Acquisitions to be successful, my view is they should be small
or they should be large like middle sized.
Acquisitions are the most difficult for both sides to be
successful. I have drunk the kool-aid of Wiz
more than anyone on the planet, right?
And so to then say I'm going to switch to iced tea is super
hard, right? What's the way for somebody to
sort of break into being in your awareness?
Well, I'm not everyone's cup of tea.
Am I crazy? Yes, sort of.
I don't know. When Google announced it was
buying Wiz for $32 billion, one name quietly became the talk of
venture capital. Shardul Shaw, partner at Index
Ventures, was one of the first checks into Wiz.
And it wasn't luck. It was pattern recognition.
Shardul has spent nearly 2 decades at Index building a
reputation for finding the right founders before anyone else
does. Datadog.
Duo, Security Coalition. The list speaks for itself.
Today we get into the Google Wiz deal, his human first approach
to spotting the next generation of great founders and where he's
looking for his next big bet. I'm Eric Newcomer, the author of
Newcomer, the subsect that tracks the inner workings of
startups and venture capital. Follow me and my team's writing
at newcomer.co. And without further ado, here is
my conversation with Shardul, one of the top venture
capitalists in the Business Today.
All right, super excited. This is a big week for you.
I'm here with Shardul Shaw in the Newcomer Podcast.
Thank you for joining me. Thanks for having me man.
Did. So we're here, you know, in
part, I guess it's we should have like, you know, party hats
and stuff. Google's $32 billion acquisition
of Wiz, the cyber Israeli cyber security startup.
Clear, the checks cleared this week.
Is that right? Yeah, closed on Wednesday.
Yeah, and index and you are. You're the largest investor
shareholder, right? Yeah, and so for the party hat,
I'd prefer a Cerebral Valley cap.
I mean, we could have been matching at least.
Yeah, so I guess for for people just paying attention, like
explain you know why Google is spending all this money to buy
Wiz in the first place. Yeah, look, the the best
companies are always bought, not sold, right?
And, and it starts with the founding team.
It it's a remarkable run over six years, but it took over 20
for this to happen. The founders have had so much
trust. They're such different
personalities that when they came together to create Wiz,
they created a culture that could move so fast in a existing
category and really disrupt the market.
So I think ultimately what you're acquiring, whether it's a
small, medium or large acquisition, at the core is a
group of people and a culture that comes with it.
One person close to Google, when this announcement first came out
mentioned to me, it was just like, in a world of AI, cyber
attacks are going to become even more likely.
Obviously, we need to be very aware of cyber security.
In some ways, this deal is a sense that like Google needs to
be ready if there is like a major massive cyber attack, if
they need to defend their customers, obviously it's an
offering that they can provide cloud customers.
I mean, now, you know, since the steel closed, now we're at war
with Iran and that's obviously increasing the risk of
cybersecurity. So like explain, you know, where
Wiz sits in terms of cyber defense, why and why Google
would want and what what they're really.
Delivering the customers, I think you nailed that.
There's a a cloud tailwind, right?
More and more workloads are going to the cloud.
We've been on this transition for over a decade.
Finally, for example, over the last five years, the pharma
industry has moved all of their data to the cloud.
Second, there is a security tailwind, right?
There's more need to secure against risks for large and
small businesses across the world and the amount of risk is
varied. I'll come back to that in a
second. And then third is AI right to
everyone knows we live in an AI era and with more AI workloads,
there is a demand for more security on the back of those 3
tailwinds. It just so happens with is at
the center and like that's not by luck, right?
They've been intentionally crafting their business to be
there. They started with a platform
that serve large enterprises from the get go.
And so it's really complementary with all of the resources and
the AI infrastructure that Google has.
So take me back to the beginning.
I mean you what I think I was reading this was the Claude
synopsis, so hopefully this is correct.
But what you they stood you up for 45 minutes, the founder
before your first meeting or what?
What were you? What did you see when you first
when Wiz was first on your radar and why?
How? It felt like, have have you been
to an Indian wedding? Not a not a huge Indian wedding.
I've I've been to a 50% Indian wedding now that I yeah.
OK, so this story is like 50% true.
Like irrespective of the size, right, People are fashionably on
time. Yeah.
And so my reception of Asaf being a few minutes late was he
was on time. So Claude's got it wrong and
turns. Out you were not offended by the
you, is it? No.
And and I think a lot of individuals have had a similar
experience with ASAF, but you know, what started late really
escalated because in 72 hours we had a term sheet signed ASAF and
I had this unusual kind of chemistry and click from the
first moment that we met. I can't really like I can't
explain it right and you can't like prepare for that.
All VCs are salespeople. I'm not the best as you know,
but you can great VC. Definitely at this point with
Datadog and Wiz, we'll talk about that.
But you're saying not you don't see yourself as a salesperson?
Well, I think salespeople can be really prepared, but you can't
prepare for serendipity, right? And so sometimes you just click
with someone and it was both professional and personal.
And we're finding ourselves completing each other's
sentences. And so that was the first, that
was the first moment for me. It was on the back of another
friendship I had with Michael Sholoff.
Michael was the, at the time, he was the founder of Lacun
Security. Lacun, is this a pretty deep cut
into Greek mythology that clearly Claude didn't tell you
about, but I encourage you to look up afterwards.
He's this like priest involved in the Trojan Horror Story.
So Michael, who became a friend of mine, I invested in his
company. I didn't know anything about
security. And so he's like, I've got to
make use of Shardul as a board member.
So he sent me hunting for customer relationships and help
building out his management team.
