20VC How To Test The Strength Of CoFounder Relations, The Dangers Of Raising A Large Series A & Why The Biggest Challenge For Consumer Companies Is Finding The Second Big Hit with Rishi Garg, Partner @ Mayfield Fund

In this episode of 20 Minutes VC, host Harry Stebbings interviews Rishi Garg, a general partner at Mayfield Fund, who shares his journey from a drama major at Stanford to a prominent figure in venture capital, with pivotal roles at Twitter, Square, and Google. Rishi discusses the importance of founder dynamics, the challenges of raising large Series A funding, and the necessity of operational excellence in startups. He emphasizes the value of authentic communication between co-founders and the role of VCs in supporting founders beyond just financial investment. Rishi also touches on his involvement with Rent-A-Center, highlighting his passion for providing financial services to lower-income individuals.

• Harry Stebbings hosts the 20 Minute VC podcast and writes about venture capital and mojitos on mojitovc.com.
• Rishi Garg is a general partner at Mayfield Fund, focusing on new media platforms, disruptive financial services, and new marketplaces.
• Rishi Garg's background includes VP of corporate development and strategy at Twitter and the first head of corporate development at Square.
• Rishi Garg was the founder of Fansnap and has held roles at Google, Highland Capital Partners, and Morgan Stanley.

You are listening to the 20 minutes VC with your host Harry Stebbings at h stebbings on Snapchat and found writing some, hopefully academic pieces largely relating to Mojitos and VC on mojitovc.com.

This quote introduces the host of the podcast, Harry Stebbings, and his interests in venture capital and mojitos.

Now Rishi is a general partner at Mayfield Fund, where he focuses on new media platforms, disruptive financial services and new marketplaces. And prior to joining Mayfield, Rishi was vice president of corporate development and strategy at Twitter, where he led the company's most active m a program including the acquisitions of Periscope, telepart, tap commerce and many others.

This quote provides an overview of Rishi Garg's current role and his previous experience at Twitter, highlighting his involvement in significant mergers and acquisitions.

• Born in northern Alberta and grew up in southern Texas.
• Attended Stanford University in 1995, initially as a premed and drama major, then switched to economics and completed a master's in industrial engineering and engineering management.
• Rishi's career has been focused on working with, nurturing, and supporting emerging and growth stage companies.

Great. So why don't I just start at the beginning. I was born in a remote part of northern Alberta and I grew up in a remote part of southern Texas, about 100 miles south of Houston in a place called Bay City.

Rishi Garg shares his early life background, emphasizing his upbringing in remote areas of Canada and the United States.

I ended up going to Stanford in 1995 and like 40% of my class I was premed. But it happened to be the first Internet boom taking place right on our doorstep.

Rishi Garg explains his initial academic pursuit and the influence of the first Internet boom on his decision to switch majors.

• Started as an investment banker at Morgan Stanley.
• Worked at Highland Capital Partners under Paul Maeder, gaining valuable venture experience.
• Transitioned to the operating world, including MTV Networks during the rise of social media.
• At Google, helped build the business plan for Google Print.
• Became an entrepreneur in residence at General Catalyst Partners and co-founded Fansnap.
• Joined Square as an early employee, leading strategic partnerships and corporate development.
• Moved to Twitter as the first VP of corporate development and strategy at the invitation of Ali Rogani.

I started off at Morgan Stanley and the technology group in Menlo park as an investment banker. Then I went on to work at a place called Highland Capital Partners, which is an early stage venture capital firm.

Rishi Garg discusses his initial roles in investment banking and venture capital, setting the stage for his future entrepreneurial endeavors.

And then in January of 2012, I started work at square. I was like somewhere between 152 hundredth employee, I think, running business development.

This quote details the beginning of Rishi Garg's tenure at Square, where he was involved in strategic partnerships and corporate development.

And then after a while we hired people to sort of run each of those functional areas and to focus on each of those things so that I could take over corporate development and strategy. As a first head of Corpdev and Corpdev at a growth stage company is really interesting.

Rishi Garg reflects on his evolving role at Square, highlighting the unique challenges and opportunities of corporate development at a growth-stage company.

