“The purpose of the startup community is to take a tiny amount of human and financial capital and create a single product, usually, a single thing, an insight that, through incredible intensity, can be used to break open a market and achieve unusual skill.” – Rishi Garg

Rishi Garg (@rishigarg) is Co-Head of the Consumer Investing Practice at Mayfield, a seed and Series A focused venture capital firm. Before joining Mayfield, Rishi co-founded FanSnap, which was acquired by Nextag. He has led business and corporate development for Google, Square, MTV, and Twitter, and has invested in companies such as Quilt, Grove Collaborative, and Projector.

Chapters

  • Rishi’s background and work at MTV, Square, and Twitter
  • Defining business development and the core skills needed for the role
  • Managing M&A as a founder
  • On joining Mayfield and returning to the VC world
  • The “people first” culture at Mayfield
  • The importance of trust between founders and investors
  • Big waves in internet investing, from Netscape to digital identities

Key Takeaway

Rishi has great advice for founders who are considering M&A, even early on in their company’s lifecycle:

​​If you're in an ecosystem that has big, well-funded competitors, people that you think may be useful to talk to as potential acquirers, then it's a good idea to start building those relationships far ahead of time.
As you're going through an M&A process, be looking for clarity of strategy. Be looking for escalating meetings, and be looking for increased pace because those things together will give you a sense if the buyer is actually really interested in what you're doing. Then you can trust that it's actually real insight there. You can use that to start to get other buyers to the table, which is always the greatest leverage in any M&A process as a seller.
Big companies are full of executives that are doing stuff with small companies. Executives change all the time. Strategy changes all the time. So, when you have these relationships

Transcript

Daniel Scrivner:

Rishi, welcome to Outlier Academy. I've been looking forward to this interview for so long. So, thank you so much for your time.

Rishi Garg:

Thank you so much for having me. It's really great to be here.

Daniel Scrivner:

So let's jump right in, because there's a lot that we're going to cover today. I think what's exciting about this episode is, it'll in part be a deep dive on business development and the BD role and what that is, because you've got deep experience there. Then we're also going to spend a bunch of time talking about investing, with your work at Mayfield.

Daniel Scrivner:

So, to kick things off, you've got quite a background. Can you give everyone that's maybe not familiar a high level sketch of your journey?

Rishi Garg:

Sure, yeah. Just real quick. I caught the internet bug, I would say, in the late '90s when I was a student at Stanford. Since then, I've worked at a bunch of companies. I would say with a product first approach, but always as a business deal guy. I was at Highland Capital, a venture capital firm in the early days, where I learned a lot, learned a lot of respect for the business.

Rishi Garg:

Then I had a 13, 14 year operating career, starting at MTV in the early days of the social web, where I helped bring MTV, or tired to help bring MTV to the social world, with Facebook, and MySpace, and stuff like that. A little bit of time at Google.

Rishi Garg:

I then started a company that was venture backed, called FanSnap. That was a live event ticket search marketplace, as a founder. After we sold that, I ended up at Square, where I met you, where I was the first Head of Business Development, at the end of 2011, early 2012. Ended up starting the Corp Dev team there, as well, and then went on to Twitter, where I ran corporate development and strategy globally for the company, right after the IPO.

Rishi Garg:

Was there for a little while. Took a little time off and the venture capital business called me back. So now, here I am. I co-head the consumer practice at Mayfield. We do some FinTech. We do some stuff all over the place. We're seven partners. Everyone's a little dangerous at everything, but that's my focus area.

Daniel Scrivner:

I'm curious. I guess I wasn't super clear that you had previous experience in venture capital, and then went back to the operating center, went over to the operating side. Was there an impetus there, or an itch you wanted to scratch?

Rishi Garg:

I was very lucky because I worked for a guy named Paul Nader, who's the founder of Highland Capital. I had an incredible experience with Paul as a mentor. It was a really flat firm at the time, seven partners and four associates. So, I got to work on everything. I just developed, through Paul, so much respect and honor for the entrepreneur journey; just how hard it is, how important it is to have partners that do the job well, how important empathy is, and also how hard it was. He was really successful, but I could see every day that you have to fight for your life every day. I just developed a lot of belief that it could be a really good power for good, so I always thought I'd come back to it because I love the job.

Rishi Garg:

The other thing that compelled me was, after having the privilege of working at some of these companies, one thing that really struck me is that how you start plays such a big role in how you end up. Who knows how long the Silicon Valley's going to last as an idea or as a place? But I think it's going to be around and important for the next 50 years, at least, whatever we can tell.

Rishi Garg:

If you can, I think, as a supporter of an entrepreneur, play a role in supporting the right kind of people, helping them make right decisions, you have a chance to have real ripple effects, I think, in the economy. Certainly, a lot of founders can attest to what happens if your partner isn't a great partner.

Rishi Garg:

So, it really felt like a noble enterprise to me, to be in the seat. That's what drew me to it.

Daniel Scrivner:

I want to know, go and dive deep into the business development side. Part of why I was so excited for this is, I think anyone listening will have heard the term BD or business development. Yet, I would bet that if I asked anyone what that means, I would either get very different answers, or I'd get really foggy, vague answers.

Daniel Scrivner:

So just to start, I thought we would play the game of, what is the simple definition. It can be your own personal definition of what BD is in a company, and maybe how that's different than corporate development, and flesh that out for us.

Rishi Garg:

Yeah. It's probably easy to start with corporate development. Typically, corp dev is sort of M&A. That means mergers and acquisitions; selling your company, buying another company. It's usually, corp dev teams exist at companies that have achieved some level of scale and are starting to be acquisitive. So let's put that aside for a second, even though there's some interesting similarities between bus dev and corp dev.

