Ian Sigalow is the Co-Founder and Partner of Greycroft, one of the biggest and most successful VCs out there. Over their 14 year history they've invested in a long list of success stories such as Public, Acorns, Goop, Bird, and many more.
On this week’s episode Ian and I discuss the strategies Greycroft has followed in order to grow into a firm that manages more than $2 billion. We chat about how they evaluate talent, sectors, and global trends as well as specific do’s and don’ts for the world of venture capital. Ian is wildly smart and very candid so I hope you find the convo to be helpful and informative. Enjoy!
MPD: Welcome Ian.
Ian Sigalow: [00:01:44] Thank you for having me.
MPD: [00:01:49] Thanks for being here. So before we get into this, I'm actually going to introduce you and historically I've had people introduce themselves, but I think that gives too much airtime to things that are easy for you, right? You're right too. It's gonna be too easy. So first we get into that.
How long have we known each other? So people have a little context here.
Ian Sigalow: [00:02:08] You're giving me a pop quiz. So what you were at Columbia business school. Oh eight, right? You got it. And I, I was, Oh six. So I I'm guessing we met in 2007.
MPD: [00:02:21] Okay. Yeah. So it's like, uh, we're, we're 15 ish years in. I've been watching you through your career.
And I think I can probably give it a pretty good summary. I'm probably gonna miss a bunch of stuff. So I'll let you fill it in at the end. Uh, but for the folks who are listening, um, Ian, he wouldn't say this is wildly smart and you'll, that'll become self-evident. Uh, as soon as he started speaking, uh, he did his undergrad at MIT, his MBA at Columbia.
Uh, he's been a VC for longer than most. Uh, he essentially started right out of college. So unusually for someone our age, he's got 20 years of experience. Um, I think we're both rounding up on 42 and I'm only 15 years in the game. So he's, um, he's probably one of the veterans for our age group, uh, and join gray cross founding team as an associate 2006 under the famous investor.
Alan Patricof. I believe Alan has since retired. And now Ian is one of the two remaining co-founders and managing partners who run the firm. They manage a billion and a half dollars and our bracket, they they've backed a number of household names, unicorns that everyone knows some recently popular ones are Bumble, acorn, scoop, plated, thrive markets, and more, um, they're about 50 people on the team, which if you're not familiar with venture is absolutely enormous.
Large venture firms are tennis people. Uh, and it's safe to say gray Croft in and of itself is one of the unicorns out of New York. Sure. Business. It's one of the companies that has kind of scaled very quickly and become a household name in our industry. So now that I have stolen all of your material in let's have a little conversation.
Let's do it. Did I miss anything?
Ian Sigalow: [00:03:59] I was hoping you would work in the word synergistic, but
MPD: [00:04:04] you did it wasn't corporate-y enough for you. So let's jump in. Uh, you know, I want to start off with getting into a bit about gray craft. I know you, uh, were just out for a run, uh, sweating off a board meeting you just had with your LP, your ELPAC, for those who don't know, it's essentially your board of investors.
If you're a VC, um, how, how is the company
Ian Sigalow: [00:04:26] doing. Glad you go right into the heart of
MPD: [00:04:30] questions. I'm going to put you on the heat today.
Ian Sigalow: [00:04:32] Yeah. Um, so some historic historic, uh, uh, information to, to level set where things are. So, you know, we manage, uh, just over $2 billion of LP commitments. Across six early stage funds and three growth funds.
The, um, the first early stage fund, we don't have an ELPAC forums, just friends and family. So we'll carve out that $75 million pool. Um, we have deployed, I don't even know. I probably a billion and a half. Dollars, maybe 1,000,000,006. So call it about 500 million of dry powder. Maybe more than that, actually,
MPD: [00:05:24] that's not always the way the math works.
Right. I just want to make sure for people that are listening, maybe aren't as familiar with the VC game. When a VC typically says they manage a certain amount of assets. That's inclusive of all of the funds that I believe are still active. So those funds might be maturing, but not be actively being invested.
They might've been invested those five years ago. So when you throw out the 2 billion number, how big is the current fund you're deploying?
Ian Sigalow: [00:05:49] So most recent, early stage fund is three 15 and the most recent growth fund is three 73. So it's also got
MPD: [00:05:59] capital pools, especially by East coast
Ian Sigalow: [00:06:01] standards. And so in total, and we're investing them at the same time, different teams on each, but it's just shy of $700 million of dry powder that we raised last year.
And we're investing 300 million a year right now. Uh, we also have us back, which I didn't include in the number, but there's a $285 million back to if you talk about that later. Um, so. So that's kind of the, the, I guess the, um, the background on what we've got the context. And, uh, we looked at our garden unrealized nav.
