What a Top VC Looks For After You Fail | Mayfield, Navin Chaddha

1. 0:00 – 1:13

   Intro

   1. NCNavin Chaddha0:00

      I'm Navin Chaddha, Managing Partner at Mayfield. Mayfield is an early-stage venture capital firm managing $3 billion investing in AI founders. 70% of our investment go at the idea stage, where it's only paper and pencil. So to be able to evaluate those investments, what are you going to do? There's no metrics. There's no market size most of the time. So we do actually a lot of work on evaluating founders. Jokingly, we say it's the founder X-ray. I think the big thing I learned is the myth about how you learn, and my most important learning is you learn the most from failures. In a rising tide, even fools look smart, but when the tide goes down, to survive, the tough get going. So these founders need to have a growth mindset, need to surround them with excellence because company-building is a team sport, and take a long-term view, which is that company-building is a marathon. It's not a sprint. And if they have those characteristics, you say, "Okay, I'm here to support you. I'll be your Sherpa. I'll be your safety net. I'll be your GPS system. Let's go." But it's values alignment. They don't

2. 1:13 – 6:30

   No Risk, No Reward

   1. NCNavin Chaddha1:13

      change. So it was an interesting moment when I had my PhD oral set up to defend my PhD, and I had done a lot of work. Like, I had 35 research papers. There was some defining technology. But I always believed when opportunity knocks, there was an opportunity to change the world to essentially the technology we had created at VX Stream, which enabled video streaming over the internet for it to go mainstream. So I said, "Okay, let's push out the PhD oral and not call anyone," because if I call my parents, they would say, "Man, you're crazy. First you drop out of a PhD program to go to a company, a startup, when startups weren't popular, and now when you're ready for the last three to four years of work to get a PhD, you cancel your exam," right? So I didn't. It was a conscious decision that, hey, just postpone it, and then I never went back. So it was, like, very atypical for an immigrant who's on a student visa to essentially take this risk, but my belief is if you don't take risk, there's no reward, and if you have the desire to go do something big, you have to just jump and not follow conventional wisdom because that leads to mediocrity. My role was the CTO, so I think, uh, wisdom and experience counts for something. I had none when I was 25 years old [laughs] , and you have to burn your hands if you get, with very little capital raised, $100, $150 million in '97 for an acquisition. It's game-changing. I didn't want to sell, but the CEO whom we hired said, "You're gonna make so much money I haven't made..." He was in the mid-50s. "... over 40 years. Just go do this. You'll be doing startups again and again and again." And that's what happened. We went public in the worst time. So first and foremost, I would say during the dot-com era, startups were selling to startups, and that's what was driving the revenue, if you will. Second, everybody told you, like they're telling you today, "Grow at all costs without looking at what you're burning, and the market will never slow down." And then when the dot-com crash happened, the whole market changed, and if you had a lot of infrastructure spent, you couldn't just course correct. So I saw the journey firsthand as the founder CTO, again, not being a CEO, of in two years, actually, we took the company public. It went, prized at a billion, went up to $3 billion and then was sold for a couple of hundred million dollars nine months later, and then the whole market evaporated. But little did I know, there'll be two black swan events, the crashing of the dot-com bubble and secondly, 9/11. So there are things beyond a human being, so I think things always don't go the way you plan it. It was my first failure in life, and it teaches you the most. And Revio was providing SaaS infrastructure before SaaS was a term in 2000, 2001 to the biggest companies in the world. And as the downturn started happening, I wanted to make sure the money we have is the money which takes us to either an acquisition or cash flow break even. In order to do that, one of my board members told me, like, "Hey, have you seen the movie Titanic?" I said, like, "Man, what movie is that? I only watch Bollywood movies." And I did go watch it, and the big learning I had is as a CEO, your responsibility is to first let people go so that when the crash happens, they're already safe, and you have to be the last one to get out of a sinking ship. So that's what we were doing. When we had the runway, we wanted to treat people fairly. We wanted to give them good severance so that they can last and sustain the company and get it to cash flow breakeven. And it was handled with respect. It was handled with dignity, and some of the people who worked with me, always anything I touch, people just follow me. My relationships last for 20 years, 25 years. And the people who were let go, their roles were eliminated, and the relationships still stay. We are like Still very, very close. It's tough when you have to go deliver that message, but I believe in radical candor, where you love people, you respect them, you care deeply, but at moments of crisis, you have to make the right business decisions, and that's what leaders do, and that's what we get paid for.

