- w- we get into the best companies and we do what we can to get into the best companies. We don't go and have dogma. Like, you know, I, I, I did not have 20% ownership of Canva when I led the Series A. I did not have a board seat. In fact, so many people said no to them because they said, "We're not giving you a board seat," or they said, "We're not giving you 20% ownership," or they said, "We're not gonna do X, Y and Z." And remember, the dogma back then, in 2014 when we were n- discussing the deal, was 20% ownership in a company located close to you, not run by a romantically involved team, and a board seat. And basically, we didn't get any of that from Canva, and I s-... you know, I was one of the few people that said... in fact, the only person that said, "Yes, we'll write the check for you 'cause we really believe in what you're doing. And fine, we'll waive all these things that every other VC is saying we have to have, like the ownership requirements and everything else." And Canva's l-... you know, sort of the lifetime achievement award, right? Like, it's gonna return so much of the fund for Felicis. I'm such... and it's one of our, it's one of our investments in, in, in my new fund, one of the first that we did, because it's such a, an amazing company that continues to scale and build, you know, products that people want. That's, that's the thing where if like, you know, I had to subscribe to some dogma about ownership or subscribe to some dogma about board seats or whatever else, I would not have gotten in or I would have said no. It would have been-

   10. HSHarry Stebbings25:43

       I-

   11. WCWesley Chan25:43

       Can you imagine me missing out, uh, you know, on, on, on, on this company because I had some dogma?

   12. HSHarry Stebbings25:49

       I, I totally agree, but there has to be a line. And it's... you know, I have this, I always have this, which is like, you know, I'm lucky because of the brand and the media platform. I have access to a lot of great deals. But there has to be a line of, it's worth it enough. Doing a 100K check in a seed round right now-

   13. WCWesley Chan26:03

       Yeah, if Canva came to me and said, "Would you leave the Series A for 100K and have like 0.001% ownership," I pro-... uh, you know, that would probably would not work. But they didn't.

   14. HSHarry Stebbings26:11

       Exactly.

   15. WCWesley Chan26:12

       There's... I mean, this is the market, right? There's some ef-... market efficiency that will work out between the founders and myself, and we say like, "Look, let's make a deal that you wanna say yes to, but at the end of the day, like, you know, I'm, I don't need 50% or 20% or whatever the other funds, you know, are requiring for their, for their model to work." We have a very flexible model to be able to win. So, that is the... that is something, again, that I learned from, from my, my wonderful colleagues at Felicis, and you know, it's, it's near and dear to my heart today to build a thing, to build a, a set of terms

9. 26:40 – 29:08

   Do board seats add value?

   1. WCWesley Chan26:40

      that make it easy for the founder to say yes.

   2. HSHarry Stebbings26:42

      Y- you said about board seats there, um, and, uh, similar to dogma. And there's still ego around boards, um, I've sat on many boards.

   3. WCWesley Chan26:48

      Yeah, I don't care. I didn't get a board seat. I, I'm on the board of Canva today but I d-... you know, they said, "We don't... we love this. We don't know you well enough yet to give you a board seat." And I was like, "Fine, I don't need one." In fact, if like-

   4. HSHarry Stebbings26:56

      I don't-

   5. WCWesley Chan26:57

      ... you go to IPO if I have a board seat, I'm fine. But they said-

   6. HSHarry Stebbings26:59

      I, I-

   7. WCWesley Chan26:59

      ... basically like, "We, we trust you, so we want you on the board now," when we... when I... when we, when we led the Series C at Canva. So, it's one of those things where I'm not, I'm not dogmatic on this. In fact, I... you know, my preference is to only take the board seat if the founder wants it, right? Like, it has to be something the founder wants, not, not what I want.

   8. HSHarry Stebbings27:15

      Okay. But do you think boards actually add value? I've sat on many with some great people. They don't really add value. I, I, I... maybe one has added value.

   9. WCWesley Chan27:23

      Again, again, that's the, the founder's decision, right? If my being on the board adds value to the founder and he wants it or she wants it, I'll totally do it. There are founders who are like-

   10. HSHarry Stebbings27:31

       But generally, do you feel-

   11. WCWesley Chan27:31

       ... "I don't want you... I don't need you on my board," that'd be great.

   12. HSHarry Stebbings27:34

       Do you feel boards do add value though, generally?

   13. WCWesley Chan27:36

       It depends on the board, right? Like, the one on Canva adds lots of value, r-... or at least I think it does. Right? You're gonna have to Clif-... you're gonna have to ask Cliff and Mill that. But it's a small board with me and Rick Baker and the two founders. And we have really wonderful, lovely discussions about, you know, how they wanna move forward and what their 100-year plans are. I... if it was a 20-person board, we would not have those discussions. Then I'm on some boards that have like 10, 15 people on there. You know, I sort of sit there and I just like, sort of, you know, I'll go to the board meeting, I'm like, "Ooh," like, "I'd rather not be here." Right? Because like, you know, I mighta... there's not much value that the board has and everybody has a different opinion and the founder spends more time managing it. This is really up to the founder. For me, like, I'm only, I'm only willing to do it if the founder wants it. Right?

