20 VC 015 Marketplaces, IPOs and the NY Startup Scene with Lisa Wu

In this episode of the 20 minutes VC, host Harry welcomes Lisa Wu, Vice President at Norwest Venture Partners, who shares her journey from investment banking at Merrill Lynch to venture capital, touching on her entrepreneurial venture with Banza and experience at Bessemer Venture Partners and Amazon. Lisa discusses the value of time, her preference for marketplaces with network effects, and the flexibility of Norwest's investment size, ranging from a few hundred thousand to tens of millions of dollars. She highlights the importance of warm introductions for entrepreneurs seeking VC attention and delves into the differences between the VC landscapes in Silicon Valley and New York. Lisa also talks about her recent investment in Jet, her approach to both first-time and repeat founders, and the significance of market size in investment decisions. Lastly, she offers personal insights, emphasizing the importance of principles and self-awareness in her career success.

• Lisa Wu is the Vice President at Norwest Venture Partners, focusing on early to late stage venture investments, especially in consumer Internet.
• Previously worked at Amazon's worldwide corporate development team and Bessemer Venture Partners.
• Founded Banza, a company providing nutritious food to schools and hospitals in Northern California.
• Lisa began her career in investment banking at Merrill Lynch before starting her own business.

"Lisa is currently vice president at Norwest Venture Partners, where she focuses on early to late stage venture investments across a wide range of sectors, but with a particular emphasis on consumer Internet."

The quote introduces Lisa Wu's current role and her focus on a broad spectrum of sectors, highlighting her emphasis on consumer Internet investments.

"Before joining NVP, Lisa worked at Amazon's worldwide corporate development team. Here, Lisa identified strategic investments for Amazon as well as providing strategies for potential expansion."

This quote elaborates on Lisa's previous experience at Amazon, where she was involved in identifying strategic investments and expansion strategies.

"Prior to Amazon, Lisa was on the team at Bessemer Venture Partners, working on early stage investment opportunities."

Lisa's background at Bessemer Venture Partners is noted here, emphasizing her experience with early-stage investments.

"As if this wasn't enough, Lisa founded her own startup, Banza, a small business providing high quality, nutritious food to schools and hospitals in northern California."

The quote highlights Lisa's entrepreneurial experience, mentioning her startup, Banza, which focused on healthy food for educational and medical institutions.

• Transitioned from investment banking to entrepreneurship and then to venture capital.
• Believes time is the most valuable asset and that starting any business requires a 24/7 commitment.
• Chose venture capital to learn from top entrepreneurial minds and understand patterns of successful, scalable businesses.
• Initially joined Bessemer Venture Partners with the intention of a short stint before returning to entrepreneurship, but found a better fit in venture capital.
• Has been in the venture business for over six years.

"Sure. So it's great to be on the show and I'm happy to tell you about my background. So basically, after college, I started my career in investment banking at Merrill lynch and I ultimately left Merrill to start my own business."

Lisa provides a brief overview of her career path, starting in investment banking and then moving on to entrepreneurship.

"I launched a company focused on bringing healthy, high quality and affordable food to Bay Area high schools and hospitals."

This quote gives specifics about the business Lisa started, emphasizing its focus on health and affordability.

"And I realized that working in venture with some of the best entrepreneurial minds would be a really ideal next step in my career."

Lisa explains her rationale for moving into venture capital, expressing her desire to learn from successful entrepreneurs.

"However, I guess over time I just found that my interests and skills, that's better fit venture, and I've been in the business now for more than six years."

Lisa reflects on her journey in venture capital and how her skills and interests align with the industry, leading to a longer tenure than initially planned.

• Lisa still possesses an entrepreneurial drive and considers starting a business again in the future.
• Acknowledges the challenge of leaving venture capital to start a business due to the high standards and understanding of the difficulties in scaling.
• Opened Norwest's New York office, applying her entrepreneurial skills in her current role.

"Do you still have that entrepreneurial drive deep down? Do you think one day you might want to start your own?"

Harry inquires about Lisa's ongoing entrepreneurial ambitions, suggesting a potential return to founding a company.

"So I'm able to kind of apply some of my entrepreneurial skill sets to do that. But there's definitely an itch inside."

Lisa confirms her entrepreneurial spirit is still active, and she applies it within her current role while acknowledging a persistent desire to do more.

"What happens in venture is the longer you stay in, it's almost harder for you to go start a business because your bar becomes super high because you understand all the challenges and how difficult it is to actually scale a business."