So this is the we've sold and distributed hundreds of millions of dollars. Um, but I would guess, um, of the cost basis remaining, there's probably a billion dollars of cost basis and it was marked at the end of last year to something like 2.3. Um, keep in mind, a lot of this is young money. So, you know, certain things have only been in the portfolio for a year and a first quarter, year to date.
So we're eight weeks in. To 2021, we're up $700 million. That's incredible on our, on our unrealized NAB. We don't, we don't Mark this this way, but, um, there have just been, and I think in the history of the firm we've had, I have somewhere between six and eight companies that we seeded or did early rounds in, you know, a rounds that have gone on to be valued at over a billion dollars.
Um, essentially like one a year. Virtually every year for the past, you know, six or seven years, we've had six new companies print valuations over a billion dollars in the past eight weeks. So it's kind of gone vertical.
MPD: [00:07:54] Yeah. And is this Greycroft or is this the market at the moment
Ian Sigalow: [00:07:58] or both? Because obviously you guys, this is my LPs.
I said, are you seeing this everywhere? And it was kind of a muted answer, which was like, kind of. I, I think that there's, um, there are certain funds that are enjoying a very, uh, very good 20, 21 because we're in the right sectors and, you know, it's risk on and FinTech and consumer internet and certain places in digital health.
And we happen to have big insurance portfolio and other things that have just gone, gone wild. Um, I think the other interesting note is that not a single one. Of those unicorn companies this year was based in San Francisco. Now that's very interesting. And, uh, and yeah, and there is, and this is the problem, I think with investing historically pre COVID investing outside of San Francisco when you're a public company and you're a public company, the public markets don't care where you're headquartered.
Right. You could be chewy based in Miami and you're going to trade it at the same multiple headquartered in Miami that you would trade anywhere, maybe even at a premium because corporate taxes are lower. So like wherever it is, the public markets are totally rational. The private markets are totally irrational and up until last year, there was a hundred percent premium.
For being based in San Francisco and it might've been even more than that. And it was, um, it's, it's it's it is skewed. So companies like a notion that goes straight from seed to $800 million pre series a, uh, along the way would, if they were in New York would have raised four financing rounds, a hundred, 200, five 50, it would have taken three times longer.
And, uh, and they would have been diluted by 50%. I mean, just look at the difference between Datadog and all of the early VCs and rounds that company had along the way, compared to a company in the Valley that had a similar user profile and trajectory and revenue, but the valuation ramp so fast and early stage investors in San Francisco.
Really enjoyed the benefit of this. I don't think they even read it because when you're, it's like the frog in the pot, you don't realize that this is happening when it's happening, but it absolutely benefits your IRR and your ownership because you're not diluted as much when companies rocket up in valuation because the subsequent financings, uh, end up happening and like, Oh, well we raised $200 million.
We sold 10% of the company in a series B. Well, that didn't ha that would never happen in a New York company during that period. Uh, and I think since COVID capital has, um, become unlocked and, you know, the multiples that were historically conveyed to companies in San Francisco alone, um, there are many other companies in many other geographies that are now seeing, um, similar multiples applied to their businesses and.
Um, I'm kind of testing this theory out as I'm telling you this, but I think that's part of what is happening, which is helping, um, East coast, VCs and Midwest VCs, like drive capital and others, you know, that we're all seeing our portfolios perform in a way that it would have been much harder to do. If people had to get on an airplane and sit down face to face and fly to Columbus, Ohio to look at.
You know, whatever company in person it's
MPD: [00:11:52] interesting. You say that we're obviously a smaller operation than you guys, but we have seen the same bump in Q1 where companies have popped. We've got a couple of companies that are, are now in unicorn territory that weren't there, you know, three, six months ago.
But the, I don't think I had correlated it as much with the breakdown of the geograph cool barrier I had, I had my head around that, just the markets and a little bit of a frenzy. And the V you know, capital is moving aggressively. The government's printing money, all the things that are stimulants and driving the capital markets.
Do you th do you think, I mean, I guess one of the questions for this is, do you think there's a material change in the dynamics people are seeing in Valley deals because if they've stayed flat and everyone else has gone up than it is,
Ian Sigalow: [00:12:40] I don't know. Uh, I, but I mean, I can tell you. And, and I don't have, um, empirical evidence.
It's not as if I've pulled down top whatever deals by geography across the U S yeah. Yeah. But I do know from his, I would have conversations and see if one of my favorite stories is with bill Smith, who was the founder and CEO of Shipt. And we led the series a and bill said, Ian, my company's worth a hundred million dollars.
And I said, I'm giving you a term sheet at 45 week. He said, am I going to do a hundred million dollars? Like I'm going to go to the Valley. I was like, good. Take my term sheet, go to the Valley, tell VCs you want a hundred million pregame and tell him you got a term sheet. You could do what you need, but you have to tell him there are no direct flights between Birmingham, Alabama.
