Hey, I'm Eric Newcomer. This week we have Rebecca Cayden
on the show from Union Square Ventures.
Great episode. We start off talking about
psychedelics only gets more from from there.
We talked about US V's climate fund, the downturn, her career
in venture capital. I think you're really enjoying
the episode. Give it a list.
It's Eric Newcomer here with Rebecca Cayden at Union Square
Ventures. Very excited to have you on the
podcast. Thanks for joining me.
Thanks for having me. This is fun.
I think we first met when you were at Mavron.
We had dinner at one of maybe the mission Burma love.
Yeah, it's so good. I haven't been there in a long
time, but it's delicious. And then I've seen you.
I think especially memorable was the first Slow Ventures summit
for sort of the UP and comers were right.
You were sort of like the, I've made it, you know, I'm at USV
but I can sort of give the wisdom, yeah, to everybody else
a little earlier in their careers.
Anyway, a lot to talk about on the episode.
I mean I think later on maybe we'll talk about some of that
like you know, venture career stuff and sort of being at USV
and sort of the downturn which is interesting.
But you know, you have some fun portfolio companies and I wanted
to jump in, in particular just talking about Journey Clinical,
which you've told me some about, but you know is in sort of the
is psychedelics 2 strong words psychedelic space or what?
Tell us a little bit about Journey Clinical and how you got
excited about that company. Yeah, Journey Clinical is a
network of therapists. And what Journey does is provide
education and access for therapists to learn about and
prescribe and utilize the newest.
Treatments and options with their patients.
Right now the focus is on psychedelics and particularly
ketamine. But over time as new treatments
evolve and get regulated and become available, Journey is the
go to platform for their members to learn about them, understand
how to use them and for their patients to get prescribed as
they need to. You know, our thesis there
really starts at a higher elevation with our, you know,
thoughts on mental health, I think.
You know, it's now relatively common wisdom that we've moved
from a, you know, mental health problem to a full on mental
health crisis in this country. I think it's, you know, one of
the top three epidemics that we're facing.
You know, there's kind of like. Climate change, you know,
actually, there's probably many other epidemics, but it's a big
one, right? And it's actually too many to
name change tracks to another USB fun.
You're like, oh, we've got a fun for all the.
Big all the major crises of our time, but this is one of them
and it's pervasive and it actually relates to a lot of
other crises that we're facing around climate polarization, you
know, loneliness. And it's something we talk about
a lot and we've been very interested in it from a venture
business perspective. The 1st.
Kind of generation of mental health companies, we're really
around access to care and that's a bucket that we've played in as
well and believe create really good businesses and will go on
to create great outcomes. But it's primarily around
bringing that care online and getting it paid for.
Those are two extremely important things and one
interesting thing to me about that is that market alone.
I think it's going to support dozens of billion dollar
companies, maybe more we can all think of.
A fair number. I think that market has turned
out to be way more powerful, the market, sorry, that market
being. Access to mental health care,
right, Getting mental health care online and paid for, right.
In our portfolio, we think about Brave Health.
There's also, you know, whether it's all more or headway or
spring or lira, there's a lot of these, right?
And many of them are very good businesses and important ones
and you know. Are are constrained on supply
and demand despite the number in the market because there's so
many elements of mental health care to touch that need that
access to be provided. People are fascinated by, you
know the USV sort of process. I mean obviously the returns
speak for themselves. I mean, I was just talking to
one of your partners about case tax, you know, which sold for
$650 million to Thompson Reuters and it's like, you know, it
didn't really have a business model when you guys invested
into some degree, that's what was like appealing.
So I guess, you know, people want to know, like how you sort
of repeatedly invest in weird things or like, how do you find
something that sort of feels out there but is like you're doing
it over and over again? I actually think this is a good
example if we kind of keep pulling the thread of how
Journey clinical came to be, right?
Because. This thesis around access to
care, which has attracted so much capital, some of it ours,
and is proving to be a good category, you know, has been
where the market has gone, but is actually only one piece of
the puzzle. And so the way we get into
things that are unusual is by having strong theses about where
things are going versus being, you know, extremely
opportunistic. And obviously there's a balance,
but that thesis thinking is important, and a lot of thesis
work on this category really led to the belief that access to
care is only half the puzzle. Right.
And the other is how is care itself going to evolve and you
start unraveling that thread. Okay.