   14. HSHarry Stebbings28:13

       You mentioned leading the Series C for Canva there. There's often a, uh, a thought that actually, in your best companies, you're never able to concentrate capital because the sequoias that you name your big funds will come in and take a big bite out of them, and so you're never able to concentrate capital across rounds in your best companies and increase ownership. Do you agree with that thought or do you counter that given your experiences?

   15. WCWesley Chan28:36

       I mean, it depends, right? On Canva, we were able to concentrate more capital. And by the way, Sequoia came in on that round too with us. It really depends on-

   16. HSHarry Stebbings28:44

       Darkly.

   17. WCWesley Chan28:44

       Look, this is such a... this business is an art, right? There isn't a hard and fast rule of let's go do X, Y and Z and that's the pattern. In fact, the VCs that subscribe to hard and fast rules, that have dogma, are usually the ones that get knocked out very quickly.

   18. HSHarry Stebbings28:57

       I, I, I totally agree. It's kind o'-

   19. WCWesley Chan28:59

       It's the art, it's the art of the... it's the art of the deal, right? Like, everyone's a custom, unique boutique deal. That's what we, that's what we spend time doing, right? And we just make it easy for the founder to say yes.

   20. HSHarry Stebbings29:07

       You said about kind of making

10. 29:08 – 31:00

    Should founders fundraise in this market?

    1. HSHarry Stebbings29:08

       terms that make it easy for the founder to say yes. In terms of the fund raise process, I saw a LinkedIn post that you b-... put out, I think it was in June, and you said, "Wait and stay put." I'm intrigued. When founders are contemplating raising today, like, talk to me about the wait and stay put thinking. I'd just like to understand that.

    2. WCWesley Chan29:27

       Yeah. You know, I had a lot of founders say, "Hey, you know, I, I want to raise now. It would be great to, to go out." And I sort of said like, "Look, the market's just completely changed." A lot of VCs don't wanna be pricing a falling knife, right? Like, could you imagine like doing a deal in your fund and then like three months later it's like worth half as much and you have to go to your LPs and explain that? Everybody's... you know, everybody's sort of thinking about, you know, what the new market sort of is and what the new reality is. And so, you know, my, my counsel to founders was like, "Look, if you don't need the capital, don't, don't go out there with everybody else desperate to get capital right now." Because everybody's out in the mar-... flooding the market going like, "Give me money." Like, you know, normally, you know, I w-... uh, the, the one data point I had was when we announced a fund, right? Like, I've announced a bunch of funds before from my previous, um, from my previous, uh, firms that I worked for, right? Like, you know, I'd get a couple hundred people saying, "Oh, it would be great to, um... it'd be great to, to talk to you about raising money." And then, you know, this time around, I, you know, my inbox and my LinkedIn messages and whatnot was flooded by over like 5 or 6,000 people saying, "I need money."... from some firms that you may have heard of, right? Like, you know, um, some, um, actually from some companies you may have heard of that you read about in TechCrunch. And I just would ask people, uh, uh, "How much do you have left? How much cash runway do you have?" And everybody, you know, it was like four months or less, right? So, that is, uh, I mean, uh, the people out-raising have, ha- had that point to be out-raising. You don't want to be lumped into the system where like, you know, if, if y- if you have the cash, you know, uh, uh, you're out with a bunch of other people that are knocking down and banging down every door because they might run out of cash because a lot of people aren't doing as many deals as they were a year ago. So, I just said like, uh, "Hold on, let the market reset then figure out what the right strategy is, and if you have quiet LPs, I mean, if you have quiet investors

11. 31:00 – 33:58

    Is now the best time to be investing?

    1. WCWesley Chan31:00

       where you can raise, you know, uh, some more money quietly and, you know, do it at terms that you're excited about and that they're excited about-"

    2. HSHarry Stebbings31:05

       Mm-hmm.

    3. WCWesley Chan31:05

       "... then go do it and sharp your capital pool but don't be out publicly raising." 'Cause everybody that was out there had a bit of desperation in there. And so that was the, that was the impetus for it and, you know, we, we, we've got a lot of people who said, uh, "Well, I totally hear you. How do I find quite capital that's willing to do it?" Or, you know, go to folks that know me, and that, you know, that served some of the founders well that had access to that, right? Like Guild was able to raise a great round from investors they knew without being on the market, and they were one of the big success stories of being able to get up rounds even when everything was falling.