Again, accidentally, Michael and I became friends after Fanny and
he had their first kid. I, I was on the I was on the top
three of of folks who got a phone call right because we
really cared about each other. And so Michael by pure chance
introduced me to Asaf and Asaf and I by pure chance clicked.
Fast forward a decade, Asaf calls me on my birthday and he's
like, hey, let's go and. It was much time for the deal.
It was. It was done.
It was clear like that this was going to be like it's you and
Sequoia are doing the first round, right?
Gilly, Doug Leoni. Well, no, Gilly, Doug Leoni and
I all joined the board at the first round.
And so when Asaf called, he's like, let's like we're working,
we're working on a new company, let's go.
I was like, I'm in. He's like, do you want to hear
what we're doing? And I was like, it's a detail,
which is a true story. And a week after we had wired
the money, we were together in San Francisco, he said, hey,
sure. We pivoted.
I was like, OK, great. Like we didn't write a memo
anyway. Like what, what are we working
on? And, and and so there was the,
the only, the only thing to invest in was like belief in the
founders. And again, we had this the
benefit of having a front row seat 10 years ago.
So we knew their character. We knew the lessons they had
learned within Microsoft after they sold the Adalim.
And as a consequence, we knew how they were thinking about
building a a culture and a platform from the gecko.
How much do you remember? How much money you put in right
at the beginning? No, I I couldn't give you dates.
I couldn't give you numbers. It was like us.
It was like, I imagine it was small relative to the overall
investment over time. Yeah, exactly it, it was like a
a standard seed investment. Later that year it was a we we
led the series. A a few months later, we let Co
led the next round and then like we kept going and, and so over
time we broke a lot of rules, right.
We invested out of four funds, which is the first time we've
done that in in index's history. First time that many funds or
across funds? First time that many funds with
Datadog, for example, we'd also invested across funds with a
number of. I realize this used to be out of
vogue and venture, and now everyone's concluded you have to
double down on your winners to succeed, right?
I think it's more complicated. So let's see if I, if I break it
down in the, in the industry, one of the things that's unusual
about index is we have one team across strategies.
So like many other large firms, we have a seed fund, a venture
fund and a growth fund, right? But most other firms have
specialization, which makes a lot of sense.
Like, people who think about early stage risk are often
different than those who think about late stage risk.
And so for those businesses, often doubling down requires
like convincing a different group of people, right?
And they have a different apparatus to make decisions.
And that's not all bad, right? Because when?
When? Holds you, it makes you honest.
It's like somebody else has to review and say, are we doubling
down on sort? Of a bad investment.
It's it's like a type of check and balance and it's a type of
specialization that ought to support like high quality
judgement calls. So it's a, it's a way of doing
business doesn't work at index. At index every time we've had a
silo, it hasn't worked. So we converged, I think in
2010, we converged our venture and growth teams into a single
team. So all of us are responsible for
all of our distinct fund strategies all over the world,
globally, yeah. Because that's another area
where firms also divide it up sometimes about.
Yeah, absolutely. And we can come back to like why
that's super hard and why we're like unusual in that dimension.
And it's not for everyone. This is not like a pitch on like
redesign your venture firm like it's just our culture supports
one team across GI. Do you have?
Given that you don't have separate growth investors, does
that make you more reluctant to do this sort of multi fund so
within? Within index it it's it's so
personality driven, right? So for me, in order to develop
deeper conviction time, I require contacts, right?
So I spend a lot of time with the management team.
I really like have a log into the product and I'm testing it
frequently. I spend time with the go to
market team. I spend time with the marketing
team without crossing the boundaries of a board member
kind of getting involved. And fortunately I'm not an
operator, so I can't really tell anybody what to do.
But I can learn a lot from contacts for a company that
helps because I can make high quality judgement calls on like
who to recruit, when and how and why, which can change the
trajectory of businesses. But for index, it gives me more
context now Second, as a personality, when I'm in the
sausage making, I see the warts, right?
And so as optimistic as I am as a natural born venture
capitalist of a fair amount of skepticism, right?
And as a consequence, I can get really close to warts.
And when I see flaws, I really study them.
So no, it's not easy for me to develop deeper conviction over
time. It's it's actually really
challenging right you? Understand what the potential
risks are of the business. No.
That's actually not true. I think far more about the
opportunity in the upside than risk calculus.
I actually think it's a fool's errand to to, you know, try to
attempt risk calculus. I think it's overweighted in our
industry, right? And it's like human nature, it
make the. Bet you have to see sort of the
big upsides, but I I thought you were saying by seeing the
awards, that's that's what gives you this sort of yeah, but.
When, like when you imagine if, if you start to see blemishes in
the room and they start attracting your attention, all
of a sudden it's harder to see beauty, right?
So it, it can be more difficult and challenging to see the whole
picture when you're attracted to awards because you want to talk
about problems to fix them, right?
So it's hard for me. However, the, the good news
about index is I don't make any decisions.
It's it's a true partnership. And as a consequence, at every
single phase, we're having debates, right?
We debated the market, we debated the product, we debated
the quality of the execution and attraction.
We debated gross margins, we debated strategy.
We debated so many things. And very few of our investment
decisions were actually unanimous.
What does that tell you? It tells you we have a culture
that promotes dissent because we want to get to the highest
quality judgement calls. We shouldn't confuse like the
judgement calls that we serially made with the outcome.
Like that doesn't mean the judgement calls were right.
But we went as a group into really high quality judgement
calls, which unlocks the ability to double down against
conviction. And you can see there were like
the some of the best firms on the planet with the best minds
that took a different view. They were not like wrong.
They just took a different view. Right was.
There so you end up in the largest position even though
there are three investors there Yeah absolutely right so that's
key So what was the next key decision like was there a
particular round or when do you think you really like put more
money in a way that others might have missed or that you're
you're proud of every single. One right?
