Podcast Summary
From Volunteer to Venture Capitalist: Sarah Cannon's Unconventional Path: Starting as a volunteer during a transition period led Sarah Cannon to a role in the Obama administration and eventually to a career in venture capital at Index Ventures. Persistence and challenging the status quo were key to her success.
Sarah Cannon, a guest on Angel podcast's season 4 opener, shares her journey from working as an economic advisor for the Obama administration to becoming a venture capitalist at Index Ventures. Her entry into the Obama administration was unconventional, starting as a volunteer during the transition period, and eventually being offered a role due to her math skills during the housing crisis. Despite the lack of experience in the field, she persisted and even challenged Larry Summers. This episode also touches on topics like productivity tools, business intelligence, and the future of work, including the gig economy and remote work.
A debate on economic policies for poor areas: Economic efficiency vs social compassion: A debate on policies for poor areas continues, with arguments for and against place-based policies to boost economic activity in struggling areas
During a conversation with Barack Obama, a student advocated for more policies to help poor people, specifically place-based policies to incentivize economic activity in struggling areas. Larry Summers, an economist, argued against this, stating that historically such policies have not been effective and that economic activity should be allowed to move freely. The student countered that people make decisions about where they live for reasons beyond just jobs and that many people lack the ability to move due to financial constraints. Obama, meanwhile, emphasized the importance of growing the economy as a whole, which would benefit everyone. This conversation highlights the ongoing debate between economic efficiency and social compassion in policy-making.
Decoupling between market growth and wage growth: The economy benefits from immigration, but policies should ensure fair competition and positive impact on all populations
While the stock market, specifically the S&P, has been performing well, wages for the average person have not kept pace. This decoupling between market growth and wage growth is significant and has political implications. Immigrants, particularly high-skilled ones, can contribute positively to the economy by paying taxes and creating jobs. However, it's essential to consider the impact on certain populations who may directly compete with them for jobs. Hiring the right people for your business is crucial, and LinkedIn Jobs can help by screening candidates with the necessary skills and qualifications, allowing you to focus on other priorities. The economic impact of immigration is generally positive, but policies should be in place to mitigate any negative effects on specific populations.
Importance of LinkedIn presence for startups and personal growth: Use LinkedIn for startup recruitment and personal branding, Twitter for engaging in topical discussions, and consider attending elite universities for professional growth.
LinkedIn is a valuable tool for startups looking to find top candidates. Sarah Cannon, a guest on the podcast, emphasized the importance of having a strong LinkedIn presence. She also shared her personal experience of being persuaded to become more active on Twitter, which she found to be an addiction for smart people engaged in topical discussions. Sarah also shared her experience of choosing between Harvard and Stanford for her MBA, ultimately deciding on Harvard after an offer from a former boss. She joked about the rivalry between the two prestigious universities and the insecurities that come with attending one over the other. Overall, the discussion highlighted the importance of using social media platforms like LinkedIn and Twitter for professional growth and networking, as well as the personal and professional benefits of attending elite universities.
From Uncertainty to Success: Sarah's Career Journey: Networking and chance encounters can lead to unexpected opportunities and successful careers, even in unfamiliar fields.
Having the right connections and opportunities can lead to successful careers, even if it means starting from an uncertain or unfamiliar place. Sarah's story illustrates this idea well. She went from being unsure about her career path after graduating from Harvard, to interning at Warburg Pinkus through a chance encounter with a newspaper article. Her experience there sparked her interest in emerging market investing, and she eventually landed a job at Capital G, Google's corporate investing arm. Throughout her journey, Sarah encountered various challenges and learned valuable lessons, such as the importance of networking and the need to clarify the nature of her role to founders. Despite the complexities of the venture capital world, Sarah persevered and found success.
Assuming communications are public: Be mindful of what's being communicated: In today's world, assume all communications will be made public and practice transparency to avoid potential damage to reputation or legal issues.