Lisa discusses the paradox of venture capital experience raising the bar for starting a new business due to a deeper understanding of the inherent challenges.

• Lisa is most excited by marketplaces, platforms connecting sellers to buyers without holding inventory.
• She finds marketplaces challenging to start but highly successful when they take off.

"I'm probably most excited by marketplaces, which are platforms that don't hold inventory, but instead connect sellers who have it to buyers who want it."

Lisa expresses her investment interest in marketplaces and succinctly describes their business model, showcasing her preference for this type of venture.

The quote outlines Lisa's keen interest in marketplace platforms, indicating the potential for high success in ventures that effectively connect sellers and buyers.

• Network effects strengthen a company as it grows, creating defensible positions.
• Larger companies benefit more from network effects, leading to the creation of billion-dollar businesses.
• Successful marketplaces have emerged across various sectors, including transportation and food delivery.
• Norwest has invested in marketplaces, with Lending Club as an example of their Series A investments.

"enefit from these things called network effects that result in these winner take most dynamics. So it just means that when they get bigger, they actually get stronger."

This quote emphasizes how network effects are beneficial to a company's growth and defensibility, leading to dominant positions in their respective markets.

• Norwest Venture Partners operates a $1.2 billion fund with flexible investment sizes.
• Investments can range from a few hundred thousand dollars to tens of millions.
• Norwest has a separate growth equity practice.
• Focus is on smart teams, disruptive products, and large market potentials.

"Given that we are a $1.2 billion fund, we have a lot of flexibility in our investment size."

This quote outlines the broad range of investment sizes that Norwest can accommodate due to the size of their fund.

• No specific preference for single founders versus founding teams.
• The founder or CEO's business judgment and execution ability are crucial.
• Diverse skill sets in a founding team are seen as a strength.

"I don't think that there really is a preference, but I will say that the founder or CEO is a pretty important person for us that we have to back behind because we have to trust in their ability to have good business judgment as well as execute."

This quote conveys the importance Norwest places on the capabilities of the founder or CEO, regardless of whether they are part of a team or not.

• Warm introductions are preferred over cold emails or LinkedIn messages.
• Inbound opportunities are reviewed, but rarely convert into investments.
• Networking through mutual connections increases the chances of securing an investment.

"I think the best way to increase the chances of networking with vcs is through a warm introduction by a mutual connection."

This quote suggests that founders seeking investment should leverage their networks for introductions to increase the likelihood of investment from venture capitalists.

• Investment cycles can be short or long, with no set timeline for exits.
• Patience is key, as startups face ups and downs.
• Examples include Skybox, which had a short investment cycle before being sold to Google, and FireEye, which had a long investment cycle before going public.

"We've had cases where it's been a short investment cycle and others that it's been longer."

This quote reflects the variability in investment timelines, with Norwest being adaptable to the unique journey of each startup.

• Lisa Wu's most recent investment is Jet.com, an e-commerce marketplace.
• Jet.com is based on the East Coast and founded by repeat entrepreneur Mark Lohr.
• Mark Lohr previously sold his company, Quidzi, to Amazon for $550 million.
• Jet.com is an example of smart teams creating disruptive products in large markets.

The most recent investment that we did is a company on the east coast named Jet. It's a member based e commerce marketplace founded by a guy named Mark Lohr, who is a repeat entrepreneur.

This quote explains the nature of Lisa Wu's latest investment, highlighting the company's business model and the founder's experience.

• Lisa Wu does not see a significant difference between first-time and repeat founders.
• She acknowledges that many successful consumer companies are started by young, inexperienced individuals.
• Repeat founders may reduce investment risk due to proven execution and scaling abilities.
• Success in the consumer space does not necessarily correlate with prior entrepreneurial experience.

I actually don't think that there is much difference in our mind.

Lisa Wu expresses her view that there isn't a strong bias toward repeat entrepreneurs over first-time founders in her investment considerations.

• Lisa Wu acknowledges New York's tech ecosystem is exciting but still behind Silicon Valley.
• Successful companies generate a culture that leads to the creation of new companies.
• PayPal and Double Click are examples of companies that have spawned successful offsprings.
• New York is waiting for the next big company to catalyze a similar effect.
• Etsy is a New York-based company being closely watched by Lisa Wu.

And while it's a very exciting time in New York for tech, the New York startup ecosystem is just still behind Silicon Valley.