Just like. Continuing.
Yeah, well. So so the Series A, what's the
context that maybe I rotated against?
There were two key customers, one of the two I had introduced
and the the buyer at that company is a he'll remain
unnamed, but he's an intellectual snob, right?
And, and he doesn't do any, do me any favors, right?
So when he made $1,000,000 purchase order decision in four
weeks and sent me a voice message that sounded like a
country song, I had distinct asymmetric information.
And I read into the qualitative of that signal more than the
quantitative #2. Soon after that company received
like conventional wisdom, which is like, hey founders, you guys
have sold some, some customers, right?
That's great. Now you should hire a couple
sales people, right to see if we can scale the apparatus of the
business and right place, right time.
There's an individual Colin Jones.
He was previously at Duo Security, a company I had
happened to invest in many years prior.
And I knew Colin Jones's mentor Jim Sib and I knew Sib's mentor,
Zac Urlacher. Urlacher is now a venture
partner with Index. Sib had joined another one of
our companies subsequently and I knew both Urlacher and Sib were
telling CJ don't join a company. Pre product market fit the way
to define pre product market. If it is $10 million of revenue,
I was like CJ they are wrong. Asaf was being told hire 2 sales
people and I was like Asaf that is wrong.
And so I got involved and CJ joined, right.
That gave us asymmetric information because we need the
personalities that unlocked the next round of financing.
I continue to spend a huge amount of time with, you know,
Kostick and, and, and AMI Ludwick.
AMI is this like genius who lives in the future, right?
And it's so challenging to talk to him because he's, he's like
always, right? But it's like Socratic and he's
like trying to lead you to truth because he's such a teacher.
What's what's? His role, What's he do?
He's ACTO. OK.
And Kosticka is world class product, right?
Like top 2-3 product leaders I've ever come across.
He's able to shape a promise that is current that he will
deliver on. He's also challenging.
And so there's there's constantly tension between the
two. And when I started talking to
them in depth about what the product road map and what the
product vision would be, the opportunity that was present for
Wiz just kept expanding. And so my view of what was
possible for the business continued to grow.
So we had to get more involved and, and like I can keep going
with like individuals like Dolly Rajeek who have been trying to
recruit for a decade when he joined the company, the impact
he made on the business or Fossil Merchant who literally
had introduced us off 2 years before he joined.
Like I, I knew the inflections of the business, the.
I'm going to stay on Wiz, but I want to digress for one second
for sure. I mean, you're clearly like, I'm
convinced, like a scholar of the people like has this, has this
like a sort of philosophy of really just like analyzing the
team ever LED you like a stray or like, I imagine it's tempting
to be like, these are great people, the numbers.
They don't say what the people should or like what, yeah.
What do you do in sort of other investments where you've have
you found this sort of disconnect between the people
and the money, you know? Where where I've I've been wrong
and I'm most insecure is making judgements of people over Zoom.
I think I have a really hard time finding connection and like
feeling someone over Zoom. And it's reciprocal, I think.
I mean, I think the first time we were on together, it was over
Zoom. This is way more fun, right?
Yeah. Exactly.
You sort of, yeah. And I, I think it's like body
language, it's micro expressions.
I have more comfort with pregnant pauses and like space
in a room. And so it's very interesting
Craddock for me. I have partners who are
phenomenal at like reading people over Zoom.
And so I don't make decisions now like I won't, I won't invest
in a founder over Zoom. An example, Asaf introduced me
to someone. Actually, I met them on Thursday
morning over Zoom. And I was like, guys, you know,
there's something here, but I don't make decisions over Zoom.
And I had some health stuff going on in the family.
So they were like, we're on the next flight.
And I was like, whoa. And they're going through Italy.
I'm like, I could just buy you a better flight.
And they're already in air. And so they land in New York
City. And 6:00 AM on Saturday we start
with a walk around Central Park. We hang out, lunch, you know,
drinks, etcetera. 2:00 AM we finish at Mckittrick Hotel.
Oh my God. I don't know if you've been.
To is that. What?
Isn't that where they used to do the those live shows?
The am I crazy? Yes.
Sort of. I don't know, but you are.
Crazy, but I'm not sure. About this story I'm thinking.
Of sleep no more. But Oh yeah, no.
That's totally that is that is I thought that.
Was called the Mckittrick. Maybe I'm.
Mckittrick hotel became sleep no more that I would not recommend
as like founder dating or like dating in real life.
Don't even talk. It'd be terrible.
Just found new dating dude my. Wife was so creeped out when I
took her there. I mean, for some people it's
like a it's a terrific experience.
Not your not not my scene. Yeah, but it's shut down now.
Kit trick, what I'm referring to, OK, has this incredible,
like Speakeasy bar, OK, where you walk up and they don't have
a menu and you tell them the direction of the drink that you
walk. OK, OK.
And then you walk next door and you you get into this like full
laundromat and you walk through the laundromat to get to the
like basically a mahjong parlor in the back, which has an
incredible mood and ambiance. And you get to see five
different. I think it's about 5 different.
Acts of close up magic through the night.
So I'm a nerd. I love you guys.
Love magic I. Absolutely do this is 1.
Of the things I definitely know about Index, you were like
magicians at parties. I love it at our.
Opening at our office opening in New York, I insisted that we
have a magician from Mckittrick come over.
So we finished the night at 2:00 AM at Mckittrick, my favorite
place perhaps on earth. And we shake hands on working
together, right? The day of the next day, we talk
about numbers, like, what is the deal?
Yeah. The next day, I tell my partners
I've done this right? And I ask for forgiveness, not
permission. And like, I think approximately
2 two weeks later, the company actually incorporates.