    4. HSHarry Stebbings31:32

       Every GP is telling their LPs, "Now is the best time to be investing. Now is the best time to be investing." Um, and I'm intrigued, do you actually agree with that or do you think we're still in the mid-

    5. WCWesley Chan31:43

       No, it's the best time to have a fund. It's not the best time to be investing, right? There's a lot of treacherous d- deals out there. Like, I don't know when, when, when there's these re- market corrections, uh, what winds up happening is the credit and capital markets seize up a little bit, right? And so the challenge is, you know, uh, you have no idea who's gonna write another check into your company, and so you might be the last check into that company. And so, it's very treacherous. Like you, like imagine finding like some company that has four months of cash left, right? And like, you know, you're, you have a, a 25 or 30 million dollar fund, and you say, "Oh, I love what you're doing. Let me go write a $4 million check in your company or whatnot, and concentrate capital in there," and then, you know, f- you know, that, that, that lasts 12 months and, you know, the markets are still seized up then 'cause who knows how long this lasts. You know, money policy isn't, you know, funding more capital into the markets so, you know, things are, VCs are still sort of skittish and waiting for the markets to re-price, so a lot of them aren't doing deals and then the founder comes back to you 12 months from now and says, "I'm outta cash again. You just put four in, I need another four." What are you gonna do? Nobody else is knocking, you know, giving, returning any phone calls to the founders. It's treacherous. So you, it is a great time to be in great companies but it is not a great time to invest because it's so easy to make a mistake because you might be the investor of last resort for that founder and then have to, have to either shut down the company or keep writing checks into that company until the capital markets, like, you know, free up a little bit. And so there's, there's some, there's some, um, there's some treacherous behavior that, uh, one has to be careful about as you're looking into this market.

    6. HSHarry Stebbings33:07

       Do you think it's the right time to be aggressive? To select assets that previously would not have taken more money or did not need more money, but now might have a mindset shift of actually having more money

    7. NANarrator33:16

       Oh, yeah.

    8. HSHarry Stebbings33:16

       ... in their pocket?

    9. WCWesley Chan33:16

       No, that's what we're doing. We've, we, we, we've done, we've done at least seven deals so far, right, since, you know, and our fund is like two months, you know, two months launched. So, we're being very aggressive and we're being very thoughtful in terms of what we're putting capital into. But, and most of them are companies that I've known well, the founders that, uh, know me well and that, like, you know, have no need for more capital.

    10. HSHarry Stebbings33:36

        I, I, I totally get you and I, I agree in terms of the, the aggression that-

    11. WCWesley Chan33:38

        So the answer is th- yeah. It's great, this is a wonderful time to be into those companies. But would I be doing a company that has, goes on to me and says, "I have two months of cash?" And, you know, w- you know, if, if you write us a check and it'll last us 12 months, uh, you know, it, if it's a great market, like, with a great founder and, like, you know, two months of cash? I probably wouldn't do that deal.

    12. HSHarry Stebbings33:56

        I, I totally agree with you.

12. 33:58 – 37:58

    Biggest misses

    1. HSHarry Stebbings33:58

    2. WCWesley Chan33:58

       Not now.

    3. HSHarry Stebbings33:58

       Um, can I ask, we, we, we've spoken and we've heard a lot about Canva. I think you also learn a lot from misses. When you think back to your misses, what's the most prominent one for you, and what, how did that change you as an investor?

    4. WCWesley Chan34:10

       I think, um, you, you know, I've had, I've had quite the anti-portfolio, right? Like, uh, one of my big misses was Twilio. You know, Jeff Lawson, um ... You know, I was a s- founder of Google Voice and, you know, I'd built that for multiple years and knew a lot about telecom and he kind of said, he's like, "Oh, I'd love to have, you know, the, the Google Voice, um, founder on my cap table. Would you invest?" Uh, and this was at the seed round, right, like, when I was at GV. And he's like, "I'd l-" you know, and I passed on it because, you know, I looked at it and, you know, talked to my, my team at Google Voice and everybody looked at it as like, "Oh, this is easy to do. Like, you know, once a company gets big enough they don't need Twilio anymore." Boy, I didn't understand how much he would evolve the product, how much he would change it. That was a big miss. My, my, um, my lesson learned on that one, and, you know, many of my other misses is that when you're an expert in the area, you know too much and everything becomes hard. It's the not invented here syndrome. Especially you're v- if, if you're a classically trained engineer. And so, you know, my best investments like Canva or some of my life science investments, right? You know, Orca Bio or, or Xilis or, or, uh, or, or, uh, you know, these, these amazing life science companies I've had the chance to, to be part of. Like, if you know just enough to be dangerous where you can believe the founder instead of having all this skepticism going, "No, it can't happen," that's where you do the best, right? So I, I, I, I, I try not to take any pitches in the ex- areas I know too much about, 'cause I have a natural bias to pass on it and say, say no. And I'd rather, you know, have one of my colleagues or partners who don't know enough about it take the pitch and then, like, be really excited about it and I'll go stare and poo-poo it afterwards and if it survives that then the deal gets done than to have me go and, like, have the natural bias. That is literally my biggest set of misses is ones that I knew too much about.

