20VC Preparing For The Next Big Trend, Why Conversational Will Be The Next Big Thing & How Entrepreneurs Should View Market Size with Sarah Guo @ Greylock Partners

In this episode of the "20 minutes VC," host Harry Stebbings interviews Sarah Guo, an investor at Greylock Partners, discussing her journey from engineering roots to venture capital, her work in taking companies like Workday public, and her advocacy for STEM education. Sarah shares insights on the future of technology, including the impact of AI and machine learning, the challenges and opportunities in investing in new platform shifts, and the evolution of VC towards a value-add model. She emphasizes the importance of storytelling in company growth and the potential in sectors like agriculture, healthcare, and construction, where data sets are yet untapped. Sarah also touches on the role of domain expertise in AI startups and the significance of market size in investment decisions. The conversation concludes with Sarah's thoughts on the next generation of VC and her recent investment in Rumbix, highlighting the importance of a strong team and significant market potential.

• Harry Stebings is hosting part two of the Greylock Partners feature week on the 20 minutes vc podcast.
• Harry introduces himself and mentions his social media presence on Snapchat and his writing on mojitovc.com.
• Sarah Guo, an investor at Greylock, is the guest for the episode.
• Sarah's background includes working at Goldman Sachs, investing in Dropbox, helping take Workday public, advising technology companies, and advocating for STEM education.

"Hello and welcome back to part two of our very special feature week of the world famous Greylock partners. Here on the 20 minutes vc with me, your host Harry Stebings, found on Snapchat at htebbings and now I'm getting a little older and more reflective. Also found writing on mojitovc.com."

The quote provides a context for the podcast episode, introducing Harry Stebings and the focus on Greylock Partners.

• Harry thanks Josh Elman and Tiffany Zhang for introducing him to Sarah Guo.
• Simba Hybrid and Sirius Insight are mentioned as sponsors, offering products for better sleep and productivity.

"I also want to say a huge thank you to both Josh Elman and Tiffany Zhang for the intro to Sarah today, without which the episode would not have been possible."

The quote shows gratitude towards individuals who facilitated the guest's appearance on the show.

• Sarah's parents were engineers at Bell Labs, and her father started a tech startup called Casa Systems.
• Sarah's early experiences include working on networking infrastructure and building Casa Systems' first corporate website.
• She attempted her own startup, which was not successful, before joining Goldman Sachs.
• At Goldman Sachs, Sarah learned about technology startups, met talented executives, and did principal investing.
• Sarah worked on the Workday IPO, which led her to meet Anil Bussery, a co-founder of Workday and partner at Greylock.

"So the roots actually go back pretty far for me. My parents are both originally engineers, and they worked at big tech companies like Bell Labs. And eventually my dad and some of his friends started a tech startup called Casa Systems, which is now a large private."

This quote provides insight into Sarah's early exposure to the technology industry and her family's influence on her career path.

• Sarah discusses her experiences and learnings from taking companies like Workday public at Goldman Sachs.
• She emphasizes the importance of market size, team quality and ambition, a differentiated and defensible approach, and being a market leader for startups aiming to go public.
• Sarah notes the significance of a company's narrative and its ability to communicate its value and story to various stakeholders, including the public markets.

"I believe it was, yeah, so many things, some which apply very directly, which I wouldn't have expected. The first would just be sort of seeing where these startups have to get to, to become durable, independent public companies."

The quote highlights the key takeaways Sarah gained from her experience with public offerings, such as the necessity for startups to meet certain criteria to succeed as public companies.

• A compelling narrative is essential for attracting high-quality individuals to your team.
• Founders often struggle to articulate why customers pay for their product or why people want it.
• A clear narrative can be self-fulfilling, contributing to a company's success.

"Because if you tell the story right, you can get the highest quality people on your side. And then if you have those people, the story is somewhat self fulfilling."

This quote emphasizes the importance of a well-crafted story in building a successful team and company.