And what company is this? It's still in style.
Wow, it's the next one people should be chasing.
If if a founder gets you to be out till 2:00 AM, they're gonna
get your money. They're like, what, what, what
time in the day? You're like, this wouldn't still
be going on. If he's not, he's not ready to
check. Like I I want to learn that from
Olivier A a dated dog. He told me about the concept of
a no battery. Okay, right, So like at the
beginning of the day, your no battery is completely full.
By the end of the day, it's like wiped out.
So the way to get money for me, you try to get.
Information at the end of the day.
Exactly, exactly. Just keep talking.
To me, and eventually I just can't.
I can't hold it. So, so we're, we're sort of
telling the Wiz story. We, we learned the lesson of
like, you know, keep investing and sort of the firm deciding on
conviction. Like I guess another key point
in the company's history, which maybe you fit in as a board
member, I don't actually know, is sort of the will they won't
they with Google and sort of like, oh, do they go public?
Do they sell at a lower price? Like what?
What can you share about sort of that decision and how you
thought about things? Yeah.
You know, at a high level I've been on both sides right on on
supporting Wiz, for example, with acquisitions, supporting
Datadog with acquisitions, supporting Coalition with
acquisitions. And on the other side, 10 plus
companies of mine have been acquired by other businesses,
Duo by Cisco Signal Sciences by Fastly and and and and many
more, right. So I've seen both sides.
I, I think for acquisitions to be successful, my view is they
should be small or they should be large.
Like middle sized acquisitions are the most difficult for both
sides to be successful, right? And I think it's really
important for there to be a shared concept of success,
right. So small, small and large is
kind of the most important zip code to plan mid size.
Just because people don't get excited and they just walk away
or I'm trying to understand, you're asking what are the
common reasons that mid size yields fail or how come?
Yeah. So the most common reasons are
like integration #2 is notation. Enough to the company or
exactly? It's neither here nor there,
right? So it doesn't reserve the does
receive, excuse me, the, the TLC needed to make it successful #2
because it's neither small nor large, the acquired entity
doesn't have the space to make an impact, right?
Those are the two most common failure modes.
And, and so as you can tell, it's more human psychology than
like how does the product fit into the, you know, the, the
strategy. So small and large is #1 #2 I,
I, I learned this from Roy Resnick, who's one of the other
Co founders of, of Wiz a decade ago at Adelum.
One of his mentors is a is who's now passed is Zohar Zisopel.
A, a legend in like the early tech scene of Israel.
And when Adelum had an acquisition offer from
Microsoft, the first question Zohar asked the founders was,
what do you want to do? And I actually think it's a
profound, profoundly important question.
And I do subsequently tell founders what I think.
But the first question is always what do you want to do?
What? I mean, you know, Datadog is
public, you know, that's your one of your other huge
investments. It's I just checked, it's like
44 billion right now or something.
I have to check. Yeah, 4044.
I mean, at some level, yeah. It's, I mean, it's bigger than
the price we're talking about with Wiz, but I assume you make
more money off, I don't know how much you're still letting things
ride with data Datadog, but you know, a clean acquisition, you
get paid in cash as a venture capitalist.
That's a very desirable outcome. Or how do you think about the
advice that VCs give of, you know, go public, go the distance
versus everybody getting paid is, you know, a a great outcome.
Oh. I so I don't think about
optimizing exit like obviously from a fiduciary standpoint, as
a board member, one of your responsibilities is to try to
maximize shareholder value. So you see, you think about
that, but I wouldn't confuse that with the shareholder
interest of in what period of time, how much return do you
generate? I think that's you have to be
used as a founder. You should be really
conscientious if a partner, an investor, a board member that
you involve cannot distinguish the two.
I'm not sure I can, so you have to dumb that down a little bit
for me. What do you say as a board?
Member, I'm responsible for everybody, OK, right.
As a shareholder, I'm responsible for myself, right?
Different OK, So you, you have to be able to acknowledge like
your own interest and what's in in the collective interest.
But it's it's which is speaking to one part of your question,
right. One part of your question is
like, well, for your, for the investor, like it can, it can
look very different. You know, part of I think the
job of an investor board member is to push entrepreneurs past
their limits, right? And remove anything that's in
the way to really experience the fullness of ambition and even
sometimes, you know, kind of bring the goal posts further
apart. And so the same has been true
for for Datadog, right? Like years ago, they actually
years ago we we talked about like a billion in revenue as a
far off milestone. Right now we're talking about
like a completely different level of revenue as a achievable
milestone. So you're constantly kind of
pushing where the company can be, whether it's AM and a or an
IPO is more of like a moment versus a strategic, you know,
direction to push ambition. Does that make?
Sense it does, but they're also, you know, there's subtlety to it
in that. So it's like, OK, you, you're
like a shareholder, you're a board member.
You also, you know, I imagine being an index and like a you're
playing a repeat game. So even as a shareholder with
LP's, you're like, listen, doing great by founders and like
honoring the founder of vision in some ways is also in our like
fiduciary interest. So you have that sort of
complicated calculus. They're like the founders
themselves have like how much more do I want to keep working
on this versus exit? And then they also have the sort
of obligation of like, well, is this so much a better deal?
I mean, it's just is do you try to turn this into like a math
calculus or like how much is it pretty soft?
This sort of oh, how much more is this than I would have
thought first? How much do I want to do it?
You try and turn that into numbers or you just sort of live
in this sort of soft squishy thing it.
It, it does depend on the relationship with each
entrepreneur. So last year, there's one
entrepreneur who's got a terrific business that's growing
super well that was, was attracting acquisition interest.
