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- [00:00]
Seydou
Wells Fargo seeks broad impact in their communities. They're focused on building a sustainable, inclusive future for all by supporting housing, affordability, small business growth, financial health and other community needs. That's why They've donated nearly $2 billion to strengthen local communities over the last five years. Wells Fargo the Bank of Doing see how@wellsfargo.com Saydou Wells Fargo's philanthropic support includes contributions from Wells Fargo and company, Wells Fargo Bankna and the Wells Fargo Foundation.
- [00:30]
Ms. Klein
From the Delta sky Welcome back, Ms. Klein, to the JetBridge. Delta Air Lines relies on 5G solutions from T Mobile for business to power operations and serve customers faster. Together, we're putting 5G into the hands of ground staff so they can better assist on the go travelers with real time information throughout the airport. This is elevating customer experience. This is Delta Air Lines with T Mobile for business. Take your business further@t mobile.com now.
- [01:03]
Tracy Alloway
Bloomberg Audio Studios Podcasts Radio News.
- [01:20]
Jill Wiesenthal
Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Wiesenthal.
- [01:25]
Tracy Alloway
And I'm Tracy Alloway.
- [01:27]
Jill Wiesenthal
Tracy, I love being out on the West Coast. I love being in San Francisco. We did a live episode last night. I love coming out here.
- [01:33]
Tracy Alloway
It's been fun. We also had some really good Chinese food afterwards.
- [01:36]
Jill Wiesenthal
We had really good Chinese food.
- [01:38]
Tracy Alloway
Oh, and I woke up to the dulcet tones of the San Francisco Parakeets this morning. That was fun.
- [01:43]
Jill Wiesenthal
There are some big protests happening. I don't know what. So I've been waking up to the sound of protests. Seems fitting. I think I've mentioned it in a million tweets. In another episode I've taken a few Waymo rides, which is amazing. I love that. But you know, we talk to a lot of, I guess traditional normie investors most of the time. And when we're out on the west coast, we have to talk to VCs because that's certainly in San Francisco.
- [02:09]
Tracy Alloway
That's are VCs not normies. They're no different class of humans.
- [02:13]
Jill Wiesenthal
They're like different, you know, their offices feel different. They invest in sort of wildly uncertain markets in the way that say, someone investing in the treasury market is not. It's fun, it's different. It's always eye opening from my perspective.
- [02:29]
Tracy Alloway
The interesting thing is I think like 10 or 20 years ago, I think a lot of people would have expected the VC world to move more towards the traditional investment world. And instead it feels like the traditional investment world has moved more towards vc.
- [02:41]
Jill Wiesenthal
Yeah, I think that's completely right, actually. I mean, I Think like all of culture has kind of become VC AFide because everyone is just looking for, you.
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Tracy Alloway
Know, the lottery ticket.
- [02:51]
Jill Wiesenthal
The lottery ticket in various ways. Big, high conviction bets and you sort of hope that one of them, whether it's a bet on a presidential election, a sports game, a cryptocurrency, one's career, et cetera, you want to find that right tail outlier, which has been the VC mentality since the beginning of the industry.
- [03:10]
Tracy Alloway
Right. Everyone is a VC now, so we should talk more about the industry.
- [03:14]
Jill Wiesenthal
If everyone is a VC, we should talk about what a VC actually does and doing now in the year 2024. I'm very excited. We do have the perfect guest. We are here in the offices of Index Ventures and we are going to be speaking to Index Ventures partner, Nina Ishadian. Nina, thank you so much for coming on the podcast.
- [03:33]
Nina Ishadian
Thank you so much for having me. I'm excited to chat with you guys today.
- [03:36]
Jill Wiesenthal
What does a partner at Index Ventures do?
- [03:39]
Nina Ishadian
Well, our job is to find exceptional entrepreneurs, really build trust with them, and be part of their journey in building a generational company.
- [03:50]
Jill Wiesenthal
Setting aside what a partner does or investor, you know, there's a lot of VC firms. Does Index Ventures have like a specific sort of differentiator or mission or raison d'etre that is different than anyone else?
- [04:02]
Nina Ishadian
Yeah. Well, I think to answer that, it's helpful to know a little bit about the history of Index. So Index started in Europe almost 30 years ago and was one of the first VC funds to really believe that entrepreneurship could come from anywhere, not just Stanford, Silicon Valley. And we've really had a global mindset. And so today we have offices in New York, San Francisco and in London. And the way that we think about investing is first and foremost, it is truly all about the people. So when we hear a pitch, we actually spend a ton of time diligencing the entrepreneur and trying to build a foundation of trust to understand what motivates this person, what is truly this person's spike. And we try to see them in many different settings, in our office, in their office, in a comfortable situation, in an uncomfortable situation, in a professional setting, or having dinner at a restaurant. And so we spend a lot of time really getting to know the individual because at the end of the day, when you're investing in venture capital, you're really taking a bet on the trajectory of someone, which oftentimes is really hard to see when you're talking to a very young first time founder.