"And so I'm always trying to ask the very direct question of why do customers pay you or why do people find and want your product? And a lot of founders can't answer that question."

This quote highlights the challenge many founders face in clearly communicating the value proposition of their product to customers.

• Workday's narrative is highlighted for its simplicity and clarity.
• Workday's story revolves around replacing old, clunky HR and financial software with cloud-based solutions.
• The founders' understanding of workflows and relationships is crucial to their success.

"The story of workday is incredibly simple, right? And it's also one of our portfolio companies."

Sarah Guo points to Workday's narrative as a prime example of a simple, yet effective company story.

"And the secular story is there is HR and financial software out there that is the core of every business today. And it is old and clunky."

This quote explains Workday's narrative, focusing on the outdated nature of existing HR and financial software, setting the stage for Workday's cloud-based solutions.

• The venture community is currently insecure about identifying the next big platform shift.
• Mobile and cloud were not just enabling technologies, but also provided new distribution channels and ecosystems.
• Conversational mixed reality, computing nodes everywhere, and AI are seen as the next enabling technologies.
• AI, while enabling, lacks the distribution and ecosystem aspects necessary for a platform.

"And that comes to the question of what's the next platform shift after mobile and cloud?"

This question introduces the discussion on the future direction of technological platforms.

"To me, what we'll see next that matters is like conversational mixed reality software. More computing nodes everywhere, in your house, in your car, in AR and VR."

Sarah Guo predicts that the next platform shift will involve conversational mixed reality and more pervasive computing.

• AI is a significant enabling technology but is not a distribution platform.
• Big technology companies are commoditizing AI by open-sourcing tools like TensorFlow.
• Building an AI-enabled company requires expertise in machine learning, domain knowledge, and product design.
• Despite open-source contributions, AI systems sold as products still contain a significant amount of proprietary IP.

"AI as the enabling technology, but people are talking about AI itself as a platform, but it's not distribution and ecosystem."

Sarah Guo clarifies that AI is an enabling technology but lacks the characteristics of a platform like mobile and cloud.

"The systems that you would actually sell as products are so far away from AI in a box today that there's a lot of IP that is going into them despite everything that's coming out into the open source community."

This quote indicates that while AI tools are becoming more accessible, the creation of marketable AI products still requires significant proprietary development.

• Startups using publicly accessible datasets in areas that interest large companies like Google and Facebook face significant challenges.
• Opportunities exist in processing unmined datasets, such as weather data for agriculture.
• Building company-specific models with internal data can create unique offerings that big players are less likely to replicate.

"If your plan as a company is to take Internet accessible data sets and do something interesting with them on the machine learning side and productize them, if it's an area that Google and Facebook care deeply about, you're on dangerous ground."

Sarah Guo warns that startups competing with large companies over public datasets are at a disadvantage.

"There's a very different opportunity on the sort of b to b side. And there's many data sets that haven't been mined, including ones that are sort of theoretically publicly available."

This quote suggests that there are untapped opportunities in B2B sectors with data sets that have not yet been fully utilized.

• Enabling technologies influence market problems and investment strategies.
• Venture capitalists face challenges when investing in radically new areas.
• The dynamics of economics, timelines, and technology play a critical role in investment decisions.

"I think we still think about the enabling technology and then the market problem you're solving if you're going after."

This quote implies that investors consider both the technology and the market problem it addresses when making investment decisions.

• Greenfield markets in industries like agriculture, healthcare, transportation, heavy industry, and construction are traditionally avoided by VCs due to unfamiliar go-to-market strategies and concerns about market size.
• Investing in these areas is exciting due to the uncertainty, lack of expertise, and capital gap, allowing for contrarian bets.
• The capital gap is a result of VC uncertainty and lack of expertise in specific verticals, leading to potential opportunities for those who understand and invest wisely.

"greenfield markets, which is sort of, I think what you're talking about when you allude to different economics and different timelines, a lot of the most impacted industries, so we just mentioned agriculture, but healthcare, transportation, heavy industry, we did an investment last year in construction, are ones where traditionally vcs are uncomfortable and unfamiliar with the go to market or worried about the market size."

