David Thacker, General Partner at Greylock, shares insights from his career journey. He previously led product development at high-growth tech companies such as Google and LinkedIn and now invests in consumer and B2B2C tech startups. He discusses changes in the venture capital industry and their impact on fundraising for founders.
David Thacker, General Partner at Greylock, shares insights from his career journey. He previously led product development at high-growth tech companies such as Google and LinkedIn and now invests in consumer and B2B2C tech startups. He discusses changes in the venture capital industry and their impact on fundraising for founders.
In this episode, you'll learn:
3:45 Make calculated bets during slow periods to capitalize on contrarian perspectives.
12:16 Founders who start their company to solve a problem understood through a lived experience are able to build some of the best startups.
18:30 How has investment decision-making changed since and after the pandemic?
21:38 Is venture capital still patient?
The non-profit organization that David is passionate about: Tipping Point
About Guest Speaker
David Thacker is a General Partner at Greylock, where he invests in technology startups that focus on solving significant challenges through exceptional product design. He has been at the forefront of Greylock's investments in companies such as Curated, Instawork, Pragma, Wealthsimple, and AmplifyMD, to name a few. Prior to joining Greylock, David had an impressive career as a technologist, having held key product leadership roles at renowned companies like Google and LinkedIn.
About Greylock
Greylock is a Silicon Valley-based venture capital firm that invests in entrepreneurs that focus on consumer and enterprise software companies. The firm has invested in market-defining companies, including Airbnb, AppDynamics, Apptio, Arista Networks (NYSE: ANET), Cloudera, Docker, Dropbox, Facebook (Nasdaq: FB), LinkedIn (NYSE: LNKD), Medium, Nextdoor, Palo Alto Networks (NYSE: PANW),Pandora (NYSE: P), Pure Storage, and Workday (NYSE: WDAY).
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"I've invested at the stage where it's just a founder with a white paper on what they want to build. Nothing's been built yet. There's no team too. I've also invested in companies that are well on their way to getting a million users and have a real business with millions of dollars."
Gopi Rangan: You are listening to The Sure Shot Entrepreneur - a podcast for founders with ambitious ideas. Venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision. Welcome to The Sure Shot Entrepreneur.
My guest today is David Thacker. David Thacker is a venture capital investor and partner at Greylock. He has invested in many early stage companies, and I've co-invested with him as well in a company called Ava. He's had amazing successes over the years. His career has zigzagged between being a venture capital investor, going back to building, coming back to venture capital. Let's talk to him to learn more about why he likes venture capital, how he looks at opportunities when he invests in companies and what are some trends that he's interested in these days.
David, welcome to The Sure Shot Entrepreneur.
David Thacker: Hi Gopi. Thanks for having me. Great to be here.
Gopi Rangan: Tell us about yourself, starting with how you went from a Texas boy to a California professional. Did you change your loyalty?
David Thacker: I think when you're from Texas, you're always think of yourself as a Texan first. But I grew up in Austin, Texas, and that's back when it was a sleepy college town. Today, it's this thriving metropolis that everyone wants to move.
I, at an early age, was exposed to computers and was always tinkering around writing my own programs, writing my own software. And I went away to college at Duke University, studied computer science and economics there. When I graduated, end up going back to Austin to a startup called Trilogy Software, which was one of the top enterprise software companies. That's really when I got exposed to the startup scene. Since then, I've spent my career working mostly in high-growth tech companies - everything from Google, which I joined in 2003 and spent about five years there, to Groupon (I was an early product manager there), to LinkedIn where I was a VP of product up through the acquisition by Microsoft. I went back to Google in 2017 to to build the Google Cloud organization and to build all the Google workspace productivity products like Gmail and Google Calendar and Google Drive. And then, I found myself coming to venture capital at Greylock in the summer of 2020.
Gopi Rangan: You did spend some time at Greylock for a couple of years between your stints at Google and at Groupon. Then you came back to Greylock. How is your perspective now different compared to how venture was in the early days, like to 2009, 2010, around that time compared to where it is now?