- [05:09]
Tracy Alloway
I bet this gets into something that I've Always wanted to ask a VC person, but what are you doing for founders besides writing checks? Because I hear a lot about the relationship and the pitch is always, well, we have great relationships with our founders and we really build them up as both people and businesses. What does that actually mean?
- [05:28]
Nina Ishadian
Yeah, well, I can tell you at Index, we don't pride ourselves on being the cheerleader for a founder. Many VCs, oh, that's cool.
- [05:35]
Tracy Alloway
Many.
- [05:36]
Nina Ishadian
No, many VCs, they show up to board meetings and they're the cheerleaders, which is an important role. Right. You want to have that positive energy in the board meeting. For us, we really want to be business builders along with the founder. So what does that mean exactly? Number one, we try to be a mirror to the entrepreneur. So that could mean in a board meeting, if they have a blind spot on, let's say, like an executive that they've had around that has been incredibly loyal to them for years, it's often hard to see, you know, because we are going to all of these board meetings in the quarter, we can kind of calibrate, hey, this CRO is excellent, or, hey, maybe you've outgrown this particular person and you need to think about, you know, augmenting them or putting them into a different role. So being a mirror is difficult because oftentimes you have to share with the entrepreneur something that they don't want to hear or maybe they don't see yet. And so that's one thing that we definitely think about. Second, you know, I think being able to know exactly what is going on at a company and not feeling like a lot of founders, I didn't appreciate this for a long time. They would have so much anxiety preparing for a board meeting. You know, they would tell me, like, the night before, they wouldn't sleep. They'd be all worried about what's going to come up in a board meeting. A lot of founders have a fear of getting fired by their board that I never really thought about or appreciated. Because for us, we're like, it's all about the founder. We're here to back you and your vision. And so I think being able to have a conversation that kind of transcends the board meeting, where, for example, on the first company that I took a board seat of, I would actually fly down the day before the board meeting and spend a ton of time with everyone who was going to speak in the board meeting, plus their, like, minus ones, to really get a good sense of what's going on in the company. What are they worried about what are some topics. And then before the board meeting, I'd talk to the CEO and say like, hey, these are some of the things that are on my mind, just so they didn't feel like they were blindsided. So taking that extra effort to feel like an extension of the company, not just like, I show up, I grill you at the board meeting and then I go away like a sort of.
- [07:37]
Tracy Alloway
Neutral Greek chorus almost, right. That can spot the blind spots that the founders might not necessarily see and be like, hey guys, this is happening.
- [07:45]
Nina Ishadian
Yeah, you really want to be that mirror.
- [07:47]
Jill Wiesenthal
So it's interesting because in my mind, when I think about public company boards, I always think of them as well. There's a cliche, there's a stereotype that many of them are rubber stamps for the chairman or the rubber stamps for the CEO, particularly on questions like compensation. And there's a lot of criticism of governance of public company boards.
- [08:10]
Tracy Alloway
My dream job is to have 16 board memberships for which I'm paid an enormous amount of money.
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Jill Wiesenthal
Yeah, well, you don't even need enormous if you have 16. You just rack them up. What is. Actually I've never asked this. What happens in a private company board meeting? Typically, what's the agenda?
- [08:24]
Nina Ishadian
Yeah, so typically if it's a well run board meeting, the materials will get out, be sent out 24 hours in advance, and usually it's in a memo format. Actually, a lot of our founders write a co letter where they say, here's what's on my mind. And it's like stream of consciousness, like what went well, what didn't go well, what they're struggling with, things that they want the board's view on. And then the ideal board meeting is you come in. Everybody has looked at what happened in the past quarter. What are the open questions? We collect some data to help the entrepreneur. If they're like, hey, I'm thinking about changing my usage from seat base or my pricing from seat base to more like usage base. How has that gone? What other companies have done this, you know, what should I be thinking about? And it's more of a discussion versus like a report. Those are the best meetings in boards.
- [09:08]
Tracy Alloway
So one other thing I always wanted to ask a VC person is how much technical expertise do you actually need in this job? Does it get as granular as you're looking at someone's like source code and saying this looks really elegant, or is it more about the business case and sort of refining the business model itself?
- [09:28]
Nina Ishadian
Well, it probably depends on what you're investing in. Generally we would do a lot of that technical diligence at the time of investing to make sure that what the founder is saying is built the way that they're presenting it and that there's no loopholes and that we feel really good about the engineering team. So we will often bring in also deeply technical experts to help with that diligence. But in general, I'd say going forward it's much more on the business building and also giving feedback on the team. Like, you know, at the end of the day, because these companies start so small, the people that they are bringing around the table and what the bar of excellence is for the entrepreneur is really important because that's the foundation of who's going to build that next source code or that next product or that next go to Market Motion. And so that's where we spend the majority of the time, the business and the talent.