And I was like, Hey, ask yourself 2 questions.
Like 1. Can you 10X your company and #2
do you have the stamina to do so?
If the answer to both questions is no, you should probably sell,
right? If the answer to the first one
is yes and the second one is no, maybe we think about building,
you know, a succession plan. If the answer to both is yes,
what are we even talking? Stop wasting my time.
Interesting. And those were.
Sincere. It wasn't like, oh, I'm leading
him to what I want. You were like, it depends on
which one. Well.
It can be, it can still be a conversation, right?
Which is like you sort of have a.
Theory, of which it is. The starting point is like,
well, what is again? What do you think?
Like, OK, you think it can be 10X, right?
Like let's talk about that. What what is the plan to like
10X? And I might disagree and say
like, well, I don't think the opportunity is here.
I think it's there or at you're staying at 10X.
That sounds to me like 50X, right?
So it's still a conversation, but the starting point is like
it's AI think it's a sincere and useful framework.
If someone does not see the opportunity, right, then it's
like, OK, we need to like search for the opportunity.
Like it's a again, it's always a conversation in terms of
stamina. It it's so introspective, right?
Like, you know, we, we debate like how much is our job to
listen to and not to put an intention, but how much of our
job is to inspire entrepreneurs? Super interesting question,
right? When someone doesn't have
energy, what do you do right? And I think you have to like see
the whole person. And that's why to me, it's
really important to understand someone's flaws, right?
And and have context and have like a real relationship so that
I can be more objective about. Have you had founders who lost
steam that you were able to resuscitate?
Or it feels like once they've sort of lost the energy, it's
like, OK, we need to change gears.
That's a really interesting question.
I'll have to think about that. OK, Yeah, the.
All right. So I mean people care about this
for a lot of reasons with the money being so large is
obviously a piece of it. What's it like?
So it's $32 billion sale, right? It is cash.
What does that? And is 2.8 billion the number
coming to index? No, I don't think we've talked
about it. I I saw is that the larger
numbers, larger numbers that we're talking about the?
All that money, it goes into a bunch of different bank accounts
or it first goes into like one bank account and then you
disperse it. So yeah. 32 billion gets sent in
a number of a number into a number of different places.
We have, you know, a group of limited partners, largely great
causes, right, that receive distributions.
We have a team including inside of index rather that receives
distribution. So ultimately, there's lots of
so it goes. To like if you're some
foundation isn't limited partner in an index, they get it sort of
directly. You get sort of the carry or
whatever the fund and so it goes.
You're not like routing. It's not like some billions of
billions comes into one pool. You should probably talk to Jan
or Martin about like payment. Infrastructure like money flows
and it's just fascinating that it's like I have an employee
much smaller scale, you know, it's like she just started, she
wired, you know, the 70K. It's just funny, like the actual
money movement when it gets so large, like I have friends in
private equity, you know, they'll send the actual check
and it's like you got to like make sure I think it's.
A really relevant question, but like, I was at I went to
Carbone's last night, OK. And I'm.
I'm with a colleague of mine from San Francisco who had flown
in and we're having dinner with an entrepreneur and I'm.
And it's her first time at Carbone.
I'm like, what do you think? She's like, it's great.
This neighborhood's really cool. And I'm like, I have no idea
what neighborhood we're in. She's like, sure, do it.
We're in Greenwich Village. And I was like, OK, cool.
Where is that? I've lived in New York for the
last four years. Yeah.
I'm explaining this to one of my other partners.
This morning. OK.
And she's like, is this consistent for you, like across
countries and geographies? Like do you know if you're
flying out of JFK, Newark or LaGuardia?
I'm like, I don't like I just take the Uber and I get to the
airport and I find my gate like it.
It drives Jan crazy because he's maniacal about knowing like
every single flight alternative and uses FlightAware to like
pinpoint which flight is his on the way to the airport.
But the logistics? I I live in your world as well,
or I'm not proud of this. I'm like geographically inept,
but I think it speaks to like sometimes like logistics and
movements are are are just not very interesting to me.
And and so similarly like how the money flows.
Like we got a great team that, you know, watches and and makes
sure it's appropriately handled and I trust them.
But did you? I've been to.
I went to Carbone one time. We went too late at night and,
you know, it's so it's hard to get into.
So then I was like, all right, like we got to really make the
most of it. We way over ordered.
We treated I Lilia is probably my favorite restaurant.
Have you ever been to Lilia? And like, that's like small
place of town. So we ordered Carbone as if it
was Lilia. So we had like, my wife and I
had way too much food at the end of the night.
We had like, espresso martinis. I literally thought I was gonna
like have a heart attack over that meal.
It was like the IT was just like the most.
It was, you know, yeah, gluttony to the point of real like
suffering over. Yeah.
Did you? But do you?
Do you like Carbone? Do you like I love the spicy?
Rigatoni yeah it's A and the dessert, like the the the way
they demonstrated right is is hard to resist that was the.
Other element, it was my birthday and they didn't bring
the first dessert with a candle and so then my wife was like,
oh, it's his birthday. Anyway, yeah.
Are you celebrating a lot or was your birthday September 7th?
Yeah, noted the candle's. Coming your way.
What is it? Can you say?
How do you stay motivated after like such a huge exit?
It's all. About the next relationship, OK,
We don't think in terms of deals by the way, right.
Like I think most of the industry is geared around deals.
They talk about like the number of deals, the amount per deal,
like they talk about chasing the next deal.
We think in terms of relationship that the next
relationship that we build depth in is the most important
relationship. And that will lead to accessing,
assessing, winning, supporting and exiting great investments
that generate terrific returns for LP's.
