20VC Index's Ilya Fushman on The Key Lessons From Scaling Dropbox To 400m Users, Is Excessive Amounts Of Capital Driving Valuations Too High In The Valley & Why Venture Is Like Being On A Swim Team Not A Soccer Team

In this episode of 20 Minutes VC, host Harry Stebbings interviews Ilya Fushman, a partner at Index Ventures, who shares his journey from a physicist building quantum computers to venture capitalist, and his operational experience at Dropbox where he helped scale the company from 50 to nearly 1500 employees. Fushman emphasizes the importance of maintaining company culture and the value of having a VC with operational background on a startup's board. He also discusses the challenges of VC market fit and the significance of aligning with founders to establish productive partnerships. Fushman highlights his recent investments in Slack and Culture Amp, citing their potential to transform workplace communication and employee engagement. Throughout the conversation, the role of venture capital in supporting startups' expansion across continents and the critical nature of talent retention and management in today's technology-driven organizations are underscored.

• Ilya Fushman is a partner at Index Ventures in San Francisco.
• He has made investments in companies like Slack, Dropbox, Optimizely, and Intercom.
• Prior to joining Index Ventures, Ilya was the head of product at Dropbox.
• He was one of Dropbox's first 75 employees and helped build the company's business and corporate development functions.
• Ilya built Dropbox for Business and the developer platform.
• Before Dropbox, he worked at Kosla Ventures and as the director of technology at Solarjunction.
• Special thanks were given to Ilya for hosting the recording session at Index Ventures and to Jason Lemkin for the introduction.

"Now Ilya is a partner at Index Ventures in San Francisco where he's made investments in the likes of Slack, Dropbox, Optimizely and Intercom."

"But prior to joining index, Ilya was also the head of product at Dropbox and as one of Dropbox's 1st 75 employees he helped to build and run the company's business and corporate development functions before taking on a product leadership role and building out Dropbox for business and the developer platform."

"Before Dropbox, he was a principal at Kosla Ventures and the director of technology at the solar cell startup Solarjunction."

These quotes outline Ilya Fushman's professional background and his current role at Index Ventures, highlighting his previous experiences and contributions to significant projects and companies.

• Ilya started as an academic with a PhD in physics, working on quantum computers.
• He transitioned from academia to a startup that built the world's most efficient and expensive solar cell.
• After the company was acquired, he entered the venture capital industry at Kosla Ventures.
• Ilya wanted to be a venture capitalist with operational experience to provide real value.
• His journey took him to Dropbox, where he experienced significant growth and launched key products.
• After Dropbox, he sought a new challenge and joined Index Ventures, where he could leverage his experience to help build the firm and support entrepreneurs.

"So a very long time ago, I was an academic. I did a phd in physics, I worked on building quantum computers, did semi successfully. I then realized I don't want to be in academia."

"Company wound up being acquired and I wound up getting to venture for the first time at a place called Kosla Ventures."

"And so my journey then took me to Dropbox, which was amazing because I joined it around 50 people and was there for about four years when we grew through to almost 1500."

The quotes describe Ilya Fushman's transition from academia to the startup world, his first foray into venture capital, and his significant role in Dropbox's growth, setting the stage for his current position at Index Ventures.

• Ilya discusses the challenges of scaling a company from a small team to hundreds of employees.
• The early stages of a company involve close-knit, aligned thinking that changes as the company grows.
• At around 50 employees, the dynamics change, and the company needs to expand and restructure.
• Ilya emphasizes the importance of aligning the team and steering towards common goals during growth.
• Successful scaling involves transferring knowledge and adapting across different sectors.

"You start getting to the room limit. The first thing that goes are conference rooms, and the second thing that goes are bathrooms."

"How do you kind of restructure and realign yourself? How do you make sure that people really know what they're doing? And how do you steer the ship towards a common set of goals?"

These quotes reflect the practical challenges of scaling a company, like the need for physical space and the strategic challenges of maintaining alignment and direction. They highlight Ilya's experience and insights into the growth of Dropbox.

• As companies grow, the need for effective communication and knowledge transfer becomes more critical.
• New employees lack the context that founders and early team members have, requiring deliberate efforts to share knowledge.
• Regular reorganizations and process developments are necessary to manage growth.
• Processes for product development, interviewing, and integrating sales with product teams are developed and refined.

