20 VC 049 VC is Getting Younger with Spencer Lazar @ General Catalyst Partners

In episode 49 of the 20 minutes VC, host Harry Stebings interviews Spencer Lazar, a principal at General Catalyst Partners with a focus on early-stage tech investments. Lazar shares his unconventional entry into the venture capital world, starting as a college recruit at Insight Venture Partners, and emphasizes the importance of storytelling, clarity, and financial acumen for startups. He discusses the evolving paths into VC, advocating for domain expertise or strong community leadership as attractive traits for aspiring VCs. Lazar also highlights emerging sectors like insurance tech, non-bank lending, and the future of work, and explains his investment philosophy, which includes seeking markets with billion-dollar potentials and teams uniquely suited to their venture. His recent investment in Campus Job reflects his interest in labor marketplaces and education, driven by a dynamic founding team and the opportunity to establish a strong brand in the student job market.

• Harry Stebings hosts the 49th episode of the podcast.
• Spencer Lazar, a principal at General Catalyst Partners, is the guest.
• Spencer's focus is on early-stage investments in internet, software, marketplaces, mobile apps, web services, and enterprise IT.
• Spencer co-founded Spontaneously Inc. and worked with companies like Halo and Birchbox during his time at Axcel in London.

Hello and welcome to episode 49 of the 20 minutes VC with your host Harry Stebings. And in today's episode, I am thrilled to welcome our second member of the general Catalyst team.

This quote is Harry Stebings' introduction to the episode, expressing enthusiasm about having Spencer Lazar as a guest.

• Spencer had aspired to be a VC since he was ten years old.
• He studied economics in college and was surrounded by startup culture.
• Spencer joined Insight Venture Partners after college, which recruited from notable schools.
• Insight Venture Partners had a unique model for building their sourcing team, which was competitive and collaborative.

The VC world is a funny place, and I'm sure, you know, having talked to many, there historically haven't been sort of obvious channels into the industry.

Spencer comments on the lack of clear pathways into the venture capital industry, highlighting the unconventional nature of his entry into the field.

I went about it in a pretty kind of lucky way in a lot of ways.

Spencer acknowledges that his entry into venture capital was fortuitous.

• Insight Venture Partners recruited college graduates for their sourcing team.
• The team was responsible for reaching out to companies and generating deals.
• It was a competitive environment where team members had to find deals to work on them.
• Insight Venture Partners is known for setting the bar for growth equity sourcing with young talent.

It was a glorified sales job, but the industry, you were an inside salesperson, was venture capital.

Spencer describes his role at Insight Venture Partners as akin to an inside sales position but within the venture capital industry.

• Spencer was recruited during college but started working at Insight Venture Partners full-time after graduation.
• At 22, he began his professional career in venture capital, but it was not in early-stage investing.

No, I'm sorry if I wasn't clear. No, I was recruited or went through the recruiting process when I was in school, but that was for a full time job when I graduated.

Spencer clarifies that his recruitment was for post-graduation employment, not for sourcing deals while in college.

• Early-stage VC firms receive significant deal flow because they invest in companies needing cash.
• Insight's model targeted profitable companies that did not need cash and had never raised money.
• Early-stage venture firms typically have fewer junior team members compared to firms like Insight.

I got into VC straight away. But remember, this is not early stage VC and I wasn't doing VC in the way that I do VC now.

Spencer differentiates his initial experience in growth equity from his current role in early-stage venture capital.

• Spencer suggests that the traditional ways of entering VC might be changing.
• Historically, entry into VC has been from fields like investment banking or consulting.

And do you think the roots into venture then are changing with time, or do you think it is still very much the investment banking consultant?

The host inquires about the changing landscape of entry paths into the venture capital industry, hinting at a possible shift from traditional routes.

• Venture capital (VC) is considered a young person's business due to their connection with emerging trends, especially in consumer products.
• Young people are increasingly present in the venture business compared to a decade ago.
• Partners in VC firms often learn about new trends through their teenage children.
• An example provided was a partner at Lightspeed whose daughter's use of Snapchat led to their investment in the company.

"I mean, in a lot of ways, venture is a young person's business in terms of kind of knowing what phenomenon are emerging."

This quote indicates the importance of being attuned to emerging trends in the venture capital industry, which young people often drive.

"And so having some degree of connection, connective tissue either in some cases, you have partners at venture firms who have kids who are teenagers, and that's how they learn about these things."

The quote emphasizes the significance of having connections to younger generations to identify new investment opportunities.

• VC firms are attracted to individuals with strong points of view and domain expertise.
• Young people can become domain experts or stand out through leadership and community engagement.
• Peter Boyce at GC is highlighted for his role in organizing young entrepreneurial energy and bringing value through his network and opportunities.