    5. HSHarry Stebbings35:45

       My biggest misses were, well, some of them were Riverside, which we're on now, uh, uh, every round. Descript, which we use as well.

    6. WCWesley Chan35:52

       Yep.

    7. HSHarry Stebbings35:52

       Every round.

    8. WCWesley Chan35:52

       Mm-hmm.

    9. HSHarry Stebbings35:53

       I knew too much. Eight years in podcasting. No, no one-

    10. WCWesley Chan35:55

        Yeah.

    11. HSHarry Stebbings35:55

        ... would ever use this. Ridiculous.

    12. WCWesley Chan35:56

        Yeah. Yeah. Yeah.

    13. HSHarry Stebbings35:57

        I used to think-

    14. WCWesley Chan35:57

        I love too much. I like- these tools, I'm too used to it. Like, you just hate, you hate everything you know too much about.

    15. HSHarry Stebbings36:01

        Uh, my question to you is, you said there about Twilio, you know, you know people will scale out of it when they get to a certain size. I find this is a big investment mistake that people make, and that you can make it with a number of companies, uh, like, Algolia as well. I, I know a lot of people who did the same. Like, h- how, do, do you agree with me in terms of that, and how do you get over that oh, well actually when a company reaches a certain scale they'll scale out of it?

    16. WCWesley Chan36:22

        It's, uh ... My, my comfort level on getting over that is you really have to truly understand, this goes back to that thing about building products and not features, right? The founder's vision in the 100-year plan.... like, what, what... the, the, my biggest lesson learned on investing is that what you see today is not what... if the founder's truly visionary will not be what the company is a year or two years or five or 10 years from then. So, you have to really believe that the founder's capable of morphing the company and its later products into something that's truly incredible. That's the piece that I spend most time doing. I don't ask them about what the product is today, or all the problems or issues that customers have. In fact, like, a lot of time, like, I'll do customer references just to understand what the limitations are. But like, you know, my, my, my, my early lessons of investing were the... you know, and I missed out on quite a few companies because I, I, I listened to customer references and list- listened to them bag or hate the product, and I was like, "Ooh, we can't invest in this. The customers hate it." Um, it really... this goes back to the founders. Is the founder truly one of those incredible product visionaries that's capable of morphing both the company and the product into something that's truly visionary? Now, can you imagine meeting Elon Musk and thinking about Tesla when he only had the Roadster and you, you know, everybody's thinking, "Oh, he's only gonna build these $500,000 cars for rich people that are electrically driven"? And you sort of sit there and go, "Ooh, I'm not gonna do the deal because I don't think Elon can morph the company into something where the Model 3 and these other great cars that he can create at $30,000 price point is possible." The company changed, right? Like, so you have to, uh, truly believe and listen and hear if the founder's capable or has a plan to change the company, what the real, you know, vision of the company is, versus, like, what the company might be today. That was the piece and my biggest learning lesson in doing this business for 10-plus years.

    17. HSHarry Stebbings37:57

        This is such a

13. 37:58 – 39:17

    How to determine if a founder is a product visionary?

    1. HSHarry Stebbings37:58

       base question, um, but, um, I have to ask it. If you're not asking about kind of product intricacies to determine level of product mine in quality, how are you determining how they think about product planning and that 100 or 50-year plan? Uh, w- what questions does one ask? How, how are you planning product? Like, how do you an-

    2. WCWesley Chan38:16

       No, you don't ask that because, you know, uh, they don't... they'll give you a... the problem is if you a-... a lot of people tell you what you want to hear versus what you, wh- what, what you're, you're doing the question. So, you have to ask it 10 different ways, in ways that make sense. And, you know, again, that's one of those things I don't want to give away the trade secret of how I do it. But like, you, you, you're, you have to ask it 10 different ways and listen carefully. And if the answers are consistent, you can truly differentiate those that are product visionaries than those that, that, that aren't. Um, you know, people try... y- you have to do it in ways that people can't game, right? Like, you know, if you ask, "What's your product planning?" You know, people can game it. They create a roadmap or they have a friend who works at Google create some product roadmap, and you look at the roadmap, and it all looks really legitimate, right? But it may not indicate their ability to really truly understand what the company needs to morph into, right? That's the piece that, you know, is the art in this business. And that's, that's one of those things where, like, you know, you sit there and, you know, having been at Google where I got to build and work on and dream up some of the best products, you know, that the world uses today, like, you know, you just have to listen to that and say, "Is this founder capable of that?"

    3. HSHarry Stebbings39:14

       Uh, talking of dreaming up products, when you started

14. 39:17 – 41:52

    What is the product of FPV Ventures?