In today's corporate world, communications are tracked and everything is public. Therefore, it's crucial to assume that all electronic communications, whether encrypted or not, will eventually be made public. The speaker emphasizes the importance of being mindful of what is being communicated and assuming a level of transparency. Furthermore, the speaker shares an anecdote about the founding of Index Ventures, a venture capital firm, and how Danny Reimer, one of its founders, helped establish the firm's European presence. Index was founded 25 years ago in Geneva and later moved to London, where Danny opened the office. Danny played a significant role in creating the venture ecosystem in Europe and helped expand European companies to the US market. Later, Index also expanded to help European companies expand to the US. Today, Index has a billion-dollar growth fund and a $650 million venture fund, with partners investing out of both funds and doing all series of deals.
Index Ventures offers various funds for different stages of investment: Index Ventures welcomes companies at any stage, offers funds ranging from seed to Series A, and uses SPVs for larger investments, providing ease and benefits for investors and founders.
Index Ventures, as a venture capital firm, welcomes companies to approach them at any stage, and they will determine which fund is the best fit based on the investment amount required. The funds range from seed investments starting at $50,000 to Series A investments of up to $20 million. Index Ventures prioritizes a compelling founder and idea in attractive markets for seed and Series A investments, while Series B and above investments require real traction and product-market evidence. Founders do not have to worry about which fund to approach, as Index Ventures will handle the determination. Additionally, Index Ventures uses Special Purpose Vehicles (SPVs) to allow up to 250 accredited investors to invest up to $10 million into a company. SPVs, managed by Assure, have become increasingly popular due to their ease of use and benefits for both investors and founders. Assure's innovative software platform, Glassboard, automates the entire investment experience, making it an attractive option for those looking to invest in a group or access deals with larger checks. During a partner meeting for a Series A investment, the focus is on the founder and the value proposition they present, along with the size of the opportunity. Consensus is not always required, but a strong case and compelling argument can sway the decision in favor of the investment.
Building strong relationships with founders through holistic assessments: We prioritize strong founder relationships, evaluate market size and margins, aim for high-quality recurring revenue businesses, consider niche markets and emerging trends, and value flexibility to make unconventional investments.
Our venture capital firm prioritizes building strong relationships with founders by having all partners meet them, ensuring a holistic assessment of their business and potential for growth. We evaluate the potential market size and margins of the business, aiming for high-quality, recurring revenue businesses such as enterprise software. However, we also consider niche markets and emerging trends, acknowledging that exceptions to the rule exist. Our investment committee values flexibility to make unconventional decisions and invest in businesses with unique potential, even if they may not fit neatly into traditional categories or have initially challenging unit economics.
The gig economy offers flexible jobs with income-on-demand: Government efforts to classify gig workers as full-time employees face resistance. A potential solution could be a partial contribution system for healthcare benefits based on hours worked.
The gig economy, which includes platforms like Uber, Lyft, Postmates, and DoorDash, offers millions of people flexible jobs that they prefer over traditional full-time employment. These workers, many of whom are supplementing their income, value the freedom and income-on-demand these jobs provide. The government's efforts to classify them as full-time employees is met with resistance, as many prefer the flexibility of freelance work. A potential solution could be a partial contribution system, where employers contribute healthcare benefits based on the number of hours worked. This acknowledges the changing nature of work and the need for government policy to adapt. Ultimately, a third tier between full-time employment and 1099 work could emerge, with benefits triggered based on hours worked or income earned. This approach would ensure that freelancers, regardless of their profession or income level, have access to essential benefits while maintaining the flexibility that comes with freelance work.
Discussing Flexible Housing Solutions and Income-Based Healthcare Benefits: Proposed idea suggests determining healthcare benefit eligibility based on individual income, around $20 hourly or $40,000 yearly, to encourage choice and responsibility while addressing healthcare issue. Implementation challenges exist.
Zeus Living offers flexible, smart housing solutions for those on the move, with essential amenities, convenience, and security. During the discussion, the topic shifted to potential solutions for income-based healthcare benefits. A proposed idea suggested determining the cutoff for companies to provide benefits based on an individual's ability to afford their own healthcare, estimated to be around $20 an hour or $40,000 a year for a household. The idea encourages individual choice and responsibility while addressing the healthcare issue. However, the conversation also highlighted the challenges in implementing innovative ideas in the political sphere.