Rishi Garg:

For startups, you often have business development, at least concepts, opportunities, or ideas pretty early. Sometimes you have business development people pretty early, depending on what the needs are of the company. Bus dev is anything that, where a company needs to have an external relationship in order to be in business.

Rishi Garg:

So it can be as simple as an affiliate deal to get paid 3% from Amazon because part of your business model is doing that. It can be convincing Chase Paymentech, and Mastercard, and Visa to support the existence of your business, which is to accept all major credit cards for small brick and mortar companies through a smart phone.

Rishi Garg:

So there's a whole range of partnerships that can be in place, but that's the idea of what business development is. I think it's a little bit different for every kind of company. Enterprise software companies, sometimes infrastructure software companies often, not always, but often can exist in a web of relationships that's really important. There's a set of gatekeepers who are helping you drive your business into the hands of the customer.

Rishi Garg:

But most of our industry, as startups, ends up being about how do you create an incredible product that allows you to tell a story to a customer that is unique, sparks interest, is exceptional. So, the interesting interplay that comes for a startup is, what is the right role of business development? When is the right time to have BD people? How do you make them effective? There's all kinds of different ways to handle that.

Daniel Scrivner:

I think an interesting other way, another lens to maybe use to look at the role is, I'd be curious for your take on what makes someone good at the job of business development. Because in some ways, it seems like pseudo sales, or like a Trojan horse of sales. In some ways, it just seems like old fashioned relationship building.

Daniel Scrivner:

I remember at Square, there was a lot of very intricate, very strategic business development that had to be done, just literally building relationships with all the big card issuers and payment rails, and trying to do this thing where we're trying to get them on our side, while at the same time, assuring them that we're not competing with them.

Daniel Scrivner:

So maybe that's an example, but I'd be curious. What are some of the core skills that really make someone great?

Rishi Garg:

I think that's a great question.

Rishi Garg:

Let's start with roughly, what does BD typically comprise? There's usually roughly two kinds. There's what I call foundational business development, which is business development that you need to be in existence, and then there's distribution deals, a rough patterning.

Rishi Garg:

The foundational business development is exactly what you're describing, Daniel, where in a lot of ways, Square served at the pleasure of these quasi-regulators, Visa and Mastercard, especially Visa on the credit issuing side, and on the network side, and Chase Paymentech as our processor. Those are all the deals that Jack, and Keith, and his team did in the early days.

Rishi Garg:

So, dancing with elephants so that you can find a shared sense of purpose, so that you can navigate what could be "frenemy" dynamics, such that in this kind of regulatory environment, you can enable existence was really a delicate dance, an important dance. One that you have to do generally with a certain amount of care, maybe with a certain amount of seniority and credibility.

Rishi Garg:

So, that was the foundational BD piece of it. The distribution side, where things like, to use Square again as an example. A distribution deal with Apple where we started to be sold in the Apple stores around the country. Another example of a Square distribution deal was Starbucks, where there was a co-marketing agreement for payment processing done with Starbucks, back in 2012 and 2013.

Rishi Garg:

Foundational BD deals are the ones that are really important and usually these are done by founders or quasi-founders. Because in certain markets, not in all markets, but in certain markets, you have to have those relationships in place so you can exist. A lot of fintech companies have crucial business development deals to do with a sponsor bank, if they're going to be a lender or a card issuer, or the rails or services that's enabling that to happen.

Rishi Garg:

So, that's usually a sale, if you will, that's done by a vision, enabling a shared vision, articulating a shared vision. The most interesting deals like that are done when you're bringing a new vision to the market, the way that Square did in the early days, and identifying a common enemy. In that case, it was cash, and driving cash out of the system.

Rishi Garg:

But also, what you'll see a lot of times is that as people are competing at the application layer for customers, a lot of those foundational relationships have gone from being business development deals to essentially being access to an API. That's essentially what Stripe does. Right?

Rishi Garg:

So, I would say that business development, as a foundational reality for being in business as a consumer company has become, generally speaking, a little bit easier. Less common is a gatekeeper to being in business. That's why you've been able to see companies like Stripe, foundational companies with very young founders who don't necessarily have a long history with a gatekeeper, being able to be in business and being able to compete with great applications. That, I think speaks to what you need to do if you're that kind of a BD person.

Rishi Garg:

There's distribution deals, and I think this is where people tend to get stuck a little bit more because once you have any modicum of success, or even if you don't have a modicum of success, if you're starting to try to figure out ways to drive traffic, or generate adoption, it's very, very tempting to look to people who already have adoption or a customer base, and partner them because you want access to their customer base.

Rishi Garg:

This is where you run into trouble, more commonly, because of two things. One, if you're slightly successful, you end up getting called by all these big companies who want to deals with you. They want access to whatever secret sauce you have that's happened. We saw this happen a lot at Square. Someone needs to catch all that stuff and figure out what's important. At the same time, if you're the company with the BD person who's trying to access the bigger company's customers, you're trying to grow. There's a lot of pressure to find new ways to grow.

Rishi Garg:

So, that's where it's important to be clear about what you're trying to achieve. I define the purpose of a BD person is to take something amorphous and abstract, and put it on the rails. You're trying to take the transportation analogies from something that's a boat on the ocean where you're roughly trying to make it to your destination, to a car that's driving on the highway, to a train track that's like something repeatable, very clear destination, very clear where it's going.