How is care itself evolving? The real biggest last evolution
of care is Ssri's, and those have been extremely successful
and have done a lot of great things.
Those are drugs to treat depression, basically.
Yes, those are prescription drugs.
You know, the roster that you've heard about and have been very
important to the treatment for mental health crises.
But. There's a lot of things they
don't treat. They're not A1 size fits all
model and they're basically all we got right.
The innovation has not, you know, had a lot of other layers
except for psychedelics. And so we've became very
interested in psychedelics as you know, the next card to get
turned over and the next option in needing a bucket of options
to treat a crisis. And then you start, you know,
talking to clinicians and researchers and therapists and
understanding that we're really at a tipping point on it, right.
Ketamine has been a legal drug for actually you know, quite a
long time. That's not really new.
And MDMA and psilocybin are progressing through clinical
trials, you know pretty rapidly and there's becoming large
clinical acceptance towards their role in treating mental
health problems, but. There's also desire for it to be
done in a controlled way and through the infrastructure of an
ecosystem that's already in place.
And so we were looking for that. How do you leverage the mental
health ecosystem the therapists that are experts at this but
also give them access to the newest options and that's how we
got to journey clinical. Well, you know, whenever I, you
know, sort of healthcare less somewhat to climate, there's the
question of like why is this like a venture problem And
outside of the existing, you know, medical system, like, I
mean there are pharmaceutical companies, like why if there's
money to be made, shouldn't they be trying like what's happening
that it feels like you need a real sort of outsider thinking
to bring ketamine, a drug, you know, that's legal to people's
lives, that the medical system is unable or unwilling to do
what's happening there? Well, this isn't really unique
to psychedelics or to mental health.
You know pharmaceutical companies make drugs.
So the development of drugs falls with them, but the
distribution and networks of access is outside of it and
that's not particularly new or unique here.
That's where business opportunity has been.
So the idea is when you talk about distribution and networks
of access, that's often where these business opportunities
lie. You know, the development of
drugs is kind of a different beast, which lies in the
pharmaceuticals. But you know, why is there a
business opportunity with creating access?
Because the same reason technology drives business
opportunity into anything. Offline access is slower, It's
more gated, it's more piecemeal, right?
You have to be at the right doctor at the right time.
You have to find it. And then by creating a network,
you just allow anyone anywhere to find access and education at
a, you know, faster speed and with much broader supply, which
brings efficiency to the market. This was Series A, right or like
how far along his journey, on their journey.
Yeah. Series A, but has grown rapidly
like as you know, we invested in, call it November and it's
Forex, maybe more since then. So it's, you know that I think
they're a great team and have executed white well, but there's
also strong tailwinds to this market that they're in on the
regulatory side of it. Like, do you think, like,
mushrooms are going to be sort of on the table soon or how much
was this a bet that, yeah, the regulatory regime would change?
I don't think mushrooms, as we think about them in, you know, a
recreational sense are just going to get legalized.
Maybe they will, but that's a separate kind of thing.
I think other forms of psychedelics in, you know,
formats that are right for care are very much going to get
legalized. And actually, as we did our
research, to us that's a when, not an if.
You know when you dig into what's going on clinical trials
and in that clinical world in some ways that seems you know
pretty easy to bet on that these will continue to happen.
And if not exactly the forms that we've outlined, rapid new
forms of that options for care for mental health diseases are
going to get, you know, approved and released and really have to
and they're going to need a network of education.
And distribution to go into to the therapist network and you
know Journey isn't unique to a format, it should cover them.
I do think there's regulatory risk here, but I actually
obviously there's some amount of regulatory risk on psychedelics,
right. We have to be honest about it.
But I actually think more about regulatory risk across broader.
Online healthcare in general. And I think we're at somewhat of
a time of just still that whole market still getting worked out
on not unique to mental health and not unique to psychedelics,
but what you can prescribe online and to whom and to how
and how to, you know, allow that really important access that
we've come to rely on, but also do it in a you know,
appropriately controlled way. Yeah.
I mean, there's been sort of a fair bit of skeptical coverage
about sort of the Adderall prescribing companies like Done.
I mean, this sort of COVID era being able to prescribe drugs
over video chat was obviously sort of hugely important to
those companies. How much is that key to Journey
and like yeah, what do you think about sort of the impact of sort
of the more ADHD focused companies?
