Gaurav Garg Transcript
Clint Betts
Gaurav, thank you so much for coming on the show. You've done so many incredible things. You were at Sequoia for such a long time and built some incredible companies along the way. And to start, let's start with how you got involved in tech and how you eventually ended up at Sequoia, as one of their partners.
Gaurav Garg
I came to America in 1984, did my undergraduate and masters at Washington University in St. Louis, and then I came to the Bay Area in 1990 to work at a company called SynOptics. And through the six years that I was there, I had lots of ideas, and I liked doing things my own way. I had a couple of job offers that were rescinded because the founders or the CEOs, and they were companies with five to 20 people, many of which went on to be public companies, they said, "Well, you have so many ideas of your own, you should just start your own company.”
And I was an engineer. I was a system architect for a major product at SynOptics. And so, in 1996 I ended up leaving, and I started this company called Redback Networks, which was at the very early stages of the transition to broadband networking. Our market timing was perfect, and it turned out that a really good friend of mine had just joined Sequoia as a new partner. So, he convinced us to go in and talk to the partnership about the idea, and they became seed investors in the company with a grand total of $200,000, at the time.
And so we started this company. Our timing was perfect. And from the time that Sequoia put in that first check, four months later, we raised a series A of $5 million. From the day that we raised the series A to four years later, the company's revenue run rate was $500 million.
Clint Betts
Wow.
Gaurav Garg
And we just had perfect timing and perfect product market fit, and we had predicted that something would be needed that nobody else thought would be needed. And it turned out that this was a very critical piece of glue in enabling broadband networking. So, two-and-a-half years after that series A funding, we were public. Some point along the way, the market cap was $30 billion. Everybody made a lot of money, and we were at 14-1500 people. I had a team of around 100, and I just realized I was spending all my time in rooms with 25 people.
Clint Betts
Right.
Gaurav Garg
My teams, customers on Wall Street, and it was just exhausting, and I realized that I enjoy the creative process of generating ideas and bringing them to life. So the Sequoia guys who I'd been in business with, at that point, for four-and-a-half years or four years, something like that, said, "Hey, come over. Hang with us. Do whatever you want. You can start companies. You can incubate companies. Maybe we just turn you into an investor. Let's see."
So, I went there as a venture partner, and uniquely, I was a venture partner there for a decade plus. And I did exactly what we had talked about. I started, I can't even remember, two or three companies. I incubated two or three companies. But the whole idea was that I would really be deeply engaged in everything I did, so in the 10 years I was there, I did 11 companies total.
Clint Betts
Wow.
Gaurav Garg
And five of them went public, and four went out of business. It was—
Clint Betts
Hey, that's a great rate.
Gaurav Garg
Yeah, it's a great rate, exactly.
Clint Betts
That's actually incredible.
Gaurav Garg
I had a lot of fun, and it's an amazing place. I learned a lot. But in the period that I was there, head count at Sequoia grew 10x, and the number of partners grew 6x. And the number of products went from one-and-a-quarter to nine. And my style of working, which is informal, super early stage, just didn't work in the whole machine, so I ended up leaving. I stayed on all the boards for them, all these companies went public. I was actually on boards for Sequoia for six years after I left.
Clint Betts
That's great.
Gaurav Garg
And it's been a wonderful relationship, so anyway, that's how, pre-Wing, was my history.
Clint Betts
Yeah. You were at Sequoia what I would consider kind of the golden era of that firm, in some respects. It really became legendary while you were there. And what do you make of that? How do you think that happened? Was that just the right place, right time? Was that something to do with you and the other partners? How did that happen?
Gaurav Garg
There's a lot of things that go into it. There's a lot of talk about diversity, but at that time, more than half the partnership at Sequoia were immigrants and actual immigrants—we were not born in this country. And pretty much everybody came here with almost nothing, so you have a certain drive and a hunger. And almost everybody in the building had accomplished something. There were five, six real founders, who had taken companies public or done something substantial around the table of nine or 10. There were people with sales background, finance background. There was a journalist, like Moritz. There were people who were engineers. There were people that were product managers. There was a pure market here in Mark Kvamme.