Rishi Garg:

So the skill sets that are required are both relationship development, so that you can actually manage those things, and the deal skills associated with that, but also a certain understanding of the strategy of the company. Because the biggest problems come into play when founders and BD people are un-judicious about how to spend time because everything looks interesting. Having a really clear sense of not only the salesmanship skills, "Let me get deals done," and that piece of it, but also, what's best for the business, and how do I put numbers against that so that it can become repeatable.

Rishi Garg:

That's actually the goal of the organization. It takes a lot of alignment. One of the biggest problems in a BD org is that you're gold on whether or not you're doing something. But a lot of times, the best thing to do is to not do anything. It takes time and effort on both sides to build trust between a BD lead and the founding team so that you can be seen as actually furthering the business, even though you're not necessarily getting paper signed.

Daniel Scrivner:

I love this because there's already so many parallels between the approach you need to take from sitting on your hands, to identifying what's truly important. In the BD world, and obviously there's a lot of connections and parallels there with the world of investing, I have to explore that soon. One thing I wanted to do to build off of what you were just sharing is, maybe compare and contrast BD at an early stage versus BD at a later stage, and what are the differences there?

Rishi Garg:

BD at an early stage is, well, BD at an early stage, think about an early stage startup, usually just trying to feel around for ways to get things going.

Rishi Garg:

So, on the foundational side, like I said, you're trying to appeal to someone who's a gatekeeper and say, "We need to be in business. Please allow us to do that." This is KAYAK going to the airlines and saying, "List on KAYAK," back in 2004. It's Square and the payment relationships at the beginning.

Rishi Garg:

The distribution deals tend to come, at a startup, with really big companies. This is where the impetus and mismatch starts to come into play because big companies have very different goals than small companies, but there's usually a BD team at a big company that is tasked with the idea of working with small companies.

Rishi Garg:

So there's a few key pitfalls that occur when a small company works with a big company. One is that, if you do a deal with a company with a lot of users, let's say Yelp, or Yahoo!, or something like that. Well, all the sudden, they're most of your user base. You could easily confuse the BD deal for product market fit because users are coming in through the door. All of a sudden, you've misaligned whether or not you are truly making progress and connecting with your customer base.

Rishi Garg:

The second one is, big companies are full of executives that are doing stuff with small companies. Executives change all the time. Strategy changes all the time. So, when you have these relationships with a big company, and an executive leaves for a bigger job, or changes roles within the org, whatever it is all the sudden, you may find yourself without the sponsor that you need to make that deal successful. Suddenly, you've placed a big bet on this relationship that no longer is sustainable anymore.

Rishi Garg:

That leads to the third one which is, it's very common for startups not to account for the hidden costs of deal management. So you say to a large third party, "Sure, let's do a BD deal. We'll do a nice integration. It'll take one month of time, two engineers. We'll still work on our core business on our own, and we'll get some BD deal to get some users into the door."

Rishi Garg:

Well, 99% out of 100% of the time, that turns into a much longer project with many more resources than the startup can ill afford to have. But it's such a big deal, you can't say no and just stop it because of the sudden cost dynamics that are at play there. You've sold it to your board. You've maybe even announced the deal, et cetera, et cetera.

Rishi Garg:

So, it can be really, really challenging to do that. There's a couple ways to handle that, as a startup, if you're doing it on the startup side. One is what I said earlier, which is be thinking all the time about how to turn this bespoke relationship into something repeatable. One, to diversify yourself so you're not just relying on one potential distribution partner. But also so that you can ultimately hand it over into a playbook that you can staff appropriately, get it out of abstract land and get it into concrete land.

Rishi Garg:

A great example is how Square started out with a trial balloon, with the Apple Store selling the Square Card Reader. Then over time, really mechanized that so that we could go from 5,000 to 100,000 stores around the country in the course of a couple years. The other thing you can do is manage and limit get live resources. It's really hard to do, but really, really tightly constrain how much time you're spending on it. Once you start to go outside the bounds, reinvestigate the opportunity. Make sure it sings for its supper.

Rishi Garg:

Then the third way to handle it, which I think is really important, is make sure that you are keeping your direct relationship with the consumer the primary goal, and that any distribution deal is in service of your primary relationship. A great example I like to use is the KAYAK/AOL deal. When KAYAK got founded back in 2004, they did a deal with AOL to power travel search. It ran into all the problems that we're talking about, but it was a lot of traffic.

Rishi Garg:

What KAYAK was really, really focused on doing is using AOL traffic to generate KAYAK users on their own, to make the product better, to figure out how to get KAYAK to work on SEM, which was a [inaudible 00:15:36] opportunity on Google at the time. They really leveraged the AOL relationship to build KAYAK effectively, by keeping a really tight focus on, who was the first altar they needed to pray for, the direct relationship with the consumer.

Rishi Garg:

So, that's the quick primer on BD at a small company. Daniel, when you think about BD at a big company, do you mean a large company working with small companies, or a larger startup?

Daniel Scrivner:

It's a great question. I think either of those, whichever you think is most interesting. I think what I was trying to draw out of that is, you're obviously focused on very different things. Whether it's, I imagine maybe at a large company, you're focused on maintaining your position in the market, advantaging yourself by getting access to or working with the best startups, but it's just a very different mentality. I was just curious to explore that a little bit.

Rishi Garg:

No, it totally is. It also depends, when you're a large company, on whether or not, there's BD relationships that relate to the infrastructure and the technology of your business all the time. You're always trying to find customers, and potential technology partners, and that sort of thing.