"As you scale, you need to start investing a lot more in communication and transferring the knowledge that's in your heads and verbalizing it and putting it in some kind of processes for everybody else, because new folks who come in don't have the same context as you did."

This quote emphasizes the importance of establishing clear communication channels and processes to ensure that the growing team has access to the knowledge and context necessary to perform effectively.

• Dropbox focused on company culture as a top priority, which helped in managing rapid hiring.
• The executive and leadership team were actively involved in onboarding new hires.
• A dedicated team was created specifically for new employee onboarding.
• Onboarding included a process that lasted several weeks to ensure proper integration into the company culture.

"We had an incredible recruiting team early on. Kudos to Drew and Raj for really focusing on company culture as one of the top priorities."

This quote highlights the role of the recruiting team and leadership in prioritizing company culture, which was integral to the successful onboarding of new hires.

• Delight was a key element in Dropbox's culture, extending beyond the product to the company environment.
• Company all-hands meetings included elements of humor and self-deprecation.
• A dedicated culture team was responsible for maintaining a fun and delightful atmosphere.
• The concept of delight was encapsulated in the company value represented by a cupcake.

"We had an incredible designer, John Ying, who is responsible for the stick figures, the shark with the Velociraptor and the AK 47, and the panda, who really focused on bringing kind of this notion of delight into everything that we did."

This quote illustrates how Dropbox incorporated delight into its culture through creative design and a focus on making the work environment enjoyable.

• Ilya Fushman's move to Index Ventures involved learning how to engage with companies beyond just the executive team.
• Spending time with the builders and teams within portfolio companies is a key part of his role at Index.
• The feedback cycles in venture capital differ significantly from those in product development.

"I try to spend a lot of my time with the folks who are building things, not just the founders and CEOs, but also their team and their team's team, to really help build the company, shape it and guide it."

This quote conveys Ilya's approach to venture capital, which involves a hands-on engagement with the operational teams of the companies he invests in, providing a more in-depth and supportive role.

• There is a spectrum of involvement among venture capitalists, from purely financial to deeply operational.
• Ilya finds fulfillment in being hands-on and assisting with the building process.
• The concept of VC market fit is about finding what makes the VC happy and effective in supporting their portfolio companies.
• Ilya enjoys working with product-centric founders and being actively involved in strategy and brainstorming sessions.

"It's really about, I think, picking what makes you happy and what makes me happy is scratching that building itch, right. Because otherwise it would be really lonely."

This quote reflects Ilya's personal approach to venture capital, focusing on the aspects of the job that provide him with a sense of involvement and contribution to the growth and success of the companies he works with.

• The direct application of specific past experiences can be problematic due to differences in company context.
• The value lies in sharing decision-making frameworks rather than specific actions taken.
• Emphasis on the importance of pattern recognition and foresight in managing company growth and challenges.

"I think it's a fallacy to say we did it this way at a company, and therefore you should do it that way."

This quote emphasizes the fallacy of directly transplanting solutions from one company to another without considering unique contexts.

"It's really more passing on the knowledge for how founders and executives should be making decisions, how they can be thinking about things more effectively."

The quote highlights the importance of imparting decision-making frameworks over specific solutions.

"It's dangerous to be prescriptive."

This quote underscores the risk of offering overly specific advice without considering the unique circumstances of each company.

• The concept of prevention is likened to pattern recognition in venture capital.
• Experienced investors develop an instinct for identifying potential issues before they arise.

"Yeah, I think that's probably a good way of putting it. It's really pattern recognition."

The quote suggests that prevention in venture capital is about recognizing patterns that could lead to problems.

• Establishing a resonance with the founder is crucial for successful investments.
• The relationship and mutual understanding between the investor and the founder can be more significant than the deal itself.
• Operational experience can provide valuable insights into a founder's challenges and contribute to a successful partnership.

"I think that for me, it's getting to that product market fit right, which is what I said before."

This quote highlights the importance of aligning with the founder's vision and ensuring product-market fit.

"But to me, the fact that Owen is a product centric founder and he and I have a great working relationship was the thing that ultimately I think made me excited about the deal and ultimately, I think led to me winning the deal."

The quote illustrates the significance of a strong investor-founder relationship in securing a deal.

• The venture capital environment in Silicon Valley has been competitive for decades.
• The abundance of capital leads to competitive deals and discerning companies.
• Successful companies are thoughtful about choosing investor partners who bring more than just capital to the table.