David Thacker: Yeah. It's a big contrast. I joined Greylock the first time in 2009 after I had finished my first stint at Google. And ironically, I think I'm the only person that's ever worked at Google twice and both times left Google to go to the same place, which was Greylock. . So, my career has gone in a few circles, but when I joined, Greylock in 2009, I had heard about the firm. They had actually backed the first startup that I had worked at right out of college. That's where I first heard of the firm. But then one of my friends from Google was going to Greylock as an EIR (entrepreneur in residence) to start a new company. And so he told me they were looking to hire somebody on the investment team, and that's what led me to start interviewing there.
But when I joined Greylock in 2009, it was January and that was a really tough time in the economy. We had just had the great financial crisis, the blow up of Bear Stearns and Lehman Brothers in 2008. So, I really wasn't sure what to expect in 2009 because the economy was really bad. I stayed at Greylock for two years. Back then there was definitely a lot of fear in the financial markets. There were worries that other dominoes may fall. It was right after the global financial crisis. Yes. Yes. Really? And, and which was still going on. It took many years to recover from that, as I'm sure you remember.
Investors were definitely risk off. Venture capitalists were being very cautious with the way they were deploying capital. The IPO markets were shut, so there were limited exit opportunities for the best startups. Ironically, when you look back at that time period, some of the best, most important, most iconic technology companies were started during that time period. Everything from from Square to Uber to, we were the Series A investors in Airbnb, which was started around that time. So there were some really important companies started. When I look back now it's amazing. In the venture capital job, it takes a very long time to get feedback on your decisions on whether to invest in a company or not to invest. We came very close to making some investments. We didn't, but in retrospect, we should have. There were just some really incredible companies created during that time period.
Gopi Rangan: You invested in Pandora, Redfin around the same time as well, right?
David Thacker: Yes, yes. Both interesting stories. Pandora was really struggling to raise money in 2009 when we invested. We met with them and it was a pretty impressive story, I thought. When I met with them, I think I was two weeks or three weeks into the job. I met with the CEO and the founder. What was interesting is they were the number one app on iPhone and Android at the time. Number one free downloaded app, growing like crazy, all organic growth. It had a really incredible product experience for streaming radio with great personalization recommendations. But there was just such fear that they were gonna go out of business, that they wouldn't be able to turn it into a business and they would just run outta cash and shut down.
In the music space, you've gotta pay royalties to the music industry. If your usage and user growth is growing like crazy, your costs are also going like crazy. So, if you're not able to monetize that, you're not able to really sustain the business. We looked at that and it was clear that the radio advertising market was so large. I think it was like a 20 billion market just in the US alone. We knew that a lot of those ad dollars would go to digital radio because terrestrial radio (AM/FM) would eventually sort of trail off and go away was the thesis. If Pandora could build an advertising business [which we think they could because we ran bits of modeling], we thought they'd be able to sustain the business and continue growing. It could be a really big player in the space. So, that was our thesis and it was very contrarian, ironically, because just the market sentiment was so negative about anything in music or media or anything that had a high cash burn. But we invested and the company built a great advertising business and then a subscription business, went public several years later. It ended up being acquired by Sirius XM, but really incredible founder journey for that team. It's one of those lessons there is that sometimes as an investor, you need to think contrarian to the rest of the market.
The other lesson there for me was: when you see incredible usage and growth, like really strong product market fit like that, that's a very good signal that a really big company can be built because I think if there's great usage there and engagement and retention, then you can build a business around most things when you have that right.
But the toughest thing for a startup, especially a consumer startup, is getting that really deep engagement with users and building up to a significant scale and keeping that retention going. That's really challenging. But if the startups that are able to do that, there can be some really big outcomes.
Gopi Rangan: So you were a contrarian and you were right. At that time, in 2008/9, smartphones for just taking off always on internet was not really available. You still made the bet that usage for radio will move from terrestrial to digital and that paid off. Very interesting indeed.
David Thacker: Yeah, it's important when you're contrarian to be right. Yeah. That's the second part of it, right? You could be contrarian and be wrong and that's usually not a great thing. But yeah, that time we were right.
Gopi Rangan: Fast forward 10+ years now where we are. How has your perspective changed? Are you still looking for contrarian things and what kind of contrarian things are you looking for? What do you look for in founders today?