So with Journey. Obviously, right now they
utilize the ability to prescribe through online appointments.
They do so through a lot of controls and I think in a very
kind of specific and defined way.
If they couldn't, they have a lot of other plans that you can
do it with offline appointments that they could shift to.
So it's not so dependent on that format, but for them and many
others, it creates efficiency and a level of access that's
really beneficial to the category.
That being said, it can be abused.
Right. And I think what we are seeing
in this market is that I believe that, you know, one, businesses
play out to the incentives that they're created with, not the
kind of good or bad intense of the, you know, founders
involved, right. So often times the mistakes made
aren't malicious. It's that if you create a
business model you know and you get scale, the business model
will play out to the incentives that give it scale.
And so if the incentive is purely sell more drugs, right,
you will sell more drugs if you start to create scale and you
will do internally what you need to in the business to make that
happen. And if you don't have checks and
balances internally and you don't have kind of catches to
make sure that quality is an important piece of the business
model who you're prescribing to. You know, making sure that goes
to the right person when and the right appointments happen, You
know, I think it can get away from you very quickly and I
think we've seen that in the. Market here, but I am concerned
that you know mistakes of this market getting developed that
were really problematic might create problems horizontally
that we just have to be prepared to face when kind of moving you
know digital healthcare forward moving beyond you know this
investment. I'm curious, I mean I mentioned
in the beginning of the show, you know I met you coming from
Mavron which was a very consumer focused firm and you know I've
had Sarah Toble on a couple episodes ago and sort of took
stock on the state of consumer. I'm curious like when you were
interviewing with USV, was it clear in your mind you would be
sort of shifting away from consumer and like what
percentage of like consumer have you been doing since moving
over? And how have you thought about
it sort of professionally in this sort of period where
consumers get tough and there are sort of big swings and you
know it's, I don't know, it's a challenge.
Yeah. I mean, we can table this, but I
actually think consumer is about to become exciting in new ways.
But you know, all right, well, I will circle back to that right.
Now if you can circle back to that, but I think you know.
Firms all have different designs and kind of cut the world in
different ways. Mavron cut the world by being a
category focused firm on consumer and doing that super
well and by having those guard rails was able to develop
expertise and brand and network in direct to consumer
businesses. USV just cuts the world in a
different way and I definitely knew that you know going in and
it was something that and it is something that I'm excited
about. We don't think a lot about kind
of the divide in our portfolio. If we think about our fun
construction or you know how we're looking at the world
between consumer and B to B, what we think about is this
thesis and kind of the mechanics involved, for instance, you
know? The role of building network
driven businesses and the opportunity to leverage you know
bottom up networks to create modes and scale and to broaden
access by driving you know value and down costs systematically
across you know categories. We care about.
You know, capital, well-being, knowledge and sometimes the
right application when you pull the threads of that thesis is a
consumer, you know, product or service and sometimes.
It's the enabling infrastructure of them.
But most of Usb's investments have been one of those two
things. They've either been the end
application or the enabling infrastructure involved.
But a common theme throughout our investments is how do you
build important networks that can change industries but rise
outside of them. Like if you think about journey
clinical right, it's a network, it's a network of therapists,
they're stronger the more you add on to them.
It's a bottom up growing network of acquiring the therapist even
though it interacts with the healthcare system and can change
it, but it's growing this network outside of the
infrastructure to then. Impact the existing structure,
we really like that if you think it like across of our
investments and sometimes that turns out to be consumer if you
think about you know an out school and education or a
Duolingo or a Twitter and sometimes it turns out to be you
know the enabling infrastructure or the B2B marketplace
application like a journey clinical.
So you know we just cut the world in a little bit of a
different way. Do you think a lot about your
sort of personal mix of investments or they tend to be
firm wide or how do you think about how much consumer type
investments you're doing now even though I know those can
sometimes? Yeah.
I don't think that much about how many of my investments are
consumer and how many of my investments are beautiful.
I do think about am I? Focused on a range of you know
problems and thesis areas, right.
If we think a lot about, you know, capital, knowledge and
well-being, I want to, you know, be doing things across them.
And climate, you know, which is its own fund.
That's important to us. And one thing we feel strongly
about as a firm, which is a little bit different from other
platforms is that each of us. Should make investments and have
insight into each of these categories.
We don't want someone to be on fintech and someone to be on
education because our firm is really small, right?