3. 6:30 – 9:38

   Ideas Come and Go

   1. NCNavin Chaddha6:36

      I think my belief always has been it's all about people. Most investors think about ROI, which probably for everybody means return on investment. I think that's very short-term thinking. I believe ROI is about founder's responsibility and investor's responsibility for rise of the individual. How do you help individuals reach certain levels in life that they might have never dreamt of? So that's what my passion, my belief is, and that's what defines me. So Rehan Jalil is a good example. I met him in 2006, 2007 through an intro. He was an engineer trying to build a company, and we clicked. He was in late 30s. I was in ear- mid-30s, and we clicked, and we said, "Okay, let's get in business." When he started the second company, he's a successful entrepreneur. Everybody should be funding him. He didn't even talk to anyone else. The experience we created for him, and they were all other top-tier firms, he never went back to them. Then that company succeeded Elastica, and he was doing a company the third time. What I was just seeing is not the idea, because ideas can come and go, is what has he learned and what hunger he has to create a bigger company this time, and this time the company he created is six times bigger than what he had done before. So it's that hunger, learning ability, and what is the dream, and what would he do differently this time? So I think first and foremost to learn, you need to have the belief you haven't learned everything. You need to be nimble so that you don't end up becoming a dinosaur. First and foremost, you need to have a growth mindset. Second, you need to listen. Most people talk. They don't listen. You have to listen to founders as a VC. You have to listen to customers. You have to listen to ecosystem and then go back to pattern recognition and say, "Ah, I'm getting all these signals. When the equivalent signals were happening in some other domain, this is what happened." So how do I take that, translate the learnings from that space, do some transformations in math, being an engineer, and apply it to this thing, and continuously be in founder mode tinkering, listen from people, follow social media, read blogs, continuously keep improving? But at the end, you can consume as much. As I mentioned earlier, you can learn so much from reading. You have to practice. Practice fast. Iterate fast. Get better. And then the most you will learn is from failure because if you're not failing enough, you're not trying hard enough. Then you're shooting for the roof, not the moon. I believe one should shoot for the moon.

4. 9:38 – 12:31

   Run a Marathon, Not a Sprint

   1. NCNavin Chaddha9:44

      I think I would say I always understood the value of people. What I didn't realize is how long does it take to build a successful company? And that's what I say today, like, "Hey, there's no overnight success. Whatever you do, it's going to take a long time, so run a marathon, not a sprint." Especially if the aim is to continuously keep improving, I don't even know what the ceiling is, right? If you're shooting for the moon, you have to keep jumping higher, higher, higher. It was a long journey. Manish and I got to know each other in 2002, 2003. He started a company in 2004, which was ahead of, like, social media or mobile. It would have been Pinterest or mobile if mobile was there. I didn't understand it. I didn't invest. It was a small acquisition, but we kept in touch over the years, and when the iPhone happened, we were just catching up for breakfast at a coffee shop which doesn't exist anymore. Big, tall, high-rise buildings have been built in Cupertino. It's the place where even NVIDIA started, HOBIS, very well-known place. Most of it has evaporated today. So essentially, he and I were chatting, and he said, "Hey, I did Kaboodle, which helped people figure out what to shop in a social way, but now social media is everywhere. iPhone has happened." And he showed me Instagram, and he says, "I have an idea of creating a woman's fashion, fashion company, mobile first, social, that will not only help you with discovery of what you want to buy but complete the transaction." And the big idea was they're not going to be a retailer. They're going to be a marketplace, allowing people to sell from their closets and become entrepreneurs. So that was the original slide, and 10 years later from when we funded it, it went public and had millions of buyers and millions of people as sellers. It was amazing to go through that journey. We were the first investor who helped start the company. We didn't even sell at the IPO, and we were the last investor to sell in when the acquisition happened. So again, running a marathon, not a sprint, lots of learnings, but the satisfaction you have in starting something six months before even the entrepreneur Has decided to a company, it's amazing because you're involved in the co-creation of that thing with them. And then helping them achieve their dreams, being there for them all the time, is just gratifying.