    1. HSHarry Stebbings39:17

       FPV, what was the product that you wanted to dream up with FPV? Is it a multi-stage fund? I mean, it's multi-billion dollar fund.

    2. WCWesley Chan39:23

       No, the product is simple. You, i- w- we're an investment firm where, at the end of the journey, the product... the founder says, um, y- uh, "You're my, uh, you're one of my first phone calls." That's it. Whether you, well, IPO the company and we make billions of dollars for, you know, some of the children's hospitals we... whose money we manage, or whether you, uh, we shut off the lights. At the end of the day, the product is simple. You know, you have a relationship with me where, you know, I'm gonna... y- you're willing to say I'm still one of your first phone calls.

    3. HSHarry Stebbings39:49

       Is it multi-stage? Is it multi-geo?

    4. WCWesley Chan39:51

       It can be multi-stage. Uh, no. It's multi-geo, multi-stage. I mean, you know, the only thing we're not touching right now is crypto. Um, you know, the, the founders, you know... look, my best company that I've had the privilege of working with is Canva, which is located in Sydney, and it was, you know, in a geo that wasn't obvious when, you know, I, I, I, I, I, I, I led that deal at ..........................., right? And so, you never know where the world's most amazing founders will come from or where they live or where they might be hiding or where they... what they might be doing. Like, you go, "This is the business of pleasant surprises. You just have to keep an open mind." But when you find that and you spot that amazing and amazing founder that's gonna be the next Larry or Sergey or Cliff or Mel at Canva, like, you, you know, you kind of sit there and go like, "I want to work with you. Let's make it easy for you to say yes." And so, if, you know, if I was... again, I'm not dogmatic, right? I don't say I have to own, um, 20% ownership or, you know, be only in the US or be in places where I, I have to be able to drive to. I'm willing to... you know, like, some of my best companies, like I said, are in sectors that, you know, people are like, "I don't understand." I say, "Uh, why you're in it." Sometimes, you know, there's this joke that, you know, my, my old firms and then some of my colleagues would have that, you know, and in fact Don calls it sometimes, it's called the Wesley Head Scratcher. When I did Canva as a Wesley Head Scratcher, I don't get it. Australia company, romantically involved founders, like, you know, they haven't launched revenue yet. You know, $100 million plus valuation. No one got it, right? Like, in fact, like, everybody's like, "That's a head-scratcher, Wesley. Why are you doing this?" And it turns out to be the lifetime achievement award, right? And so, it's one of these things where you just have to have an open mind and not be dogmatic about stuff. But like when you spot that product visionary, and again, that's what I index on is product visionaries, right? Then you go and you back up the truck. And I'll take, I- I'll take the risk that most other people won't. And so, that's how I invest. I'm not saying it's the right way of investing, but it's what's served me very well. And there's... you know, the lovely thing about VC is there's hundreds if not thousands of different ways to make money and be successful at this business. That's just the one that's authentic to me.

    5. HSHarry Stebbings41:35

       Totally with you. I think, uh, there's a brilliant quote which is, "The best investors have the willingness to be lonely for long periods of time."

    6. WCWesley Chan41:41

       Yeah, yeah.

    7. HSHarry Stebbings41:41

       Um-

    8. WCWesley Chan41:42

       I mean, I don't mind, I don't mind doing sh- uh, an investment and wandering the wilderness. But, uh, you know, after, you know... look at Canva, right? After, you know, eight years of doing that deal, everybody looks at it and goes like, "Oh, I can't believe I passed on that deal in the series A."

15. 41:52 – 43:05

    What type of founders do you invest in?

    1. WCWesley Chan41:52

       I'm like, "But you did."

    2. HSHarry Stebbings41:54

       In terms of the founder types, you mentioned the product visionaries many times. Uh, does that exclude sales leaders who start companies? Does that exclude CMOs who start companies? Do they have to have product at their core for you to really excite?

    3. WCWesley Chan42:08

       Some of the s- salespeople, uh, some sales, you know, leaders and CMOs have lots of product expertise. You have to remember, they're close to the customers. They've explained to the customer what the product does. They, you know, in their previous jobs, have learned what the shortcomings of their products are. And so, some of them make the best product people, right?... but not all of them.

    4. HSHarry Stebbings42:28

       Sure.

    5. WCWesley Chan42:28

       So, it's one of these things where again, that's, that's what I index on, right? It's the art of spotting that, because that's what I, you know, spent 10 years of my life doing and being trained by some of- by folks like Marissa Mayer, or Susan, or Salar, or Larry and Sergey building products, right? Like, you know, that's something when you see what excellence looks like, you can spot the excellence. You know, it's w- well, one of my LPs said, "It takes one to know one," right? So, yeah, you know, that's one of the privileges that I've had in, um, in having the, the journey that I've had is that, you know, I've had, you know, the ability to spot what excellent product people, or work with excellent product people. You know, it's kind of what, you know, Warren Buffett and Charlie Munger said, you know? The, the standards, uh, th- the best gift you can give people is high standards, and I have

16. 43:05 – 45:29

    Advice to first time fund managers

    1. WCWesley Chan43:05

       exceptionally high standards on product, right?