There's only, you know, a small handful of partners and we want
a lot of shared knowledge and conversation and debate.
So we don't want a situation where something comes in and we
say this is a climate investment.
So like Albert, you know, what do you think about that?
Or it's the Fintech investment, John, like what should we do?
We want it to be everyone's. Responsibility to have an
insight and have our perspective and I think that's done by us
all investing across each of the buckets.
You said right before we got into this, you thought consumer
was about to take off. Why?
Why do you think that? The piece of the A I craziness
that I'm most excited about is the application layer.
I think there's still a lot of kind of complexity and
uncertainty on the foundational model and on the enabling
infrastructure on where equity value aggregates, right, how
much of the stack the models own, how defensible those models
are. You know how that shakes out.
But what I feel like we can have more conviction about is that it
unleashes. A wave of consumer innovation
that's going to be really fun because the way this is going to
get utilized is by products that we want to use.
I'm excited about unleashing this rejuvenated value around
fun things to do right where the coolest thing about AI driven
applications is. They get better if people
actually use them. So the strongest incentive of
the team is to increase engagement in utility.
And I think the only way to do that is to combine utility with
fun. There's going to be so many
things in the market that if things aren't fun to use, you'll
go to another option. But the team has a huge
incentive to get you to stick because that's how their product
gets better. So if you think about something
like Duolingo which is you know been on this for a long time of
leveraging machine learning and I I to create.
Better, you know, consumer experiences, streaks,
gamification, fun, infused with the utility of language learning
is critical because their product gets better if I use it.
And I'm really excited to see that apply to lots of different
consumer applications. And I think we've been talking a
lot and everyone's been talking a lot about where they're going
to be moats, right? You know, is stickiness going to
be possible? The barriers feel low.
And I think the Moat is going to be fun and teams that can create
rapid new fun things that keep you on the platform.
And we haven't seen that in a while and I'm excited about it.
Chat bots I guess would be sort of front of mind in terms of
consumer, you know you have companies like character.
Is that the kind of thing you're thinking about or you're
thinking of like more on the other end of the spectrum, like
pure games that sort of employ large language models in some
way, or any sort of more specificity on the type of thing
you're seeing? I don't know that we're even
fully seeing it yet. I think we've seen a lot in
learning. I think we're going to see a lot
in Consumer Financial services, maybe even in healthcare, right.
There's a huge advantage to companies that can get me sticky
on being a point of entry for care in terms of diagnostics and
kind of data networks. But you got to make me want to
use it right and. I don't know that we've fully
seen these come to life yet. I think chat bots are a start,
but I don't think kind of a chat bot interface on its own is
going to be fun enough. And what you're seeing in this
kind of early 1st wave of consumer applications on these
models is high trial, low engagement, right.
So you see, you know, big usage numbers out of a gate and top
line and then very low. 306090 day engagement because I think
we're in a period of trial behavior like me and everyone
else will try anything that comes along.
It's so easy to try and we're all so curious.
But the real indication is what I'm still using, you know, a few
months from now. I know, even with ChatGPT.
I mean partially. It feels like they're maybe
degrading the quality of the service, but I use it regularly
for proofreading. Still like it's good at catching
random typos, but I don't think. You know, in the beginning I was
having like long conversations with him.
Really. It was like in a let's feel out
sort of how powerful this thing is and sure, really get a sense
of it. And the novelty of that winds
down, I don't know. Do you find yourself using it
much these days? You know, I use it for a very
specific use case every day, which is I, you know, I used to
use it in the same way, like kind of as a toy or for help
writing. I found myself doing that less.
What I use it for actually, is that my son, who's 5, loves
having it create bedtime stories for him.
So he loves the idea of telling it.
I want to hear a story about Max, who's his name, and my
brother Leo, and we meet Spiderman and we go to a glacier
and we fight Green Goblin and he loves being able to play with
those inputs and have it tell a story.
And I really like it because I used to have to make up those
stories every night and now it does it for me.
And he thinks, you know, the Chad GBG stories are certainly
better than my made-up stories, which is interesting cuz that's
a full toy use case. But it's sticky because he
thinks it's right, right. And so I'm like that's.
A business, you know, there are lots of maybe clearly people
will make children's books with this.
Or, you know, I mean people used to do all those, like fill in
the blank. People love the idea of like,
oh, you put your name in it, but you do that like most nights
now, basically every night. I mean that I'm home.
