Traction Podcast
00:15:39 · Roy Luo, Lobo
[00:15:39] S1: Absolutely. We and myself personally are very thesis driven. There are core themes in different markets and different, I would call them, vectors of markets and trends that we're excited by and that we wanna bet on. And whether that takes you across the pond into Europe or down South to Latin America or out East into Asia, we won't... The benefit of Iconiq is that we're large enough and we have the scope that I don't think we would let borders really change or restrict us on finding the best businesses, the best founders, and investing behind the core trends that we have deep conviction on. I would say the most important thing for us is to have alignment with the founders that we work with. And when you find folks out there that are building in a way that really aligns with the philosophy in which you see the opportunity, you'll make that investment. You'll you'll forge that partnership. And we've been lucky that we've been able to do, not just in The States, but all over the world at this point, and it's been working out so far. [00:16:39] S2: Fantastic. So when you look at that alignment, right, I guess at series a and series b, give us some quantifiable rubric of how you assess. What does founder alignment look like? What does business alignment look like? What does the metrics that need to be aligned with your thesis to do a series a and a series b deal?
00:17:04 · Roy Luo
[00:17:04] S1: Sure. Sure. Typically, we'd love to see businesses that have either visibility to call it, like, at least a million of ARR. And this... And that's a really soft target because we're really looking for product market fit. So I'm throwing that number out there because it's eighty twenty type of rule where... And we've done deals way less than that and pre revenue deals actually, but it's a really good proxy in terms of what kind of establishment you have in the market in terms of stability and hardening of your product. Series As and Series Bs, it's really interesting because we'll often come across bootstrap businesses that are 5,100,000,000 AR that built their businesses without really taking any funding. And so that first round of funding that they take it's a series A. I don't think that's necessarily indicative of the stage of business that they're in. But I would say from a stage perspective, as long as you've demonstrated product market fit, what we are really looking for is there a unity between our thoughts on a particular market, the vision of the founders, and also what we're hearing from customers? And sometimes it's about really how all the pieces of the puzzle fit together. We have met businesses where the growth is amazing. The numbers are amazing. The founder will say, Hey, we're winning because of A, B, and C. But then you talk to customers, and they're like, I love this product because of X, Y, and Z. Right? And so there is a misalignment. You think you're winning because of these categories or these reasons, but you're actually winning because of these other reasons, and you've to parse that apart. Is it because the customers don't really see what the vision behind the vision is, or is there something misaligned in terms of how you're going to market or how the product is really speaking to its own value? And then, obviously, between those two perspectives, does that align with what we think as well is their way in the path to victory? And we're not always right, but I think what forges great partnerships is that when we see and are aligned in how we think the path to victory is. Because when you aren't aligned, you can oftentimes basically provide guidance, advice, or to see things differently.
00:19:16 · Roy Luo, Lobo
And I think healthy disagreement's always important, but I think fundamentally great partnerships start with really good alignment on what the goal is, what the opportunity is, and generically, how we're gonna row together to get there. You know, [00:19:32] S2: the word product market fit is a really hard one. Right? We we say it a lot in Silicon Valley, and it's now proliferated across the world. What does that mean to you? Because it means something different to different companies, but there are maybe some fundamentals.
00:19:32 · Lobo, Roy Luo
[00:19:32] S2: the word product market fit is a really hard one. Right? We we say it a lot in Silicon Valley, and it's now proliferated across the world. What does that mean to you? Because it means something different to different companies, but there are maybe some fundamentals. [00:19:48] S1: Yeah. So for us, I think there's a... Again, it's a law of art versus science. But if you talk to enough customers, enough buyers, and you say, hey. This product as it stands today, is this something you wanna buy? Is it strategic to you? Is it important? Is it a point solution, or is it a platform? What's the road map, and are you excited by that road map? Are you too excited by the road map? As in what they are today isn't exactly what you need, but you're excited for what they're building in the future, and that's what you really need. That would... I would call it not product market fit that's too early. But you really wanna hear from the customers. The idea of something is, hey. If they could build... This would be at the top of my budget. This would be the biggest thing that I would fight for money for. I would go to my CFO and ask for a day in and day out kind of thing. And you find consistency in that. Sometimes that's 20 Fortune 500 CIOs or CFOs talking about it. Or if it's SMB software, you just hear it all over the place. Like, how you build conviction in PMF, I would say, can vary in different markets for sure. And that's why I think there are some areas where we've made earlier investments and there are other areas that we've made later investments as well.
00:19:48 · Roy Luo, Lobo
[00:19:48] S1: Yeah. So for us, I think there's a... Again, it's a law of art versus science. But if you talk to enough customers, enough buyers, and you say, hey. This product as it stands today, is this something you wanna buy? Is it strategic to you? Is it important? Is it a point solution, or is it a platform? What's the road map, and are you excited by that road map? Are you too excited by the road map? As in what they are today isn't exactly what you need, but you're excited for what they're building in the future, and that's what you really need. That would... I would call it not product market fit that's too early. But you really wanna hear from the customers. The idea of something is, hey. If they could build... This would be at the top of my budget. This would be the biggest thing that I would fight for money for. I would go to my CFO and ask for a day in and day out kind of thing. And you find consistency in that. Sometimes that's 20 Fortune 500 CIOs or CFOs talking about it. Or if it's SMB software, you just hear it all over the place. Like, how you build conviction in PMF, I would say, can vary in different markets for sure. And that's why I think there are some areas where we've made earlier investments and there are other areas that we've made later investments as well. [00:20:58] S2: Could you share maybe one or two examples of companies, maybe one earlier and one later that you've really loved or, like, you got drawn to the product market fit and what that was?
00:21:08 · Roy Luo
[00:21:08] S1: Sure. Yeah. I would say there are two I could talk a little about. They're both pretty early bets, I would say. Last year, we made an investment in a business called Pepper. They really provide commerce tools for food distribution, actually. And when you talk to food distributors, like, traditionally, it's amazing. We're in 2025 or 2024 at the time. And the way grocers and restaurants order their food, they're still going through catalogs, making phone calls, and texting their sales reps as, Hey, I need chicken. Hey, I need rice. I need... Etcetera, etcetera. And that's how the commerce there is still done today. And what Pepper is providing really is a digital portal for these counterparties to really interact and transact with one another. And so you gotta ask yourself, hey. In order in 2025, how is it still done this way? There are many different end markets and verticals where you'd be surprised how little technology has really penetrated it and has really transformed. And so you talk to the food distributors that were in a world now where we're seeing a paradigm shift. Mobile's everywhere. I think the next generation of labor workers is a lot more tech forward than they used to be, and you can start to get the telemetry points from the market like this is something that is being a pull rather than a push, and you're starting to see that hockey stick moment. Now we'll see if we're right. We'll see if the the business and investment plays out. It's going really so far, but that's the kind of... Those are the kind of data points that we're looking for and the narrative and what we're hearing from the customers and, obviously, how the team at Pepper is really thinking about it, they really align well together, and that's what's exciting. We made a similar type of investment in a business called Primer, which provides infrastructure to manage your entire payment stack for merchants, big, medium, small. And there's a really compelling, I would say, idea and thesis there around how in the future, you have these amazing PSPs out there, but what merchants are gonna really want is intelligent management and... Of the infrastructure for payments. Not every merchant can afford to staff up hundreds of...