In San Francisco and C and C, this was 20, 2016. And see how many VCs raise their hand to fund you? You, you were worth, it was worth a hundred per week. It was no doubt in my mind that company was worth
MPD: [00:13:47] generally the inconvenience of get it going to the board meeting or was it, I'm concerned that the infrastructure in Birmingham wasn't sufficient to bring talent and capitalists
Ian Sigalow: [00:13:58] all of it, but every company is remote now.
Right. So that's the other thing, which how do you. And by the way, I mean, valleys, the V the air quote, the Valley's a lock on talent when no one lives there anymore. Like, I don't know, my, my engineer used to live in San Francisco, but they just bought a home in Nevada because they're tired of paying taxes in San Francisco and having organized crime knocked down their door and whatever, like, okay, well, So be it, people are free to move wherever they want.
MPD: [00:14:28] I saw an interesting, um, little video montage put up at the wall street journal and it was making the argument through some research studies that by not having people in geographic proximity, you actually lose a degree of innovation. They done some studies and I saw it. I was like, okay, there's probably some merit to the work.
They've done my question now, though, is, are we going to be in a world where there is density in seven cities? Right right now there's only been density in two or three cities up until this point. I don't know what the tipping point is for innovation to really harvest manifest, but maybe we'll have enough from that in Miami.
We have it in New York, maybe Boston and we'll pop back up the way it used to the right Chicago will hit. Right. So that's what I'm looking at this and wondering, are we going to see a slowdown in innovation, which is what they're suggesting or are we just going to see more innovation and more
Ian Sigalow: [00:15:18] places? I don't know that either of those answers is right.
What do you think might be happening? Um,
well I think that we're seeing an acceleration in innovation, uh, for a lot of reasons, one of which is just the macro environment of people out of work, and they've got more time. And then there's also just like I'm working for a company. I don't love. And I didn't realize how much I didn't love it until I spent all of this time at home.
And I'm now not connected to my coworkers and I'm not getting my massages and free lunch every day, Google. So maybe I work on a side project because no, one's looking over my shoulder anymore. Um, and that that's happening everywhere. So I think innovation is accelerating a second point. Um, there are only a handful of cities in America.
I mean, in the world that produce all of the software that the world runs on. It's really kind of an unbelievable thing. When you step back and say, well, you know, where is. All the companies in Europe and United States and Latin America and where they run on Microsoft or Google, they have Apple phones or Android phones.
Like you just look across this, their hosts, their software is hosted on one of three clouds. Maybe they're using optimized for their CDN, but you know, it's like how many cities in the world produce massively scalable software companies? Do I, all the wealth in the whole world is concentrating in United States in a couple places.
And I'm not so sure that that is going to change because I think that people are, um, are moving for various reasons during COVID. Um, I think that the cities, uh, that were very popular in 2019 will be popular. Again. It may take a couple of years, but. My friends that are moving are also thinking about it as like, well, it will do it for a year or two, but if we're going to come back, I think a lot of people are also just lonely.
So, you know, you move, you're like, well, you know, I've been living in New Hampshire on whatever. And like, this is okay for now. I needed space, but I can't wait to get back and see people again. And loneliness drives a lot of behavior.
MPD: [00:17:51] So, let me re let me take this a different direction for a second. You're you're managing a ton of capital at this point.
The firms large. Uh, well, how big was your first fund back in Oh six
Ian Sigalow: [00:18:01] was $75
MPD: [00:18:02] million, 75 million, which is a pretty good size fund for first fund, but nothing of the caliber where you're playing now, why do you think grace Croft was so successful? If you could look back and. Pull some wisdom for what changed.
There's a lot of VCs in the market. A lot of people trying to learn
Ian Sigalow: [00:18:20] first. I don't, I don't know that we were so successful and we were like a three X fund.
MPD: [00:18:29] Uh, I think that was generally top decile by VC metrics.
Ian Sigalow: [00:18:33] Yeah. I wasn't happy with that. Like there's so much, there's so much more opportunity to things that we missed.
Um, So one is, um, you know, we wanted to fund really only internet companies in Oh six, and we didn't get caught up in the first wave of nano and clean tech. And that was very work. We weren't, we weren't distracted by some of those things, which, you know, it's sector rotation is everything in venture capital.
You're in the wrong markets, forget about it. You know, you lose all your money. Um, So we were in the right markets, both from a, um, uh,
MPD: [00:19:15] kind of in the right market. No,
Ian Sigalow: [00:19:18] it wasn't the right market from Oh one to Oh six. It wasn't the right. That's true. That's true. That was face dropped off. Yeah. Um, so it was the right market then.
Uh, what else? I mean, we, we launched the iPhone launched 12 months later. And we didn't really start funding companies based upon a mobile thesis until fund two, which was 2010. Although it was pretty evident by 2000. I dunno if let's say the iPhone launched in Q1 of Oh seven by Q2 of Oh seven. It was pretty evident that this was a thing.