- [10:18]
Jill Wiesenthal
How much of your success would be attributable to perhaps going out into the world and identifying promising founders or promising companies that are going to be the next big thing and how much would it be? There is a promising founder and a promising company that's the next big thing and they want to call you. You are one of the first calls that they place. This actually came up in another conversation we did recently about wanting to. A first call. Which strikes me as slightly different than you being the one to call that.
- [10:52]
Tracy Alloway
By the way, that was with a credit guy. But Nina also has a background in credit. Amazing to be a high yield bond trader.
- [10:59]
Jill Wiesenthal
But I'm curious about like that dynamic, the importance of being a first call or a second call as opposed to an eighth call for certain types of deals and like thinking about that, sort of like that ranking for potential opportunities.
- [11:12]
Nina Ishadian
Yeah. So maybe it's taking a step back. Sure. So the job of a VC is number one, sourcing, which means being able to find interesting opportunities or having those entrepreneurs come to you.
- [11:23]
Jill Wiesenthal
Yeah.
- [11:24]
Nina Ishadian
Number two is of course doing the diligence where you're making sure that you know, the market thesis is right, the product is great, the team is excellent. Number three is winning, which I don't think a lot of people actually talk about. So people think that, you know, you sit in this room in San Francisco in this nice office and people just come to you and you know, you say, oh yeah, this is a great idea, where do I sign the check? But that's not actually the case. Usually when you identify a great entrepreneur, chances are somebody else has also recognized this person is spectacular. And so actually being able to convince the entrepreneur that you are the person in the firm that is going to work the hardest, be there for the founder, and also that you have a really specific investment vision and thesis that aligns with their vision, I think is really important. So the process of, you know, once you know you want to invest in this company, actually getting that founder to choose you is actually quite, quite difficult and takes a lot of time. And then there's of course, being a board member and then finally exiting the company, IPO or acquisition.
- [12:27]
Jill Wiesenthal
When it comes to winning, can you talk about the difference in 2024 versus 2021, when the perception was that there were a handful of really large firms that would write a check within an hour or maybe two hours or maybe a day. But I think in many cases, like, yep, this looks good, we're going to write you a big check and then we're never going to talk to you again, but the check's there, et cetera. How real was that for you as a competitor and what is that like in 2020 for that competition also?
- [12:57]
Tracy Alloway
Sorry just to tack onto it, but if you can't write the big check, what do you do instead? Do you send like bread baskets and nicely written letters? What's your edge in that case?
- [13:06]
Nina Ishadian
Okay, happy to give you an example there. So in 2021, yes, absolutely. That's accurate. It was crazy. We'd meet a company at 9am and by 4pm they would send us a text or an email saying, hey, we have four term sheets. What's your decision? And you know, we sat a lot of those out for a couple reasons. One, we didn't feel like we did our fiduciary duty by actually doing the diligence. And number two, it felt extremely transactional, you know, and I think that there were some players that had very large funds that could afford to do that kind of investing that have really exited the VC today because they realize that again, unless you are getting the real unfiltered view of what's going on in the company, it becomes very difficult to actually know, like in these private companies, you know, what are the challenges, what's going well, being able to have that authentic conversation with the entrepreneur now, you know, a lot of those people have exited. A lot of the smaller funds have not been able to raise, you know, a second time fund. I think that the players have consolidated back to a lot of these enduring platforms and institutions that have kind of gone through a lot of these cycles. And by the way, I think founders realized that those who took the Money from those firms that were more like, I think someone else threw this phrase out, like atm, like VC atm. When times got tough, those players were not around because they weren't on the board. They had totally set expectation of that. And the founders realized they really needed someone to help them walk through how to do their first rif, or how to restructure the company or what to do, take a down round or take debt. So I think less players now and then. Also, founders have really recentered on the original value proposition of venture capital, which is having someone along your side who can really help you build this business.
- [14:52]
Tracy Alloway
And then how do you compete? Do you have any interesting instances of, I guess, being really creative when pitching to a potential founder?
- [15:00]
Nina Ishadian
Yeah, well, I don't want to share all my secrets, but okay, okay, so look, I think winning is this incredible art where you have to really try to get as many data points about the entrepreneur as you can. So, for example, even before I meet a founder, let's say that I'm really excited about and I have a thesis about, I will watch every single podcast, video, Twitter, LinkedIn post to try to gauge, like, what is this person? Like, are they going to respond to a super aggressive, hey, I'm lean in, let's do this, let's go. Which some founders love that, or are they more like, I want to get to know you. Maybe I invite them over to my house. They get to meet my husband and my kids. Maybe we bond over our love for Formula one, Or maybe they want to hear about my values as a board member. So I try to custom tailor the interaction with the founder based on the data that I can get outside in. And of course, that means talking to other people that know them and trying to understand what they care about. And then in terms of the winning, you know, I think the hardest part that a lot of people don't share is once you've issued a term sheet to someone and you know that they have term sheets from other VC firms, like, what happens in that gap of time until they sign. And so I try to map out the entire process of, okay, if they're gonna sign by X date, and most likely we're gonna give them a term sheet on this date, what needs to happen in that gap of time? And it could be like this touch point, this thoughtful note, this special event that we're gonna invite them to. And so I map that all out ahead of time. And as the conversation goes, I'm continuously, like, tweaking what I do, in which.