But what's motivating is like it's all about the people,
right? And so I just go back to the
this impossible art of, you know, studying, you know, people
like human beings. I'm less of a sociologist and
anthropologist than like a psychologist.
Yeah. But it's like there's nothing
better. It's it's the most fun.
How did I have? If I'm a start up founder, how
do I sort of get on your mind or like how do I sort of start this
relationship where like it needs to be?
I was at a company that you respect through somebody you
know, or like what's what's the way for somebody to sort of
break into being in your awareness?
Well. I'm not everyone's cup of tea,
right? So it it should not be
everyone's mission statement to like get into my awareness.
The fastest path right is through a warm introduction
right, right. Think I don't know how you met
your wife but like we went to. College together.
Yeah. I I.
Went to high school together with my wife.
I took her to homecoming. And so, you know, it just so
happened we had the same last name, not because we're second
cousins or anything, but you know, we, we had lockers next to
each other. So we knew each other for our
lifetime. But when a friend introduces a
friend, you, you just have many more priors.
You likely you're more likely to have shared values and alignment
around a range of different opportunities in the world.
And and so there's it's easier, I think, to find connection,
right, going back to how Michael connected me with this off.
And so it's it's not for me in terms of like being efficient,
right? Cold e-mail me cold LinkedIn me
like I, I like I'm on it. But a warm introduction is, is
the most efficient path. And, and it, it's, it's usually
also the best way for someone to figure out if they even want to
spend time with me. Like, you know, again, most
venture capitalists are terrific salespeople.
The the best thing an entrepreneur can do is
reference, right? So go talk to entrepreneurs that
I've worked with, Like hear, hear what like.
What their side of the story is and then decide like, do you
actually want an introduction to me or or to anyone else totally
changing gears. What, what categories are you
hunting for now? Like you've sold a cybersecurity
startup. Does that mean, oh, I'm free, I
can do the category again, like reinvent it?
Like what? What are you chasing right?
Like in terms of themes, like what?
Are you really looking for it? Yeah, I'll try to.
Parse it into two dimensions. One, obviously we're in the AI
era and everything is related to AI and so I think it's a really
relevant question to think about what categories are interesting.
I'm not a top down thinker. Like it's just not my skill set.
I'm a bottoms up person like and as a consequence, I start with
the people when I met June at simile, right, which is aiming
to simulate. Yeah, you wrote about so like
he's he's got the imagination to simulate the entire planet, yet
he's so focused on delivering value to fortune one hundreds
like in the second sentence and he's talking me through like
Pocs and MO us and different terms like that contradiction in
June was so compelling and then it got like there's so much
depth to the portrait when I learned more about him as a
studio artist, but also his Co founders, Percy and and Michael.
And then I learned even more when I spent a significant
amount of time with Lanie and then he pulled in Mihika, who
we've known for years. And so like the enrichment of my
enthusiasm or on simile starts with the people.
And it just so happens I think it's going to dominate a
category because they have moral authority When when I invested
in Parag at parallel. I don't know if you've had a
conversation with him yet. Yeah, yeah.
He announced one of his stations on stage right, But I.
Wasn't sure if you guys were like one-on-one.
Yet actually I think yes, at a dinner.
I've no, I don't know. We haven't like hung out, but
I've spent time with him so. Prague's amazing.
I love him. When we invested like first we
went on a walk, right? And it was supposed to be 45
minutes instead. Instead it was like an hour and
a half, two hours. And I was like, I don't know
what's going on, but we just like clicked.
I asked him like, how do you learn?
And he's like through adversarial conversation.
And I was like, I can do that. And so we've, we've had a
phenomenal relationship, but leading up to our investment, I
did a lot of references. I, I, I hadn't known him as
like, you know, beyond the, the celebrity of like CTO of
Twitter, CTO of Twitter, like I, I didn't know the human being.
And so I did a huge amount of like referencing, including
talking to his wife when I wrote the memo internally.
There's nothing about his business because he didn't even
know what he was going to work on.
So it's just like 5 pages about notes on Prague full conviction.
We invest together with Vinod and and and Josh in the first
round and and then I, I, Josh a couple minutes ago at.
First round, OK. In the first.
Round at first round, yes. It's a commercial for Josh.
I do. I'm a big fan of both.
But after we invest the wires in the bank, I I ask Prague, I'm
like, hey, like, why'd you let me in?
Like we've known each other for six months.
You've had relationships for a decade, right?
So like, how did I receive this honor?
And he's like, sure, duel, like you made it so painful.
And he's like, if you take an easy decision this seriously, I
want you on my side. We subsequently Co led the
Series A with Mamoon and now he's working on web search for
AI agents right. And as the world has become
agent 1st and agentic web search is such a natural requirement
for the best companies in the world.
And so the company has taken off.
But sincerely, it wasn't a category.
It wasn't like a story. I'm.
Following the people. I'm not chasing categories.
Yeah, I don't know. How now the inverse, the second
part of your question, which is like, are you going to do
something else in cloud security?
You know, it's something I, I, I worry about like I've, I've had
so much, I've had such a front row seat that what I think is
the market leading company in cloud security that I'm actually
riddled with bias. So I'm not sure I can be
objective in taking a view on who can.
Now you're like too much of the expert.
You're like, I'm used to trusting that the founder is the
expert. Now you've developed expert.
It's not, it's not expertise, it's bias.
OK, Like I have drunk the kool-aid of Wiz more than anyone
on the planet, right? And so to then say I'm gonna
switch to iced tea is super hard, right?
So the beauty of Index again is we it's a partnership model
right there, super talented investors like Johanvi, who's
also focused on security that can compliment me, right?
And so is there more opportunity in and around cloud security?