    2. HSHarry Stebbings43:08

       Can I ask, you've just been through the fundraising process for, for Fund I with FPV. What advice would you give to, um, other managers raising their first time fund having been through it so successfully?

    3. WCWesley Chan43:18

       Um, boy, like, uh, what a crazy story, right? Like, I started fundraising, like, three days before, you know, the whole, before Russia started invading Ukraine. I thought I'd be screwed, um, and you know, it's very terrible what's happening there. But, um, uh, there's this irony. Like I, I, I invest in boring money-making businesses, right? Or it's, or, or, or in life science companies that like, you know, create new drugs to cure cancer or whatnot. Um, and one of my LPs had this, you know, sort of ironic insight. You know, raised the fund pretty quickly. We were able to close in, you know, less than a couple months. The, uh, and we were, you know, almost, uh, two if not 3X oversubscribed, uh, in the commitments that we were able to take room for, and we capped it at 450, right? Versus, you know, being able to be greedy and taking more money. And the reason we did this was we wanted to be very disciplined in our, in our, in our approach to investing in great money-making businesses. There's only so many of them. And we want to be super picky and be disciplined and, uh, being limited in what we can invest in. If you have unlimited capital, you start, you know, being loose with capital and invest in not high quality deals. So, we decided, uh, to, to have the strategy of saying, "We're gonna invest in boring businesses that make money and not faddish businesses, not crypto." And a year ago, I w- you know, one of my LPs had this interesting insight that said like, "You would have had more problems raising a year ago, because everybody had these strategies like crypto and Web3 and whatnot that, you know, are, are not making money today. Um, and, uh, you would have, you would have been seen as, you know, just some traditional investor." And in fact, like, you know, with the markets changing, with crypto crashing, all these scams where, you know, poor, you know, little old ladies are being ripped off by, you know, these crypto, you know, so-called banks that have lost all their money. Like, you know, we look like safe harbor, right? Like, we do traditional venture capital in businesses that have revenue, and we plan out, you know, exit scenarios that, uh, that, that, that we're, you know, if these multiples hold, these companies are, like, long term valuable. They're critical need businesses. They're timeless. In fact, that's, you know, sort of the pitch that we gave to our LPs is that, like, we invest in timeless companies. So look, uh, it's not for me to tell other managers what their strategy is or how they do it. They, I'm sure they have authentic strategies, but the, you know, the one piece of advice I gave myself is just go back to your roots and do what's authentic to you, which is great businesses that make money, that we can get in at fair prices, that the world will always value no matter, you know, there's a recession or there's a disaster or

17. 45:29 – 47:38

    What’s your learning process?

    1. WCWesley Chan45:29

       whether the times are good, and, you know, that's served well.

    2. HSHarry Stebbings45:32

       Final question for you. You're a learning machine. I know you're a concert pianist and, uh, a complete rock star on the piano, among many other things. What's your learning process, Wesley?

    3. WCWesley Chan45:44

       Boy, you know, I hired, uh, one o- I tried to hire a piano teacher and, uh, you know, it was a disaster. They, you know, you have to learn the scales, you have to learn your sheet music. And I said, "I just want to learn Chopin." And, um, yeah, nobody would, wouldn't teach me that. So, I, I learned, uh, I basically learned using, uh, uh, you- using YouTube and, and then, uh, so you learn that there's two things, um, that, that, that I sort of broke down the learning process into. One was, um, the mechanics of it and the technicality. Where do I put my fingers and how do I, and, uh, you know, for how long? So, you, you learn that on YouTube, you figure out the fingering for it, you like, you know, practice one hand at a time, you get that right. And then the second piece of it is the mastery of it. Like, you know, some of the world's best artists, Arthur Rubinstein, uh, Garrick Ohlsson, how do they play it, right? And like, what is the nuances that they do to master the piece? And so, like, you know, we have all this stuff in Chopin, which is, you know, very emotive rubato, which is, you know, that's the, that's the whole timing element where you robbed him and passed, um, to give to the future, uh, you know, so the timing isn't consistent, isn't just like one, two, three, or mechanical. And you listen to them play it, and then you duplicate as much as you can in their timing and in their emotive sense and then you learn those two things together, and then you get the mastery, right? It's the same with venture capitalists and mechanics of the, of the, uh, of doing the deal. Anyone can be a venture capitalist. Anyone can just do a term sheet. Anyone can go find a great company. And then what's the art that's the mastery of it, where, where you, you know, you go from, you know, being just mediocre or you're, to being averaged in, in venture capital, having outlier returns, um, and outlier companies like Canva and Gusto and, and Plaid and whatnot? And what are the, what is that one edge that you can master that you can do it slightly different than everybody else so that you have a, you have an edge that people can notice and that, you know, pays off in the end, that compounds, right? And that's the piece, you know, in the piano is just, like, really truly understanding and, you know, my edge there is just breaking it down into, you know, certain timing elements where I think mathematically about how long to play each note and sort of like, you know, how much pressure to sort of apply to the key and then you can sort of create something that, like, is a slightly different interpretation