- [16:36]
Tracy Alloway
Order, Joe, you Kind of did that to me when you were trying to get me to go to Bloomberg. I remember that.
- [16:42]
Jill Wiesenthal
And it was successful.
- [16:43]
Tracy Alloway
Yes, it was successful.
- [16:44]
Jill Wiesenthal
Which actually dovetails into a question which is that we have listeners who, many of them, some of them in college, and maybe one of the things they think about is venture capital. And it looks pretty cool. You really do seem to meet a lot of very interesting people. If nothing else in this industry, some people make a lot of money. Your offices are a lot nicer than say, other offices where people might go into the investing realm. But you don't know if you're good at it. So if I were in college and I was like, I want to be vc, but I don't know if I'm good at it, what would you have to know about yourself to know if, oh, this is a path I want to pursue?
- [17:26]
Nina Ishadian
Yeah. So first, you know, it goes without saying, for me at least, that I think this is one of the most incredible jobs in the entire world because you are getting to be on the front row seat of technology and innovation and the people you interact with. I mean, every day I have to pinch myself that I'm getting to meet these. This is how Tracy and I felt.
- [17:46]
Jill Wiesenthal
By the way, about our job.
- [17:46]
Nina Ishadian
Yeah, it's incredible, right? Like, you get to meet these incredible people who are putting their life on the line to pursue something because they think, you know, this business or this product or this broken system needs to be fixed. And so, you know, if even that sentence inspires you, you know, I would certainly encourage you to think about venture capital. The beauty is right now, there's so much information about vc. When I tried to get into venture capital back in 2015, 2016, there was nothing like VC firms didn't have websites, there was no YouTube videos, podcasts. So the first thing I would say is try to determine if you get excited listening to invest, like the best or some of these, you know, a lot of these VCs that share their journey and how they think about their day to day and what the trade offs are of investing, you know, at this stage. Second, I would say in order to be good at this job, you kind of have to have some raw ingredients. One of them is definitely thriving in ambiguity. So when you show up at a VC fund, usually you're given a laptop with a blank calendar and a lot of type A people try to get into vc, myself included. Right. Like where it's like, give me the milestones, tell me what the goalposts are. And I'm just Gonna, like, crush them. Well, when you get to vc, you don't really have that. It's like, make magic, make money, find great entrepreneurs. And you're like, where do I start? So you really need to love thriving in ambiguity and kind of breaking down.
- [19:15]
Jill Wiesenthal
So it's just your job to fill up that calendar.
- [19:17]
Nina Ishadian
It's your job.
- [19:18]
Jill Wiesenthal
And no one else is going to tell you, like, how to.
- [19:20]
Nina Ishadian
No one is going to tell you how to spend your time. Of course, like, you get some guidance on, like, hey, find a market, go deep, find the founders. So this. So that's one. Thrive in ambiguity. The second thing is being able to take the ball. So oftentimes VC firms are pretty lean. That means a lot of responsibility for a young person. So that means, hey, you met a great founder at a conference. Like, it's on you to figure out, like, how we get a second meeting. Do you write them a really thoughtful email? Do you invite them to this dinner? Follow up, follow up, follow up. And then the third thing that I don't think a lot of people really appreciate is these very long feedback cycles, right? So again, type A people are usually like, very driven by positive affirmation because you do something, you do well. Great. Next thing, next thing, you get the.
- [20:09]
Tracy Alloway
Sort of immediate feedback.
- [20:10]
Nina Ishadian
Yeah, exactly. The dopamine hit of like, I'm good at this. At vc, in vc, you really don't get that because it's like years before, you know, and, you know, anyone that tells you, like, any company has only been, like, good news and up into the right is lying to you because it is such an emotional rollercoaster, things go wrong. You know, things go right. You think you're a genius one day, and then the next day it's. It's very humbling. So I think, like, those are core attributes that you should have. And then finally, of course, you need to be able to sell yourself. And that's where a lot of people, I think, feel very uncomfortable. You know, because it's one thing if you can sell a product, it's another thing if you can convince someone to take a bet on you as a board member. And, you know, being able to articulate, like, your personal pitch and why you, I think, is really important.
- [21:12]
Seydou
Wells Fargo seeks broad impact in their communities. They're focused on building a sustainable, inclusive future for all by supporting housing, affordability, small business growth, financial health and other community needs. That's why they've donated nearly $2 billion to strengthen local communities over the last five years. Wells Fargo, the bank of doing See how@wells fargo.com Seydou Wells Fargo's philanthropic support includes contributions from Wells Fargo and company, Wells Fargo Bankna and the Wells Fargo.