Learning from Past Mistakes: Mistakes can provide valuable lessons for creating better solutions, but regulatory infrastructure must adapt to accommodate new business models like Uber's
While mistakes can be made, such as Bloomberg's stop and frisk policy or the US breaking the Universal Declaration of Human Rights, it's essential to learn from them and strive for better solutions. In the case of Uber and similar companies, offering minimum wage and benefits to full-time workers could be advantageous for both the business and the workers, but the regulatory infrastructure needs to catch up to allow for such flexibility. Ultimately, trusting individuals to make decisions for themselves, while providing them with necessary information, could increase upward mobility in America.
Reimagining Education for a Changing World: Invest in education throughout life, learn from successful models, foster open debates, and elect qualified leaders to address pressing issues
The current education system could benefit from significant reforms, such as allowing more investment opportunities for the average person and implementing continuous technical education throughout one's life. The speaker also emphasized the importance of learning from other countries, like Germany and South Africa, which have successful models for worker representation and technical education. Furthermore, they expressed a desire for open and vibrant debates and discussions, allowing individuals to evolve their views and learn from one another. The speaker also highlighted the importance of having qualified leaders, regardless of personal opinions, and the need for new economic proposals to address pressing issues like climate change.
Government loans for education in high-demand fields: Government loans for education in high-demand fields, with extended repayment periods, could reduce student debt and make education more accessible. Emphasis on early childhood education and European-style social models with universal daycare and education.
The discussion revolves around the idea of the government providing tax-free, long-term loans for education in high-demand fields, with the condition that the recipient pays it back over an extended period. This model could potentially solve the issue of student debt and make education more accessible. Another key point raised was the importance of early childhood education and making it widely available to ensure children's capabilities are maximized from the start. The conversation also touched upon the need for a balance between capitalism and social welfare, and the potential benefits of implementing a European-style social model with universal daycare and education.
Identifying game-changing companies and securing investment: Proactively identifying unique investment opportunities and demonstrating high conviction can lead to significant returns, even if it means jumping the funding round queue.
Successful investing involves identifying unique opportunities and demonstrating high conviction in those opportunities, which can sometimes mean jumping the gun on funding rounds. This was exemplified in the investor's experience with Looker, a company that democratized business intelligence with their innovative language, LookML. Despite the company not actively seeking funding, the investor presented them with an attractive term sheet, which required the founders to weigh the pros and cons of accepting preemptive funding. This approach paid off, as Looker went on to be acquired by Google for a significant sum. Overall, the conversation underscored the importance of identifying game-changing companies and being proactive in securing investment in them.
Preemptive investment: Pros and Cons for Founders: Founders should weigh the benefits and drawbacks of preemptive investment offers, including potential pressure, limited future funding, and fit with investor. Meeting with multiple investors is advised.
Founders should carefully consider the implications of accepting a preemptive investment offer. While the initial valuation may seem attractive, it could potentially put unnecessary pressure on the team and limit future funding opportunities. Founders should also consider if they truly want to work with the investor, as those who preempt may do so because they wouldn't win in a competitive process. Additionally, founders are encouraged to meet with multiple investors to ensure the best fit for their company. On a different note, the speaker also emphasized the importance of self-defense for women, using the analogy of being prepared for unexpected challenges in business to the importance of being prepared for potential physical threats.
Honesty and clarity in founder-investor conversations: Be clear about reasons for taking investment and have a solid plan for its use. Avoid distractions and focus on core business growth. Bullish on China and India, particularly India's timing. Focus on Europe and US but open to opportunities in self-possessed entrepreneurial countries.
