20 VC 064 Finding Exceptional People with Big Ideas with Nick Beim, Partner @ Venrock

Harry Stebings hosts Nick Bime, a partner at Venroc, on episode 64 of the 20 Minutes VC podcast. Bime, who has a background with Matrix Partners and experience at McKinsey and Goldman Sachs, discusses his venture investments in consumer internet and big data companies, such as Guilt Group and DataMiner. He emphasizes the importance of impact investing and its potential for significant social benefits alongside financial returns. Bime also highlights the challenges female founders face in securing VC funding despite progress in the industry. He predicts a rise in impact investing, stressing the need for measurable impact metrics. Additionally, Bime contrasts the startup ecosystems of New York and Silicon Valley, noting New York's strength in applied technology and its position as a major hub for various industries. The conversation touches on hiring practices, with a nod to Hiring Screen's innovative data-driven approach, and concludes with Bime's insights into his investment philosophy and a teaser about his latest stealth-mode fintech venture.

• Harry Stebings hosts Nick Beim from Venroc in New York.
• Nick Beim focuses on various investment sectors and maintains an economics of innovation blog.
• Nick's background includes roles at Matrix Partners, McKinsey, and Goldman Sachs.
• Impact investing and international development are highlighted as Nick's passions.
• Nick is recognized by Forbes in the venture capital field.
• HiringScreen.com is mentioned as a data-driven hiring tool.

Hello and welcome to episode 64 of the 20 Minutes VC with your host Harry Stebings on today's show.

This quote opens the podcast episode, introducing the host and the series.

Nick is a partner at Venroc, where he focuses on Internet, mobile, SaaS, big data and fintech investment.

This quote introduces Nick Beim and outlines his investment focus areas.

In 2011 Nick was named by Forbes as one of the elite eight to watch in venture capital.

This quote highlights Nick's recognition by Forbes in the venture capital industry.

• Nick Beim joined the venture industry serendipitously after an offer from a venture firm.
• His transition involved a conflict between Goldman Sachs and the venture firm over poaching talent.
• Goldman Sachs' ultimatum to the venture firm led Nick to seek other offers.
• Nick ended up joining Matrix Partners, which he found to be a better opportunity.
• Nick moved to New York to be at the heart of startup activity on the East Coast.

Sure. I got into the venture industry serendipitously and rather unexpectedly.

Nick Beim describes his unexpected entry into venture capital.

I ended up finding a better offer, a more interesting offer, and I informed the venture firm that had been courting me that I was going to take the offer.

Nick explains how he ended up with a better opportunity at Matrix Partners after exploring other offers.

• Nick worked at Matrix Partners in Boston for twelve years.
• He transitioned to Venroc in New York, citing the city's vibrant startup ecosystem.
• New York is presented as the most exciting startup hub on the East Coast.

The better option was Matrix Partners, a firm that I was a partner at for twelve years.

Nick mentions his duration at Matrix Partners before moving to Venroc.

I think New York has really become, by a significant margin, the most exciting startup hub on the east coast.

Nick shares his view on New York's prominence in the startup world, influencing his move.

• Dataminer specializes in real-time information discovery, utilizing large data sets like Twitter.
• The company identifies early digital signatures of events, effectively discovering news before it becomes news.
• Dataminer serves financial markets, governments, public safety, and has built a real-time news wire.
• Nick Beim was intrigued by Dataminer's secretive operations and their early detection of significant events.

Data miner is in the business of real time information discovery.

This quote summarizes Dataminer's core business function.

They effectively discover news before it's news.

Nick explains Dataminer's capability to identify significant events before they are widely recognized.

Someone once said the future is unevenly distributed I think knowledge of the present is also unevenly distributed.

Nick reflects on the distribution of information and Dataminer's role in balancing that distribution.

They just can't compete with this kind of information.

Nick comments on traditional news sources' inability to compete with Dataminer's real-time information service.

They had identified the assassination of bin Laden 28 minutes before Bloomberg in the New York Times.

Nick highlights an example of Dataminer's capability to detect major events before mainstream news outlets.

• In early-stage company financing, founders look for investors who can add significant value to their business.
• Startups need more help in the early stages, especially with building a team and scaling quickly.
• Dataminer was looking for help to build a world-class executive team and to take their powerful technology to market.
• Founders want investors who understand their business, are collaborative, and fit their company culture.
• Dataminer emphasized a collaborative culture without egos at the board and executive levels.

"So it was a super competitive financing. It happened very fast. I feel very lucky to be working with the team." This quote by Nick Beim reveals the competitive nature of the financing round for Dataminer and his enthusiasm for being involved with the company.

"But in the early days, they want help building a team." Nick Beim points out that early-stage startups like Dataminer prioritize assistance in building a strong executive team to grow the business.