Um, and some tailwinds from the iPhone certainly helped. Our broader portfolio grow faster, but you're
MPD: [00:20:08] telling a story that it was right place, right time. There's something
Ian Sigalow: [00:20:10] more to it. Well, let me say I'm a super genius and I figured it all out. You guys had some strategy or the business that was different.
Yeah. First off, anybody with a checkbook can be a venture capitalist. Whatever people say to me, Oh, you know, I want to succeed. Anyway. I want to break into venture capital will show me your portfolio. Like you're gone angel list and go fund some stuff and see how it works. Um, so, uh, yeah, we had a theory around how to construct a portfolio and we had a theory about, um, you know, how to be a good co-investor.
And, uh, those two things were, were unique at the time. I think our portfolio construction was probably wrong, but it was, it was unique and our how to be a good co-investor was right. Can you
MPD: [00:21:04] elaborate
Ian Sigalow: [00:21:05] on what those theories were? Yeah. So, um, on the how to be a good co-investor everybody in the venture capital business in Oh six wanted exactly the same thing.
And they want it now, too, which is they show up. I love your company. I'm a really active investor. I want to be on your board. I will be on your comp committee and your audit committee. And I really want to own at a minimum 20%, but you have 25%, really our ownership target. And I need to own it now. Like right now I was, I'm not, I'm not investing unless I get to 20% today.
So 20% became a very expensive percentage to get. Cause everybody wanted the exact same thing and it became a death match between every VC. And it's awful for companies because the company's like, well, I'm going to be raising money forever. And then build this company for the rest of my life. There's going to be like a series Q before I'm done.
Why do I have to sell 20% to this person? I just met on the street corner today. Like that doesn't feel like a long-term partner and they're insisting on dates. They tell me they're active, but what I'm hearing as an entrepreneur is this person needs to be in all of my committees and up in my business in order to do this deal.
And I really like being an entrepreneur and not having a boss. And when I read the term sheet, it says, you know, customary rights and privileges of preferred what's what's that mean? And I started looking through, like, I can't do anything. Without approval from this guy. And it's always a guy that was the other part.
It was like total, Oh, I'm a white man, but it was all white men. So we said, well, we're going to flip the script on that. Um, first I've been a co founders, Dana settle. We were, I think we're one of two female co-founded venture capital firms that manage anywhere close to the amount of money we manage. Like there's, Luvata.
In venture capital land. Um, so that that's one. And then the second thing was like this, this whole arbitrariness around, I need to own X and get to X and do this. And like that doesn't sound to me like putting the entrepreneur first, that sounds like letting my fund size dictate my strategy. So we're not going to do that.
And, you know, as a result we got into things. So we'd show up and the entree say, have you read the term sheet you got from pick your whatever fund and they'd say, yeah, I did. Like, have you ever thought about having a boss who tells you, if you can hire people and approve a budget, sell your company and raise more money and like, Oh, I never thought about that.
Hmm. And our pitch is great for repeat entrepreneurs. They showed it cause they they've been through. The sausage maker before and come up the, I was like, I tried to sell my company and I got blocked by Sequoia and then it went to zero and I hate those guys. I mean, you'd hear those stories like, well, we won't let that happen to you.
Um, and, uh, and so they're the ones who really helped us build our, not only our reputation, but our returns because. Repeat entrepreneurs in the venture business are gold. You find them, he's built a company before who's got a team and a successful outcome. And they're not, they're not worried about making payroll because they can fund it them selves.
Like, I love that profile. Like, you know, we'll, we'll, we'll invest alongside you. You don't need me. You want me? Yeah. Yeah. I want somebody who can open doors and make intros and think about strategy and help with your network. I'm a partner. I think that's the best relationship in venture.
MPD: [00:24:56] Um, think about the advantages of having a large AUM assets under management for folks listening. Uh, it's one of the things people talk about a lot on the LP side, we're, you know, always talking to LPs for our fund. And one of the things people are concerned about is that venture doesn't scale that well, meaning.
More money in her management, typically lower returns.
Ian Sigalow: [00:25:20] What's
MPD: [00:25:20] your view on that? As a, as a fund on the larger side of the occasion, at least on the East coast?
Ian Sigalow: [00:25:28] Uh, it's a really good question. Let, I'm going to answer it from the other side of the tunnel and then work back to scaling because ultimately we can deploy big, big dollars and generate big returns.
Um, th the first challenge. As a manager in 2021 is the venture business is global and it's becoming a platform business. And by that, I mean, um, we are seeing the same transition in venture that happened in the private equity industry in the nineties and the hedge fund industry in, you know, 15 years ago, whatever, the two early two thousands.