Rishi Garg:

But then there's also, what happens in a lot of big companies is, they want to work with startups who have interesting products, interesting growth that they can showcase to make their products more successful for their audience. Like I said, there's whole teams doing that. I've worked on those teams. It's hard, because in those capacities and roles in BD at a larger company of any kind, you find yourself trying really hard not to succumb to some of these impetus/mismatch challenges. But it's really tough because these are not anyone's fault. They're just inherent to the job of business development at a big company.

Rishi Garg:

But even at a big company, what you're trying to do if you're working with small companies is, to the best of your ability, turn BD relationships into programs. That's why you see at so many companies, for example at Twitter, there's a devrel relationship with developers, as opposed to doing one off BD deals with each of them.

Rishi Garg:

That sounds kind of obvious now. But before the age of the API, each of those relationships were done on a one off basis, when you had teams of BD people doing that. The big thing at a growth stage company, and Square in the 2012, 2014 early days is a good example of this, is just this eyes are bigger than your mouth problem. Because there's just so many damn opportunities, once you're onto something, to partner with people that are of all sizes and jurisdictions.

Rishi Garg:

Staying focused on what the point is of these deals is really, really crucial, hard to do. I think there's two jobs of a BD person at that stage. One is the top stout. Here's the strategy of the company. How do we partner with people to achieve our strategy more quickly?

Rishi Garg:

But there's also the important bottoms up role, which is, as you're out there in the marketplace meeting with companies, or doing innovative things, how do you help to see around corners for your management team, so that you can be ahead of technology curves, ahead of consumer zeitgeist changes? That ultimately maybe even lead to M&A.

Daniel Scrivner:

So, we talked a little bit about the difference between corporate development and business development, and that business development is maybe less about M&A, more about developing relationships. But for founders listening, typically if you're thinking about a venture backed company, there's two traditional exits. One is getting acquired, which is obviously, I don't know if any founder, I don't think any founder starts off their business saying, "Oh, one day it would be wonderful to get acquired." They want to build something on their own, build something independent and durable.

Daniel Scrivner:

But that is an outcome. So for someone listening, what advice would you have for founders about how to manage that, and how to go about always having that option of selling your business to someone that might be a strategic acquirer in your back pocket, and how to think about M&A, or maybe advice for people that could have their business sold in the future, or are actively pursuing that?

Rishi Garg:

It's a great question and a long one. I've done a couple of talks about this that you can find online, but I'll try to summarize it relatively quickly.

Rishi Garg:

The first thing to mention is, there's this old trope that great companies are bought, not sold. Which means that if you've built something of value, people will notice. If your ultimate destination is an acquisition, then that will end up happening if you want it to, because people will come knocking on your door.

Rishi Garg:

As opposed to necessarily building something explicitly to get sold. I've found founders in different markets end up building something with a goal of getting sold all the time. Indeed, 80% of the exits, even in our crazy spac IPO world we're in right now are M&A. So, it's the most likely way to do it. But as you said, certainly at Mayfield, and I think great founders in general try to build companies that are sustaining, durable, category defining businesses and can ultimately be stand alone public companies.

Rishi Garg:

So what do you do if you're a founder? There's a whole up front funnel part of the process, if you will, and then there's the execution. On the up front part of the process, I will say that something like, I don't know, 14 out of the 15 M&A deals I did at Twitter, or for relationships that were in place with people at the company for at least a year, if not more; sometimes for decades.

Rishi Garg:

So there's a really strong relationship component to being acquired. What I always tell founders is, if you're in an ecosystem that has big, well funded competitors, people that you think may be useful to talk to as potential acquirers, then it's a good idea to start building those relationships far ahead of time. Don't wait until, "Oh, our series A process didn't work out and we have to sell," or, "We have to decide if we want to go long or sell the company because we're at the cusp of the next round of financing," any one of those milestones, think about it ahead of time.

Rishi Garg:

An easy way to do that is one, you can align your bus dev relationships, if you need bus dev relationships, with corp dev relationships because they're often one and the same. So when you're meeting with people from a bus dev standpoint, be thinking about presenting yourself in a way that makes you interesting and attractive as a leader to the acquirer.

Rishi Garg:

Another way to do it is to think, "How do I make sure that every couple of months, every quarter, I'm spending a little bit of time with at least one acquirer?" That way, you're starting to sow the seeds of a relationship that can potentially be harvested in the future.

Rishi Garg:

One of the comments and question I get a lot from founders is, "How much should I talk about my business? How much should I give away in these conversations?" My rough [inaudible 00:21:31] that is, you're there to actually listen more than you are to speak. That's where it can be really valuable for you. So come in with your standard pitch, and then ask questions. By asking questions, you'll be able to understand how the buyer, potentially, thinks about your business. You'll be able to tailor and understand how their language intersects with your language, so that you can speak from the same vocabulary. Such that if dev stream returns to have an acquisition, it doesn't feel like there's a big cultural mismatch because you're always talking the same language already.

Rishi Garg:

So, there's some interesting elements of that, that I think are important. On the actual acquisition front, there's a long list of things to do. But a couple of basic bits of feedback I give to founders are, one, get great advisors. Most founders, even if they've sold a company before, need good advice. Have a great lawyer. Sometimes a banker makes sense, sometimes it doesn't. Venture investors who've been through the wringer a few times are usually really good folks to get advice from. So, really lean on your advisors. Get great advisors in the process.

Rishi Garg:

Then, there's signals of interest. As you're going through an M&A process, be looking for clarity of strategy. Be looking for escalating meetings, and be looking for increased pace because those things together will give you a sense if the buyer is actually really interested in what you're doing. Then you can trust that it's actually real insight there. You can use that to start to get other buyers to the table, which is always the greatest leverage in any M&A process as a seller. Keeping in mind, obviously, that there's always a lot of ups, and downs, and all arounds before the end.