So, we had former CEOs. We had semiconductor people, who are really hardcore and Don Valentine and Pierre. So, there was a lot of diversity of thought, of expertise, of industries, coupled with a lot of hunger. Everyone there worked 50, 60, 70 hours a week, and everyone was really alert to the way the world was changing.
That's part one. Part two is, there's a culture—or there was, I haven't been there in a decade plus—there was a culture of focusing on markets that were substantial and were changing abruptly because rapid change favors the startup. If something changes slowly, big companies can do it. So, you were looking for huge changes in a place where there could be a really substantial market, could be an untapped need, could be something you didn't understand before, number one. Number two, great margin structures.
Selling semiconductors to Apple is a big business, but it's low margin. Now, if you're TSMC, you can pull it off, but most people will struggle. And then the third thing is the nature of the founder. Are they the kind that can take a lot of punches, come back the next day with a smile? Are they good sales people? Do they have domain expertise? So, there's this long checklist you have in the head and in your consciousness, and there was incredible discipline around this and the culture of taking risks.
I don't know what the number was, but at least a quarter of the companies went out of business, but then 35% or whatever were going public.
Clint Betts
Again, that's an incredible number.
Gaurav Garg
Yeah.
Clint Betts
Nobody puts up those stats. That is unbelievable.
Gaurav Garg
But that's the point, that if you have that culture of risk and a little bit of boldness and willingness to look around two corners, you are going to be the investors in the transformative companies. And they don't look like that at the beginning. You think all of these babies are great, and some of them turn out to be and some not. But it's just embracing that risk, and I think a lot of investing is follower mentality. To have the courage to do that, then you reap rewards, and to me, that's what venture capital is about.
Clint Betts
You said a few things there that I want to double click on. As you think about the future of Silicon Valley, the future of tech, the future of investing, and the future of work, the first thing you said there that I thought was really interesting is that you guys were working 50, 60, 70 hours a week. That's become a big, hot topic currently, in today's climate, with Elon laying people off at Twitter and saying, "Hey, we need to be hardcore in order to work here, all." It's brought this to the forefront of how much you should dedicate, if you're trying to build something great. And I'd love for you to talk about that a little bit, on what does it take? You've got to put in the hours. You've got to put in the work. But why is that so important? I think that part is getting missed, in the current conversation, is why that's important.
Gaurav Garg
I don't think of this as work, so let me just answer the personal question first. Post Redback, my company, this has been about some immigrant masochism about charging to help, against insurmountable odds, and I just enjoy that. Why am I doing all these early stage companies? It's really hard, but I really enjoy doing this for eight, 10 years and watching the institution grow from two people to 1000.
And I've had the privilege of doing that, I don't know, half a dozen times, and it's really fun to be part of the journey. It's also really fun to watch people grow up. I can reflect on that myself, but 45-year-old founders, when the company goes public at age 55, they are not the same human that they were 10 years earlier. And that is true of the 28-year-old founder or the 45-year-old founder.
And I know, obviously, I'm changing along with it too. I learn with them. But they're utterly transformed, and I enjoy people who have that learning mindset. We can talk about the infallible founder. I don't believe in that. I think all great founders have to have a learning mindset because they're learning something which is a completely new business, and no one can predict what's going to happen.
So, to the point about the hours, look, when you're having the baby, you'll do anything to nurture it and protect it, and it's just the nature of the founder that there is a level of paranoia. It's literally like your child. How much effort and emotional energy do you put into your child? And it's that commitment. It's not an intellectual commitment. It is an emotional commitment. And I care intensely about every company I'm involved with, perhaps to a fault, but I actually think that matters to my contributing to the founder's journey. They don't always like it, but they always, at the end, appreciate how strongly I felt about it.
Clint Betts
What do you make of the growth of VC since you started?
Gaurav Garg
Uh-huh.
Clint Betts
Because that has been phenomenal. It seems like almost everyone's a VC, nowadays. Whereas, previously, it was like the opposite. What do you make of that?
Gaurav Garg
Probably an unpopular thing to say, but the perception of money and power attracts a lot of mercenaries, and it's just the nature of things. I think, as the tide goes out, like it looks like it might, in the next couple of years, a lot of people will disappear.