And it's happening in venture now. And a platform business means that, um, I need as a venture manager to provide very significant services to my companies to distinguish myself from then the next venture guy, a. Maybe even synergistic services. There you go. There you go. I worked in, um, buzzword. Bingo.
That was, that was a four. Um, and second second is I need to, I need to spend money on data. So, you know, we're spending millions on data and technology and product because we have to have like the entire internet world. Companies blow up all over the place all the time. And you've basically need to build a Geiger counter that a Richter scale that listens everywhere and interpret signal.
And we need to figure, we need to take those inputs and figure out through pattern recognition about where to invest, define the $50 billion companies. And that's really hard to do. And then the third is the best investment professionals are expensive. Um, I was the lowest paid person out of Columbia business school.
I was, I was ashamed to put my, to put my salary in those farms for a couple of years. Like, Oh my, like I'm going to Columbia is not gonna be able to recruit people because my number's going to lower the, the mean or median. And, uh, know that was my, my job. But now I'm competing and like the kids who have.
I say kids, that's probably not nice, but you know, the men and women who have two years of experience at you name it. Yeah. Tier one consulting or banking firm that we're, we're rushing to come into Greycroft it's us, or they're going to go work for a Pollo, like, okay. So I have no idea what Apollo pays, but it's a lot of money and I'm going to compete for talent.
And, you know, the, the talent game is fierce. So the only way to play the data game and the data science game and the talent game at the scale we want to play is to, is to invest. Like we have to have money from LPs that fees to invest. Otherwise I'd be spending the $30 million a year. It costs to run my infrastructure out of my own pocket.
So that that's the one side, like it's a necessity. The second thing. Is are companies like, I'll tell you a story. I'm checking the time I got time for stories. Um, this is a great interview. I, you asked me three questions and I just like rattle stuff off. You can try to have you on for longer in your board meeting.
Sure. Uh, so I, I w I went to, um, I was, I was a, uh, like a spy at number nine Downing street. I probably shouldn't use the word spy, which is take the prime minister residents in England. And I got invited in as the token us venture capitalist in a round table discussion of other there's wonderful VCs in the UK, by the way.
And there's, we have a lot of LPs in the UK and some of our LPs, including Cambridge associates, et cetera, were all like in the room. Uh, and there were you U K VCs in the room and there was an open table discussion around how hard it was for UK VCs to raise money from UK LPs and why the market worked the way, and I will paraphrase, but the LP response, and they would like, look at me the help responses.
If we, why would we invest in you? If we could invest in. Tier one USB-C firm that will give us use us exposure, but also cherry pick the very best companies in the UK and Europe and Southeast Asia at the series B, because we may miss the first 50 or a hundred million dollars of value appreciation in the next Spotify.
But we're going to capture a hundred, two 30 billion because our funds that we're investing in are, you know, they're going to be cradle to grave funds in, in the U S and they're going to capture that. And I don't need this little bit of idiosyncratic UK exposure to capture that first a hundred million.
And I came back from that meeting. And I said to my partner, Dana, who is in Los Angeles. We can't let that happen to us. We can't let the Valley firms go to the LPs and say, um, you don't need to invest in New York venture. We're going to, we're going to come in. We're going to turn and take. We're going to cherry pick all the best BS and CS.
Can't let that happen. This was like life or death. And so I said, you shifted to build the growth platform at that point. Oh, yeah, that was 2014. I came back called Dana. We were already working on it. I said, this is, this is imperative because we can't let other people have our victory lap. Like you can't be in this seed round and the series a round, and then miss a 30 X, B, and a 20 X, C, and a 10 X D like you can't do that.
MPD: [00:32:02] And there's a lot of people though, who are just in the early stage and they're putting up good numbers. And yes, there are the global platform funds that will do the growth play. And it might be you guys, some cases stepping in and carrying the next round forward and playing in the upside. Those firms can be, well-managed deliver a great yield to their LPs, but that model doesn't scale.
And this is the, I guess the crux of it is if you want to run a lot of money, You have to get to that next stage, that bigger round where you're writing
Ian Sigalow: [00:32:34] bigger checks. So that implicit in what
MPD: [00:32:37] you're saying is that you wanted to run a lot of money where there's a lot of people who want to focus on delivering a great multiple in a stage.
Ian Sigalow: [00:32:46] Yeah. Um, there are room there's room in the market for people who want to be a specialist in something, and there always will be, um, And I'd like to think that we broke our business into two. So we kept an early stage fund. That fund is small. Um, it will likely stay small and we have a growth fund. That fund is bigger and it's going to get bigger.
And the reason we did that was you can be precious about a one or $2 million check in a small fund. It's really hard to be precious about a one or $2 million check in a billion dollar fund. In fact, like no one cares. Right. And you see this, like the supermarket venture capital model of, I do everything out of one pool vehicle and it's all collateralized and like to pick on an obvious example, like the NDA model, um, You know, like someone we're in bright health with NEA and I love them and they put, and then hundreds and hundreds of millions of dollars into that business and it will return billions.