"They really wanted to find someone who was super collaborative, so very thoughtful, no table pounders, no egos." Nick Beim emphasizes the importance of a collaborative and ego-free investor to match Dataminer's company culture.

• Dataminer's first institutional round followed a small seed round and a unique customer round.
• Beta customers from the financial services sector were so impressed with the product that they insisted on investing.
• One customer even proposed creating a fund with Dataminer, highlighting the technology's perceived potential.
• The institutional round was large ($30 million) due to the company's promise, with Nick Beim's firm leading the round and him joining the board.

"It was their first institutional round." Nick Beim clarifies that he joined Dataminer during their first significant round of institutional investment.

"The beta customers loved the product so much that they insisted on investing." Nick Beim shares an anecdote that illustrates the high value beta customers placed on Dataminer's product, leading them to become investors.

• Female founders still face challenges in raising VC funding despite progress in the industry.
• Old school biases regarding productivity and family commitments are diminishing but still present, especially among older investors.
• Venture capitalists often rely on pattern recognition, which historically has not included many successful female entrepreneurs.
• Nick Beim is optimistic due to a growing pipeline of successful female-founded companies and more women entering venture capital.
• There is a need for more recognition of successful female entrepreneurs to shift investor attitudes.

"I do think it still is harder for female entrepreneurs to raise money, and it's sort of an uncomfortable truth in the industry." Nick Beim acknowledges the ongoing difficulty for female founders to secure venture capital funding, despite improvements in the industry.

"I think venture capitalists, when you really get down to it, invest primarily on the basis of pattern recognition." Nick Beim explains how the reliance on pattern recognition in venture capital has historically disadvantaged female founders due to a lack of precedent.

"It's about a $60 billion pipeline of very successful female founded companies, including Epic systems, Theranos, eventbrite, Howes, Gilt, many others." Nick Beim expresses optimism for the future, citing the significant value of successful female-founded companies that could change investor patterns.

• Open discussions about gender imbalance and potential biases are important.
• Data-driven statistics can raise awareness and reduce biases among venture capitalists.
• Celebrating the successes of female entrepreneurs can encourage more investment in female-led startups.

"I think it's great to talk about it." Nick Beim advocates for open conversations about gender imbalance in tech as a way to address the issue.

"I think once people start to think about it, it will limit the bias of a lot of the players." Nick Beim believes that awareness and consideration of the issue can help reduce biases among investors in the tech industry.

• Impact investing is a for-profit investment that also aims to create positive social impact.
• Investors do not see a conflict between financial returns and social impact, but rather view them as overlapping goals.
• Some investors may accept slightly lower returns for the assurance of social impact.
• Internet companies, particularly new platforms, are seen as promising impact investments due to their potential to provide economic opportunities.
• eBay is cited as an early example of an impact investment that helped many out of poverty.
• The growth of impact investing depends on the development of measurable impact metrics.
• Impact investing has the potential to channel significant capital towards social good, rivaling traditional philanthropy.

"So what is impact investing? It's for profit investing that also seeks to have a positive social impact."

This quote defines impact investing as investments made with the intention of generating financial returns while also creating a positive impact on society.

"And interestingly, I think some of the most promising impact investments are Internet companies and specifically new platforms that provide opportunity for people to make money or save money or have opportunity that they otherwise wouldn't have had."

This quote highlights the potential of Internet companies and platforms as vehicles for impact investing, due to their ability to create economic opportunities for a broad user base.

"I think the last piece of the puzzle that's really required for the impact investing industry to boom, and I think this will be coming, is measurable impact metrics."

This quote emphasizes the necessity of developing measurable impact metrics to evaluate and drive the growth of the impact investing industry.

• Measurement of success in impact investing varies by field, such as job creation in international development or equal pay in women's workforce treatment.
• Environmental impact can be gauged through increasingly quantifiable metrics.
• Hundreds of social impact themes exist, each requiring its own set of evolving, commonly accepted metrics.
• Metrics are essential for measuring improvement and gauging the actual impact of investments.

"I think job creation in a specific country, and maybe high wage job creation, really sustainable job creation that will help generate wealth for those who haven't had opportunity, is really important."

This quote suggests job creation, particularly high-wage and sustainable jobs, as a key metric for measuring the success of impact investments in international development.

"I think in environmental areas you can look and increasingly measure environmental impact of what a company does."

This quote points to the environmental sector as an area where the impact of a company's actions can be increasingly measured, indicating progress in the development of metrics.

• Venrock is not currently planning to launch an impact investing fund.
• Nick Beim is collaborating with thought leaders to advance the field of impact investing.
• He is on the board of Endeavor, a nonprofit supporting entrepreneurs in developing countries, and helped create a fund as an impact investing vehicle with successful returns.
• Beim's involvement is aimed at contributing to significant institutions that promote impact investing.

"And NROC is not planning an impact investing fund anytime soon. I'll certainly post you if that changes."