18. 47:38 – 49:15

    The art of venture

    1. WCWesley Chan47:38

       that people still think is good. So, that's my lesson.

    2. HSHarry Stebbings47:41

       What, what, what, what is that art in venture? I agree with mechanics, anyone can do it, anyone can read portfolio mechanics books, understand that shit. But what's the art then?

    3. WCWesley Chan47:50

       For me it, uh, for me, my art and my edge is again, indexing on the product visionary and finding that founder that says, "I get product and I get what this company could be in 100 years." And when I hear that, I back up the truck, and when I don't hear that, I'm like, "Ooh, let me do some more digging," and if I can't unsurface it, then that's a, that's a deal that I tend not to do, right? So, it's one of these things where that's my edge, and everybody has a different way of doing this. They have a different art, and they have a different way of succeeding. That's what makes this business so exciting, right? Like, 'cause you learn from other people's mastery of it and you go, "Oh, I would not have thought of it that way" and they have this amazing sort of ability to have this edge that no one else has, and I look at it and go, "Is there something I can learn from that? Is there something I can..." you know, I don't want to use the word copy 'cause that sounds completely unauthentic, but is there something I can adapt into my behavior change or my investing? If the answer is no, then I just go, "Oh, I'm not gonna do that," right? And if the answer is yes, then that's another piece I add to, add to my mastery of this business. So, I think that that's the pieces that, you know, I, uh, uh, I love getting the mastery.You know, I still have a long way-

    4. HSHarry Stebbings48:46

       Well, I want to move on from that.

    5. WCWesley Chan48:46

       ... I still have a long way to go on this, but like, you know, at the end of the day, that's why I love, you know, m- meeting folks like you and everybody else who approaches venture capital in a slightly different way and go, like, "What is the piece that you've mastered and what can I learn from it?"

    6. HSHarry Stebbings48:58

       I think my mastery was realizing that there were many more people who were much smarter than me and deciding that a podcast was the best way (laughs) to extract knowledge from people who wouldn't normally give you time. Uh... (laughs)

    7. WCWesley Chan49:07

       It works.

    8. HSHarry Stebbings49:07

       But, uh, it works. Amazingly, VCs-

    9. WCWesley Chan49:10

       Yeah.

    10. HSHarry Stebbings49:10

        ... are more than willing to talk about themselves. Uh, but, um, I do want to move into my favorite,

19. 49:15 – 49:33

    Favorite book and why

    1. HSHarry Stebbings49:15

       which is a quick fire round.

    2. WCWesley Chan49:16

       Yeah.

    3. HSHarry Stebbings49:16

       So I say a short statement, rock, rock and roll. Favorite book and why? I'm going away next week, what should I read?

    4. WCWesley Chan49:21

       Uh, favorite book, Liar's Poker, Michael Lewis. Um, and Michael Lewis is one of the most amazing storytellers on the planet, and he tells the story of the mortgage crisis back in the '80s. It's just amazing, uh, a lot of interesting

20. 49:33 – 49:38

    Biggest strength and weakness

    1. WCWesley Chan49:33

       analogs to what's happening today in, in the markets and in venture capital.

    2. HSHarry Stebbings49:37

       What is your biggest strength?

21. 49:38 – 49:53

    Most contrarian opinion

    1. HSHarry Stebbings49:38

       What is your biggest weakness?

    2. WCWesley Chan49:40

       Uh, biggest strength is, uh, empathy with founders, really truly understanding the part of their, their journey. Biggest weakness is I appear really awkward to folks, just given my, like, sort of, uh, engineering upbringing.

    3. HSHarry Stebbings49:50

       (laughs) Cliff actually, um, at,

22. 49:53 – 52:34

    How to navigate hypergrowth

    1. HSHarry Stebbings49:53

       uh, Canva. I mean, we had such a great chat about you, but he asked a question which was, "What are non-obvious learnings for founders to think about navigating hypergrowth?"