This quote highlights the speaker's interest in greenfield markets and the opportunities they present, despite traditional VC discomfort with these areas due to unfamiliarity and market size concerns.

• Market size is compared to valuation as an art form that fluctuates over time.
• The significance of market size in investment decisions is viewed in terms of potential for expansion and the ability to raise capital on initial wins.
• Market size is less about current size and more about the "neighborhood," or the potential for growth and expansion into adjacent areas.

"Terms of kind of the market size there. Market size to me is always slightly like valuation. It's always a bit of an art."

This quote compares market size to valuation, emphasizing its subjective and variable nature in the context of investment decisions.

• The capital gap refers to VC uncertainty and lack of expertise in new technology sectors such as AI and autonomous vehicles.
• Making the right contrarian bets and understanding platform shifts can fill the capital gap.
• The conversation shifts to the evolution of VC and the impact of platform shifts on investment strategies.

"I think when you are worried about the speed of go to market or the market size, how you're really going to get distribution with new technologies, there are all of these questions around these AI enabled companies."

This quote explains the capital gap as a result of VC concerns about market entry speed, market size, and distribution in new technology sectors, particularly AI.

• The venture capital industry is evolving beyond just introductions and advice to providing more value-added services.
• The rise of new networks and models, like Andreessen and Y Combinator, indicates that venture capital itself is subject to change due to software and networks.
• The cost to start a company has decreased, but the cost to scale has stayed the same or increased, leading to a need for venture firms to adapt and find new ways to identify successful investments.
• Venture firms need to build and maintain strong networks, deep relationships, and work for the entrepreneur.
• Most venture firms are fragile and don't scale beyond a certain number of partners, requiring constant reinvention to stay relevant.

"I won't comment on the Andreessen model directly, and we're not going in that direction, but we're a small firm that has grown somewhat in the last nine months."

This quote indicates that while the speaker's firm is not following the Andreessen model, they acknowledge the need for growth and adaptation in the venture capital industry.

"And so what does that mean for the next generation of series A investors? What we think is that they need to build a bigger network, keep it strong, continue to have deep relationships, and work for the entrepreneur, and think of new ways for looking for a signal."

The speaker suggests that the next generation of Series A investors must focus on building a strong network, maintaining deep relationships, working for entrepreneurs, and developing new methods for identifying promising investments.

• The segment is meant to be a rapid-fire round of questions and answers, with the speaker providing immediate thoughts on various statements.
• The speaker is prepared to answer personal and potentially informative questions.

"But I'd love to dive into a quick firearm with you now. So I say a short statement, and then you give me your immediate thoughts. About 60 seconds per one."

The host introduces a quick-fire segment where the speaker is expected to give immediate responses to short statements within a limited time frame.

• Harry Stebings recommends "The Most Human Human" by Brian Christian, which explores AI from a multidisciplinary perspective.
• He also suggests "Once Upon a Time in Russia" for its fascinating and relevant take on recent history.

"I'm recommending to a lot of people the most human. Human by Brian Christian. It's just a thoughtful, fascinating, multidisciplinary point of view on AI and then out of the tech genre. Once upon a time in Russia is fascinating and relevant. Recent history."

The quote indicates Harry Stebings' appreciation for books that offer deep, multidisciplinary insights into AI and engaging narratives about recent historical events.

• Sarah Guo rises early at around 4 or 5 a.m. but does not equate waking up early with productivity.
• Her morning routine includes making coffee, checking for urgent matters in email or Slack, and then dedicating time to think about the day's priorities, work out, and read Twitter before others wake up.

"So every morning I do get up at four. I stumble through making coffee. I see if there are any fires in my email or slack. And then it's my time to think about priorities for the day and work out and read Twitter. And if I'm lucky, I've got several hours before everyone else wakes up."

Sarah Guo describes her early morning routine, emphasizing the importance of having quiet time to set daily priorities and manage her own activities before the day's demands begin.