Oh my God, that's amazing. Are you searching for companies
with like AI in mind or would you invest in a company right
now? To put it a totally different
way, that is not sort of talking about AI like it.
Does every company in some ways need to be using language models
to be relevant to investors at the moment, or do you still see
like? People with like totally
different theses that are unrelated that are exciting to
you. We absolutely see companies that
are exciting. I mean I can think about pieces
of climate for example, that are not related to AI.
However, I think very similar to mobile.
If you're talking to a company and mobile should be a part of
their strategy or could add leverage to their strategy, you
want them to talk about it, right.
It doesn't have to be the first thing you're doing.
It doesn't have to be the core of their business, but it's an
important component of it. So if you're thinking about
education companies right, where you spend a fair amount of time
on direct to learner education, A I has been instrumental in
lowering the cost of creation in a lot of ways and personalizing
learning. It doesn't have to be that their
thing is an A I company, but we would be curious if that's a
tool set that adds leverage to what they're doing.
Healthcare, right. We spend a fair amount of time
and access to care. There's a lot going on there
about how AI can offer more personalized care and change the
cost structure. I would argue that one of the
most, if not the most most important thing to do in
healthcare right now is to change the cost structure, and
that's an important tool. Maybe they've come up with a
different way to do it that's, you know, also exciting.
So it's not a gating item for us, but it's coming up in a lot
of conversations. Yeah.
I mean with mobile it's a little more clear like.
Are you going to be there like there's this, it's a new way to
get users that sort of quickly growing.
You're going to be differentiated from your
competitors with like, you know the LLMS.
It's a little more varied in like whether it's like a tool to
make you more productive or it's not always clear to companies
like which. Piece of their business, they're
supposed to use it for totally, yeah.
And I think a big question is, is it customer user facing or is
it internal efficiency? I think for a lot of the
companies, right, the lowest hanging fruit is going to be
internal efficiency. Can you make tasks that you do
that add cost internally more efficient leveraging some of
these tools and improving your margin structure and that is
likely to come into play before it's a, you know, a user or a
customer facing tool. Do you see venture capitalists
doing that? Do you think like Llms will be
useful for what you do? I'm sure it will be in a lot of
ways. There are a lot of rote tasks we
do, you know, areas that we've been thinking about where it's
particularly useful. Obviously, rote tasks is one.
Companies have more of them, especially as they scale, than
venture capitalists that we've discovered.
But I'm sure there are ways. USV is a relatively boutique
firm, right? We're not doing so many
investments each year. A lot of it is dependent on a
small group of people sitting around in a room and really
hashing out our thesis and ideas.
It's not scale, right? Like it's kind of the antithesis
of scale in a lot of ways despite our interest in scaling
companies. And so it doesn't feel to me the
most natural fit. But we have a lot of data and
I'm sure we will, you know, think about using.
We're playing with a bunch of different things internally all
the time. I don't know that we've like
found it's, you know, sweet spot.
But the other place we think about its utility is where are
there complex interfaces that you use, whether it's SQL or
Excel, right, or it's Salesforce where people get hired
particularly to interact with an interface.
Or, you know, you can take an Excel class, right?
But it's all data on the back end.
And I think one of the lowest hanging fruits is transforming
that interface. And there's applications for our
business around that. So no doubt there'll be
intersections. I'm not sure we've nailed it
right now. It's shifting gears to the
Climate Fund. Have you invested out of the
Climate Fund in anything that's like truly non tech in some way
or it's more just it's tech but it's like super heavy capital
intensive hardware. It's more the latter, it's more
the latter, right? We did micronuclear reactor
investment. Really cool.
Micro. Honestly don't know.
Oh, the nuclear reactors are small.
They're actually in shipping containers.
Whereas generally, wow, reactors are really big.
Yeah, it's really cool. It's called radiant.
Exist or this is like they exist.
They can be built and piloted, but it will take a long time for
them to be really, you know, rolled out and commercialized.
And there's regulatory writ. There's all kinds of risk with
it. And we also think that nuclear
is an essential piece of the pie and changing the energy
spectrum. So both are important.
We think in our climate fund really deliberately around fund
construction, right. It was important for us to have
a nuclear investment in the fund.