And that's the deal that they're rewarded financially for doing and see deals don't matter. Yeah. No matter. And you know, the partners who are good at seed, they leave for whatever. Cause like, I don't know. I'm not doing the $500 billion buyout deal that is going to move this fund. And I, I didn't want that to happen.
So we set up a structure where people can earn Carey and work on what they want to work on. And the flip side of this. Is, we do want to seed companies that eventually can return a hundred million dollars. Right. So, and the business still
MPD: [00:34:41] has to be attractive
Ian Sigalow: [00:34:42] and functional for folks. Yeah. And for, yeah.
And for us, it's like, well, what are the areas we should be playing and where the, you know, the fish are big enough and the water's deep enough. And there aren't very many global markets that have that characteristics. And we've been over the past five years. A lot more, um, focused on that.
MPD: [00:35:04] So that, that brings me to an interesting question for you.
I mean, when we talk to LPs and we hear people in the market, there's a lot of focus around the sector of a venture fund. But if I was to look at Greg Croft on the outside, I'm sure you have your spiel of sectors. You tout to LPs because they like to hear that. Right. But they're at the end of the day, you look pretty generalist for internet and.
You know, when I hear the demand from LPs to have a sector focus, I'm confused by it. It's obviously a trend. It's a way for people to differentiate themselves. What is your view on sector focused funds? Is that important? Is it
Ian Sigalow: [00:35:41] good? I'd say, I'd say we at Greycroft are a sector focused fund, but we're not the same sector every time.
And this is really, this is really important. So today change by fund. Oh yeah. Oh yeah. I mean, we have five-year roadmap cycle in and out. Sometimes we kill them early because they're played out. Um, at the moment, everything we do fits into these aren't neat buckets. Like some things have overlap, right. But we have a FinTech portfolio.
It's both consumer and enterprise. We have an, uh, a consumer internet portfolio. We have an enterprise software portfolio and we have a digital health portfolio. Okay. That company essentially,
MPD: [00:36:23] and a company walks to the door that doesn't fit in any of those. You guys don't do it. It, the next unicorn, the next 50 know mega unicorn.
Ian Sigalow: [00:36:32] I, well, the short answer to that is. Uh, there's also a separate sidecar, like experimental thing. That is a small percentage of capital. And they're almost everything. If you really wanted to, we could fit into one of those buckets. Right? So you've
MPD: [00:36:53] defined your sectors as to call it for a second broadly enough where you can shoe horn the entire internet.
Into those sectors. So you can tell folks there's a sector focus, but you do the internet.
Ian Sigalow: [00:37:05] But like for instance, we did some consumer products investing years ago. We've cycled out of, um, almost all consumer, unless it's a connected device. Like there's an internet story, but no, like haircare skincare, um, CPG products that, that we've cycled away from
MPD: [00:37:28] treating the market.
Most people will say,
Ian Sigalow: [00:37:31] yeah, we invested in media, we've cycled away from media. Uh, we invested in within enterprise software. There's things that, you know, we don't do as we did a lot of MarTech ton of it. We not anymore. So, um, You can't be the same person tomorrow that you were yesterday. And part of the problem with a, a sector focused fund is good for now, but it becomes a straight jacket and you want to avoid wearing a straight jacket to work everyday.
So I, my advice to people, if you're trying to raise a fund, you need to be good at something and have a track record and credibility. But that something needs to be broad enough that it can extend into the next new thing. And the next, like Roger Ehrenberg is a great example. He raised his first fund on big data.
Big data's coming. Big data is not a sector. Big data is like mobile. It's an attribute, right? And the ability to tell a story that said, well here, you've got this underlying change in the way data's created structure, managed, index, search, whatever. And then I can apply it to transfer wise. I don't know how that jump was made, but it was made sounds great, but
MPD: [00:38:51] it catches the whole internet, you know, to a certain extent what's, what's not dealing with massive amounts of data.
Ian Sigalow: [00:38:59] Yeah. Yeah. And like there's all sorts of secular trends and things changing that people are. Let me pull
MPD: [00:39:06] you in a different direction here for a second, you know, uh, even though this for a long time,
Ian Sigalow: [00:39:11] uh you've, you've started to questions with you be doing this for a long time. Now I want to call it
MPD: [00:39:16] wisdom out of you.
I want to
Ian Sigalow: [00:39:17] pull that like I'm grandfathered time over here at age 41. Well,
MPD: [00:39:21] age 41 and a startup land is pretty. Yeah, it's cool. I got referenced as, Oh, OJI New York in an email a week ago and I'm like, wow. I guess, I
Ian Sigalow: [00:39:30] guess forties is that I'm going to start sending that to you. Oh, gee. Okay.