Rishi Garg:

So, the other thing to always remember as a founder who's thinking about selling a company is, the deal's not done until it's done. So make sure you run all the way to the tape, because certainly, there's many unfortunate stories of founders who, because of one change or another, have been left at the altar at the end of the process, and maybe don't have the capital to keep going because they haven't been accounting for that reality.

Daniel Scrivner:

Fantastic advice. I'm not even going to try to recap. You have so many layers there. We'll definitely link in the show notes for anyone listening, to those talks online. Just before we move on, and change gears, and switch to the investing side, is there anything that you haven't discussed that you really want to make sure to get across? Or is there a way to put a point on all the BD stuff we've been talking about for people listening?

Rishi Garg:

That's a good question. There's only one thing I keep coming back to. Which is that the purpose of the startup community is to take a tiny amount of human and financial capital and create a single product, usually, a single thing, an insight that, through incredible intensity, can be used to break open a market and achieve unusual skill.

Rishi Garg:

Every company's a little bit different. Certainly, sales matter tremendously at SaaS companies and at infrastructure companies. But in the end, that's what you're trying to do. That's why your industry exists. That's why it destroys old categories and creates new ones.

Rishi Garg:

So, I talk about praying at the first altar. I think my career's been defined by always praying at the product altar first, even as a business development person. I think that's really important, to keep the most important thing, the most important thing. Hard to do sometimes in all this different mishegas, but I think that's the one takeaway I'd have.

Daniel Scrivner:

I think that's also how you get bought and not sold, by having something of immense value, and typically that is a product that an enormous amount of effort has gone into.

Rishi Garg:

But look how, I always use this example. Mark Zuckerburg knew the Instagram founders for years before the deal happened over a weekend. The same thing with the WhatsApp founders. Mark made a point of, I think meeting the WhatsApp founders once a quarter for, I think three years, before that deal came together very, very quickly. So, that's just the dynamic. These things are always about relationships, especially on the M&A side.

Rishi Garg:

I guess one final point that I always like to add, which is so funny is that, I think people under value, in the course of an M&A process, how important the team is. No matter how well you're performing as a seller, as a company, in the end, M&A is a lot about the acquirer hiring a management team, hiring a leader. You're interviewing for a job.

Rishi Garg:

A lot of times, what a CEO will see when he buys a company is, that person's going to be great for my org and my management team. It's amazing to me how binary outcomes are on the M&A front, just based on that, regardless of performance. It's not like a company with $50,000,000 versus a company with $20,000,000 has similar valuation profiles and linear chances of being acquired. The $50,000,000 one with a great team has 100% chance of being acquired, and the $20,000,000 one with an okay team has a close to zero chance of getting acquired. That's the way it works.

Daniel Scrivner:

Very binary.

Rishi Garg:

Yeah. Going back to storytelling on the founder as a seller becomes, it's just as crucial on the M&A side, if not more so, than any other time in the company's life story.

Daniel Scrivner:

This is fantastic. We packed in a ton there. Now switching over, I guess just to start, I want to explore a little bit of your work at Mayfield. Maybe to start, you have this initial VC experience. You then go and have a long operating experience. You take a little bit of a break. What brought you back? What made it so that Mayfield was the firm that you said yes to?

Rishi Garg:

I inadvertently did a little bit of a survey course around the venture business. I think my original feeling was, boy, there's a lot of venture capital, and there's a lot of money chasing, a lot of deals. Hey, is this market crowded! How do I make my own way in the business? Et cetera.

Rishi Garg:

There's a few things I ended up coming back to which really are about, for me at least, my personal journey, and what really mattered to me. I cared about being early, because I feel like you can have a really big impact when you're early with a company. I cared about backing founders that were extremely mission driven, where they were doing some good in the world. Because I felt like if you could be someone that could play a role in that, that would be really valuable.

Rishi Garg:

So I was looking for a mission driven firm, a firm that had showed with their investments, with their longevity, that they were also values driven. I personally wanted a place that had a high team quotient, where everyone worked together to work on deals. Venture capital can be really lonely, so I looked for evidence that there was a small team that was kicking ass as a group.

Rishi Garg:

I wanted a, it sounds a little bit funny now because there's so much success in the venture business that's happened over the last four years. But it was important to me to find a firm that was really successful with the current team. And also, this was really important to me, a group of people that wanted to be the best in their business every day. Because one of the things I loved about being in a startup is, you are trying to get better every single day. You're trying to sharpen yourself every single day. And a firm that had those same dynamics, and had a capacity for change instead of resting on their laurels.

Rishi Garg:

When you apply all that, there's one other thing I should probably mention. I decided, even though I had a background working at large companies in M&A, and you might think that growth capital was a good place for me, I really wanted to be early. That was because I perceived that as capital markets ebb, and flow, and change, and things go in and out of favor, capital would enter and leave an industry.

Rishi Garg:

But seeded series A stock is often the hardest stock to buy. It's where the least is known. It's where you can't just win by spraying money around and praying. You have to have real insight, or maybe not real insight, at least. But you have to be able to have conviction, and to make a concentrated number of bets to be successful.

Rishi Garg:

I think that just appealed to me. There's something about the masochism of that, that appealed to me. I also felt really durable. Being able to partner with an entrepreneur at the very early stages, before everything's figured out, is something that would always be there. It'd be there as long as entrepreneurship was alive. So that was an important thing for me, as well.