It's also important for us to not have so many nuclear
investments in the fund. And so we think about that
balance really particularly, honestly, probably more
specifically than we do in the core fund.
I mean, small nuclear was very interesting.
Are there other ones that are like are fun to hear about at
the moment or that you think are particularly interesting in the
funds lots? Yeah, the Climate Fund has kind
of been fun because you know, I guess actually these days
between climate and psychedelics, like I have a lot
of party conversation people, but often times I don't.
And it's like here's a B to B marketplace I think is really
interesting but like you're not going to think, is that it?
People love to be like what do you investigate?
But the Climate Fund is actually like a gold mine cuz it's a lot
of really cool stuff. We have Remora which is doing
carbon capture off the back of semi trucks.
We've been very interested in how can you take existing.
We split the fund into mitigation and adaptation,
right. Mitigation is how do you
decarbonize the planet, right? How do you prevent more carbon
in the atmosphere and sequester carbon?
Adaptation is how do we adapt to a world where this is what's
going on, right? A world of kind where you're
going to have more extreme weather events, where you know
we have this changing ecosystem and planet, What do we need to
do to live in it? And so we put investments in
both in the fund. So for example adaptation we
have flood map right which is a data network around predicting
floods which is going to be enormous ly important given the
weather patterns that we're seeing mitigation we have
something like remora which is you know carbon capture off the
back of semi trucks. We have an existing, you know,
world of semi trucks driving across the country, very hard to
stop that, very problematic to the American economy to stop
that. But how do you adapt them to be
able to, you know, further mitigation of the climate
crisis? Well, you can attach these
hardware contraptions and capture carbon along the way.
So there's a lot of really interesting innovation coming
out of it. You know, I always say, you
know, if future generations get the ability to look back at
ours, they'll be very critical of where we allowed this planet
to get to, but amazed at what innovation could do to change
course. And they'll only be able to do
that if it does change course. And if it doesn't, it'll be mute
because they won't be there to tell us.
It's easy to fall into this sort of.
I feel like the tech mindset can sometimes fall into.
Oh, this problem will get solved.
You know, it's like there was just that article about the
Super white paint that is very reflective.
It's like, oh, we can just deploy that.
But obviously, you know, somebody has to do the solving,
which is also sort of the entrepreneurial sort of tech
mindset. It's like, yeah, the money has
to be deployed. Like somebody has to go do it.
It's not you can't just sort of like, oh, we tend to work things
out, you know, I mean that. So yeah, I guess that's the way
of say it's good that you guys are doing these climate funds
and obviously. Sort of where a firm like USV
goes, so goes a lot of Silicon Valley eventually.
Are you seeing the growth stage funds?
I mean I've written about lower carbon before.
Obviously Chris Sacca sort of came out super strong on the
early stage. You guys are now sort of coming
out strong and there are certainly others, but it doesn't
feel like. We've seen sort of the growth
stage at the same level or how are you feeling about like
follow on capital for the companies you're investing?
We've been very focused on this question.
First of all, there are some right, you have galvanized which
is really interesting. You have some both horizontally
interested in climate like a galvanized and then more
verticalized around energy or you know different pieces of it
that touch it. But overall we think there's a
dearth and you see some strategic come in right Benny
off. Some people have made huge
commitments that they're making good on putting capital at
growth stages behind his innovations.
But we don't believe there's the systematic growth stage capital
that this market needs. And it's not only just later
stage venture funds. My partner Albert, what a
really, really good blog post on this called the climate funding
stack or something like that. You should look it up.
But about this issue of building out the financing stack for
climate and the reason we think it's important is it's not just
raise a big growth fund. Often times these projects have,
you know, facilities involved. They may need different forms of
financing. You have to combine, you know,
an equity financing with different types of debt because
they're building, get something out.
It's not as simple as scaling software, but it's really
important to do. And so we think there's a big
opportunity for new funds to form with mixes of capital
structures that can support this ecosystem.
And we're been very active in talking to people and helping
them who are thinking about coming out and doing.
That part of the beauty of investing in software is like.
You know, if you do it long enough, you can.
I mean, I don't do it, but my sense is that you start to see
the milestones, that it's like this company, if we invest, if
you hit these milestones, you'll probably raise more money.
Or at least that was true, maybe less true this year.
But like how do you do that with climate companies where first of
all, they're much more different one to another?
It's not like okay, here's a SAS for X.
