Traction Podcast
00:27:52 · Roy Luo
[00:27:52] S1: I would say during the Silicon Valley Bank saga, that was a really crazy time. I think everyone was stressed. There was real existential risk for businesses, our own business, other businesses in our portfolio. And how do you think about partnering in one of the darkest periods of time? I would say the onset of COVID was another one of those moments. But I just remember SVB very vividly because when that was really going down... I work with a double digit number of businesses, and I'm spending ten, fifteen, thirty minutes, an hour each. And so quickly, I'm working through my list, making sure I call everybody, and I'm in the weeds working with them, coming up with a game plan, coming up with contingency plans around how to manage this situation, reporting what we're hearing from other places, and just working deeply as partners with them. And then in that crisis moment, it was interesting because before you knew it, it was the evening, and I had started the day at 7AM making phone calls. And I was in my room doing all these calls, and I couldn't believe how quickly the time passed by, basically. That was a wild time. And I think that to be able to work in deep partnership and an intimate way with all your businesses, that comes from trust and vulnerability. Everything's on fire at the moment. No one knows what's going on. And to be able to make quick decisions, I think you can only enable that if you really have deep trust in your partners.
00:29:23 · Lobo
[00:29:23] S2: Fantastic. Now we're heading in an interesting world. Right? Every company is becoming a fintech company was the theme for a bit. And now every company is forced to become an AI company. You either stick to the past and die or embrace the future and thrive. What's happening? I guess I see this VC 3.0 in a broad sense. If you say the first technological was on prem silicon, and then it was the 2.0, which is cloud, mobile, SaaS, it's all in the cloud. And now it's all AI first. How is this impacting the way you invest and the way you look at startups?
00:30:09 · Roy Luo
[00:30:09] S1: I think that's a great question. I think there are some folks who are talking a little bit about how AI is gonna crush everything, change everything. I think that's a little extreme for sure. Mhmm. I absolutely believe that AI is an essential to be a conduit to make yourself competitive and relevant in this new paradigm that we're living in going forward. I think Canva is a great example of this, actually. I think there is a lot of, like, dear or considerations around how AI can transform or disrupt industries by which Canva plays, for example. But I think and my personal thesis was, and what drives our continued partnership there is, ultimately, it's a little philosophical. I think creatives and humans want to maintain their agency when it comes to decision making. And so the love for something like a Canva really comes in the form of the workflows, the UI, how they work with the product, how the product helps them realize their creative vision. And, yes, do they have amazing tools, content, templates, things like that? Absolutely. And historically, there was a whole marketplace of sorts to be able to help drive that. But Canva is one of the most forward thinking businesses in AI, being able to leverage AI to improve their cost structure, expand their capabilities, and deliver them in faster, more efficient ways. And ultimately, the agency of the creative is maintained. Their love and their interaction with the product is maintained. In fact, it's enhanced, but they're getting even more out of it because of AI. And I think credit to Mel and Cliff for leaning in hard and building upon that to be able to be the conduit that brings AI to the masses. But without that philosophy, you could put yourself at risk of actually getting disrupted. But what I personally believe and what we're really seeing is that the big brands and the big winners of AI are going to be the ones who already have that distribution, have that customer advocacy, and aren't sitting back, but are really leaning in and bringing AI and leveraging it to deliver more to those customers and to their communities. And I think Behave is a great example of that.
00:32:21 · Lobo
[00:32:21] S2: I a 100% agree. A lot of people... And I've been in this space of automation, like dating back to rules engine, to AI, to models, and so on. Right? A lot of people think like, they'll just ship a single agent application and it's gonna disrupt industries. You have the opportunity to disrupt industries that are largely service oriented. But if you're competing with people like Canva or sitting on so much data, in the AI space, these agents will get commoditized very quickly. Your real moat is a data network effect that gets you to a concept drift resilience, which is you can adapt in real time, built on voluminous data where workflows perform at high intensity, high velocity, high frequency. Canva has that. They have the data. A new startup for it to come and say, oh, I'm the AI version of Canva. And to make that fully autonomous, they're going to have to get the volume of data that Canva has and train it. And that's a hard thing to build. I think we are bang on. Companies that have already established brand and customer moats have volumes of data and they have the opportunity to build these AI agents on top of that data that become the standard. So, you build something like in the SaaS world, you could build an application that's better than an on prem clunky application that went from just put a veneer and didn't really have the product DNA and went from on prem to SaaS. You could crush them by some growth tactics. Think in the AI world, it's gonna be a lot harder because how are you gonna get proprietary high quality data?
00:34:21 · Roy Luo
[00:34:21] S1: Yeah. The other thing, which is a derivative of sorts, is that I do believe that with AI, you've lowered the barriers to entry in a way for new products to emerge. Right? The technical talent. A lot of these coding agents or copilots, it allows people who are maybe less technically inclined, but really experts in their end markets to be able to access and build products in ways that historically was less accessible before. And so I think you will see more point solution or emerging competition for any business, frankly. And what I believe it really highlights is that the winning businesses and the winning founders are those that really understand their customer. There are some industries out there where it could be like the coolest, most technically savvy, amazing product ever, but it's like this old analogy of selling a Cadillac or a Porsche to someone who just wants to drive a sedan or something like that. It's not necessarily going to really land with the customer. And sometimes I think what actually really wins is when you just understand your customer incredibly well and you build a product for that persona. And you don't have to be some rocket scientist engineer to be able to build that. You just need to know your customer and your end market really well. And what it also enables and will show is that true platforms have the unfair right to win, exist, and consolidate share. Point solutions can emerge. They can be ankle biters, but they're not gonna be able to have their day, especially when there's gonna be more of a crowding of point solutions that come up and they start to beat each other up. And so strong brands, strong advocacy from customers, and established platforms and strategic categories, I think, are going be the ones that accrue more value. And hopefully, the investments and the identification and processes that we've been a part of, you know, folks like Canva, folks like Ramp, folks like FloQast, I think are gonna be the winners of the day that we're really excited about.
00:36:32 · Lobo
[00:36:32] S2: Fantastic. How is this changing VC outreach? I'm I'm really curious. How do you get in front of such awesome deals? And does any of this change the way you outreach and get in front of prospects who are fundraising? So