- [21:41]
Ms. Klein
Found from the Delta Sky Club. Welcome back Ms. Klein to the JetBridge. Delta Air Lines relies on 5G solutions from T Mobile for business to power operations and serve customers faster. Together we're putting 5G into the hands of ground staff so they can better assist on the go travelers with real time information throughout the airport. This is elevating customer experience. This is Delta Air Lines with T Mobile for business. Take your business further@t mobile.com now.
- [22:13]
Tracy Alloway
So you mentioned trying to get into VC circa 2015. Can you talk a little bit more about your previous job history? Because I was saying earlier, before we started the podcast, but honestly one of the most eclectic bios I have ever read. So in addition to being a high yield bond trader at Citi, you also worked at a bakery in Istanbul for unknown reasons.
- [22:37]
Nina Ishadian
Yes, sure. So I grew up in the Bay Area. I'm Armenian. My parents moved to the US from Iraq. Actually we're part of the Armenians that originally lived in the southern part of Turkey before the Armenian genocide. And basically my parents, you know, raised me with this philosophy that I was so lucky to have the right to work in the U.S. my dad, who had the equivalent of a Ph.D. in electrical engineering, when he moved here, he had to wait seven years for a green card. And so, you know, I grew up with this perspective that wow, I'm so lucky to be able to even work in the United States and of course speak English. And so that really always drove me and of course my Armenian heritage. And so when I got to college, as many immigrant kids do, it was either like become a lawyer or a doctor. And I thought, you know, I'd love to be a lawyer. So I originally decided to study pre law and then I interned at a law firm one summer and I was like, this is just, this is terrible. It was just like I knew that it would take so long for me to like actually do what I thought a lawyer did based on what I saw on tv. So I asked a couple of my friends who had done some finance internships what their experience was like. And most of them were investment banking, which honestly sounded very similar to doing the, you know, lawyer path of just sitting and doing spreadsheets and PowerPoints. But my, a few of my friends had done trading and I just, it just struck me as, wow, like here's something where you can like form conviction very quickly. You have an opportunity to put your money where your mouth is. And I was like, this seems like the most intense job I could possibly do after college. So if I do this as, like, a training ground, worst case scenario, any other job after this would be like a cakewalk. And so I was really fortunate to get this offer at Citi, and I really wanted to be on the High Yield Bond desk because the number one trader, this guy Scott Goodwin, who now runs an incredible fund himself called Diameter, was running that desk, and I really wanted to learn from him. However, I had this terrible timing of graduating college in 2008, and so a lot of the funds called individuals and were like, hey, would you defer your offer for a year? And I had, like, my apartment in New York set up, roommate, the whole thing. So, long story short, I applied for a Rockefeller fellowship, which asks you, if you could go anywhere in the world, where would you go and what would you do? And I decided to write a proposal to work at a baklava bakery, because food is the perfect intersection between Armenian and Turkish culture. And so, yeah, when I got it called, my parents, they were like, are you serious? And I worked at a baklava bakery for a year in Turkey.
- [25:10]
Tracy Alloway
That's amazing. Okay, so here's my other question. What is the Venn diagram overlap between baklava baking and venture capital?
- [25:19]
Nina Ishadian
Okay, I thought you were going to ask me about trading and venture capital.
- [25:21]
Tracy Alloway
Well, I thought I'd ask the harder one, which I think is baking.
- [25:25]
Nina Ishadian
Yeah, I mean, I think the analogy is probably, number one, like, you're serving customers at the end of the day, and for we're serving our LPs and entrepreneurs. Number two, you actually have to be, like, quite collaborative because one person is, like, making the layers and the dough, like, super thin. Someone else is perfecting the pistachio, like, mixture that's, like, perfect. Somebody else is doing, like, the sugar syrup and, you know, to bring it all together. It really does take a village. And I think the analogy is to build an amazing company, it takes a village. And then third, you just gotta, like, roll with the punches. Like, you know, the oven goes down or somebody doesn't, you know, show up to work or whatever it is. You just got to roll up your sleeves and. And help. Those things, I think, have been good training grounds for being a vc to.
- [26:09]
Jill Wiesenthal
Use a line that we say over and over on the podcast. I imagine that baking baklava is kind of like investing in bonds in the sense that you want to repeat the exact same process over and over again and avoid the screw ups more than you're trying to at any given moment make, you know, the one out of ten batches. That's transcendent, right? Like you just want to keep that consistent process.
- [26:35]
Tracy Alloway
That was a stretch, Joe.
- [26:36]
Jill Wiesenthal
It was a stretch, but I think, I think, I think I got there in the end. Let's talk a little bit about investing right now. AI. Yeah, no, it's probably going to be a big deal. I'm curious though, within AI there are various views on what it's going to do and how it's going to change the world and who will be the winners and who will accrue. And will it accrue to legacy companies or startups or the models or the chip company, whatever to be successful right now, do you have to have a view on some of these questions? Because there's obviously the point about, yeah, you want to find people who have for some reason likely to be good founders, good operators, et cetera. Do you also have to have a view on tech debates that are happening right now?