It's like here's a totally different company.
How do you figure out what milestones this company could
reach? Before to to get another round
of funding, it's a really good question and we spend a lot of
time on that internally at the early stages because I totally
agree with you. It's much more complex and
varied than you know. There's a there's limitless
blogs out there on you know milestones for SAS companies on
raising different rounds and this is not it And in some ways
the most complicated part is the market doesn't really know yet,
right. There isn't I don't think a
horizontal answer. And there's a lot that goes into
the climate fund, right? There's software companies,
carbon chain, which is carbon accounting for source of truth
for supply chains. That looks a lot like a SAS
company, right? The milestones involved are
going to be a lot like a SAS company.
It's going to be underwritten that way, you know.
But then there's you know the nuclear come radiant totally
different in milestones you can't do it off of revenue.
And so we do a lot of talking to the market, right, like before
we go into categories really doing our homework on what those
downstream investors would want to see.
What you know the expectation is to unlock different levels of
capital, how much capital is going to be necessary to get
these companies to the proof points and trying to underwrite
that. And as we all know, sometimes
that's not so clear at the early days.
We also we tailor the capital we put in to the different rounds
to that capital risk. We think about that a lot more
in the Climate fund in many ways than we do in the core fund,
because that ecosystem is evolving.
As in not just deploying a ton of money to something because it
will need it or what do you mean you tailor the capital, meaning
if we think that risk is higher, we may do a smaller seed, right?
We tailor our own exposure depending on the risks.
Involved. You do the stage.
You're like, oh, we'll do a seat.
Yeah, that makes sense. I said at the beginning of this
that I would ask you about your career and sort of looking at it
in this down market. I mean, you know, it feels to me
like, you know, there was a period where it seemed like
every promising up and coming VC and certainly I put you in that
category. I was like oh, should I be
starting a fund? Like did you consider starting a
fund when you went to USV and LIKE?
That for a while that seemed great, like you're going to get
a lot of the economics and like there's potentially more upside.
But then now, you know, I feel like many of those same funds
are the ones where LP's are sort of much more cautious and might
be the hardest to raise anyway. So that's me laying out.
What I see is sort of how things went.
But I'm curious, yeah, for you just like how you thought about
the decision to go to sort of an established firm versus maybe?
Setting out on your own, Yeah, I mean, a couple of things.
One, I actually think some of the new franchises and platforms
that are coming out are extremely exciting.
You know, I look at what friends of mine are building in all
kinds of different realms, whether that's like a Pace
Capital or what, you know, Justin April are building or 12
Below in New York or these kind of different platforms.
And you look at them and there's so much hustle, there's so much
perspective. The networks are so strong,
there's a lot to prove. But one thing I love about
venture is it really favors the hungry.
You know, you're only as good as the fund you're deploying right
now. All of those past successes can
make old partners rich, but they can't make you, you know, win
that next deal if you don't get out there and hustle for it and
you can be outworked and out hustled.
And I, you know, there are a lot of people doing it.
And so there is a natural evolution of platforms and Lps I
think are excited about them. So I actually think it's a
pretty interesting time. That being said.
Sorry to interrupt. Well, I'll let you keep going
with this point, but I mean Pittsburgh put out data that
affirmed that there is, it seems like Lps are favoring existing
firms. I mean, of course Lps are
favoring. That doesn't mean the sort of
the coolest new, right? Right.
Yeah, okay. As long as we're aligned on that
sort of being the universe, right, the data is the data
right. Like of course Lps are favoring
existing firms, right? And especially in times of come
all you pull to the kind of, you know, most obvious ones.
But there's also a lot of data that in many cases first funds
outperform, right. That like many platforms are
never as good as the first fund. I am, you know, banking my
career that USB will outperform USB's first fund, which is hard
to do because that was an epic first fund.
But I'm going to, you know, work my ass off until we do that.
But you know, there's a reason why and I think it has to do
with risk tolerance and hunger and it's a really cool element,
I think, of the venture ecosystem that's very much in
play right now. That being said, you know I
think everyone has their own set of aspirations and mine is to be
you know, one of the, you know, best investors of my generation
in terms of returns and firm building and working with and
behind companies that I can be proud to be a part of.
And that is kind of I've always been very clear on that being my
aspiration. It wasn't to start my own thing.