But at the same time, the markets now are so much bigger, and it's become very apparent that, in the old days, tech was tools. Then, things became tech-enabled. And now, you effectively have to radically transform every company into being a tech company, or you're not going to survive because there's all these interlopers in startups, crawling on every part of every industry.
Oil companies might survive because they're highly capital intensive, but anything that is not, is just fair game. So, I do think it's good that there's more capital to make that transformation. I think it's just a natural evolution of technology that we free ourselves from mundane tasks and apply ourselves to things that are more interesting. I think there was a point in which 70% of the world's population was engaged in agriculture. And thank God we've moved on from that, and we're not waking up at four in the morning to till the fields.
Clint Betts
Right.
Gaurav Garg
So, I do think it's a good thing there's more capital, but as someone who's been in this business for 21 years, it always just feels like there's too many ups and downs and even more than the public stock market. It's just that the cycles are much bigger. And to some degree, we welcome times like this, when money might be scarce. You get more time to evaluate companies. Real founders come out, as opposed to people who think it's fashionable to start a company. But I agree with you. There's been too much capital and too many people, and perhaps this correction will get us to a more stable place.
On the other hand, it is appropriate that there's a lot more money now than there was 20 years ago.
Clint Betts
Yeah, that is, for sure, a net positive because that means more companies will get funded from different types of entrepreneurs than maybe was funded 20 years ago. I think that is, for sure.
Gaurav Garg
And we are much more ambitious in what we are taking on, rightfully so, actually.
Clint Betts
And more money outside of Silicon Valley too, which seems like a really good thing. You mentioned something, when you were at Sequoia, everyone had started something or had done something pretty incredible to get in that seat and be a partner at that firm. How important do you think that is? Part of why I said, "Man, it seems like everybody's a VC now," is it just feels like people who probably have not really had a successful company are investing or have not been in the founder's shoes. And I wonder if that matters in the long run. I can't imagine it doesn't matter to some extent. Or whether it's money is money.
Gaurav Garg
It's a bit of everything. The founder is trying to build an institution. The 28-year-old that just enter venture capital may have an instinct for how the world is going to change that I, as a founder, may not, and I think you just need a blend of people. But the most important ingredient is intellectual curiosity and the humility to know ... This is a hard business, and you are grappling with so much uncertainty. How you write under uncertainty is a big part of the role.
And I don't think you can eliminate anybody. You don't have to have this CEO or founder background, but I do think having all of the perspectives is very helpful. I always feel that partnerships should be made up of people that approach things in different ways, have different expertise, come from different domains. And it's just what matters now will not matter in five years, and you just need to have people that can adapt to that and carry along the right pattern recognition, but not be too married to it.
Clint Betts
How has your investing thesis or investing style changed since you left Sequoia and started Wing?
Gaurav Garg
It hasn't changed much actually.
Clint Betts
Really?
Gaurav Garg
Yes. At least for me, what we do, as a partnership, now is obviously different from what one was doing 20 years ago, but that is a function of how the industry has changed, as well, and what we are investing in. Back then, we were doing a lot of systems, and software was a part of it. We were doing semiconductors, and we don't do those things anymore because the industry is not as vertical as it used to be, and economies of scale work in a certain way, in the whole tech stack. So, in general, venture capitalists have been pushed further up the stack, as time has gone on, because Amazon web services, and people like that have made what we invested in 20 years ago irrelevant.
Clint Betts
Yeah. So, what are you looking at now? For the future, are you looking at a lot of biotech, a lot of energy, things around AI, blockchain? As we head into this period where it feels like we're in a recession, whether they say we're in a recession or not, but we're going into something that could be pretty intense next year, in 2023 what do you look at now? Where are the opportunities? What does the future look like?
Gaurav Garg
We always approach these things from the point of view of what is going to matter for the next 10 years because startups take five or seven years to mature. So, you need to have markets that are going to be enduring and which don't look like much now, but are likely to be quite significant in seven to 10 years or five to 10 years and where our companies can grow into it. So, the most obvious thing is there's a revolution underway in data and data availability and data usability and, more importantly, the machine learning that can take advantage of that data, can absorb processes, workflows, automatically and be proactive, provide greater insights than before, all the things be generated, make us more super powered, if you will.