"So I think that venture firms typically are attracted to people with points of view and some degree of domain expertise."

This quote outlines the qualities that make someone attractive to a venture capital firm, emphasizing expertise and informed opinions.

"And that's what my colleague Peter Boyce did, who now works at GC, was really an organizer of young talent, young entrepreneurial energy, and has really been a huge driving force of value for our firm because he's brought a lot of that with him and introduced us to a lot of opportunities."

The quote demonstrates the value of networking and community leadership within the venture capital industry, as exemplified by Peter Boyce's contributions.

• Putting opinions out in the world is crucial for building a reputation.
• Social media allows for a democratic platform where anyone can share ideas and engage with others.
• Persistence in communication is important, as schedules may differ between young people and established venture capitalists.

"I would say the first thing is probably to put your opinions out in the world."

This quote suggests that sharing one's opinions publicly is the first step to being noticed and building a reputation in the field.

"Most of the smartest people in the world that do venture capital enjoy interacting and engaging with young people with strong views."

The quote highlights the willingness of venture capitalists to engage with young people who are informed and opinionated.

• A preference for founding teams over solo founders due to the challenges of a solo journey.
• Ideal CEO founders are clear thinkers, persuasive yet open to other perspectives, and great storytellers.
• Storytelling is seen as a crucial skill for CEOs in sales, fundraising, and recruiting.

"But in almost all cases, there can only be one CEO. And so I tend to gravitate towards CEO founders who are very clear thinkers who have strong views about the world, but still can be persuaded otherwise."

The quote captures the balance sought in founders who are confident yet receptive, which is desirable in a CEO.

• Spencer describes his role as a "goalie and a sniper," focusing on specific areas of interest.
• Current areas of interest include financial services, education, labor marketplaces, and the future of work, as well as insurance.
• Spencer's approach is not geographically limited to New York or American startups.

"So I think about my role at our firm as being what I call a goalie and a sniper."

This metaphor illustrates Spencer's strategic approach to investment, being selective and focused on specific sectors.

• The historical view is that education has not produced significant VC returns.
• The belief is based on old distribution models and an outdated understanding of the industry's pain points.

"I would say that historically that's been true, but I think that there are a lot of companies that are. That was a truism built on old distribution models and a world that hadn't yet fully realized the pain of th"

The quote acknowledges the past challenges in education investments but suggests that the landscape is changing and new opportunities are emerging.

• The United States faces a significant skills imbalance, particularly in the realm of software and computer literacy.
• This imbalance has led to a substantial demand for education and skill acquisition in these areas.
• There is a growing trend towards spending on education to meet the demands for these skills.

"The skills, sort of 21st century skills imbalance that our country faces. And in the face of that very, very significant imbalance, the demand for those skills largely around not just software engineering literacy, but computer literacy more broadly creates an incredible appetite to spend on education and acquiring those skills."

The quote highlights the mismatch between the skills available in the workforce and the skills demanded by modern industries, emphasizing the need for education in software and computer literacy.

• Spencer Lazar discusses his investment interests across the full lifecycle of educational companies.
• He mentions companies that have demonstrated success, such as Lynda.com, which was acquired by LinkedIn.
• Pluralsight is highlighted as an online training platform for existing developers to learn new skills.
• General Assembly is noted for its hybrid online-offline vocational training in various disciplines.
• Grovo, a company Lazar is an angel investor in, focuses on teaching non-engineers to use business software.
• Climb Credit is mentioned as a financial services company that helps finance vocational training for students.

"So on the most obvious example of this, over the course of the past few months, folks would look to a company like Linda.com, right, which was just acquired by LinkedIn for well north of a billion dollars, I think a billion and a half."

This quote exemplifies the value and success of educational companies, specifically Lynda.com, which was acquired for a substantial sum, indicating the high demand and profitability within the education sector.

• Spencer Lazar uses a company's deck as a storytelling device to understand the company's significance and clarity of explanation.
• He looks for significant opportunities, clear explanations, good unit economics, defensible business models, and network effects.
• The suitability and capability of the team to solve the problem they've identified are crucial, though harder to assess from the deck alone.

"In my mind, a deck is a storytelling device. So I'm really trying to understand the story of the company and why it's going to be very significant."

The quote emphasizes the importance of a compelling narrative in a company's presentation deck, which should clearly articulate the company's potential impact and value proposition.

• Spencer Lazar is interested in markets that may not be large currently but are expected to grow significantly.
• He uses the example of the VR market as an emerging ecosystem with potential for future growth.
• The venture business requires markets with the potential for billion-dollar outcomes to justify investment.