David Thacker: When I rejoined Greylock, it was in the summer of 2020. It was in the middle of the pandemic. I actually spent my first year at Greylock completely virtual. I didn't meet any founders or even my partners in person. We did everything via Zoom. It was a very different venture environment from before but also just from the standpoint of risk taking, in 2009, 2010, I had worked in venture when it was risk off. Every venture capitalist was very cautious. You fast forwarded 2020/21 and it's risk on. Everyone is looking to make bigger and more aggressive bets. Firms are raising really big funds. The investment pace and activity, for me, was unbelievable how fast things were moving and how quickly some firms were making decisions based on very limited data and very little diligence. Maybe a few Zoom calls with the founders, some firms were writing really big checks and it was just totally different venture market. So it was an interesting contrast.
To get back to your question about: what do I look for in founders? There's a set of things, and I think if you talk to VCs, you'll hear a lot of these similar things. For me, and especially at early stage, it's important that the founder has a really strong passion and mission orientation for what they're doing. I always like to ask founders how they thought of the idea that they're working on and why they wanna spend the next potentially 10 years of their life working on that. You'll get some really good answers usually, and oftentimes there's an insight someone had. Maybe just as a consumer they had a bad experience or something and they saw an area for improvement.
Or sometimes, we will invest in founders that have a lot of domain knowledge in the space they're working on, and they just thought something could be done differently when they have that insight. So, that's the first thing I look for is just this sort of mission driven founders.
The second piece of it is just along with that. What is the unique insight? How are they going to build this company? Why they should build it now, why is it gonna be successful? I love to hear the founder's point of view. You know, why they think they have a good shot of building something big. Along with that, usually I'll ask for a set of assumptions and I'll build up my own list of sort of assumptions on what needs to go right for that company to get built and to be successful.
Other aspects of the founders, you're looking for folks that wanna build and wanna move quickly. I think that's really important for founders. And I've seen lots of different types of founders, but sometimes you'll have founders that have more of an analytical or academic sort of research bent. That can be very difficult to build a startup. Startup's about moving quickly, trying to get to the next milestone before you run outta money. So, you want people that wanna hustle and, and wanna move fast to build stuff. Sometimes that means taking shortcuts in the product experience. You're building the technology to move faster and to learn.
Finally, look for founders that have super high integrity. You wanna be in business with people that are obviously ethical and wanna do the right thing. It sounds cliche, but typically love to back founders building their company because they do want to improve people's lives. I think that's really important as well.
Gopi Rangan: You ask a lot of questions, but the foremost important question on your mind is the mission. Why did you start the company? What's the purpose? Before we go into more details, can you give a a quick overview of how you make investments? What stage do you invest? How many investments do you make per year on average?
David Thacker: At Greylock, we're on our 16th fund right now. We're one of the oldest venture capital firms in the world, about 60 years old. Our current fund is $1.6 billion. We primarily invest early stage. That's seed and series A, some series B, but really we can invest in any stage. So we do select growth investing as well. I've done all different stages. I've invested at the stage where it's just a founder with a white paper , you know, on, on what they would've built. Nothing's been built yet. There's no other team. I've been also invested in companies that are well on their way to getting a million users and have a real business with millions of dollars in revenue and everything in between.
But we tend to bias towards early stage. Greylock invests across a number of different domains. For me personally, I've focused on a couple key areas. The first areas is the future of work. I'm really fascinated by new tools, professional networks, new ways of working. I spent many years at LinkedIn and more recently at Google working in this area, so I'm very interested in that. But I also do some marketplace investing. I invest in the gaming category. So, gaming platforms is one area I look at, and then I've done some FinTech investing as well.
Gopi Rangan: A wide array of topics, but I see that you invest a steady pace across the spectrum from seed stage to growth and you prefer early stages. Let's get into some of these details. Can you give an example of a recent investment you made? How did that connection come about? What did you look for in those founders? What did you ask them?
David Thacker: Yes. So, one of my most recent investments that's been announced as a company called AmplifyMD. I consider it a future of work company, but it's in the healthcare space. We co-lead the seed round. What the company does, they provide a telehealth platform and a network of medical specialists like cardiologists, hematologists, pulmonologists, and they work with hospitals. They allow hospitals to give their patients that are in the hospital access to these specialists via telehealth appointments. The reason this is an important thing is that most hospitals in this country, especially rural hospitals, but even some urban hospitals, don't have any medical specialists on staff. They may have some more general practitioner doctors, but they don't necessarily have a cardiologist on staff.