- [27:20]
Nina Ishadian
I mean, yes and no. For example, I think you do need to have a view on foundation models, right? These are the models that power chatgpt and Claw and Gemini and some of these others. Because there's still many, many entrepreneurs that are coming out and saying, hey, I want to build a better, faster model and I'm going to raise hundreds of millions of dollars. And I think having a view on, okay, has it already consolidated? Have we kind of already reached like the horizontal model penetration with these four or five players? Like that's definitely a market view that you need to take.
- [27:52]
Jill Wiesenthal
What is your view on this question?
- [27:54]
Nina Ishadian
Yeah, my view is kind of dust is settling and consolidating with these players and I think it's really hard to ca up. I think what's been really interesting however, is these smaller models that are very domain specific. So they're really good at one particular industry or one problem they solve. And their value proposition is not we're going to be better than the underlying models. It's actually, hey, as the underlying models get better and AI generally gets better, our technology also improves. It's like rising tide lifts all boats and they figured out how to incorporate AI, not to just be this feature, but actually something that solves a real workflow problem for their end customers and has a real roi. And so I think that's the areas that we're really excited about.
- [28:40]
Tracy Alloway
This is actually something I wanted to ask you about because in all our conversations with VC people in San Francisco or VC adjacent people, this kind of comes up. There's enthusiasm about building more specific applications on top of those large language foundational models. And I'm kind of curious, like how much of a moat is there for those businesses? Because it feels like, you know, if the essential technology is the thing that you're borrowing from Microsoft or Google or whatever, it feels like the customization is almost the easy part there. So I guess, like how easy is it to replicate a specific use case for AI if you're not, you know, developing the foundational model yourself?
- [29:21]
Nina Ishadian
Yeah. So I think actually history teaches us a lot about this. If you think about SaaS software as a service, there's no technical moat to SaaS. If somebody wanted to rebuild, you know, there was always this question that a lot of VCs would ask is like, if Google threw 10 engineers at this, would they build it? And like an honest founder would be like, yeah, you know, if they threw a hundred engineers, they'd build it in this amount of time. But I think finding one white spaces that have been ignored, which I like to invest in a lot of what I call like the forgotten functions and forgotten industries, which we can talk about. And then second, you really have to take a view of where is your user spending time. You have to really understand their day to day. And just throwing an AI feature that reads, for example, like legal contracts is not enough. You either got to be like, okay, this is the version control, or you're going to get like so much more information or it's just such a more delightful tool that you as a lawyer spend your entire day in. That's the companies that we're excited about because otherwise it's really a race to the bottom of how much you can charge on top of these foundation models.
- [30:26]
Jill Wiesenthal
What are some of those white spaces? I mean, law is intuitively a big area because we know how much time lawyers spend reading and documents of text. But what are some white spaces that excite you?
- [30:37]
Nina Ishadian
Okay, so let's think about the physical world. So this table, these chairs we're sitting on, the sneakers you're wearing, all of the items that you see in the physical world have been designed by an industrial designer. So an industrial designer usually starts with a sketch. Like 0 to 1, they draw the next Air Jordans, Ferrari, whatever it is. And then they have to do this painful process of taking this sketch and turning it into something that can actually be manufactured. The textures, the color library, the specific way that the shoe shows up or the materials that they can use. And that is a very manual process. So almost a year ago I invested in this company called Viscom. The founder Jordan, worked as a car designer for Honda and then he worked at Nvidia for a couple of years. And he saw the power of AI and instead of replacing the human creativity of drawing that next incredible Ikea chair or H and M dress or whatever it was, he was like, let's preserve the human creativity and then just use AI to automate all the painful tasks of taking that sketch into something that can be totally manufactured.
- [32:00]
Seydou
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- [32:30]
Ms. Klein
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- [33:01]
Tracy Alloway
Other big topic in San Francisco seems to be valuations and the inevitable Gartman style hype cycle that we will probably encounter in this space. Where are we in terms of enthusiasm and inevitable disappointment with AI?
- [33:16]
Nina Ishadian
Yeah, so could not be a bigger difference between AI company valuations and non AI company valuations. Like for example, if you are just a regular SaaS company and you're making a million dollars of revenue, it's really hard to raise over $100 million valuation which would be 100x multiple.
- [33:35]
Tracy Alloway
But even if I put out a press release saying that I am now using AI in my SaaS business, which seems to be the new strategy, that.
- [33:41]
Nina Ishadian
Does seem to be a strategy. But I mean if your core function is not AI native and then within AI valuations range from even half a billion dollars for some new seed companies because they're run by income incredible technologists. So I think there's a broad sense that this is real, the market is huge and people want to have the right chips on the table. There's also a lot of demand for these limited amount of individuals that have very specific AI talents and experience there's not that many of them in the world and most of them are in San Francisco where all the VCs are. So basically I think it's a combination of limited talent supply for people going out to solve really, really hard problems within AI, and then also capital that's kind of flocking to those types of individuals. And supply drives demand and supply is what drives valuations. And so that's why we're seeing that.