Maybe, right. Am I going to be the biggest
bull on competing against Wiz? Absolutely not.
What? Yeah.
What did what did you want index to be?
I don't know in 20 years or like what's we're, we're in such an
odd time in venture. You know, the mega firms like
keep getting bigger. Like there are firms clearly
pursuing sort of AUM and and dollars that they're managing.
Like how do you think about sort of that trend and how much is
index chasing sort of scale of capital and like how do you
really want to distinguish the firm over the next couple
decades? So the.
The core of index is. It's like a machine, right?
We create a culture that can recruit, nurture and develop
great people, meaning investors, right?
And strategists like we can do that with our team.
The consequence is we can attract and nurture and develop
greatness in entrepreneurs. I want to make that machine more
and more effective and outlive me.
That's the most important thing Now, the consequence, I believe,
of raising more and more capital.
It's it's like supply, demand. I'm, I'm a youth Chicago
economist. Like, I get it, right, public
market investors can't access private market companies, right?
You've written about this and therefore the Russell 2000 is
now these private companies. And to get access to that, you
can, you know, invest in, in, in mega funds.
That's part of the the like. Thrive.
I mean, with the rumors, they're like telling on a Brewer, stay
private. Like we we'll just keep doing
rounds. You know, there's like, almost
even even the investors who might want to see an exit seem
to be encouraging founders to say private in certain ways.
Yeah, I don't know. Yeah, that's.
Interesting, but that's. Interesting.
It, it, we can talk about that, but there's a, there's a place
in the world for that, right? And I totally have respect for
individuals who see their business model as like AUM
collection, right? Like respect and and there's an
opportunity and you should go chase that.
I think for us to succeed in attracting, developing and
building greatness. It's about the craft, right?
It's about a the focus on the individuals internally and the
entrepreneurs that we recruit. And so not scaling it is is kind
of the point. But it what what is the fund
size right now or we have like? A few 100 million seed fund, a
billion dollar venture fund, $2 billion growth fund.
So we're like large enough to be really relevant across multiple
stages to some of the best companies in the world, right?
But I think focus, sufficiently focus to attend to the craft.
Have you? Do you do SP VS on top of it or?
I have not I I'm not a fan of SP VS personally.
It's like it's confusing to me, you know?
Like is it my main business or not is how I think about it.
If yes, then like I have high conviction.
I want to invest, set up my main funds.
The SPV is like, well, I've gotten access, right.
Should I monetize it right and make some economics off of it
that that's like how it feels? And so it's like it's it's
satisfying, like, and I don't mean this pejoratively, but it
like it satisfies the greed in me, right, right, more than the
artist in me, right. So I'm in service of the artist,
right? I think that might, yeah.
I think that's one of the challenges covering venture
capital overall. It's like sometimes it's like
it's a money game. On some level.
You're like, oh, shouldn't you be optimizing for the money?
But then there is sort of this aspiration of like, oh, there's,
there's still an art to it. And like that's sort of like the
crass way to make money. But there's an argument some of
these firms, I mean, I don't think it's.
Crass. OK, I I mean, I, I don't think
it's crass at all. OK, I, I, I'm just saying it's
my, it's my personal style and preference, right?
Like if you want to raise SPVS, like God bless, it's totally
cool with me, but there's a limit.
To how much you'd put of a single company in a fund, right?
I mean, at some point, you know, that's.
A it's a really important question and it's still
something I'm trying to develop skill in, right?
This is the question is like asset allocation.
So how much do you concentrate within a given fund?
And, and I've talked to a lot of different folks from Thrive and
Lightspeed and Sequoia, like a bunch of my friends about this
concept of, of how much to concentrate.
I, I, I actually like, I'm still developing that skill, you guys.
Have sidestep the big foundation model companies, is that right?
Or sidesteps? Maybe not the word yeah.
Sidesteps not the not the right word.
We've definitely participated in labs and like Foundation labs
and Neolabs, but we aren't playing statistics with like put
a small or large amount of money into every, you know, team that
comes out of Anthropic or open AI or other maybe labs.
I mean just. So we sidestep, I mean, I guess
portfolio theory. Yeah, I mean, there's a lot, you
know, like Lightspeed, I mean a huge percentage of their fund I
think isn't anthropic now really.
And a lot of their. Yeah.
So you just made me think of that with this sort of
anthropic. Also, you know, in terms of this
SPV conversation, I understand there are firms where they got
in early like, and you don't have to weigh in all this, but I
think like, you know, like Spark I think got in, in my senses.
They didn't necessarily use the allocation in every way they
could have. And then you have other firms, I
think like Menlo, where they're fairly aggressive and like
having access and doing SPVS. And so that venture capital has
just become in some ways like a different business in that like,
yeah, that because there's so much growth investing happening
adjacent to to venture capital. There are no sacred cows, right?
So maybe I revisit the concept of SP VS in a in a couple years
when I'm exposed to like the next Anthropic, I don't have
enough money. Usually what I do when I go to
my partners and I'm like Max conviction, I'm like, tell me
the maximum amount of dollars we can invest in this company,
double that. That's what I want to do.
And they're like. The do you guys, does everyone
in index have to or what's the level of agreement that you need
across the firm to do a deal we're?
Consensus oriented, OK. So like just majority or yeah,
it's like a it's. A little bit so we can vote one
through 10. You can't vote 5 or 6 if it
passes a certain threshold. The answer is yes.
So if someone were like it's a one right that that makes like
the calculus a little bit more challenging.
Largely it's consensus which largely follows like simple
majority. Can you?
Revote or it's like it's one vote and then it's over.
Great question. We do do revotes.
