20VC The Biggest Lessons From Working Alongside John Doerr, How To Optimize The Speed of Investment DecisionMaking & Why Saying No Graciously Is The Most Important Thing with Shabih Rizvi, Founding Partner @ Gradient Ventures

In this episode of "20 Minutes VC," host Harry Stebbings interviews Shabby Rizvi, the founding partner at Gradient Ventures, Google's AI-focused venture fund. Shabby shares his journey from working at Genentech to helping establish Google Play's startup outreach program, and later becoming a partner at Kleiner Perkins. He emphasizes the importance of maintaining long-term relationships with founders and the impact of market timing on startups. Shabby also discusses the global expansion of venture capital, the significance of team dynamics in investment decisions, and the challenges of scaling both a venture fund and its portfolio companies. Highlighting the importance of founder relationships, he recounts his experience with Ujet and Honey, illustrating how these connections can lead to successful investments. Throughout the conversation, Shabby provides insights into the venture capital industry's evolution and the nuances of deal sourcing and decision-making processes.

• Harry Stebbings introduces Shabby Rizvi as the founding partner at Gradient Ventures, Google's AI-focused venture fund.
• Shabby's background includes a partnership at Kleiner Perkins and leading the startup outreach program for Google Play.
• Harry acknowledges a previous guest, MZ, for introducing Shabby to the show.
• Harry also gives a shout-out to WePay and discusses the importance of integrated payments, referencing Invaluable as a case study.
• The discussion moves towards the challenges of hiring developers and the benefits of remote technical teams, highlighting Terminal.io as a solution.
• Harry emphasizes the role of Lattice in people operations, managing performance, and employee engagement.

"I'm thrilled to welcome Shabby Rizvi, founding partner at Gradient Ventures, Google's new AI-focused venture fund, which will invest in and connect early-stage startups with Google's resources, innovation and technical leadership in artificial intelligence."

This quote introduces Shabby Rizvi and his role at Gradient Ventures, emphasizing the fund's focus on AI and its support for early-stage startups with Google's resources.

"Invaluable, the world's leading online marketplace for fine art, antiques, and collectibles. Auction houses, galleries, and dealers use invaluable to grow their businesses and connect more people around the world with the things they love."

Harry highlights Invaluable as an example of a company that has successfully integrated payments to grow its business.

"Terminal is your dedicated partner in rapidly standing up world-class remote technical teams."

Harry discusses the importance of building strong remote technical teams and introduces Terminal.io as a service that helps companies achieve this.

"Latice is the number one people management solution for growing companies, and it helps companies like Asana, Reddit, and Cruise build a strong company culture."

The importance of people operations in a company's success is emphasized, with Lattice being presented as a key tool for managing performance and employee engagement.

• Shabby describes his atypical path to venture capital, starting in the Bay Area and the Middle East.
• His early career was in biotech at Genentech, but he was drawn to the tech side and joined mobile advertising company AdMob.
• After AdMob was acquired by Google, Shabby worked with startups and mobile entrepreneurs, especially on the Google Play team.
• Relationships with investors led to an opportunity at Kleiner Perkins, where he focused on early-stage investments.

"I had a slightly atypical path to the world of venture. I was born and raised between the Bay area and the Middle east...ended up at a company called Genentech...spent several years in Riyadh, Saudi Arabia...came back to the States, finished up college, and ultimately ended up graduating and going into biotech of all places."

Shabby shares his unique background and career path, which took him from biotech to the tech industry and eventually to venture capital.

"I ended up finding an opportunity to join this company called Admob, which is a mobile advertising company, and the rest is sort of history area."

Shabby describes his pivotal move to AdMob, which led to his involvement with Google and the start of his career in venture capital.

• Shabby learned from John Doerr's approach in the boardroom, balancing politeness with asking tough questions.
• He admired John's ability to quickly understand problems and focus on important issues.
• Shabby mentions the possibility of discussing John's recent book later in the conversation.

"It was just amazing to see him in the boardroom, how he interacted with his CEOs, with the other board members. And it was this combination of both being simultaneously gentle, as well as asking the tough, hard questions, but in the most polite way possible."

Shabby reflects on how John Doerr's style in the boardroom influenced his own approach to venture capital.

• Shabby emphasizes the significance of long-term founder relationships in venture capital.
• His early involvement with mobile entrepreneurs at AdMob provided him with valuable connections.
• Shabby highlights the transition from WAP-enabled devices to the beginnings of App Stores as a formative experience.

"I was very fortunate to have one, been a part of an early-stage startup, and just met entrepreneurs that were really at the forefront. So at Admob, it was the beginning of the mobile ecosystem."

Shabby explains how his experience at AdMob allowed him to build relationships with leading entrepreneurs during a pivotal time in the mobile industry.## Market Evolution and Startup Ecosystem

• The market has grown significantly, with smartphones and app stores becoming ubiquitous.
• The original iPhone did not have an App Store, leading to jailbreaking, which eventually spurred the creation of official marketplaces.
• Early engagement with startups can lead to long-term relationships with founders.
• Being part of entrepreneurial groups, such as the AdMob group, can lead to connections with multiple successful founders.