This quote clarifies that Venrock, referred to here as NROC, does not have immediate plans for an impact investing fund, but Beim remains open to future possibilities.

"And I helped them create a fund that is a great impact investing vehicle to invest in those entrepreneurs. And the returns have actually been great."

This quote describes Beim's direct contribution to impact investing through the creation of a successful fund that supports entrepreneurs in developing countries.

• New York is seen as an applied technology ecosystem, contrasting with the perception of Silicon Valley as driven by foundational tech and engineering.
• The accessibility of technology for startups has dramatically increased due to open source computing stacks and cloud computing.
• The change in technology accessibility has widened the pool of potential entrepreneurs.
• Urban centers globally are becoming hubs for applied technology firms.
• New York's startup community is characterized by its diverse and applied technology focus, as opposed to Silicon Valley's reliance on anchor engineering universities.

"I think the biggest difference between New York and Silicon Valley is that New York is fundamentally an applied technology ecosystem."

This quote contrasts New York's focus on practical application of technology in various industries with Silicon Valley's foundation in core technology and engineering education.

"Today you can do it over a weekend for less than 2000. And certainly to scale, it takes great engineering. But I think that change has been a fascinating global one."

This quote highlights the reduced barriers to entry for starting a technology-based business, pointing to a global shift that has empowered a broader range of entrepreneurs.

• New York has extraordinary talent communities with skilled individuals in various functions and industries.
• It is a major capital for several major industries like financial services, real estate, media, advertising, and fashion.
• Companies in these sectors benefit from local domain expertise, customer bases, and partner networks.
• Examples include Gilt, Dataminr, and Bloomberg.
• New York has been the fastest-growing tech ecosystem in the country over the last decade.
• Nick Beim is bullish about New York's future in tech.

"So great design talent, great marketing talent, for example. But also it is the world capital for many major industries or a major capital." "Having vested in guilt when it was just three people, I can promise you you could not have built that company to the same degree of success in the west coast." "I think there's certain areas, certain industries that certain types of companies that New York will be very good at." "And if you look at the numbers, it's been the fastest growing tech ecosystem in the country over the last ten years and it's still growing amazingly quickly."

These quotes emphasize the concentration of talent and industry in New York, which contributes to the success of local companies and the growth of its tech ecosystem.

• Valuations for highly successful companies are similar in New York and San Francisco.
• High valuations are linked to companies with the potential to disrupt large industries.
• Dataminr is an example of an east coast company with a "west coast valuation."
• Early-stage companies may have slightly higher valuations on the west coast.
• This could be due to founders on the west coast having pedigreed networks and deep domain expertise.

"I think for companies that are working very well, there's no major difference." "I think the companies that get the biggest valuations are companies that are working extraordinarily well." "So maybe a bit higher on the west coast for the earlier stage, but I don't see huge differences."

Nick Beim suggests that successful companies can achieve similar valuations regardless of location, although some differences exist at the earlier stages due to founder backgrounds.

• Mike Moritz of Sequoia and Fred Wilson are considered successful venture capitalists.
• Success is attributed to long-term views and performance without an existing platform.

"I think Mike Moritz has been very successful at Sequoia." "I was very impressed with what Fred Wilson had done without the existing platform or assets that some of the long standing west coast."

Nick Beim acknowledges the achievements of both Mike Moritz and Fred Wilson in the venture capital space.

• "Man's Search for Meaning" by Viktor Frankl had a significant impact on Nick Beim.
• The book discusses finding meaning in life, even in the harshest conditions.

"There was a book that had a big impact on my life and it was under $100. It was man's search for meaning by Viktor Frankl."

Beim shares that Viktor Frankl's book, which delves into finding purpose and happiness, was an influential read for him.

• Nick Beim's investing ethos involves finding exceptional individuals with very big ideas.

"Finding exceptional, off the charts individuals with."

This quote captures Beim's focus on the exceptional talent of founders when making investment decisions.

• Nick Beim prefers long-form thought pieces that are eye-opening, contrarian, and non-obvious.
• He enjoys Reed Hoffman's blog and would appreciate a blog by Peter Thiel.

"I'm intellectually attracted to longer form thought pieces that are eye-opening, kind of contrarian, non obvious." "I like Reed Hoffman's blog and absolutely brilliant."

Beim expresses his preference for in-depth, insightful content that challenges conventional thinking.

• Nick Beim's most recent investment is in a stealth-mode fintech company.
• The decision to invest was based on the exceptional talent of the founders and their deep industry insight.
• The company aims to disrupt a trillion-dollar industry with weak legacy competition.

"My most recent investment is a big swing fintech idea, very big swing that is currently in stealth mode." "The two founders were just astonishingly talented."

Beim shares his enthusiasm for his latest investment, highlighting the founders' talents and the potential for significant industry disruption.