So, a patient comes in with an issue and if they can't see the right specialist, typically the protocol is to send that patient to another medical facility. You might end up putting them in a n ambulance and shipping them a hundred miles away to a medical facility where they can see the right specialist, or sometimes they just have to wait for a medical specialist.
So what Amplify MD does is they provide the platform plus the doctors to get someone a consult very quickly and so much can be done now via telehealth. Their platform integrates with all the health record systems that makes it very easy for a doctor no matter where they are to get the data and treat a patient.
How I intersected that company is one of the co-founders I had worked with in a prior life at LinkedIn. Both co-founders are very talented people. Their reason for starting the company was that they were the children of rural doctors. So, they had seen this problem up close hearing this from family members on what an issue it was.
And they actually were fortunate to start the company before the pandemic even hit. But then of course, the pandemic really accelerated the option of telehealth. It made it much more mainstream for doctors, for health insurance companies, for the medical facilities, for the patients. I think people are very comfortable with telehealth now.
Since we co-ed the seed, they've since raised a Series A. The company continues to grow into scale and it's been a great team to work with.
Gopi Rangan: You and I have also co-invested in Ava and one of the founders worked with you at LinkedIn previously. They have a very noble mission as well. The financial system doesn't serve everybody well, although the intentions were right. The infrastructure doesn't really support all the families and people the same way.
So they are building a solution that is mission driven, of course. And they were very early when you met them. I see a pattern here that you like investing in people who you already have a connection with, who you are familiar with over some period of time in some capacity, perhaps even worked together. Is that something you prefer?
David Thacker: It's always great to back people that I've worked closely with before because investing, especially at the seed stage, and you mentioned Ava Finance, we invested there at the seed stage. In fact, the founders had just resigned from their jobs. They had a slide deck, but that was . That was it.
That was the stage at which we invested. if you have people you've worked with before and you know they're world-class, those are the people you wanna back. And you almost have an unfair advantage as an investor if you've worked with somebody closely and you really know how talented they are. But this was also a function of just the environment. Going back to when I started at Greylock for the first year because of the pandemic, almost the first year and a half, everything in the venture world pretty much went remote and virtual. And because of the frenetic pace of investing that some firms were doing, it's very hard to meet a founder on a Zoom call for an hour, maybe have a second follow up call and then expect to give them a term sheet.
I didn't feel comfortable with that because when I invest in a company, it could be a five to 10 year even longer relationship with that person. So the idea that, you'd make that decision after an hour on Zoom, I was really struggling with that.
So, my initial investments during the pandemic, almost all of them were people that were close in my network that I already had known and had a good relationship with. But since we've reopened now over the last year and we kind of figured out of the pandemic. Definitely, we have been meeting and spending more time with founders. And what's good and what's healthy, I think, for the venture environment is the, and the industry has slowed down quite a bit, so you're not seeing the crazy activity of 2021. And what's been terrific about that is the ability to really build relationships with founders before you invest. So, I'll meet with founders that I'm not invested in and build relationships over the course of the months and sometimes years before end up investing. I think that's a, a much better way to approach the business.
Gopi Rangan: Although you and I invested exactly at the same time in Ava, I never asked you this question. What happened in the first meeting? What did Omar, Reza and Abed tell you? What got you excited at that time?
David Thacker: Well, I think there were a combination of things. One, I knew them both really well and they were the people I love working with and that I greatly respect, and that I knew would be really talented founders. This was their first company, but I had that confidence in them. In the first meeting, it was again, the mission. Ava is a service that helps people reduce the amount of interest and fees they pay on their debt, right? So, it helps people build their credit, helps people refinance into to lower cost debt. I thought that really excited about the idea of helping people with that because consumer debt is such a huge problem. There's so many people in trouble with it. Now, their mission is not to eliminate debt, right? Their mission is to help people get into lower cost debt. Debt's a good thing. Debt allows people to buy a home. It allows people to buy a car. It allows people to go to school. So there's a lot of positives with that. Helping people better manage that was their longer term vision. They've got a lot of things they haven't announced that you know are exciting on their longer term roadmap. I really liked that mission, really liked the founders.