"You were ahead of a market, essentially becoming as large as it now has become. And now we look back and we're like, wow, of course there's smartphones in your pocket, right? But before, this wasn't the case, there were no App Stores."

This quote emphasizes the speaker's early involvement in a market that has since experienced exponential growth, highlighting the foresight in recognizing the potential of smartphones and app stores before they became mainstream.

"And then at Google, on the Android and Google Play teams, I had a chance to meet some incredible founders very, very early on."

The speaker had the opportunity to meet influential founders while working at Google, which underscores the importance of being positioned within influential teams and companies to build early-stage relationships.

"So I remember when I first met the Snapchat team, it was only about 13 people at the time, and so had a chance to really build relationships with folks over a longer period of time."

Meeting the Snapchat team when it was small allowed the speaker to develop lasting relationships, highlighting the value of connecting with startups at an early stage.

"Secondly, I would say the AdMob group was incredibly entrepreneurial. There was at least six or seven different companies and founders that kind of came out of there."

The AdMob group is cited as a particularly entrepreneurial environment, with many successful companies and founders emerging from it, demonstrating the potential of such groups to foster innovation and entrepreneurship.

• Building and maintaining relationships with founders is crucial for investors.
• Meeting founders early in their careers or before they start a company can lead to powerful connections.
• It is important for investors to identify areas of interest and maintain relationships over time.

"And it's just really important to figure out which one of those areas are critical for you and maybe be areas that are interesting to you and ensure you're able to kind of maintain these relationships over a long period of time."

The speaker stresses the importance of identifying key areas of interest to maintain long-term relationships with founders, indicating that sustained engagement can lead to fruitful investment opportunities.

• The Ujet deal at Kleiner Perkins (KP) exemplifies the importance of close founder relationships.
• Being introduced to founders through trusted connections can lead to investment opportunities.
• Venture capital is both an individual and team effort, with due diligence and partnership considerations.
• Maintaining consistent contact with founders, even when not initially investing, can lead to future collaboration.

"Got introduced to the founder, Anand, actually, through a buddy of mine at Kleiner, who was actually focused a bit more on our both investing as well as operating side of our business."

An introduction to Ujet's founder through a colleague at Kleiner Perkins highlights the value of personal networks in discovering investment opportunities.

"But we really meant it. And so over the subsequent, I would say probably five months, there was always some sort of a touch point with the founder."

The speaker emphasizes the sincerity of their intent to maintain contact with the founder, which ultimately contributed to a successful investment relationship.

• Successful "rocket ship" companies often have a faster cadence of fundraising.
• Once a company achieves a certain status, it has continuous access to capital.
• Founders must make prudent decisions about when and how to take on additional capital.

"But once you sort of hit this special rocket ship status, I would say there's always suitors waiting to come invest in your company."

This quote indicates that companies that reach a high growth status attract continuous investment interest, highlighting the different fundraising dynamics for highly successful startups.

• Saying no to founders is a challenging aspect of venture capital.
• Providing detailed feedback can lead to further discussion, but it is important to communicate decisions graciously.
• The approach to declining an investment may vary based on the relationship with the founder.

"And so saying no as graciously as possible is the most important thing."

The speaker believes that declining an investment opportunity should be done with grace, acknowledging the effort and passion founders put into their ventures.

• The best founder introductions can come from unexpected places.
• Most investors source deals from three main buckets: past founders they've worked with, referrals, and personal networks.

"But before that, there's the stage of the founder introduction. And you said before that the best founder introductions have come from a place where you may be least expected."

This quote underscores the unpredictability of valuable founder introductions, suggesting that investors should be open to opportunities from various sources.

"I think there's really generally three buckets that most investors are sourcing from."

The speaker categorizes the typical sources of investment opportunities for investors, providing insight into the common avenues for deal flow within the venture capital industry.## Investment Sourcing Strategies

• There are three primary sources for investment opportunities: direct founder outreach, peer funds/seed funds/incubators, and proprietary networks.
• The focus on these sources may vary based on the stage of investment and individual expertise.
• Proprietary networks are built from personal work experience and industry involvement.

"The second is peer funds, seed funds or incubators. And then the third, I would say is, I like to call it proprietary networks."

The quote explains the three main sources that investors use to find potential investment opportunities, emphasizing the importance of networks formed through professional experiences.

• "Dark deal flow" refers to investment opportunities that are not widely known to the public.
• It often involves deals from proprietary networks or long-standing relationships.
• The term "dark deal flow" may have negative connotations, but it signifies the existence of under-the-radar investment opportunities.

"I think calling it dark deal flow is an interesting way to talk about it... I would say there's underground deal flow."

Shabih Rizvi suggests that while "dark deal flow" could be perceived negatively, it is a real phenomenon where deals happen through personal networks and are not publicly known until later stages.

• Unexpected sources, such as introductions from non-industry professionals, can lead to significant investment opportunities.
• Investors should meticulously review all introductions and emails since valuable deals can come from surprising sources.
• The responsibility of filtering potential investments lies with the investor, not the introducer.