"I mean, one of the things we talk a lot about in our industry is kind of not necessarily investing in markets that are big today, but will be big in the."

This quote underscores the venture capital strategy of investing in markets with future growth potential rather than those that are already well-established, aiming for large-scale returns on investment.

• Unicorns are billion-dollar companies, and their existence depends on the size and growth of their markets.
• A market needs to be large and growing to support a unicorn.
• Venture capitalists assess market size to determine a company's potential value.

And in order for that to be the case, you need to have markets that can support billion dollar companies.

This quote emphasizes the importance of market size in the creation of unicorn companies, suggesting that without sufficiently large markets, such companies cannot exist.

The question is, how big of a market do you need in order to support a billion dollar company?

This question highlights the consideration venture capitalists must make regarding the necessary market size to support and justify the valuation of a unicorn company.

• Spencer Lazar is interested in insurance, financial services, and non-bank lending.
• Nontraditional capital sources, like hedge funds and family offices, are providing credit in new ways.
• Low consumer satisfaction and low brand awareness in insurance offer opportunities for technology-driven innovation and brand creation.
• Technology can be used to create new distribution models and improve risk underwriting in insurance.
• Investments in companies like Oscar and Sensio reflect these interests.

And then talking about those markets, you said obviously, looking at the future and potential markets, where do you see real potential in a future market?

This question prompts Spencer to discuss his views on which markets have potential for growth and innovation, setting the stage for his insights into insurance and financial services.

Yeah, insurance is one of the areas we're digging into right now that we find exciting.

Spencer's response indicates that the insurance sector is a current focus due to its potential for disruption and innovation, making it a prime candidate for investment.

• Insurance is ripe for disruption due to low consumer satisfaction and changing demographics.
• New brands can emerge with the help of technology, appealing to millennials.
• Technology can also lead to new insurance distribution models and improved risk underwriting.
• Investments like Oscar and Sensio demonstrate the application of these concepts.

There's a real opportunity to use technology in new ways to kind of delight the consumer and to create new brand value.

This quote highlights the potential for technology to transform the insurance industry by enhancing customer experience and building new brands.

We have an investment in this space already, in a company called Sensio, in the auto space that uses data from your smartphone to try to understand your driving behavior better and use that to help insurance companies a better price risk for their policies.

Here, Spencer explains how Sensio, one of their investments, uses smartphone data to improve the insurance underwriting process, which is an example of how technology can innovate traditional industries.

• Spencer's favorite book over the past year is "The Everything Store," an unlicensed biography of Jeff Bezos.
• He admires Bezos's focus, ambition, and ability to reinvent his business.
• Spencer is skeptical about the current version of the Apple Watch but optimistic about its future iterations.

The one that I've enjoyed reading over the course of the past year was the book the Everything Store, which is sort of, I believe, an unlicensed biography and story of.

Spencer reveals his interest in Jeff Bezos and Amazon through his choice of favorite book, reflecting on the traits that make a successful entrepreneur and founder.

So current version, not going to fly, but very confident about future versions, including a front facing camera, glucometer, some form of mobile connectivity, data connectivity, local processing, all those things.

This quote captures Spencer's perspective on the Apple Watch's potential, suggesting that while the current model may not be successful, future improvements could make it a significant product.

• Campus Job is Spencer's most recent investment.
• It is the largest marketplace for student employment.
• The investment was driven by the strength of the founding team and the opportunity to build a brand in the hiring market.
• Campus Job occupies a niche that LinkedIn hasn't fully captured, particularly for first jobs which are highly impactful.

So my most recent investment is a company called Campus Job, which is the largest hiring marketplace where students find work.

Spencer introduces Campus Job as his latest investment and outlines its role in the student employment market, indicating its relevance and potential for growth.

And we said yes because we absolutely love the team. The founding team, Liz Wessel in particular, the CEO, is an absolute dynamic force.

The quote explains the rationale behind the investment in Campus Job, emphasizing the importance of a strong and dynamic founding team, which is a critical factor in Spencer's investment decisions.

• Hiring Screen's blink algorithm helps recruiters save time by filtering irrelevant CVs.
• The service balances recruitment technology with the human element in hiring.
• Richard Hansen can be contacted on Twitter for more information about Hiring Screen.

I would love to say a special thanks to hiring screen, whose blink algorithm means you can spend less time looking at irrelevant cvs and more time meeting with the most relevant candidates for the job.

This quote serves as an acknowledgment of the episode's sponsor, Hiring Screen, and describes the benefits of their blink algorithm for the recruitment process, highlighting efficiency and relevance in candidate selection.