Lisa Wu's quote compares the tech ecosystems of New York and Silicon Valley, indicating New York's current position and potential for growth.

• Lisa Wu suggests there may be slight differences in investment attitudes between New York and Silicon Valley.
• West Coast investors might be more willing to take risks on big visions.
• East Coast investors may prefer businesses with more established models.

I think it might be a little. I obviously my firm is based out in West Coast. I kind of have that West coast mentality here.

The quote reflects Lisa Wu's perspective on the potential differences in investment attitudes between the two coasts, influenced by her West Coast-based firm.

• Lisa Wu's firm is open to investing at any stage, including pre-product idea stage.
• Past relationships with entrepreneurs can lead to investments based solely on a PowerPoint deck.
• The firm has invested in companies like Jet.com even before they launched.

Yeah, we definitely do. Especially if they are an entrepreneur that we've backed before that we would like to back again.

This quote reveals Lisa Wu's willingness to invest in entrepreneurs at the earliest stages, especially if there is an existing relationship.

• Lisa Wu attributes the significant advancement in her career to leaving investment banking.
• She emphasizes the importance of taking ownership of one's life rather than conforming to societal expectations.
• Lisa believes the 20s are a crucial time for taking risks, gaining a variety of experiences, learning from mistakes, and discovering personal preferences to establish a career in a well-suited industry.

"If I had to pick one action, I guess, that really propelled my career. I would say that it was leaving investment banking at the time, everyone discouraged me from doing that." "And I guess, in general, I just think your 20s is the time to take a lot of risks, to get a variety of experience, make mistakes, fail fast, fail often, and figure out what you like and dislike."

The quote illustrates Lisa's belief that her career was significantly boosted by making a bold move against conventional wisdom and that young adulthood is the ideal period for exploration and risk-taking.

• Lisa started a small food business after leaving investment banking, which she ran for a year before transitioning to venture capital.
• She was motivated by the desire to engage in more tangible value creation.
• Lisa saw venture capital as a natural next step that combined her interests in finance and entrepreneurship.

"I think I mentioned this earlier, but when I left investment banking, I actually started a small food business first, and then I did that for about a year before joining venture." "And so when I left banking, I was definitely excited to do something that was a little more tangible and a little more focused on value creation."

Lisa's quote reflects her journey from investment banking to entrepreneurship and eventually to venture capital, highlighting her pursuit of tangible value creation and a synthesis of her interests.

• Lisa Wu shares the best piece of advice she has received, which relates to the importance of consistency in adhering to one's principles.

"It's easier to hold to your principals 100% of the time than it is to hold to them 98% of the time."

This quote underscores the idea that unwavering commitment to one's principles simplifies decision-making and integrity.

• Market size is the primary reason Lisa and her fund decline investment opportunities with entrepreneurs.
• Lisa's fund seeks companies with the potential to become unicorns, requiring a large total addressable market.

"Given our fund size, it would be market size." "We're looking for companies that we think can really become these unicorns over time."

Lisa explains that her investment decisions are heavily influenced by the potential market size, as her goal is to invest in companies with significant growth potential.

• Faced with a hypothetical situation of having only a laptop and $100, Lisa would continue learning about startups and connecting with passionate entrepreneurs, potentially investing in them through crowdfunding.

"A laptop and $100? Yeah, I would probably do exactly what I'm doing now, which is really just learning about startups, proactively reaching out to entrepreneurs to learn about their businesses, because I love interacting with people who are just passionate about what they're doing and then maybe try to invest in them."

Lisa's response to the hypothetical scenario reflects her dedication to the startup ecosystem and her passion for engaging with innovative entrepreneurs.

• Lisa finds inspiration in the book "Love, Aloneness, and Freedom" by Osho, which discusses meditation, self-awareness, and love.

"So it's called love, aloneness, and freedom. It's a book by a philosopher named Osho." "And he just emphasizes the importance of just meditation and self awareness and just love and celebration."

The quote provides insight into Lisa's personal development interests and the philosophical teachings that resonate with her.

• Harry encourages listener engagement by inviting suggestions for future guests and questions.
• The podcast aims to be responsive to its audience's interests and preferences.

"Likewise, this podcast is really for you, so please do let me know if there are any guests that you would like to have on the show or if there are any questions in particular that you would like to be asked."

Harry's quote indicates the podcast's commitment to audience participation and the value placed on listener feedback for the show's content.