MPD: [00:39:37] Uh, what makes someone a good founder?
Oh, I want to ask it really broad because I think there are so many people out there trying to jump into this, whether they're micro VCs or they're angels, and there's some pattern matching that people who have done this for a long time. See. Is there a framework or a way to articulate what it is you're looking for in a person, the company dynamics are easier for people to get their head around it's math.
It's the market analysis. It's their gut. There's a lot of things that people are using that may or may not work for them, but the founder bit, it's kind of hard to grab until you've done it for years and years
Ian Sigalow: [00:40:16] and years. So a M. There is no good answer to that question because a good founder for one business would be a bad founder for a different business.
Uh, so I, I would punt, but if you said to me, what do I look for in a founder? And it just make, make it a different answer. You know, I, the I'm, I think pattern recognition in ventures just. It's understated in its importance because it is everything in early stage venture. And, um, the patterns start to line up once you've seen enough companies and you know, one of the founder patterns I mentioned before I do a lot of repeat entrepreneurs.
Um, in addition to that, You know, w the best pattern is, and you can record this and put it on YouTube, and it is the secret to making money in venture capital. So not now the secret is out, but the best pattern is a repeat entrepreneur who has successfully built scaled and exited a company for enough money that they're still hungry, but not too much money that they don't care anymore.
And. Has then left, recruited their former team. So one of the questions, so you started something for her, who's worked with you before and gone back into the same or directly adjacent market to the one they were in previously. And the person has to be the CEO or co-founder, you know, leader in the business, not like the head of marketing or whatever.
I don't want to disparage marketing people, but you get it. And, um, And then they have to recruit people. Who've worked with them before, when I see. And they have to be in the same industry. When I see that pattern, we just auto fund. Cause we've never, we've never lost money. Well, yeah. And, um, we've made a fortune on that pattern and we only used to see it like once a year.
Now we see it every month. And maybe more frequently. And when you do, it's just a question of how much you're willing to pay and whether they, they like us. And, you know, everybody knows this in the venture industry. Um, and, uh, and the second thing I'd say is the worst pattern in the venture capital business is almost exactly like the first pattern, but with two exceptions, one is they didn't bring anybody with them and you start to dig.
And you're like, well, this guy was an asshole and no one liked him. And the company was successful in spite of him. And he was pushed out out of the boardroom and like, okay, well, got it. So he was just not great. And the second part of this is I was really, really good in enterprise software. And now I'm going to build a consumer company.
And that doesn't work because the, the talents required to build an enterprise business are very different from the talents required to build a consumer business, which is why I couldn't give you a generic answer.
MPD: [00:43:35] That's great. Thank you. Let me ask the same question, but for VC pluck, you have a large VC team.
Most people have probably not hired and managed as many VCs as you are at this point. Even at the big firms, what makes someone a good VC?
Ian Sigalow: [00:43:52] So I, I think the, um, the attributes of some, and I don't know that I'm good. Like, I, I, I, some days I wake up and I think that Jesus, we just totally EFT up and we miss like 20 great things.
And, you know, you lay awake at night thinking about the 10 deals that I, I, we, we gave trade desk to another firm at 3 million. And every time I see a CEO check and gave it to, you know, whatever, but that was, that's another sense, another story for another day, but whatever I see Jeff Green is I feel terrible map.
Remember when you didn't invest and like, Oh yeah. Or ACV auctions, like just the number of companies that come through and you're like, well, lift on those. So. Uh, we don't have the anti-portfolio on our website. We should put one up like Bessemer, although it's like a little bit played out this point. So I guess the things that I would think about, um, one is you just have to be intellectually curious.
It is not enough to like, like startups really be a student of why stuff works the way it works. And, um, Most people aren't built that way. Think most people don't wake up in the morning and you know, drink a cup of coffee. Like this doesn't taste quite right. Why? And you start like Googling things and you start to figure out, Oh, well, gee, you know, this thing was ground like in a factory seven months ago.
And then they aired it out for like, you know, you have to, you don't want to know why things work the way they work and why the world works the way it works. And. Most people just aren't curious. I don't know why they're not curious.
MPD: [00:45:41] I know this is a characteristic about you. Every time we've talked, you've read some other randomly obscure part about trading markets and you know, things that a normal humans don't know about care about, or have no interest in, but you're, you're knee deep in it.
How do you, how do you Hunter find that in your process?
Ian Sigalow: [00:46:05] You ask people questions about like what they find interesting. And you just keep asking why you don't, it's not annoying. You know? I was like, why, why, why, why? But it's like, Oh, why do you think that? And then they gave you an answer. Well, that's interesting if you thought about this and they was like, Oh, why not?
And you just keep going. And eventually you get to like some fundamental thing about like, well, I was just really curious. Uh, so that's one question. Uh, the second question, I always cause the people we interview have ridiculously good resumes. I know like never failed at anything in their whole life and it's all on a piece of paper and it's all perfect.