We only do B2B investing, so the transformation of business and work through AI, based on proprietary or novel data sources, is our biggest thing. I think we can all feel that that will matter for 10 years, and we see that across vertical industries, across horizontal job types, etc. And then, there's a third thing on the way, which is the internet started this very large trend of ... I don't like this word, decentralization, but basically, democratization of channels and acquisition. You see that in open source projects. You see that in so many places, product-led growth, consumer companies, of course, which are direct to consumer.
There are many opportunities there that you can think of as business modeling because of the enablement, even further enablement of decentralized owning. If Web 1.0 was about read, Web 2.0 was about write, Web 3.0 is about own, what does that enable in a not necessarily token mechanism, but what does that enable? Or are there other things? Labor marketplaces are having a real moment in the sun. The first generation was product marketplaces with Amazon and eBay. There was a second generation of service marketplaces with Uber and Airbnb, and of course, people like bookings.com. And now, we have this era of labor marketplaces, where people don't have to work full-time. They can add second jobs and work by the hour in what we call the gig economy, but it's a lot more than that.
So, there are things like that, that are business-modeling, that we do as well, but it's those three things, things that where the internet has enabled massive changes in business models, the enablement through AI applications and the underlying data forms that drive the whole stack. And yes, we are doing things in bio and health. We actually feel that medicine and health will be the area where AI eventually has the greatest impact. It will take time, but we actually do sincerely believe that. So, it is about 20, 25% of what we do.
Clint Betts
Why don't you like the word decentralization?
Gaurav Garg
Because it's too tied up with the whole tokenization, crypto phenomenon, and I think of it as much more than just crypto.
Clint Betts
Yeah. Crypto has taken a huge hit. I think Web 3.0 has probably taken a hit in all of this, as well. FTX did nobody any favors in that. But even before that, they were taking some hits. And by the way, Sequoia's been in the news around this FTX thing, which is pretty interesting and they are investing in them and the post that they did about that. How does that whole space regroup and come back from this?
Gaurav Garg
It's the typical hype cycle, goes up and down. Speculators pile in. Eventually, real use cases show up, and businesses get built. We saw this with the internet itself. I'm not saying that crypto has the scale of the internet, but we saw this. I think of NFTs as just a way of making securitization of an asset cheaper. If you can do it programmatically, and it costs $100 to securitize something instead of two million, why not?
But the issue is that speculators always pile in, in the beginning, and spoil it for a little while. But eventually, we will have the right use cases. If you could securitize your house without it becoming speculative, you should be able to do that, instead of having to go through these mechanisms where there are three levels of brokers, to get it to the point where it's big enough to securitize and sell off $1 billion loan portfolio to somebody.
It would be really nice if you could do it at a more micro scale, so I like that part. But it'll take a little while. There'll be a couple of use cases. I don't know if it's real estate. The stock market is securitization. A piece of stock is an NFT. The piece of paper has nothing. It is an NFT. A collectible is an NFT. But we do that all day long, but somehow, it's just gotten caught up in the hype cycle. So, anyway, I think there are lot of use cases to give consumers power over themselves, but it's just going to take time. And you're absolutely right, but hits like this may be necessary for people to focus on the real use cases, as opposed to just the speculation.
Clint Betts
What do you make of Zuckerberg's big bet on the Metaverse?
Gaurav Garg
Let me turn the question around and say, what comes after the phone? And if I were to just stretch all the way into the Terminator analogy, if you had a contact lens that completely blurred the distinction between the real world, AR, and VR, it'd be pretty interesting. And we would think of even things like art very differently. We would think of experiences very differently. We would think of the way we learn very differently. We'd be able to experience physical phenomena and teach ourselves physics or biology in completely different ways, in a way that was really intuitive and immersive.
So, I'm very enthusiastic about it. I just think it's going to take a while for the hardware to show up, and then native software applications that you can't imagine today usually show up a few years after the hardware is available. Who would've thought of Uber before the iPhone? You wouldn't have thought about it.