    2. WCWesley Chan50:01

       Uh, it, it's really the empathy that they have with their employees, right? You know, the best founders, like Cliff and Mel, have massive empathy with their employees, especially if you're growing. 'Cause you can just imagine, like, you know, you've been walking in the company... I went through this firsthand, you know, when I was at Google where the company was doubling every, every, uh, every, every two months. And, you know, you can just imagine how, how unfrazzled everybody gets, you know, in a business where, like, it just keeps growing and you're like... Every day is different, and you walk in and it's uncertain. And so you just have to have an empathy with your employees and truly understand that, that they're going through their own journey, and they've joined you on that journey. And if you can demonstrate, communicate, and under- have that empathy, like, you know, you can go, you can go to the moon and back.

    3. HSHarry Stebbings50:41

       What is the most contrarian opinion you have on the venture space today?

    4. WCWesley Chan50:46

       Uh, you know, it's probably... I was one of the first to, like, boo-hoo crypto. Um, you know, some of it's done well, but like I said, like, I can't be involved in a bunch of stuff where, like, I think more than three quarters of it is scammy. You know, uh, like I said, I managed children's hospital money, and the last thing I want to do is like, "Oh, I'm sorry, I lost your money in a scam," and we- we- we've- we, we, we took, we took advantage of a bunch of little old ladies. Um, that's contrarian. A lot of people thought I was crazy when I said that, and, you know, some of it's coming home to roost now as we see Celsius and Voyager and some of these other companies, like, really take, you know, a lot of retail investors and a lot of 'em, you know, folks that aren't very wealthy or don't have much money or, you know, they took their life savings and ran off with it. It's terrible.

    5. HSHarry Stebbings51:24

       What have you recently changed your mind on?

    6. WCWesley Chan51:26

       Um, you know, it's, uh, I think... God, that's an interesting question. I change my mind, like, eight times a day on stuff. Um, you know, Pegha, my partner, bought a deal, uh, in a, in a... to me that I thought was in an area, it was payments, that I thought was, was hard or terrible.

    7. HSHarry Stebbings51:43

       Mm-hmm.

    8. WCWesley Chan51:43

       And, you know, she basically said, "No, uh, look at the, you know, founder's vision on this." And I said like, "Oh. Well, in that case, I'll change my mind on it," and, you know, we would have ended up doing the deal. So, you know, I- I... There's this famous quote, not a famous quote, this famous saying when I would pitch stuff to Larry where he goes, "Wesley, if you have the data, you're right. If you don't have the data, then I'm right, and you don't want me to be right 'cause I'm often wrong. So, bring the data." And so, you know, I think that that's how we operate our partners meetings is that people bring data and, you know, when that happens, then, you know, we have a productive discussion. If not, it's a bunch of people yelling and opinions and, you know, that usually causes people not to change their minds if it's just random opinions.

    9. HSHarry Stebbings52:19

       You can take one luxury to a desert island, what do you take?

    10. WCWesley Chan52:22

        Uh, one lux- luxury to a desert island. Um, boy, I would, I would probably take, uh, I would probably take my iPad, but there'd be no communication, but, uh, that's, that's, you know-

    11. HSHarry Stebbings52:32

        (laughs)

    12. WCWesley Chan52:32

        ... there's so much information in reading, uh,

23. 52:34 – 53:53

    The next 5 years for Wesley and FPV

    1. WCWesley Chan52:34

       that I love learning on.

    2. HSHarry Stebbings52:34

       (laughs) Final one, my friend. What are the next five years for you and for FPV? If we have this conversation in five years time, what does FPV look like? Where are you at?

    3. WCWesley Chan52:43

       Um, if there's... You know, I always do this planning exercise with my founders and I write down the things you want to be true in five years, and I wrote down, like, three things that I want to be true. One, we remain a small team. Two, we have a family of founders who, you know, vehemently tell everybody else we're their first phone call. And that like, you know, any time you have a problem, whether it's, like, a therapy issue or, like, a fundraising problem or a product issue, Wesley and Pegha are my, my, um, my f- one of my first phone calls and, you know, I... You guys need to work with them because, you know, they'll be one of your first phone calls too. Uh, and then the last thing that I sort of say is that, uh, you know, we... everybody on our team continues learning in like, you know-

    4. HSHarry Stebbings53:20

       (laughs)

    5. WCWesley Chan53:20

       ... understanding truly, like, what, what, what, what brings them fulfillment. Like, we started this firm so that everybody that works with us can be fulfilled on what they do, not because... You know, uh, the money is always secondary and, like, one of our core values is that we want people to be fulfilled and, you know, we want our founders to be fulfilled in what they do as well, but money is always secondary.

    6. HSHarry Stebbings53:36

       Wes, this is such a joy. You know I always so love our chats. Thank you so much for joining me. I can't wait for the coming years with FPV, and, uh, many exciting years ahead.

    7. WCWesley Chan53:45

       Awesome. Well, Harry, it's always a pleasure.

    8. HSHarry Stebbings53:48

       You are a hero, my friend. Thank you.

Episode duration: 53:53