And I always ask the question, what are you most proud of? That's not on your resume. And, uh, I, there, there are some really good answers to that question, which I won't share with you, but. Um, cause then every interview I ever do from now on people are like, Oh, of course. But, um, you know, you can think about that.
And, uh, the answers you get on that question can be really telling about how people work and how they think about the world. And. So there's that part. I think that goes with the territory. Like you have to be w w we for, we hire people, we make them do a case study and then we make them defend their case study.
That's fantastic. So they, we say here's a company, write a two page memo, not more than two pages. I don't want 40 pages. I want two pages about, you know, why we should invest or not with a recommendation. You can, you can put some charts and graphs and looking at it. And then they come in and then they get like the gauntlet from the partners.
So you said this, why do you think that's true? And they have to be able, it's hard to do this by the way, when you're 20, 25 intimidated, nervous hearing about it. Yeah. You sit across from me and I'm like, Oh God guy just quizzing me about some company. I read a thing on. And I always try to figure out, um, like who'd, Cuccos like the extra step and the extra step would be, you know, I didn't know a lot about this company, but I made three phone calls to people to see if I could figure something out.
And here's what I learned. And, um, or an insight that we I've, I remember this so clear, I should have hired this person. We, we gave this a nice guy, a, uh, uh, A case study and he gave us back this whole logistics analysis about why the company wouldn't work. And it had to do with the weight. This company was like a, um, a micro cafe that was robotic and it had to do with the weight of the water.
He like calculated like, like how many people do you think in New York could carry 96 pounds of water up four flights of stairs, like, Oh, And it's like, yeah, you know, this is, I called this guy from Anheuser-Busch. He said, yeah. How, how easy you think it is to hire a mixed gender workforce to carry keg?
Hey. Oh, you're like, okay, well now I understand you're
MPD: [00:49:26] almost out of time here. I know you gotta run you, uh, You're a very busy guy. It feels like every time I'm trying to catch you,
Ian Sigalow: [00:49:36] I hate the word busy. I hate the word busy, but you are. I got a lot going on. People make their own busy-ness right.
MPD: [00:49:43] But you're working hard still.
And you're building and ambitious. What's success for you at this point. Most people will look at where you are and say he made it right. He built a great firm, his compost. What do you want him to do in his life? Where are you going?
Ian Sigalow: [00:49:58] What's success for you. Yeah. So I have a coach which may surprise you and, uh, hire this coach because I, I was suffering from this problem.
Like, what do you do next? When you've kind of like me growing up as a kid in Ohio where I grew up, I, uh, I'm not really sure that I had goals outside of. Like the next thing, I was looking down the road at let alone where I am now and where we go next. Um, and, uh, it's a very hard question to answer because it's a personal question.
I mean, I know work-wise where I want to take Greycroft with my partner, Dana and we're we're in lock step on it. Um, But there's also personal gratification and contentment that comes from other things outside of work, too, that, uh, that I get to spend more time on. And, um, Yeah, I, I think they're the two big things that I spend time thinking about.
One is I, I want to create more than we like venture capitals also destroy industries. Right. And we come in and we find a company and that re that company is growing a hundred percent a year and is ripping as my colleagues would say, the economy is only growing 2%. So it's taken something from somewhere that spend is coming.
And I feel like, I think in the back of my mind, like, I want to create more than we destroy over the course of this career. And how do I, as like a North star do that? How do I build a new industry instead of something that just sucks in like the, like a black hole money from another industry it's hard to do.
And I think the second thing is, you know, business-wise, we were 75 million of assets in 2010. And we're at 2 billion and some change 11 years later, uh, I want to grow faster in the future. That guy, I want to get to an interesting target weight. I don't have one.
MPD: [00:52:15] It's not like 50 billion or 10 billion. Is there some number in your head that you're chasing?
Ian Sigalow: [00:52:20] No.
MPD: [00:52:22] Oh, I think you're
Ian Sigalow: [00:52:23] not sharing. No. No. Okay. If I told you. And the number is like 10 trillion. You'd be like, Ian, that's not possible,
MPD: [00:52:33] but I respect it. But
Ian Sigalow: [00:52:35] yeah, you know, SoftBank vision fund a trillion dollar. No kidding. I don't have that vision. Hey, this was fantastic.
MPD: [00:52:44] You, um, you delivered. Thank you. Good insights.
I'm sure everyone listening. Appreciate it. Thank you so much for your time.
Well, thanks to Ian for sharing his unfiltered thoughts today. I thought it was super insightful. Uh, and I, I hopefully it was helpful for everyone and learning about venture capital. If you liked what you heard, please hook us up with a like, or a five star review and feel free to share with a friend. You can find me on Twitter at M P D.
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