• Sarah Guo finds the context switching in venture capital costly and emphasizes the importance of having uninterrupted time.
• She avoids constant switching between tasks such as fielding emails and attending meetings on vastly different topics.

"The context switching in venture is very costly. Right. And so it's very important to me to have some time when I'm not trying to field emails from people in the portfolio or jump from one meeting on perception for autonomous vehicles to another on developer productivity. Right. It's very hard to think if you're in that mode."

This quote highlights the challenge of context switching in venture capital and the need for focused time to think and strategize, away from the constant demands of communication and meetings.

• Sarah Guo values mentorship from her entrepreneur parents and her partners at Greylock.
• She appreciates the diverse investment lenses and working styles of her partners, which contribute to her learning and decision-making.

"My parents as entrepreneurs and then my partners at Greylock. Right. Why does anybody choose to work in a partnership? Because you respect the other partner's point of view. And I learn enormously different things from working with Josh Reed, Ashim, Jerry, Sarah. Everyone has a different investment lens, and they work on boards and with entrepreneurs differently."

The quote reflects on the importance of working in a partnership where mutual respect and diverse perspectives facilitate learning and growth.

• Sarah Guo does not rely on a single source for reading material but instead uses algorithms and her network to receive content.
• She values the insights from individuals who may not publish regularly but have valuable things to say.

"So Twitter medium, people sending me, in case you missed it, stuff in slack and email. And I think one of the sort of reasons behind that is that there's a lot of people out there who have something incredibly insightful and valuable to say but aren't going to be publishing all the time."

This quote explains Sarah Guo's approach to staying informed, which involves leveraging her network and technology to access diverse and insightful content.

• Sarah Guo emphasizes the importance of asking questions and leveraging a network of knowledgeable friends in the learning process.
• She acknowledges the need for a foundational understanding of computer science and curiosity to explore and understand investment opportunities.

"One of the reasons I love venture, the short answer is I ask a lot of questions and I have many friends who are much smarter than I am. I do think that depending on what you're looking at, you need enough computer science foundation to understand what is hard and what matters, and then the rest of it is just enough curiosity and network to dig."

The quote summarizes Sarah Guo's approach to learning in the venture capital industry, highlighting the significance of curiosity, foundational knowledge, and a strong network.

• Sarah Guo's recent investment in Rumbix reflects her investment strategy, focusing on a huge market, an amazing team, and a product that has the potential for rapid expansion.
• She believes that Rumbix is well-positioned in the construction industry, which is undergoing generational shifts and technological advancements.

"It speaks to a few of the things that we talked about earlier, which is it's this huge market. Construction is more than $10 trillion annually, which seems obvious. We have to build a lot of things and it's an amazing team. So it's hard to get people who have deep domain where they have the trust and understanding of workflows in the industry, but also have technical talent from like Salesforce and eBay."

The quote details the rationale behind Sarah Guo's investment decision, emphasizing the significance of market size, team expertise, and the product's potential for growth in the construction industry.

• Sarah Guo expresses enjoyment and gratitude for being on Harry Stebings' podcast.
• Harry Stebings and the host appreciate Sarah Guo's contributions and recommend her blog posts on Medium.

"Yeah, it's great to meet you Harry, and this podcast is a ton of fun, so thanks for having me."

Sarah Guo conveys her positive experience on the podcast, appreciating the opportunity to discuss her work and insights.

• Harry Stebings shares his personal routine changes, including better sleep with the Simba Hybrid mattress and increased productivity with Cirrus Insight.
• He invites feedback on his thoughts and the show, highlighting the importance of continuous improvement and audience engagement.

"And if you like the show's date and want to see more from us, then you can add at htebings on Snapchat and read some more thoughtful and pensive thoughts on mojitovc.com. I'd absolutely love to hear your thoughts and feedback on that."

The quote encourages audience interaction and shares Harry Stebings' commitment to personal development and responsiveness to feedback.