Finally, it comes back to that unique insight. The founders had respectively worked at Credit Karma and Stripe, so they knew this space really well and they knew where the opportunities were to better serve their consumer customers. I felt really good about their intuition on the space and their plans to create a new service.
Gopi Rangan: Founders are world class indeed, and they are building something that automates all these decisions about debt to start with and hopefully do other topics of finance as well. Most people are scared to talk to a financial advisor or deal with their finances, and that is the usually the starting point for more troubles.
If that can be solved by automating a lot of these things so people can go live their life while an infrastructure like Ava can take care of their finances, that makes a big win for these people who definitely need a solution like this.
How long does it take for you to make a decision from the point of the first meeting to when you decide that "I want to invest in this?"
David Thacker: We can make decisions pretty quickly. I think the answer comes back to how much work have we done before the decision has been made or before the first meeting. It's not uncommon for us, as I mentioned earlier, to start building relationships with founders in advance of investing or advance of them even fundraising.
I have a list of companies I'm tracking. Some of them I have not even met yet but I know what they're doing and I'm watching them and following their updates and their product launches. I've tried their service. So, typically there's a lot of research that goes on too. Sometimes at the first meeting, we feel really well informed and then we hear great things from the founders that might result in a couple follow up meetings, but we can make a decision within a few days if need be. I think fortunately given a more normal funding environments, it's rare now you see in investment processes playing out in less than a few days or less than a week.
And so I think we have time to be thoughtful about these types of decisions.
Gopi Rangan: You mentioned that now that the market is in a different place compared to where we were a year ago, it's sometimes a good thing when things slow down. We were in a very frenetic pace, making very quick decision. Perhaps even many bad investments were made in the past couple of years, but now things are coming back to ground.
How have your decisions changed? What are you doing differently now compared to a year?
David Thacker: The biggest thing is thinking very carefully about valuation multiples which I think during the 2020/21, we had record valuation multiples across a lot of different categories. And this is in the public markets, right? That filters its way back into the growth market and then sort of filters its way back into the early stage markets where prices had just gone up across the board and it wasn't unheard of to see, for instance, enterprise software companies to see companies raising at a 100x ARR, or in some cases even 200x ARR.
But when the public markets now are valuing companies paying on their growth rates. Could be anywhere from, there's SaaS companies right now trading at 3x ARR as public companies, the average tends to be a bit higher, in the 5-10X range. The best companies might get up to 15 or 20 x, but you have to think about your entry point, the price you're paying when you invest in a company relative to the current business because that's certainly gonna impact. We can't assume, and we shouldn't assume, that valuation multiples will go back to those 2020, or 2021 levels. It's really a lot more thinking carefully about entry price, entry valuation, when you're investing, and then what an exit will look like for that company, whether it goes public or whether that's acquired, assuming the company continues to grow, how will it be valued? There's definitely a lot more rigor there because it's a really important determinant of the drivers of returns of any investment.
Gopi Rangan: We're definitely not going back to the, those days, like 100X multiples and 200X multiples on ARR. My pace as well has slowed down significantly. I used to invest in seven, eight companies per year, and now in the past 12 months, I've invested in only three companies.
I'm looking forward to the next year. I'm very excited. Let's see if the pace picks up. I'm looking forward to meeting some exciting founders. Before we conclude the discussion, I want to ask you about your perspective on the venture capital industry. If you were to change one thing, what would you change to make it better?
David Thacker: That's a great question. There's a number of things I would change. I think there's been a lot of positive changes. E even, you know, when I go back to comparison of 2009, my last time in venture to today, one of the biggest changes I observed was the amount of effort firms put into resources to help their portfolio companies, you know, it's no longer just capital.
If you look at Greylock for instance, we now have several operations teams. We have a recruiting team that can help our startups hire entry level engineers, product managers, user experience designers, executives. We have a marketing team that can help with branding and marketing strategy.