Rishi Garg:

There's a lot of great firms in the Valley. I was really fortunate that the Mayfield partnership, which checked all those boxes, invited me to join

Daniel Scrivner:

We're going to talk about some of the particular dynamics, and focuses, and the culture there. But I want to ask one more question which is, you have this gap in your experience, of having early experience in venture, and then coming back to venture. I'm curious for your observations on what changed during that time, and what didn't change.

Rishi Garg:

Whoa. A lot changed. A lot's changed in the last four and a half years.

Rishi Garg:

Like I said earlier, a lot more money. One of the biggest changes from the early 2000s to, we'll call it 2016, 2017, the modern venture age, is that there was a lot more space for collaboration in the early 2000s; probably pre-1998, as well. It was very common for venture firms to work together on a round, for a round to have 40% dilution.

Rishi Garg:

I remember one of the first deals I ever got to work on, when I was at Highland Capital in 2002. A company called Imprivata had three investors in the series A, each with 20% ownership. That was a tranched deal, if I'm not mistaken. So, it was a different time, obviously, post-internet bust. It was a different time from a deal perspective, but there was a lot of in-deal collaboration in the early stages. Obviously now, there's not enough room for that kind of collaboration from firms. So, it really is, you're fighting to win a deal, and it's extremely competitive, and I think more competitive than it's ever been.

Rishi Garg:

The other thing I'd say is that the game has really changed in terms of, it was, for a very long time, really until about 2009, I would say, a bit of a clubby atmosphere in the venture business. People were in the business for a long time. There was hierarchies in the venture business and that sort of thing. I think Andreessen and their focus on leveraging PR really changed the game on that.

Rishi Garg:

There was almost, PR was a little bit anathema. Blowing your horn was a little bit uncouth in the venture business. That changed. Having this very broad public persona, redefining the venture role to be building a following, and be building a public brand. Even, as I think we've seen, even without necessarily a long track record of investing success, which is actually the norm now. If you look at the best investors in our industry, the vast majority of them don't have big, online presences or blogs. But that certainly is a strategy today, to get access to deals and start to build the kind of relationships that could get a portfolio together.

Rishi Garg:

So, I think that's indicative of the times, but it's an example of how new capital and new entrants have really changed the game.

Daniel Scrivner:

I want to dig into something that I find fascinating about Mayfield, which is literally when you go on the website, one of the first things that's locked up right with the logo is, "people first." When we talked initially, you talked about this framework of the stack rank of what you guys care about is people, product, then market. Why is that so important to Mayfield? If you can flesh out that stack rank a little bit, of people, product, market.

Rishi Garg:

Yeah, sure. I think it goes back to, and every firm's different on this, but you ask yourself why are you in business. Why do you get up every morning and do this thing?

Rishi Garg:

Well at Mayfield, we've got a couple of things that are really core to what we do. The first thing is that we are extremely values driven investors. We've got something called conscious capital, which you can learn about on our website. It's not something we totally talk about all the time, but it's inherent in the deals that we do. In that, we're not trying to do deals that are only great economic outcomes, but deals that also help put people in business, that help to further human and planetary evolution. It's sort of in the water here, and how we try to do the job.

Rishi Garg:

So if you're doing that well, your product and your market are great things to evaluate, but honestly, that's just about the values of the person. That's the who that you're investing in. So, we spend a lot of time really getting to know the people that we invest in, because that's the only way to know whether or not you have aligned values. Anyone can say anything in a one hour pitch. It's really the depth of thinking and the depth of time that you spend that start to build a relationship.

Rishi Garg:

The second thing is that we are early stage investors. The earlier you are in the investing landscape, the less data you have on the product and market side necessarily, to be able to underwrite an investment decision. Just by nature of our focus on that, we've been able to really hyper focus on how do we pick incredible people and get a chance to work with incredible people.

Rishi Garg:

That's been, I think that's also a function of the firm being around a long time. We're 52 years old, founded in 1969. We're on our fourth generation of leadership here at the firm. The thing that's been consistent throughout all of that is that, as early stage investors, we were just trying to back incredible people.

Rishi Garg:

So, there's also a history of thinking about that stuff and being able to do that. We just did an analysis to ask ourselves this question. It turns out over the last 10 years, about 70% of our deals have been either founding investments; that is the first money in the company at a corporation; or pre-launch; there's not a product launched yet.

Rishi Garg:

So, it's a little bit unusual, I think, in our ecosystem. But it really is how we do business. I think that's where we spend a lot of our time is trying to hone or normative perceptions of founder "quality" so that we can get really excited about the people we back. It is definitely a falling in love process. I wish I could call it something else. I just want to call it what it is, because there's an emotionality to getting involved with a founder and deciding you're going to be partners together for the next 10 years, or whatever it takes, that drives the quality of the relationship. I think we really just key off of that here at Mayfield.

Daniel Scrivner:

I know something you said that I loved, when we were talking initially about what we might discuss in this interview, this idea that the ultimate secret is for founders to have trust in investors when you're in the trenches. So obviously, as an investor, you're trying to build that trust from day one. Maybe share a little bit more about that idea and how important that is.

Rishi Garg:

One of the other ways that our industry's changed a little bit, to some degree, is that you now have firms that promise a lot of different kinds of value add through large teams that are there to help you with various things. Certainly, that can be very valuable.

Rishi Garg:

But the most important thing that we believe is the case for a founder is that, when they bring a capital partner around the table, a capital partner they cannot easily get rid of. It's much easier to get out of a marriage than it is to get rid of your board member when you have a company. When you have that level of relationship, this very intimate relationship with someone who is going to be with you on your journey to make your baby into something real, all you have is trust. That is the only substrate to be able to create value for the company, because it's through that trust that you can hold the mirror up to the entrepreneur when they need that, so that they can clearly see their strengths and weaknesses.