- [34:35]
Jill Wiesenthal
Tracy mentioned the whole phenomenon of, oh, we're an AI company now, we're doing something with AI. Are there good companies out there that are not AI adjacent but good SaaS businesses whose valuations are too low just because they're not sexy right now?
- [34:51]
Nina Ishadian
Oh yeah, there's so many of them. I mean, I've focused a lot on vertical software, which is software for one particular industry. So software for architects, software for car mechanic shops to run their business, software for H vac, electrical and plumbing to run their business. And these are incredibly important, mission critical industries that, you know, I think AI will certainly be a feature for. But fundamentally there are things that people need software to run their everyday business like dispatch or customer CRM or figuring out procurement and supply, you know, supply chain type of problems. And so I think that there is a huge opportunity. The challenge is though, a lot of those companies raised at very high prices, then they cut, burn, they laid off a bunch of people in 2022, 2023 and as a result their growth rate has stalled. And so I think there's like 1400 SaaS companies that were unicorns in 2021 and 2020 that haven't fundraised in the last like 18 to 24 months. And that's because they have extended their cash Runway. I expect those to come to market. I also expect a lot of consolidation to happen amongst startups. There are so many companies going after the same space and just kind of like race to the bottom in terms of unit economics to like undercut one another. I think if they're not success, if one of them's not successful in breaking out as the clear winner, I could see startups starting to join forces and go after the space together.
- [36:14]
Tracy Alloway
So at the beginning of this conversation you mentioned that index had roots in Europe, or at least it looked in Europe for potential opportunities. And I think is a sense nowadays that Europe is lagging behind when it comes to stuff like AI. I guess I have multiple questions on this topic, but a, why is that or why does that sense exist? And then secondly, have you seen good opportunities in Europe Lately. Are people doing interesting things there and potentially beginning to catch up?
- [36:42]
Nina Ishadian
Yeah, well, I think again it all comes back to the density of talent, which I know everybody was talking about, like the doom loop in San Francisco and all of that, but. But I have to tell you, I was at a conference a block away from here yesterday, Eric Newcomer's Cerebral Value conference, and literally it was like probably the top 15 minds in AI that all of their offices are within a 5 to 10 minute drive of where this conference was. Everyone from Dario at Anthropic to Ali from Databricks, and the list goes on and on and on. Fantastic. So I think the density of talent still in San Francisco, but Google had a huge DeepMind presence in Europe for example, and we've been seeing a lot of companies spin out of DeepMind and meta there. I think Mistral is a great example. They're one of the fastest growing open source models. So there's definitely talent there because a lot of these big tech labs have had presence in Europe for a while in AI.
- [37:36]
Jill Wiesenthal
When you mention the types of industries that you're interested in, Europe may not have a booming AI economy the same way San Francisco does. It probably has a lot of companies that would benefit from it. Yeah, there's sort of like productivity problems. Whether we're talking about like industrial chemicals, pharmaceutical areas, areas that people are hopeful that AI can be a big solution. Do you look at those companies as potential big customers, if nothing else for the types of technologies that you're investing in?
- [38:05]
Nina Ishadian
Absolutely. I'd say like time to Europe as like a market for US based companies is getting shorter and shorter and, and that's also one of the reasons why people pick index, because they want a VC fund that kind of has one team across Europe and the US that can help these entrepreneurs expand from being only US customers to then of course a huge market in Europe.
- [38:26]
Tracy Alloway
Yeah. I've been asking this question a lot while we're in San Francisco, but what's the coolest application of AI that you've seen? I know you mentioned the product design aspect, but is there anything else?
- [38:37]
Nina Ishadian
Well, we have an unannounced seed investment that I'll talk about. It's in the agent space. So everyone is talking about agents, right? Like agent for this, agent for that, you know, one agent to rule them all.
- [38:49]
Jill Wiesenthal
This is an agent is an AI that can actually go and do things.
- [38:53]
Nina Ishadian
Exactly, exactly. It's not like a sales AI agent. Let's put that aside. It's basically like a command box where you say, okay, Please book my trip to Italy. And here are some broad parameters. And here's my credit card. Go. So a lot of companies are building agents, but not a lot of people are thinking about the infrastructure or operating system for these agents to interact with one another. You know, if you think about it, probably an agent will have to take your credit card and then interact with another agent that is doing the, you know, hotel or flight booking, et cetera. And being able to share, you know, personal data or financial transactions is really a complex problem. And so one of the investments that we're excited about is building the operating system for these agents to be able to interact with one another.
- [39:35]
Jill Wiesenthal
I just have one last question. I think as the time, at the time we're recording this, the NASDAQ is at roughly all time highs, I think. And I more or less think that when the stock market is up, that's probably good for exit opportunities, either via IPO or the valuation of companies that would buy your portfolio companies eventually, et cetera. I'm not going to ask the Lina Khan FTC question because I think the answer is kind of obvious that there will be a more liberal environment for mergers and deals in the next administration. Though we could be wrong. But from a IPO standpoint, stocks are up, but also very heavily concentrated in a few gigantic companies. What does that window look like to you these days?