5. 12:31 – 15:39

   A Land of Endless Possibilities

   1. NCNavin Chaddha12:37

      Let's go back to my name. There was always this pressure from the parents. Uh, Navin means in Hindi novel. They always had aspirations for me to go great things that they may not have been able to do, and gave me the Maslow's hierarchy of comfort, gave me the confidence and say, "Go on to change the world." That's what led to entrepreneurship. So when I was in my undergrad, personal computers had just come out and there was a company called Sun Microsystems founded by Vinod Khosla, who was also an IIT alum. It really inspired me that if I have to pursue entrepreneurship, I have to leave the country, come to America, go to Stanford University, learn that environment will help me create companies. When you come to a new country, you don't know the culture, you don't know the people, you don't know what it's going to be. But the most surprising thing to me was somebody else had created this fellowship from the money they had made, and it used to go to immigrants and foreigners. Second, I was welcomed by the people who were students and also folks at Palo Alto who essentially welcomed me, picked me from the airport, took to their homes, and gave me the comfort of being part of a family. And then in my orientation, I realized this is a land of endless possibilities, so you go as far as you dream and you have hunger. And the environment was so supportive, and it leads to everything that defines me today of giving back. So Mayfield has a strong belief of giving back. 1% of our fees and carry goes towards supporting local efforts, and we are in the business of putting people in business. What better way to create an AI garage where we could go after students, we could go after people who don't know what does it take to be an entrepreneur, give them a stipend, give them cloud credits, and see if they can do something. And it's a long-term view. If you do good things for people, great things will happen to you. And everything doesn't need to be a financial transaction. I believe in investing in relationships, not transaction. Long-term view. You can't be short-changed. Some of them realized they don't want to be entrepreneurs. At the end, nothing is gonna happen with a year of doing these garages. You need to take a 10, 20-year view. That's what we did with the Mayfield Fellows Program at Stanford. We invested in 12 young students for over 30 years, and they have gone on to build great things, whether for-profit, not-for-profit, helping others. So you have to take a very long-term view and not be driven by just financial motivation.

6. 15:39 – 18:23

   FOMO Is for Sheep

   1. NCNavin Chaddha15:44

      So having been through a lot of technology revolutions and reimagination from PC to internet to mobile to cloud, those I think were 10X. And the main reason was some of them were innovations on the front end, the experience, and some of them were innovations on the back end, like cloud. Mobile was on front end. AI, the reason I say it's a 10X opportunity, times 10X, 100x opportunity is, first, for the first time, the front end is changing. Machines understand our language rather than us understanding machine language. There are 30 million developers who can code, but as we have seen with ChatGPT, 900 million people can use it on a monthly basis. And second, with compute AI technologies like GPUs and accelerators, fast memories, fast network, machines are able to do things th- that humans do, which is cognition. So you take... This is a buddy. It's a teammate AI. I can talk to it the way I'm talking to you. Another person is becoming available to me in the form of a teammate, and I converse with it in natural language. It's a 10 times 10X, 100X force, and it's going to redefine how we work, live, and play. So I'm, like, very, very optimistic. I have no FOMO. The reason is, in this business, we're in the financial services business, you get only measured by what returns you create. Your anti-portfolio most of the time will look better than your portfolio, but who cares? As long as we can take small boxes of money, make them bigger, continuously do it, we'll be in business. That's the most important thing of not having FOMO. You need to have your own belief, your own strategy, because if you chase somebody, they're ahead of you. A venture firm, for example, or a startup chasing another startup. The person ahead of you sees the cliff, they go this way. You don't have enough time, you fall from the cliff. So one has to have their own North Star, their own strategy, belief in it. As long as you believe in it, wonders will happen. You can't keep changing, and that's why I jokingly say FOMO is for sheep. If you're going to be a leader, you're gonna help other leaders. Have conviction. Have belief in what you're doing. You can change it, but don't copy others. You don't become great by copying others.

7. 18:23 – 19:24

   If I Weren't a Founder or a VC...

   1. NCNavin Chaddha18:25

      Yeah. In the other life, if I didn't succeed as an entrepreneur or as a VC, I would be a professor because, A, you're learning yourself, B, you're helping others, and I feel as a VC I'm doing that, right? I help entrepreneurs. I give them input. I write a lot, go talk. It's about giving back, so I'm doing it. Besides writing books, like professors work with teams to write research papers, I publish LinkedIn content two times a week, three times a week, collaborating with our team and entrepreneurs, our investors, because at the end, it's collective intelligence. So doing some portions of it in a different way, new format, different than universities, so doing it. Still doing what I like doing. [outro music]

Episode duration: 19:24