Rishi Garg:

It's through that trust that you can support the entrepreneur and explain to them that you have their back and you're in their corner, even when they may not feel like it, or even when there's a tough time, and have the entrepreneur actually believe that, truly, you are in their corner. It is through that trust that an investor, or any supporter of a company is able to say, "I don't know the answer, but we're going to work together to go figure out how to get the answer."

Rishi Garg:

I think everyone can see that, when that truth is there, that intimacy is there, it shows up when an investor is trying to recruit someone for the company, and so they're trying to give feedback to the management team. It's when they're trying to help new investors get excited about the opportunity.

Rishi Garg:

So that's the substrate. That's the only thing that actually matters. It's hard won. It's easily lost. It's the thing to really respect in this whole crazy world we're in.

Daniel Scrivner:

I love the point, just to flesh it out a little bit more. But I love the point that there are a lot of firms that promise a lot of different value add. At the end of the day, at least in my experience, that typically is a fantastic relationship you typically have with one or two people at that firm, that they are true champions for you, that you have immense trust and respect for them, that they can collaborate with you as an objective thought partner and help you see it.

Daniel Scrivner:

So, to me, it absolutely rings true that, at the end of the day, it's optimizing for that personal relationship, as opposed to promising this vague, amorphous value add.

Rishi Garg:

That's totally right. One thing we also say, and it's another thing I've learned over the years, that we want to work with entrepreneurs who want to work with us. If an entrepreneur looks at their capital partners as "dumb money" or they're certainly a zeitgeist, to some degree, and earned a sort of reputation I think that is negative about VCs, or called the dark side, all that kind of stuff.

Rishi Garg:

I think a lot of those stories, and a lot of those experiences are totally, totally valid. But in the end, if you are taking money from a capital partner of any kind, they're a partner of yours. The intentionality on both sides to make that relationship work is a really important starting point so that, that can be a really productive relationship. When it's a really productive relationship, it's really wonderful.

Daniel Scrivner:

I know obviously you're focused on the consumer side. You have a really impressive, interesting track record with the investments you've made today. For someone listening who has a business in the consumer space, what would be your pitch of why to come to Mayfield? What are you really excited about maybe looking at there?

Rishi Garg:

Oh, yeah. That's great. The number one reason to come to Mayfield, I think is, it's easy for us to say stuff about what we do. We always just refer entrepreneurs to the people we work with, because there's nothing like knowing what it's like when you're in the trenches with somebody. We think that those stories and the authenticity of that, that's what we try to earn every day. That's where I think we earn our keep. But we're also extremely thesis driven. We take a lot of time to get to know markets. We take a lot of time to try to understand patterns. We try to develop relationships so that we can be the first call of the entrepreneur.

Rishi Garg:

So all those play a role in our ability to win deals, and to see things that other people don't see. When it comes to what we're focused on, it is a really interesting moment for a consumer. If I could talk about that for a second. These things come in waves. If you look back at the last 25 years, which is consumer internet investing, which is really when it all started. 27 years, something like that, 1994 when Netscape went public.

Rishi Garg:

There's been a few waves. The first one was the internet. After the dot com bust had a bit of a lull. Then there was a mini wave with SEM based e-commerce companies in 2004, and a little bit of a social wave between 2004 to 2007 that after the financial crisis in the early mid-2000s, 2008 was a mini wave around social games and stuff like that on Facebook.

Rishi Garg:

But then you had the iPhone, so mobile was a third wave and a big wave, the second big wave after the internet. That kind of took hold after the App Store came out on July 10, 2008. Then you had the gig economy wave, which was kind of part and parcel with the mobile wave, but a little bit separate, as well, that kind of came through formation as a mini wave on mobile.

Rishi Garg:

So what did we learn from that? You basically have a Cambrian explosion of entrepreneurship when you have a big technology disruption that suddenly leads to a bunch of consumer change. Internet, iPhone. Well, we hadn't had one of those for a few years. We had a really interesting dynamic, I'd say starting around 2014, 2015, where you had these big consumer platforms; Google, Facebook, Apple, et cetera; that had tremendous scale that were also the most innovative companies out there, which is pretty rare, and that controlled access to distribution to all the consumers.

Rishi Garg:

So the most interesting stuff for a few years there was direct to consumer commerce companies that were leveraging Facebook to cost effectively reach consumers. But then you had, because of COVID, a dramatic third moment, if you will. The big moments being, again, internet, mobile, and I think COVID is one that's as big as those two, but really different, because it wasn't one new technology platform that suddenly came about. It was that COVID forced worldwide behavior change, and then forced rapid adoption of all digital technologies all at once.

Rishi Garg:

I think there's going to be another little mini change right now because whenever it goes back to COVID, some things will normalize and be the same. Other things, certainly there's been a bunch of changes in consumer behavior, so those aren't going to go away right away. So, this is a time of tremendous, interesting creativity about what the future is of "consumers." That's why it's breakneck. That's why it's really, really exciting.

Rishi Garg:

We invest in this moment in a few different themes, which we can talk about. I'll just name a few. One is, we love investing behind the theme of people, for the first time really, and I don't think this is going back to the old way, being able to de-institutionalize from employment, and take control over their livelihoods to do things they want to do. It's been called the passion economy. It's been called a lot of different things, but I don't think that's going back to the way it used to be.