Clint Betts
Yeah. Yeah, exactly.
Gaurav Garg
And that's not an application I would've thought of before.
Clint Betts
Yeah.
Gaurav Garg
So, anyway, I think, longterm, it makes a lot of sense. How it happens, I don't know yet, and I'm not smart enough to predict. And I don't know anything about the Metaverse work that Meta is doing, but I do think, in the 10-year timeframe, we really have the possibility of being much more immersive with electronic media.
Clint Betts
What an incredible bet he's making there, and if it pays off, man, that's going to be huge. How are you advising your portfolio companies or companies that come to you, to raise money now, but in particular ones that you've already funded? Going into next year, going into 2023, what are you saying to them?
Gaurav Garg
Raise money now. That's the easy one. But don't let a crisis go to waste. We've had the luxury of being lazy and inefficient for a long time because there was so much capital in the world. Really figure out how to build a real business, with a high level of productivity and efficiency. Truly figure out product market fit. In fact, at a time like this, the customers that buy really need you. Otherwise, they wouldn't buy.
So, over-index that signal, compared to the lots of products, nice to have products that are being bought. So, the telemetry now is much stronger, so pay attention and be really ruthless about focusing on what's important.
Clint Betts
Yeah. It feels like founders and CEOs now have to really think about more than just their company. They really have to think about the macro environment. They have to think about, hey, what's Jerome Powell going to do? What's the Fed going to do? All these types of things. What do you think about that? You start out, and it feels like maybe in the 2010s or early 2000s, you were just like, I'm just building this company, heads down, focused entirely on that. But now it doesn't seem like you're able to do that, or am I wrong about that?
Gaurav Garg
I think it's always been like that. I think, when you start a business, you have to think about everything that affects it. And we've had the luxury, which we don't appreciate enough, of an ecosystem where the founder who's really narrow and deep has access to that perspective through advisors, through venture capitalists, through the people they bring on, and that's the strength of where we live. Other people have managed to replicate parts of it, but it takes a long time for an ecosystem like this to build.
And I do think it's always been like that. We've been sheltered, perhaps, with a lot of money, in the last 10 years, more than usual. But understanding markets, understanding the nature of product market fit, that's never really changed.
Clint Betts
With the growth of areas like Miami and Austin and Utah and Charleston, North Carolina, other places like that, what do you think the future of Silicon Valley is? Is it still the hub?
Gaurav Garg
There is something in the water here and in the culture, which is more immersive than any physical geography. I do think the pandemic is going to kick off an age where talent can be anywhere, and we have learned to work with that. So, I don't think of it just as Austin and Miami and North Carolina and Boston or whatever. I actually think we're going to be tapping talent from all over the world, in a much more accessible way. At some level, on Zoom, does it really matter if the person is in the Ukraine, not right now, but in the Ukraine or in Austin? Engineering talent is all over the world, and we're going to be able to tap it. And that's what makes it interesting.
Now, this culture of founding companies and the ecosystem I talked about, yes, it's been replicated in Israel, in China, in other parts of the United States. I still think Silicon Valley will continue to be a big hub because the ecosystem is much bigger, and it's more immersive. But for sure, other places will develop, and I actually think what tends to happen is, other than a place like China, where the markets are very large, ecosystems can develop around a particular domain or access to a university that is strong in one area. Israel developed a reputation for security companies, as an example. Boston's having a real blossoming in the biotech world because of all the work at the Broad Institute and at MIT and Harvard. So, it's inevitable that there will be other centers that come up.
Clint Betts
The pandemic had companies saying, "All right, we'll do some sort of hybrid in the future. We'll do all work-from-home." And then, as we've supposedly gotten out of this pandemic and gone back to normal, and I think Elon is probably playing this out more publicly than anyone else, where he's like, "You got to be in the office," but it seems like a lot of companies are doing that, maybe less publicly. How are your portfolio companies thinking about it? How are you thinking about it? What is the future of work? Is it going to be everybody back to the office? Is it going to be some sort of hybrid? Does it depend on the company?