"It just reminded me that make sure you go through all your intro emails and read through them, just because you just never know where it may come from."

Shabih Rizvi shares a personal anecdote to highlight the importance of paying attention to all introductions, as valuable opportunities can arise from unexpected sources.

• Shabih Rizvi prioritizes team backgrounds and narratives at the early stages of investment.
• Quick decisions are made based on the clarity of the team's past experiences and their connection to the problem they're solving.
• Familiarity with a particular industry allows for rapid assessment of investment opportunities.

"I index heavily on team and backgrounds and try and understand the narrative and story, like relatively quickly."

This quote emphasizes the importance Rizvi places on the team and their story when filtering potential investments, especially in the early stages.

• Market timing significantly impacts the success or failure of companies.
• Past experiences with market segments can lead to cognitive biases against investing in similar spaces.
• Engaging with founders to learn from previous industry failures can help overcome biases and identify potential for success in new ventures.

"I found that the best founders... have actually made an effort to connect with either people on those teams or try and understand the story intimately well."

Rizvi acknowledges that understanding past failures and market timing can provide valuable insights for future investments and help mitigate cognitive biases.

• Initial meetings often start virtually, especially if the company is not local.
• Subsequent meetings are typically face-to-face, either at the investor's or the founder's office.
• Visiting a company's headquarters can provide critical insights into the team and company dynamics.

"It's either at their offices or at our offices, and we try and be as flexible as possible."

Rizvi describes the process of meeting with founders, emphasizing flexibility and the importance of in-person meetings for thorough evaluation.

• The investment decision process at Gradient involves regular team meetings and discussions.
• The process is designed to be nimble and focused on maintaining momentum.
• Investment decisions are collaborative and follow a routine schedule.

"We get together as a group twice a week. We meet companies on those days, we also do our partner discussions those days."

This quote outlines the structured yet agile approach that Gradient takes for their investment decision-making process, with regular meetings and discussions to evaluate potential investments.## Decision-Making Process at Gradient

• Gradient emphasizes optimizing for velocity and speed in their decision-making process.
• They hold meetings twice a week to ensure they can make timely decisions without missing opportunities over weekends.
• Their process is straightforward and similar to standard industry practices.

Sometimes deals are very fast moving and to be able to make decisions and get a group together is critical. And so as a result of that, we get together twice a week at the beginning of the week as well as at the end of the week.

This quote highlights the importance of speed in venture capital and Gradient's approach to maintaining a high decision-making velocity by meeting frequently.

• Shabih Rizvi's main favorite book is "Measure What Matters" by John Doerr, which he values for its lessons applicable across various organization types.
• His second favorite book is "When Breath Becomes Air", which he finds impactful in considering the finite nature of time.

The main one being measure what matters by John Doerr. And then the second one for me is a book called when breath becomes air.

These quotes share Shabih's top book recommendations, emphasizing the influence of John Doerr's insights on objectives and key results (OKRs) and the reflective nature of "When Breath Becomes Air" on life's temporality.

• Shabih predicts a more global venture capital landscape in 20 years.
• He expects increased global access to capital and the growth of startup ecosystems supported by educational and financial institutions.
• He notes the rise of early-stage startup communities worldwide.

I think we're going to become more and more global. I think access to capital is going to become more global.

This quote suggests a future where venture capital and startup growth are not confined to traditional hubs but are distributed globally, with improved access to resources.

• Pricing in venture capital varies by region, influenced by local investors and the capital ecosystem.
• There are market realities that create disparities in valuation norms across different areas.

I think it does vary by region, and I think a lot of that is a byproduct of the micro or the ecosystem on the capital side within those regions.

The quote explains that regional differences in venture capital pricing are due to local market forces and investor behavior.

• Managing the growth of the Gradient team and supporting a growing portfolio are significant challenges.
• Shabih likens Gradient to a startup itself, with its own growth and scaling to manage.

It's going to sound a little bit cheeky, but I would say we are a startup of our own.

This quote underscores the parallel between the challenges faced by venture capital firms and those faced by the startups they invest in, particularly in terms of scaling and team management.

• Shabih recounts how witnessing John Doerr's dedication during challenging times served as an inflection point, reminding him of the passion required in venture capital.
• He emphasizes the importance of supporting founders and companies through difficult periods.

I think it was just, like, a reminder that folks in this industry that have been doing this for far longer than I have still had the stamina, energy, passion and care to try and help ensure that they actually saw things all the way through, even when things may have gone sideways.

This quote reflects on the commitment and resilience necessary in the venture capital industry, particularly when supporting ventures through setbacks.

• Shabih is excited about Gradient's recent investment in Scotty Labs, a teleoperations company for the autonomous sector.
• He appreciates the team's thoughtfulness, hard work, and brilliance, and Gradient led their seed round of financing.

We were really, really pleased to help lead their seed round of financing. And it's an incredibly thoughtful, hardworking and brilliant team.

The quote expresses enthusiasm for the potential of Scotty Labs and the reasons behind Gradient's decision to invest, highlighting the team's qualities as a deciding factor.