Rishi Garg:

We have a couple of different takes on that, maybe somewhat different, but at least things that we think are interesting dynamics around this creator economy, passion economy. One that's current and one that I think is in the future. The current one is, it occurs to us that everyone is a direct to consumer commerce brand. Here's what I mean by that. When we think about D2C brands, we think about companies like Growth Collaborative in our portfolio, or Allbirds, or whatever. They build a product. They sell it online. They generate a following.

Rishi Garg:

But if you think about all the companies that fit into that modality, it's not much more than a venture backed D2C brand. It's influencers who are selling stuff, and need an e-commerce back end to reach their customers. It's restaurants who started selling meal kits and packaged goods to reach their consumers and create a new, third revenue stream during COVID. It's the fact that every single restaurant and brick and mortar store has some kind of delivery and three or four iPads on their front counter.

Rishi Garg:

It's that you can sell if you're a Shopify seller, not only on Shopify, but also at the craft fair, and also on Etsy, and also on Amazon, and you've got three or four different software applications there that you're trying to manage. It's the fact that whether or not you're an individual seller on Etsy, or a D2C brand, or a restaurant, or whoever, you're acquiring customers across e-mail, Instagram, Facebook, Google. You have this multi-modal dynamic on customer acquisition and retention, as well.

Rishi Garg:

So, it is a crazy world right now. There's millions and millions of, and this number is growing, of individuals who are in business for themselves with physical goods. Forget about services. We'll talk about that, but just with physical goods, and they're super underserved. We think that's a little bit of a hidden [inaudible 00:43:32] dynamic that is going to lend itself really well to a bunch of new software, and features, and services that can super serve that customer base.

Rishi Garg:

The thing we think about in the future is the idea of multiple identities being expressed in the way that we work and the way that we show up personally. Here's what I mean by that. The example I like to use is that in Japan, on Twitter, the average Japanese Twitter user has five Twitter accounts. Because pseudonymity to bifurcate interests and the presentation of the self is just how that culture has learned to use Twitter.

Rishi Garg:

It's a very interesting culture. We're starting to see that in the U.S., I would say in the Western cultures because you have a certain dynamic on Twitch, and you have a certain dynamic on Twitter, and you show up a certain way on Facebook. So, we present different parts of ourselves in these different ways.

Rishi Garg:

But I don't think people have, it's still clunky. I think in the future what we're going to have is really, ways of making the multiple presentation of ourselves really seamless, I think on the consumer side, on the social side, avatars are going to become a major way that human beings represent themselves to the world in digital means across the traditional social platforms like Twitter that we all know and love today, but also on emerging social platforms that will grow in scale, and the emergence of Roblox and Fortnite, and stuff like that, all sort of speak to that.

Rishi Garg:

I think the same thing is going to happen with the future of the creator economy in that, while it's awesome to think that in the future, everyone's going to have one business that they really love because they're going to quit that job they hate and go be an influencer or creator. I think that's going to be really tough for everyone to make a good living doing that. I think much more likely is, we'll see the rise of easy ways for human beings to express different parts of themselves to small degrees on different platforms, and cobble together multiple revenue streams, all of which feed the multiplicity of their soul and their self-actualization.

Rishi Garg:

I'll make a little bit of money on Etsy. I'll make a little bit of money hosting a meditation group. I'll make a little bit of money hosting a session on Flow Club, sharing some of my investing knowledge on Clubhouse. There'll be space for not just the famous people, or the emerging ninjas of the world on Twitch, but also the mid tier to have livelihood.

Rishi Garg:

Then what that requires is, all kinds of products and services, largely culled from metaphors in the consumer side to enable those now de-institutionalized individual proprietors of themselves as businesses to be in business safely. That's where you're going to get things like healthcare, and the ability to do taxes effectively, and people banding together to form guilds on an ad hoc basis to do projects, and stuff like that.

Rishi Garg:

I'm starting to see companies doing all of those things in different ways, but when you add it all up together, it's an incredible munging of our personal and professional selves that is very ripe fodder for creativity. You're already seeing it in the modern workplace. The modern workplace, especially now since 2020, more than ever is supercharged by the fact that, as the next generation of Gen Z and millennials bring their whole selves to work, they really are putting all those identities into the pot of their work relationships. It's a real challenge for the modern CEO to be able to manage all of that.

Rishi Garg:

Anyway, it's a heady time, I think for consumer companies. If anyone wants to talk about anything in that world, doors are open.

Daniel Scrivner:

It's a fascinating look into changes that are going on right now, as well as a peek of, as you were walking through that, there's a bunch of parallels that I'm seeing that line up really neatly there. So, it's a neat peek into the future.

Daniel Scrivner:

Just as we wrap up this first part of the interview, for anyone listening that wants to follow you, wants to get in touch with you at Mayfield, where can people find you? Where can people get in touch with you?

Rishi Garg:

Yeah. I'm Rishi at Mayfield. We're pretty easy to find, just right on our website. You can also find me on Twitter at @RishiGarg. Those are probably the two best places these days. I show up other places occasionally, but we'll have more to come pretty soon between those two on what we think and what kind of stuff we're investing in.

Daniel Scrivner:

Yeah. I think we might collaborate on some fun podcast stuff in the near term, so I'm excited about that.

Rishi Garg:

Yeah. You've been such a great resource for that. I super appreciate it.

Daniel Scrivner:

Okay. So, we're going to close this part of the interview. For anyone that's interested, we're going to explore all the personal side of how Rishi shows up as his best self in everything behind the scenes that help him perform at the highest level in the second part of this interview. So stay tuned for that.