I love Square, and I'd probably still be there today, except that a dear friend and a world class executive named Ali Rogani, who was a coo of Twitter, asked me to join him at Twitter as the first vp of corporate development and strategy.

Here, Rishi Garg explains his move from Square to Twitter, indicating the importance of personal connections and the opportunity to work at a high-profile company like Twitter.

• Twitter was perceived to have a significant potential for impact, monetization, and product development.
• Twitter required assistance in improving its entrepreneur outreach and needed a strategic approach for future decision-making.
• The strategic approach was aimed at prioritizing product and engineering efforts, making clear internal and external communications, and defining the company's aspirations.

And they really needed help, not only in making sure that their m a program and their outreach to entrepreneurs was more successful so they could bring the right folks into the fold, but also they needed an overarching strategic approach that allowed them to make decisions about where the company was going to go in the next couple of years so they could galvanize product and engineering efforts.

This quote emphasizes the need for Twitter to enhance its connections with entrepreneurs and to establish a clear strategic direction to guide the company's development and improve internal and external communication.

• Rishi Garg joined Twitter to help expand and improve its M&A program and strategic direction.
• He was involved in numerous acquisitions (14 in about 14 months) that contributed to Twitter's product development and machine learning capabilities.
• These acquisitions included notable companies like Telepart, Periscope, and others, which were instrumental in forming Twitter's deep learning practice, Twitter Cortex.

We did a bunch of different projects, about 14 or so acquisitions in about 14 months. So very active M and a program including companies like Telepart, you may have heard of Periscope, niche, zip, dial tab, commerce. We bought a couple of ML companies, deep learning companies that were really interesting, helped form the foundation of Twitter cortex, which is our deep learning practice.

The quote details Rishi Garg's active role in Twitter's M&A program, highlighting the acquisition of multiple companies that contributed to the creation of Twitter Cortex, a deep learning division within Twitter.

• Rishi Garg left Twitter to explore opportunities in venture capital (VC), leveraging his experience working with entrepreneurs and VCs.
• He sought to support impactful businesses with capital, experience, emotional, and strategic support, aligning with his values.
• His criteria for choosing a VC firm included aggressiveness in the market, a track record of successful investments, and a small, focused team dedicated to early-stage investing on the west coast, which he found at Mayfield.

I ultimately decided that was a noble enterprise. And then once I realized that, I decided to find a firm that was aggressive in the market, had demonstrated great abilities to be successful as investors focused, meaning that they weren't partners, sort of retiring and not doing stuff that were still hanging around, but really a small, focused team doing early stage investing, all based on the west coast.

This quote reflects Rishi Garg's decision-making process in transitioning to venture capital, where he sought a firm that matched his desire to actively support entrepreneurs and had a proven success record in early-stage investing.

• Rishi Garg's experience at growth-stage companies like Square and Twitter honed his operational skills and ability to make quick, clear decisions.
• In venture capital, he applies these skills to identify operational excellence in companies and to create programs that support entrepreneurs.
• He has developed a keen sense for recognizing successful entrepreneurs and applies this insight when evaluating potential investments.

One is that I'm able to see operational excellence in companies. The second is that I'm able to, in my own work as an investor, I'm able to operationalize my work so that I can build machines, if you will, build ways of seeing patterns here using the resources that I have at the firm, so that we can make better investment decisions, or that we can learn about certain things much more quickly.

The quote illustrates how Rishi Garg's background in high-pressure operational roles informs his current approach as an investor, enabling him to recognize and foster operational excellence in the companies he invests in.

• Rishi Garg emphasizes the importance of founder dynamics, communication, and alignment in the success of startups.
• He has implemented programs such as Founders Conversations at HBS to help founding teams improve their communication and co-founder relationships.
• Research indicates that founders who discuss equity splits at length, regardless of the outcome, are more likely to succeed due to their willingness to tackle difficult conversations.

Because the research shows that the better founder communication is, the more likely you are to be successful.

This quote highlights the correlation between effective founder communication and the likelihood of startup success, underscoring the importance of fostering good co-founder relationships.

• Rishi Garg criticizes the superficial evaluation of founders by most VCs, focusing on team quality without digging into co-founder relationships.
• He suggests that VCs should systematically evaluate the dynamics between co-founders, as it is a critical factor for a startup's success.
• Garg proposes asking specific questions to founders to uncover the depth of their relationships and their ability to handle difficult conversations.