And so if I felt like I could accomplish those goals on a
platform I was excited about, you know that was what I wanted
to do. And and I think USB is really
unique everything from the way we're structured and set up to
how our partnership works. And I frankly don't think I
could. You know, I know I couldn't
recruit a set of more impressive partners if I went out and
tried. And, you know, I couldn't think
of a reason why that would have been a better choice for me.
What's your sense of how screwed like the venture capital asset
classes right now overall? I mean you know with I feel like
with interest rates going up, there's been more and more
concerned that just like the sort of median venture
performance isn't like good enough to justify.
Sort of the investments in a world where Lps can go
elsewhere, I mean obviously USV sort of is fine, but I'm just
curious like how venture broadly does affects you because it
affects you know, the financing, everything like that.
So yeah, what's your read of the market?
Probably most importantly, it affects the appeal of great
founders to start companies, right?
Like people start companies when they feel like funding is there
and they're excited about platform shifts and
opportunities. And so it matters a lot I think
of the broad perception for the talent, which is I would argue
in many ways the most important piece of it.
I think it's a mixed story. I think the vintages of the last
few years are going to be very tough for every obvious reason,
right. The entry prices, the reset of a
market, the potential outcomes, the crowdedness, all of it is
going to make a set of vintages very tough to prove out and are
going to be a little bit of a bloodbath to watch.
But venture is cyclical and at heart is about you know putting
early capital into powerful new technologies particularly around
shifting markets, right, the market creation and we're
straight in the middle of that, right.
We are seeing that happen. It's an essential time for that
to happen and in some of the most exciting ways.
Categories that we've long-awaited to intersect with
technology shifts I think are happening right Healthcare and
education and financial services.
I feel like those intersections are coming to fruition in a more
concrete way through some of these technologies that we're
seeing and products being built then has happened before.
And that's extremely exciting and we're seeing a dramatic
talent shift to it. More people want to go out and
start climate businesses. They want to work on things that
matter. It's less appealing to stay at
large platforms that are, you know, bumpy or late stage
companies where they don't know that you know their options are
above water and so they're going out and they're starting
businesses. So there's a lot of recipes for
the next. Set of years to be a very good
time in venture interest rates and chaos and all, but have we
all learned to be pretty cautious on entry prices?
Have we learned to slow down? I think hopefully these lessons
at least have some longevity, even though I know memories are
short. With large language models and
AI totally believe it and get it, it's like, OK, this is sort
of a transformational technology like.
We're in a downturn, but who cares?
It's like if mobile came around, you know, when the world was
ending, like a great VC firm should have tried to gobble
everything up that they could. And I mean some of.
Yeah, anyway, so, so I get that. And with climate to some degree,
there's more capital and interest and excitement and
belief sort of happening. I don't quite get on sort of the
healthcare education side. What like the technological
inflection point? Is at the moment or like because
I mean the regulatory problems have stayed the same.
I think some of the regulatory problems might shift.
But on the technology piece of it, I would argue the biggest
problem in those systems is a cost issue, right.
They're kind of purposefully exclusionary.
They are complicated. They are one-size-fits-all and
they are too expensive. It's actually the healthcare and
education have very different problems from each other in lots
of ways. But I think have that set of
issues in common. And the best way to change that
is technology, because in many ways that's a product problem.
And scalable technology that can personalize delivery of care,
delivery of education, can change a cost curve and create
new forms of access. And I think we are seeing some
of that technology be built and products come to life in a much
more accelerated way right now than we have before and in ways
that we're gonna finally break through some of that noise.
Our strong belief is that to your point on regulation is that
these systems are gonna change from the outside in that
fighting from internally in the structure and selling into them
is a slog and is incremental change.
But enough pressure from users, being able to use new products
and services at the right cross structure from the outside can
put pressure on and change structures outside in And I
think we are going to start to see that in important.
Great. Rebecca, thank you so much for
coming on the show. I really appreciate it.
Thank you for having me. That's the episode.
I'm Eric Newcomer. Thanks so much, Rebecca Cayden.
Shout out to Tommy Herron, our audio editor, Riley Consello.
My chief of staff, Annie Wen, our intern, is helping with
producing young Chomsky for the wonderful theme music.
Please like comments, subscribe on YouTube, give us a review on
Apple Podcasts, and subscribe to the Stop Stack newcomer.co.
Thanks so much. Goodbye.
Goodbye.