I recently studied and I don't think we're that great at
revoting Interesting. I think what no matter I don't
know why it is, but our first impressions are pretty are
pretty good like the. Revote, I imagine is like the
partner who likes the deal, like is like, how do I get more
people around this? And no, it's not.
Politicking. It's like, hey, the discussion
we had was based on a set of inputs and two things happened.
1 is like I studied and I think the inputs are slightly
different or we are significantly different and so
we should revote with a different set of inputs, right?
The, the second is, Hey, this is how you interpreted the input,
like partner XYZ, like I want to talk to you about that.
And two things can happen. 1 is like, oh, I hear you now.
And I, you know what, like, I think that's totally right in
terms of this judgement call, like not going to revote, not
going to move it forward. Sometimes in that conversation,
it's, it's a discussion and the person's like, oh, I didn't see
that point of view. Like we, we didn't have that
discussion in the investment committee.
And as a consequence, I want to change my view because now I, I
misunderstood. So we have that like ambiguity
of like conversation. We have a culture that again
supports like dissent, right? And you can only have dissent
and ambiguity when there's a lot of conversation.
Going back to one of the points you made, like one of the
reasons I think most firms have not been successful across
geographies is it requires communication, right?
And and our business is so trust based that you have to
constantly communicate For many people in our industry,
communication feels like a tax. Communication feels like a tax.
You should not join index because we communicate a lot and
we like each other. So it's fun.
But that that supports like dissent and ambiguity and
conversation. I still think though, like
despite those re votes based on like good intent and more
inputs, the first time we vote we're usually right, right?
The I got asked on my last podcast episode by Barry McArdle
at Hex whether I thought the best venture capitalists like,
you know, roughly put, were like obvious at the time or not.
And I'm curious what you obviously know this much better
than I do. Like, I mean, you you look at
Wiz. I mean, it's like you guys, you
know, you're more storied now in the rearview mirror, but like
it's a good set of investors from the beginning.
Like how much do you think your best?
And Prague obviously was already sort of like Twitter famous when
you did that investment. Like how much do you think your
best deals? It's like those were like, it
wasn't clear maybe the price, but they were obviously like
strong deals at the time. Or there are ones where you're
like, people didn't see it. And what's your philosophy on
the sense of like the hot deal? I don't think there's anything
that's obvious to. I'll give you just two examples
of evidence. Right.
Like thank God 20 plus firms passed on Datadog before I
called out the Series A like right?
Not obvious Wiz. There's one investor who
increased ownership at every single opportunity, obviously.
I'm not saying there's no skill, like no, I'm just saying.
If it were obvious, everyone would have behaved in the same
way, right? And everyone didn't.
And again, I'm not confusing those judgement calls with being
right. Let's not.
Let's like there's confidence and humility.
We can both and not crossover to Eric, so if it were obvious, the
counterfactuals would be different, right?
The and I I assume they're all there's plenty of.
Deals where it's like I'm not an investor in HECS, right?
So maybe that one's obvious. Like I, you know, I've never
met. Right, yeah.
And there are lots of deals that are hot.
You have to pick like, you know, which like hot deal also, you
know, pans out because they're a lot, you know, I I feel like
covering venture capital. I mean, this is a consumer, but
far from it. But like I broke the seed in
Series A of B real. There was also like hop in those
were both deals where it's like those could sort of like, you
know, they were sort of like, you know, strong signal.
You got it at the time and then it doesn't last.
And so, yeah, the the sense of like a hot deal doesn't always,
you know, obviously live the test.
Yeah. You, you know, look, one of one
of our, I think we've talked about it before.
We've talked about like sins of omission, right?
And one of the sins of omission is don't argue with traction,
right? Another way of saying that is
like, when there's momentum, like there's there's a higher
probability that the company might be successful.
And so that expressed in investing is this potentially
like deal heat hot deal like FOMO thing I feel like?
Sometimes there are stories that I should write that they almost
feel like too straightforward. You know, it's like, oh, that if
I did that story, it's just like, Oh yeah, that'd be, it'd
be easy. You know where it's like.
Just mixing it up but like. In some ways it is the same sort
of thing. It's like, no, I need to do the
hard story that sort of like, you know, causes turmoil.
Like I really. Yeah, anyway, but sometimes.
Yeah, like having a point of view can still be differentiated
when there's a common understanding, right?
And so you can still express the significant returns right into a
terrific company, even if there's a consensus view.
So that that's where I'm, I'm being a little flip, but I'm
trying to become more precise and not so binary in terms of
like, oh, every, everybody sees it, right.
Last question for entrepreneurs like what do you think they
should learn from the Wiz journey?
Oh, I. Think imagination is stretched
now, right? Like more is possible in a
shorter period of time from anywhere in the world.
You can approach large enterprises and deliver value
in, in unforeseen moments. Like I, I, I think that not just
in Israel, right, like globally, we're going to see more ambition
on entrepreneurs. You're seeing from new countries
or just like? Any entrepreneur who studies Wiz
will know that more is possible today than was five years ago.
Great. Sure.
Duel, thank you for coming on the Newcomer podcast.
It's so fun. Thank you.
Thanks man. That's our episode.
Thanks, Chardul Shaw for coming on the show.
I'm Eric Newcomer. You can follow my writing and my
teams writing at newcomer.co. Please like, comment, subscribe.
Excited to be a YouTube hustler now, so, you know, give us your
comments, ask me, you know, whatever it is.
Tell us guest suggestions if you're hungry for more podcasts.
I'm also one of the Co hosts of the Through Valley show with my
friends Max and James. Otherwise, see you in this feed
in a couple days. Fine.
Probably in a week. We're publishing.
Yeah. How's the cup?
All right. Thanks so much.