"The VC environment has been heated in the valley for a really long time, in fact, probably for decades if you ask most folks in venture."

This quote provides historical context to the competitive nature of Silicon Valley's VC environment.

"But I think those companies are also becoming a lot more discerning about what they want in terms of an investor partner."

The quote underscores the trend of companies being selective about their investors, seeking value beyond capital.

• Index Ventures expanded to San Francisco to support European companies entering the US market and vice versa.
• The firm aims to provide a bridge between the US and Europe, leveraging its understanding of both markets.
• The strategic positioning of Index Ventures is designed to cater to the needs of companies scaling internationally.

"General thesis, by the way, for us to open the US office was that we'd seen a few trends."

The quote introduces the rationale behind Index Ventures' expansion to the US.

"And so that was one driver. The second driver was that we realized that there are great companies built in the US that ultimately want to get to Europe and have to get to Europe."

This quote explains the two-fold strategy behind Index Ventures' presence in San Francisco, addressing the needs of companies expanding across continents.

"So I think that's the role that index can play. The idea for us is that we're going to build a great team in the US where individual partners will be able to help foster growth in companies."

The quote outlines Index Ventures' goal to support company growth and provide a seamless connection between the US and European markets.

• Pros: Satisfies the "adult ADD itch," referring to the variety and excitement in the job.
• Cons: Can be a lonely job, likened to being on a swim team rather than a soccer team.

"You can totally scratch your adult add itch, Richard, for me, but it's sometimes a lonely job. It's like being on a swim team and not a soccer team."

The quote illustrates the duality of the venture capitalist profession, offering intellectual stimulation but also a sense of isolation, as teamwork is less prevalent compared to other professions.

• "Master and Margarita" by Mikhail Bulgakov is a favorite for its themes of love and human emotion.
• Appreciated for its beautiful writing and surrealist elements.

"Favorite book and why master and Margarita by Michael Golgakov. It's a russian classic, it's a surrealist novel, but it's really about love and human emotion and it's just a beautifully written piece of work."

This quote highlights the personal impact of the book on the speaker, emphasizing the depth of its themes and the quality of its prose.

• Uncertain about the future but hopes to build Index into a great global VC.
• Aspires to be a marquee investor in the next generation of Decacorns.

"But what I'd love to be at is build index into a great global vc and have us be the marquee investors and the next generation of Decacorns."

The speaker expresses a desire to grow their venture capital firm and become a leading investor in highly successful startups, despite not having a clear vision for their personal future.

• A great board member is both a partner and a critical partner.
• They provide supportive yet honest and critical feedback to guide founders.

"I think it's somebody who can be your partner, but also be your critical partner. And what I mean by that is I think you have to be supportive, you have to understand the business, but you also have to be critical and push at the right times."

The quote defines a great board member as someone who balances support with constructive criticism, providing valuable feedback to founders.

• Reading widely, including news from the BBC, is important to avoid missing macro trends.
• Tech-specific reads include Techmeme and Hacker News, with occasional deep dives into quantum physics papers.

"I actually just love reading news. I love reading the BBC. I think that a lot of times you miss the macro when you're hyper focused on the specifics."

This quote stresses the importance of staying informed about global events and trends, which can influence business and investment decisions, beyond the narrow focus of one's domain.

• Invested in Slack due to its rapid growth and potential to transform work communication.
• Culture Amp was chosen for its tools to engage and understand employees, seen as critical in a technology-driven world.

"Saying yes was pretty simple. Slack is one of the fastest growing companies, I think, that's been around, and it's poised to transform how people work and communicate and build a true operating system and platform for productivity going forward."

The speaker explains the rationale behind investing in Slack, highlighting its growth and potential impact on workplace productivity and communication.

"And Culture amp. The reason we said yes was that they're really helping organizations engage with employees, figure out who's happy, who's a good manager, how do you incentivize them properly?"

This quote provides the reasoning for investing in Culture Amp, emphasizing the increasing importance of employee engagement and management tools in modern organizations.

• Thanks to Ilya for joining the show and to those who facilitated the interview.
• Reminder to listeners about the 20 Minute VC resources and partners.

"Such a fun episode with Ilya today, and a huge thank you to him for giving up his time to be on the show and for inviting us into the index office, and to Jason Lemkin for making the introduction to Ilia."

This quote serves as a sign-off, expressing gratitude to the guest and collaborators who made the podcast episode possible.