We have customer development team for enterprise companies that can help them make potential customer connections and help them find their first customers. Many of the multi-stage firms have invested in these resources to help entrepreneurs. Now as a founder, when you're choosing a partner with a venture capital firm, you're getting not just the advice to the partner and their network, but you're getting all these additional services in the capital. So I think that's really positive and I'd love to see that continue.
But in terms of the things that I think that are potentially broken today that could be fixed, there's quite a few things. If I had to pick one, I think there's a pressure on startup founders, and I think some of this is exerted by the venture industry to really go fast and to get big as quickly as possible.
I don't think that's healthy in all situations. Every startup has a different journey. Startups should be able to grow at their own pace, which makes most sense for their business, and then really scale up when it makes sense for their business. This is changing with the newer sort of economic environment, but I think in 2020 and 2021, especially, there was just pressure and a lot of this is coming from venture capital investors because they're approaching companies preemptively, offering aggressive financings, putting more money in the companies potentially before companies are ready.
We're gonna deal with the aftermath of that in 2023 and beyond, where there's a number of companies that raise way too much. way too quickly, well ahead of their business. And they've built these cost structures well ahead of where the products are, the markets, the business traction, and now they've gotta unwind that.
I think that's partially what you're seeing as companies lay off across the board to reduce their burn and get things back in alignment with where their businesses are. Venture historically was more of a very, and we consider us as part of this set of like sort of patient capital where we're long-term partners with the businesses. Airbnb, for instance, we invested in 2009. The company didn't go public till over 10 years later. So, it was a very long-term investment where the founders didn't feel pressure to exit. They could continue to grow the business at their pace which is still fast pace, but they could do it as a private company. We'd love to see the venture more adopt that model.
There's so much growth capital coming in. There's different investors with different expectations, but there's just been this pressure to grow quickly, really fast. And that's not necessarily a great thing in every occasion.
Gopi Rangan: Starting a company is very difficult. Greylock has built a platform to provide various kinds of services to founders to make that process easier for founders.
But at the same time, growth is important, but reckless growth is not healthy. The business needs to be able to support that growth. When patient capital is available for growth, those investors are willing to wait, and as long as the company is able to sustain the growth and you grow healthily, that's a good outcome.
This reckless growth where so many funds have raised enormous amounts of money and they're just pouring into the market, that doesn't result in a good outcome in the long term. Hopefully, we'll bring more of that goodness and more patient capital like Greylock has done over the past 60 years. What an amazing firm! It's an iconic firm indeed in the world.
My last question to you is about your community involvement. Is there a nonprofit organization you are passionate about? Which one?
David Thacker: Well, one of my favorite nonprofit organizations that I've been a supporter for almost the entire time I've been in the Bay Area is called the, the Tipping Point. It's a nonprofit organization that's trying to eliminate poverty in the Bay Area.
It's very focused on just supporting the, the Bay Area. They invests the dollars that they raise, they carefully screen local charities and local organizations. They find the best ones and then they give not only capital, but help in scaling and they have a pretty rigorous methodology. They're supporting everything from housing, which is a big problem in the Bay Area, to early childhood development, education, skills training, and employment. We were introduced to the nonprofit right when we moved the Bay Area. One of my friends was actually co-founder of that organization. It's been amazing to see it grow over the last 15 to 16 years as an organization. One of the things I think that's special about it is the, the board members of the organization basically fund all the operating overheads.
So when I donate money to Tipping Point, a hundred percent of my donations going to support these Bay Area anti-poverty charities. So, that's one that's close to home. And for me, when you look at the Bay Area, there's been such extraordinary wealth created here. Probably more than anyone else in the world in the last 10 to 15 years. But not everyone has participated in that. And so you'll see in the Bay Area extreme wealth and then right next to it you'll see abject poverty, right? And so I think this organization is really trying to address that and, you know, been a, been a big supporter and fan of it.
Gopi Rangan: Thank you for your active contribution and consistent contribution over the years to support our local community. It's true there are so many opportunities for wealth creation in Silicon Valley, but there's still object poverty all around us and I'm glad that tipping points taking care of that. David, thank you very much for spending time with me today and sharing candid stories based on your experiences.
I look forward to sharing your nuggets of wisdom with the.
David Thacker: Thanks, gopi. It's great to be a guest
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