20VC Index's Danny Rimer on His Biggest Lessons On Price, Ownership, Board Dynamics & Building Consumer Businesses from Backing The Likes of King, Skype, Farfetch, Glossier and more

In this episode of "20 minutes VC," host Harry Stebbings interviews Danny Rimer, a partner at Index Ventures, a premier venture fund with a portfolio including Dropbox, Skype, King, Slack, and others. Rimer is celebrated for his investments in Dropbox, Etsy, and King, and his influence extends to retail and fashion businesses like Farfetch, Glossier, and Goat. Recognized by Forbes' Midas list and honored with an OBE for his contributions to business and charity, Rimer shares his insights on the consumer downturn, market timing, and the importance of passion and understanding in entrepreneurship. He also discusses the challenges of geographical scaling for startups and the significance of supporting companies with the potential for exponential success. Rimer emphasizes the value of listening over speaking on boards and the need for a diverse team in global business expansion.

• Harry Stebbings introduces the podcast and expresses his excitement about interviewing one of his top five desired guests, Danny Rimer.
• Danny Rimer is a partner at Index Ventures, a prominent venture fund with investments in Dropbox, Skype, King, Bird, Slack, and others.
• Rimer is known for his investments in Dropbox, Etsy King, Skype, and retail and fashion businesses like Farfetch, Glossier, and Goat.
• Danny Rimer has been on the Forbes Midas list for over a decade and was appointed an Officer of the Order of the British Empire (OBE) for his services to business and charity.
• The New York Times included him in its list of the top 20 venture capitalists worldwide.
• Harry thanks various individuals for helping put together the episode.

"Now Danny is a partner at Index Ventures, one of the world's leading venture funds, with a portfolio including the likes of Dropbox, Skype, King, Bird, Slack and many more incredible companies."

This quote highlights Danny Rimer's role at Index Ventures and the successful companies they have invested in, establishing the importance of his insights for the podcast listeners.

• Harry Stebbings discusses tools and services that are beneficial for venture capitalists, such as Carter for fund administration and Brex for corporate cards.
• Carter provides a real-time dashboard for general ledger, LP information sharing, and capital calls.
• Brex offers a corporate card for startups with instant online signup and high credit limits.
• Startengine is mentioned as an equity crowdfunding site where individuals can invest in private companies.

"With Carter's new modern fund admin software and services, you get a real-time dashboard of your general ledger."

This quote describes the functionality of Carter's software, emphasizing its utility for venture capitalists in managing their funds efficiently.

• Danny Rimer clarifies that he was not a founder of Index Ventures, though his family members were involved.
• His interest in art and technology led him to a startup that worked with digital rights to art from museums.
• The early internet venture was not successful, but it solidified his love for the internet and entrepreneurship.
• Rimer began his career as an internet analyst, co-authoring one of the first reports on the internet and participating in the IPOs of companies like Amazon and Netscape.

"I wasn't one of the founders of index, though many members with my last name were."

This quote clarifies Danny Rimer's relationship to the founding of Index Ventures and sets the stage for his journey into venture capital.

• Danny Rimer does not see the current state as a consumer downturn but rather an opportunity with the consumerization of enterprise software.
• He acknowledges the difficulty in predicting platform shifts and suggests that venture capitalists may not excel at this.
• Rimer discusses market timing risk and the strategy of investing in themes, such as fintech, rather than trying to predict the success of individual companies.

"I don't really think of it as a downturn. In fact, what's interesting to me is that you're seeing the consumerization of the enterprise."

This quote reflects Rimer's perspective on the current market dynamics and the blending of consumer and enterprise software trends.

• The discussion touches on the impact of Amazon on the consumer space and venture capital investments.
• Danny Rimer and Harry Stebbings talk about market timing risk and the importance of not taking founder risk or market timing risk too far.
• Rimer emphasizes the need for a balanced approach to risk, considering both the market segment and investment strategy.

"Probably. I mean, I think those are wise ideas to focus on people and product market fit."

Rimer agrees with the principle of focusing on strong teams and product-market fit, indicating a cautious approach to market timing risk in venture capital investments.

• Amazon, along with Facebook, Apple, and Google, is not only dominant but also innovating at a pace faster than startups in recent years.
• Amazon's aggressive R&D spending is unparalleled in the history of technology.
• Amazon focuses on mainstream products for the general populace, rather than niche markets with passionate followings.
• Niches are areas where Amazon is not well-positioned due to their broader market strategy.

"Part of that is maybe insight into knowing the folks at Amazon. I did, after all, participate in the IPO. I was at H Q when we took them public and I was part of that team. But part of it is also just because you see the service and what they're trying to do and it's clear that they're really trying to capture the main populace that's going to be online with more generic product, more product that you need on a day to day basis."

The quote explains the speaker's understanding of Amazon's strategy, which is to target the broader market with general products, thus leaving niche markets less attended to.

• VCs often underestimate the size of niche markets.
• Connecting global populations online can lead to explosive growth in niche markets.
• Etsy is cited as an example where a niche market significantly grew beyond expectations once it was connected online.