But what vcs generally do is they rely on their systemic ability to sort of perceive these things in meetings or reference checks. One of the things they don't do is systematically evaluate and try to dig into what are the relationships between co founders look and feel like.

The quote criticizes the general approach of VCs in evaluating founders, which often overlooks the in-depth assessment of co-founder relationships, an aspect Rishi Garg considers crucial for startup success.

• Rishi Garg shares techniques for assessing founder dynamics, such as inquiring about the time spent on hard decisions and the process of equity division.
• He references research by Noam Wasserman, which suggests that founders who discuss equity at length are more likely to succeed.
• Garg advises asking questions about the founders' history, communication style, and the biggest challenges they have faced together.

How did you guys divide the pie? What's the biggest question or issue that's come up between you? What's the biggest hole between you as founders? How long have you known each other?

This quote provides examples of the types of questions Rishi Garg recommends asking to assess the strength and depth of founder relationships, which can be indicative of a startup's potential for success.

• Co-founders who are willing to be open and transparent about their struggles, strengths, weaknesses, and challenging questions often have a healthier working relationship.
• Transparency can be sensed in their tone and reactions during conversations.
• Such questions are not commonly asked but can reveal much about the founders' dynamic.

"What I would auger is that these questions are rarely asked in the course of the process. And so simply by asking some of these, I think, very innocuous questions, you can start to get a sense of how founders actually interact with each other."

This quote emphasizes the rarity of direct questions about co-founder relationships and suggests that asking them can provide insights into the founders' dynamics.

• The history of founder churn is an important factor when considering an investment.
• A history of honest, albeit painful, conversations and hard choices in the best interest of the business can be a good sign.
• Rapid break apart of founder dynamics or lingering bad blood can indicate a lack of willingness to have difficult conversations.

"If it was one of those things where there was honest conversations, even if they were painful, where founders had to decide in the best interests of the business what the right personnel or founding team was to move the business forward and they were willing to make hard choices in order to do so. That's usually a good sign."

This quote suggests that a history of honest and difficult conversations among founders about team composition can be indicative of a strong founding team.

• Transparency is a key factor that investors look for in founders.
• Reluctance to allow investors to speak with an ex-founder can be a red flag.
• Transparency is not only important for investing but also for business and life in general.

"So I've always found that a willingness towards transparency is extremely confidence building."

This quote highlights the importance of transparency and how it can build confidence in the relationship between investors and founders.

• VCs should ideally not have to negotiate between founders.
• The VC's role is to highlight the importance of founder relationships and suggest ways to address them.
• VCs can provide support and pattern recognition to help founders make strategic decisions.

"The role of VC is to call out that this is an important consideration, that it's something they should spend time on, right? Put attention to and then suggest means of doing so."

This quote outlines the VC's role in advising founders on the importance of maintaining healthy dynamics and providing guidance on how to do so.

• Large Series A rounds are becoming more common due to big outcomes, founder credibility, and new platforms creating larger opportunities.
• Fear of a downturn can also motivate founders to raise more capital.
• Large Series A rounds can lead to down rounds and complacency in execution.
• Startups traditionally start with small capital and focused teams to prove their concepts before scaling up.
• Most successful companies did not start with large Series A rounds.

"Now, the problem is, and every business is different, but generally speaking, really big series A's can come with some serious negative side effects."

This quote discusses the potential drawbacks of large Series A rounds, such as down rounds and a lack of operational focus.

• The focus should be on data and what the entrepreneur wants to prove with their startup.
• Startups should aim to answer important hypotheses with the capital raised.
• Raising capital should not be about meeting a pre-determined dilution target but about learning and progressing the business.

"This process should be about trying to answer questions on your way to building a business so that you can find product market fit."

This quote emphasizes that raising capital should be data-driven and focused on validating business hypotheses to achieve product-market fit.

• The adequate cushion of capital depends on the stage of the startup and the experiments needed to validate hypotheses.
• In the series seed stage, a startup may answer key questions in six months and should raise enough to double the money needed for experiments.
• In the series A stage, startups should raise enough capital to test key hypotheses and have a cushion for learning and pivoting.