Gaurav Garg
We deal with uncertainty, every day, and our entire job is built around not having too much of a repetitious, replicable process because then, you're going to miss what's around the corner. We have found that, for that kind of work, where you have to create something new for what is collaborative work, Zoom breaks down at three or four people. And being in the room with five people, relative to doing the same creative, collaborative work, is just totally different.
Now, on the other hand, if you have a project, and you're working on it, you can do it remotely, or if there's a command and control structure, I say this, if there are tasks being handed out to people, you don't need to be in the same room. So, my best guess is there are some roles which are best in the office. There are some roles which can be 80% remote, but they still need to come together, to develop that common, collaborative culture, every now and then. And then, there are some roles that might be 50/50.
So, I feel it depends on what you do, number one. I do think senior executives are going to be back in the building two, three days a week, to brainstorm among themselves, and then the other two, three days a week, they're with their teams, propagating them down, which will be partly remote and partly in person. But then, as you get further down, with very clear tasks, you can be much more remote. So, I think it depends on the role, and I think it's going to be hybrid if you look at it across the board, on average. But again, certain roles will be more in person. Others will not. I don't know if all that makes sense, but that's the way I think about it.
Clint Betts
No, yeah. What do you think? How bad is 2023 going to be, from an economic standpoint? What are we looking at?
Gaurav Garg
Hard for me to prognosticate because there's so many macro factors. If the war in Ukraine ends tomorrow, that might change things, and so, it's really hard to predict. What I can say now is, it's very clear that lots of companies are missing revenue, and you see that in the public markets. And there's a cascading effect. When you miss revenue, budgets tighten up. You spend less money. In fact, it seems to be what the Fed is aiming for. So, it seems to be working. How far it needs to go, to do what they need to do, I have no idea. That's a topic for economists, most of whom will disagree with each other. So, I suspect it will be, on average, a little tougher than 2022 because the cycle started this year, and it'll play out a little bit more next year. But a year from now, will it be worse or better than today? I have no idea.
Clint Betts
Yeah, yeah, yeah, yeah. I think that's super helpful. And by the way, I'll let you go here because I'm not sure how much time I have with you, but I'll end on this question. We have this theory, here at ceo.com, that chances given are just as important as chances taken, so when you take a chance on yourself, there's something really beautiful about that. There's also something really beautiful about giving someone a chance. Who gave you a chance in your career? As you reflect back on the things you've built, the things you've done, the companies you've been a part of, the firms, and at Sequoia, at Wing, and the various companies, who gave you a chance that really stands out and made a difference in your life?
Gaurav Garg
Lots of people. It's not one thing. When I first came to the Bay Area, it was the founder of SynOptics, Ron Schmidt, who really was 17 layers above me, but really took an interest. And I developed a lot of perspective about the broad business because of that. When I started Redback, no question, the Sequoia guys really leaned in, and Pierre Lamond, who's a legend, was our chairman, was absolutely transformative. And I'm sure you can talk to a half a dozen founders that could regale you with great Pierre stories, but I really learned a lot. I learned a lot from Mike Moritz, from all of my partners, from Doug Leone, from Ruloff, Don Valentine, who was around, and his office was next to mine, for a number of years.
So, a lot of people have been very generous, and I'd even say a number of founders gave me, the untested venture capitalist, the chance, and it worked out quite well. So, luck is what you do with it, a little bit, but I've always been very fortunate in that people were willing to make time for me.
Clint Betts
That seems like that's what's in the water. We're going back to our previous conversation about Silicon Valley. That seems like that's what Silicon Valley is, is
people giving each other a chance, helping each other out, even when they don't have to. It seems like that's really the ethos that came out of there and built the greatest hub of innovation the world's ever known.
Gaurav Garg
Yeah, and you're right, and go back to the beginning. This is why I do this because I really enjoy watching the founder evolution, and that, in itself, is a drug.
Clint Betts
Yeah. That's beautiful. Hey, Gaurav, thank you so much for coming on. It really means a lot that you took the time for us. And good luck with everything, and I'm sure we'll talk again soon.
Gaurav Garg
Absolute pleasure. Thank you so much.
Clint Betts
Thank you so much.
Gaurav Garg
Thanks for having me on.