"And what we tend to forget is when you're connecting most of the world's population, there are going to be niches that explode in size as a result of just having everyone that's interested in that particular area connected."

This quote highlights the potential for niche markets to grow rapidly when the interested global population is connected online, as demonstrated by the growth of Etsy.

• Startups need to find efficient customer acquisition strategies, which may become less economic as they become more known.
• Early investment in new customer acquisition channels is beneficial, but understanding the community and organic growth is crucial for long-term success.
• The organic cost of acquiring a customer should be factored into the overall CAC.

"So fundamentally bringing in the organic cost of acquiring a customer into the overall CAC and making sure that you're not underrepresenting it, but you're really thinking through it, because from a longevity standpoint, that community connection is going to be the most valuable no matter what."

The quote emphasizes the importance of considering organic customer acquisition methods and community engagement as part of the overall CAC for sustainable growth.

• Companies need to consider whether to focus on product lineup differentiation or geographical expansion when marketing channels become saturated.
• The most dynamic and competitive aspect of building a consumer business is customer acquisition, requiring fluency in various approaches and dimensions.

"Obviously, the more lenses that you can really be fluent in for customer acquisition, the more sophisticated you're going to be and the more you can allocate dollars appropriately."

This quote suggests that having a broad understanding of different customer acquisition strategies allows for more sophisticated and effective allocation of resources.

• Henry Davis of Glossier, who transitioned from venture to operations, exemplifies that there can be exceptions to the typical rules.
• It's important to measure both measurable and non-measurable channels of customer acquisition.
• Early measurement and prediction of marketing elements can lead to successful doubling down on effective channels.

"How do you measure the level of love that you have, the level of following the word of mouth, how can you start predicting what the level of dedication will be, the number of likes, the number of tweets that you're going to generate as a result of the launch that you have."

The quote underscores the need to assess intangible aspects of customer acquisition, like brand love and word-of-mouth, to understand and predict customer dedication.

• Founders' ambition is key to creating a global business.
• Startups should solidify their business on a domestic or regional level before attempting global expansion.
• European entrepreneurs often have the discipline required for regional success due to market size constraints, which can be beneficial when scaling globally.

"There is no question in my mind that the level of ambition that is necessary to create a global business cannot be underestimated."

This quote stresses the importance of having high ambition in founders who aim to scale their businesses globally.

• Raising too much money too early can lead to lax spending and simultaneous mistakes in multiple locations.
• Developing a diverse team early on is crucial to avoid groupthink and bring varied perspectives to the business.

"Another one is not really focusing on developing a diverse team. And what I mean by a diverse team is backgrounds, ages, obviously genders, experience, culture so that you're sheltering yourself from the group."

The quote highlights the importance of team diversity in terms of background, age, gender, experience, and culture to prevent groupthink and foster a robust approach to business challenges.

• Companies focus on hiring abundant talent early on, with a trust and understanding of the team.
• Early hires tend to be redundant, leading to missed opportunities.

"And that's a commonality that we see in a lot of our companies is really focused on just hiring as much talent as early as possible, that they trust and that they understand."

This quote emphasizes the strategy of early-stage companies to prioritize hiring talented individuals who align with the company's vision and culture.

• Index faced the challenge of establishing a presence in a competitive market like San Francisco, which differed from their established brand in Europe and the UK.
• Danny Rimer and Mike Volpe partnered to set up the SF office, with Shardul joining early to assist.
• Index aimed to differentiate in a commodity industry and establish a significant presence in a sophisticated market.

"So the next stage was to set out and try and plant a flag in the most sophisticated geography for our business and make sure that we had something to offer that was differentiated in a relatively commodity industry..."

The quote describes the strategic move to establish Index in San Francisco, focusing on creating a unique value proposition in a highly competitive venture capital market.

• Index struggles with gaining mind share among entrepreneurs on the West Coast.
• The goal is to become a top-of-mind venture firm in enterprise SaaS and consumer space.
• Competing with firms that have a long-standing reputation and generational success is a significant challenge.

"We have not the type of mind share with entrepreneurs that we'd like to have on the west coast, that we're not necessarily the first name or venture firm that you think of when you start a company..."

This quote highlights the ongoing challenge Index faces in becoming a prominent venture capital firm in the minds of entrepreneurs in the West Coast market.

• Partners at Index view their roles as a privilege and focus on adding value and setting up the next generation for success.
• Succession planning is critical to avoid the pitfalls that have caused great firms to fail over time.
• The aim is to ensure smooth generational transitions and continuous improvement.

"The mindset is that you're not here for the rest of time, but you're here for a short period of time and you have to make it matter as much as possible."

The quote conveys the philosophy of stewardship that guides Index's partners, emphasizing the importance of making a meaningful impact and preparing for successful succession.

• Index maintains a partnership mentality, valuing collective success over individual contributions.
• Successes are shared across all partners, fostering a team-focused culture.
• Protecting the investment team's sense of contribution to the firm's success is a priority.

"I'm most protective of, is making sure that every person on the investment team at index feels like they are equally contributing to the success of our entrepreneurs."