Understanding a founder's motivation and having an honest conversation are crucial when dealing with potential investors. It's essential to ensure that founders are clear about their reasons for taking investment and have a solid plan for its use. Avoiding unnecessary distractions, such as excessive focus on office design or non-core expenses, is vital for the success of the business. Regarding international opportunities, the speaker is bullish on China and India but believes that India's potential is a question of timing. Index Ventures is currently focused on Europe and the US but remains open-minded to opportunities in other countries, particularly those with a rebellious and self-possessed entrepreneurial spirit, such as Australia. When considering different regions within Europe, it's important to note that some countries produce unicorns at a higher rate than others, and it's essential to assess each market's unique characteristics and potential for growth.
Europe's Startup Scene: A Promising Ecosystem for Innovation: The Nordics have a long history of producing successful companies, inspiring diversity in their startup scene, and offering favorable regulatory environments and social benefits.
Europe, particularly the Nordics, is an increasingly interesting region for startups due to a combination of factors including successful companies, regulatory environments, and social benefits. France, Romania, Portugal, and other countries are seeing a rise in founders from diverse backgrounds, signaling a promising ecosystem for innovation. The Nordics have a history of producing successful companies that have spun out new businesses and attracted talent. Regulatory environments and social benefits in these countries have long contributed to the region's startup success. The presence of successful companies acts as a signal to potential founders, inspiring them to start their own businesses. This "see it, be it" effect is a powerful motivator, leading to increased diversity in the startup scene. The Nordics have seen a surge in unicorns in the last decade, but this success is not a recent development. It is the result of a confluence of factors that have been in place for some time.
Collaborative Productivity Tools: The Future of Work: Individuals' buying power drives the shift towards collaborative productivity tools. Remote work is increasingly important due to societal changes, and technology enables access to global talent. These tools cater to both traditional enterprises and distributed teams, making long commutes a thing of the past.
The future of work is shifting towards collaborative productivity tools, as people value the ability to work with integrated software solutions despite having to log in multiple times. This trend is driven by the bottom-up buying power of individuals and the increasing importance of remote work due to societal changes. The market for these tools is vast, as they cater to both traditional enterprise and distributed teams. Moreover, technology is enabling access to talent from all over the world, making remote work a viable option for many. Additionally, the long commutes associated with traditional work arrangements have been linked to negative societal issues, making remote work an attractive alternative.
Leveraging AI for Intelligent Productivity, Data Liberation, and Business Process Automation: Businesses can increase efficiency by using AI for intelligent productivity, making data accessible, and automating processes to reduce the need for specialized skills.
The future of business lies in leveraging artificial intelligence (AI) for intelligent productivity, liberating data, and automating business processes. Intelligent productivity focuses on using AI to help prioritize tasks and communicate effectively within an enterprise. Liberating data involves making it accessible and usable for everyone, not just data scientists. Business process automation, including both deep automation and lighter workflow automation, is also crucial for increasing efficiency and reducing the need for specialized technical skills. The democratization of tools like Squarespace, Shopify, Zapier, and Slack is making it easier for anyone to start a business, but it also makes finding a defensible business model more challenging due to increased competition. This shift towards AI and automation is similar to the impact of making basketball accessible to more people around the world, which has led to an increase in international talent in the NBA.
African Entrepreneurs' Growing Ambition and Knowledge: African entrepreneurs are increasingly knowledgeable and ambitious, learning from various resources and building successful businesses. Investors value founders with independent thinking, curiosity, and transparency.
African entrepreneurs are becoming more knowledgeable and ambitious, with a growing number of them starting enterprise companies and speaking the language of investors. They are learning from various resources, including podcasts and YouTube videos, and are able to build their own versions of successful businesses. Investors, such as those at Index Ventures, are open to working with a range of series and are drawn to founders who exhibit independent thinking, contrarian ideas, curiosity, and thoughtfulness. Being open to debate and learning from those who challenge our perspectives is an essential part of being a great investor. The conversation also highlighted the importance of honesty and transparency, even when our views are wrong, as it allows for quick learning and growth. Overall, the conversation underscores the evolving entrepreneurial landscape in Africa and the importance of open-mindedness and continuous learning for investors.