"It's going to take me nine months to figure out or twelve months to figure out the key hypotheses I need right now. Let me add another nin..."

This incomplete quote suggests that startups should consider the time they need to test their hypotheses when determining how much capital to raise, implying a strategic approach to fundraising.

• Runway refers to the amount of time a company can continue to operate before needing additional funding.
• A range of 20 to 24 months of runway is considered comfortable.
• The right amount of runway depends on the specific questions a company needs to answer, which can vary in time.

You said 18 or 24 and I don't think there's a science to it. I think that just sort of feels like the right amount of time to answer a set of questions.

The quote highlights that determining the appropriate runway length is not an exact science but rather a feeling based on the company's needs.

• Rishi Garg has two favorite books: "The Autobiography of Malcolm X" and "The Tibetan Book of Living and Dying".
• These books have profoundly influenced him, both personally and spiritually.

The autobiography of Malcolm X is because it showed me how great a man could be when he sets his mind to accomplishing something. The Tibetan book of living and dying is just special because it's sort of the best explanation of Tibetan Buddhism I think I've ever read and one of the most accessible and a pretty big influence on me spiritually.

The quotes explain why the books are favorites, citing personal growth and spiritual understanding as key impacts.

• Square achieved product-market fit by addressing multiple pain points for small businesses.
• Innovations across different dimensions and strong operations supported Square's success.
• Technology and risk management were also key components of Square's achievements.
• Square's culture, encompassing values, purpose, and vision, was a significant factor.

Incredible product market fit. They did an incredible job of taking a process that was terrible for small businesses across ten different dimensions and making every part of those ten different dimensions fantastic and innovating across each of those ten different dimensions.

The quote summarizes the comprehensive approach Square took to solve problems for small businesses, leading to its success.

• Square struggled to replicate its initial success with subsequent products.
• Square Wallet did not achieve the same value proposition as Square's core product.
• The learning is to focus on creating significant value propositions in new products.

I think that one of the hardest things about Square was finding its second big hit.

The quote reflects on the difficulty of achieving multiple successful products within a company.

• Rishi Garg enjoys "Wait But Why" by Tim Urban and "Stratechery" by Ben Thompson.
• He also reads Nautilus and Quartz for their coverage of interesting topics.

Some of them are. Wait, but why Tim Urban's blog? I love strategy by Ben Thompson, which I quoted today in a post I just had on TechCrunch.

The quote lists some of Rishi Garg's preferred blogs and newsletters, which he finds valuable for insights and information.

• The social media landscape is seen as an expanding oligopoly.
• New platforms continue to emerge as consumer needs for expression evolve.
• Future platforms will likely target unsolved use cases, though not at the same scale as current giants.

I think we're going to be in this world of a controlled but ever expanding oligopoly.

This quote suggests that while the social media market is dominated by a few major platforms, there is still room for new entrants that cater to specific consumer desires.

• Rishi Garg has not made a public investment with Mayfield yet, but has made several angel-like investments.
• He believes in supporting companies that solve specific use cases, especially in social media.
• He serves on the board of Rent-A-Center, a company providing accessible and safe financial services to low-income individuals.

It's a $3.2 billion revenue company that provides rent to own furniture for the lower income users all around the country and in Mexico.

The quote explains Rishi Garg's involvement with Rent-A-Center, highlighting his interest in companies that offer financial accessibility.

• Harry Stebbings thanks Rishi Garg for his participation and Tim Chang for the introduction.
• Harry promotes his Snapchat and blog, hinting at future content and audience engagement.

What a great episode that was with Rishi, and a huge thanks to him for giving up the time today to be on the show and all the pre diligence he did before the show to make the content as brilliant as it was.

The quote expresses gratitude towards Rishi Garg for his contribution to the podcast episode, emphasizing the quality of content provided.

• The podcast includes promotions for Simba Hybrid mattresses and Cirrus Insight, a Salesforce plugin.
• Personal goals like sleeping more and productivity are tied into the promotions.

And with the new year we need new routines. And as I said earlier, one of mine is sleeping more.

This quote ties a personal resolution to a promotional message, suggesting that products like the Simba Hybrid mattress can contribute to achieving such goals.