This quote stresses the importance of a collaborative culture at Index, where successes are attributed to the team as a whole rather than individual partners.

• Different partners at Index have varied perspectives on what makes a successful entrepreneur.
• Danny Rimer looks for entrepreneurs with a deep passion for transforming an industry and a thorough understanding of it.
• Entrepreneurs must also be adaptable learners, continually improving and acquiring new skills.

"So the entrepreneur, for me, has to have incredible passion and convincing passion. Passion that is so clear that they've actually done the hard work of not only being excited about the industry, but actually understand all of the elements that are going to drive that industry."

The quote outlines Danny Rimer's personal criteria for selecting entrepreneurs, highlighting the need for genuine passion and in-depth industry knowledge.

• Danny Rimer is less concerned with price and more focused on the potential of the entrepreneur and the opportunity.
• Index's early-stage investment approach allows for less regret over price concerns in the long run.
• The firm avoids getting caught up in projections and prefers to be involved from the start.

"That if I think that the entrepreneur and the opportunity is large enough, I just want to be an investor in that company and that I'm not really worried about the total available market..."

This quote reveals Danny Rimer's investment philosophy, which prioritizes the entrepreneur's potential and the opportunity over concerns about market size and initial investment cost.

• Danny Rimer reflects on his growth and experiences as a board member over time.
• The quote implies that with experience, there has been an evolution in his approach to board membership.

"Well, I'd like to think that I'm getting better as a board member..."

This quote suggests a continuous learning process and improvement in Danny Rimer's role as a board member, although the specific ways in which he has evolved are not detailed in the transcript.

• The importance of listening over talking in board meetings.
• Identifying one key piece of advice to make a difference.
• Acknowledging the humbling nature of venture capital due to its unpredictability.

"Probably what I've realized is I end up spending a lot less time talking and spending a lot more time listening and figuring out what is the one piece of key advice that I want to provide."

This quote emphasizes the shift from speaking to listening as a means to provide impactful advice, highlighting the speaker's growth and learning in their role.

• Avoid overemphasizing the importance of the first board seat.
• Focus on potential successful outcomes rather than celebrating missed unsuccessful investments.

"I think the two things that I would think about is don't put too much pressure on the fact that it's the first board seat."

This advice suggests that newcomers should not be overly concerned about the pressure of their first board seat, indicating it's a learning experience.

• Gaining more insights from failures than successes.
• The lesson from the Nasty Gal investment: the importance of collaborative investment.
• Ensuring support around the table for the success of a company.

"So a big lesson was in the worst investment that I've done today, which is nasty gal, which was an e-commerce brand that we invested in."

Reflecting on the Nasty Gal investment, the speaker learned the value of sharing the investment workload with competent partners to better support the company.

• Differentiating the approach of a venture capitalist from an operator.
• Balancing time spent between companies that are outperforming and those that are struggling.
• The challenge of making a meaningful impact on successful companies with minimal involvement.

"You have to figure out how to spend the most amount of time with the companies that need you least and the least amount of time with companies that need you most without being mercenary and unhelpful."

This quote highlights the paradoxical strategy of allocating time inversely to the needs of the companies, a key consideration for venture capitalists.

• The enjoyment of reading novels that delve into character understanding.
• Maintaining motivation through the love of the job and desire to contribute.
• The importance of knowing when to pass the baton to the next generation.

"The latest book that I'm reading that I really like, I just started, and it's by Haruki Murakami, who's one of my favorite novelists."

This quote shares a personal preference, linking the appreciation for character depth in literature to the speaker's professional life, which involves understanding people.

• Recurring to the motto that despite changes, fundamental things remain the same.
• The constant allure of the "new, new thing" in the venture industry.
• The value of maintaining perspective amidst industry trends.

"It's a french expression, but it works in English as well, which is, the more things change, the more they remain the same."

The speaker reiterates a guiding principle that helps maintain focus on the unchanging fundamentals in a rapidly evolving industry.

• The hindsight wish to focus on potential success rather than avoiding failures.
• The importance of supporting entrepreneurs in realizing their vision.

"I guess I would have. I mean, it's back to what I was saying. I would have liked to make sure that I was focused on what can go right rather than what can go wrong."

Reflecting on their career, the speaker wishes they had concentrated more on fostering success rather than avoiding potential failures.

• Excitement over investing in Goodeggs and collaborating with Bill Gurley from Benchmark.
• The significance of conviction in re-investing and the impact of new leadership on a previously struggling company.

"So I got super excited with Goodeggs doing a restructured round where Gurley from benchmark came in for a couple of reasons."

The speaker expresses enthusiasm for a recent investment and the opportunity to work with a respected peer, highlighting the importance of partnerships in venture capital.

• Carter's role in simplifying fund administration for venture capitalists.
• Brex's offering of corporate cards for startups with high limits and no founder liability.
• Start Engine's platform for investing in private companies across various stages.

"Carter simplifies how startups and investors manage equity fund admin and valuations."

This quote introduces Carter as a valuable tool for venture capitalists, streamlining the management of equity, fund administration, and valuations.