- [40:19]
Nina Ishadian
Yeah, well, I think everyone's been holding their breath to see what happened with the election as well as how the stock market performs, given the question around interest rates and inflation and what's the real strength of the underlying economy. You know, I think that there are a ton of companies that are having these conversations in boardrooms saying, okay, you know, when the IPO market opens, are we ready? And they're getting their systems, their cfo, their IR person all ramped up.
- [40:44]
Jill Wiesenthal
Why isn't it open with stocks at all time highs?
- [40:46]
Nina Ishadian
Well, again, I think that there were some big things that folks were waiting for, potentially the, you know, the election. And again, like what's going on with rates. I think those are really important. And so hopefully we'll see the IPO market open up very soon.
- [40:59]
Jill Wiesenthal
Nina Ishadian, thank you so much for coming on. Odd Lodge. That was fantastic.
- [41:03]
Nina Ishadian
Thank you so much.
- [41:03]
Tracy Alloway
That was really fun.
- [41:04]
Jill Wiesenthal
Thank you, Tracy. I really enjoyed that. I, I, first of all, I really enjoyed how much of the conversation we got to spend about what the job of VC actually is, because, I mean, I understand the broad perimeters. You talk to a lot of entrepreneurs and most of them are going to fail, and then hopefully you get a hundred x return in one of them. But hearing some of the things like, okay, it's not enough to meet them. You also have to win and what it takes to win. I thought that was really interesting.
- [41:43]
Tracy Alloway
We probably should have asked. Now that I'm thinking about it, we should ask what happens to the failed founders, because there's a huge survivorship bias in vc.
- [41:51]
Nina Ishadian
Right.
- [41:51]
Tracy Alloway
And we're talking about identifying the winners and what it's like when you actually find one. But I wonder what happens to people who don't succeed on their first try.
- [42:00]
Jill Wiesenthal
I've always wondered about that too, and the degree to which a good VC can, I'm totally speculating here, find a good home for that entrepreneur. Is that one of the services that's like, okay, we have a network? I don't know, actually, I'm just totally spitballing here. But I've always wondered if one of the pitches from VC is like, you're probably going to fail because most of our investments fail.
- [42:23]
Tracy Alloway
Don't worry, we have a place to put you.
- [42:25]
Jill Wiesenthal
Yeah, you know, entrepreneur in residence, whatever it is.
- [42:28]
Tracy Alloway
The other thing I was thinking about, just in the context of Europe, US Competition and AI, to your point, it is kind of interesting to think of Europe like, not necessarily as a hotbed of AI activity, although, as Nina pointed out, there are some companies, but maybe as a prime beneficiary of some of the product boost.
- [42:47]
Jill Wiesenthal
Right. This is the story of our time.
- [42:49]
Tracy Alloway
Productivity boost.
- [42:50]
Jill Wiesenthal
This is a story of our time that there is the still important industrial giant of Europe and the fear is that they're unproductive. And there's huge pharmaceutical companies and there's huge chemical companies in Germany and so forth. And so if you actually think AI is going to lead to some breakthrough, perhaps these are the big winners because they're the buyers of the technology, not the sellers of the technology.
- [43:14]
Tracy Alloway
A contrarian approach to Europe's future.
- [43:17]
Jill Wiesenthal
I think I'm going to invest in BASF as an AI player. But I'm not actually suggesting that, but that would be a good.
- [43:23]
Tracy Alloway
I think this is actually an interesting investment thesis.
- [43:26]
Jill Wiesenthal
It's a good enough take for Twitter.
- [43:27]
Tracy Alloway
Yeah. Okay. Shall we leave it there?
- [43:29]
Jill Wiesenthal
Let's leave it there.
- [43:30]
Tracy Alloway
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
- [43:35]
Jill Wiesenthal
And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our guest, Nina Ishajian. She's at Nina Ashadyan. Follow our producers Carmen Rodriguez at CarmenArmen, Dashiell Bennett at Dashbot, and Kel Brooks at Kell Brooks. Thank you to our producer Moses Andam. For more Odd Lots content, go to bloomberg.com oddlots where we have transcripts, a blog and a new daily newsletter and you can chat about all of these topics including VC, tech, AI, all that stuff in our Discord with fellow listeners 24.7discord, GG oddlots and if you enjoy.
- [44:08]
Tracy Alloway
Oddlots, if you like it when we ask VCs what they actually do, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, in addition to getting our new daily newsletter, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.
- [45:02]
Ms. Klein
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- [45:20]
Tracy Alloway
You're all set.
- [45:21]
Ms. Klein
This is enriching customer experience. This is Tractor Supply with T Mobile for Business. Take your business further@t mobile.com now.
- [45:32]
Tracy Alloway
Join Bloomberg in Atlanta or via livestream on February 11th for the Future Investor Finding the Opportunity. This 2025 event series will examine how companies are investing in their businesses to create efficiencies, innovate their products and services and improve the customer experience. This series is proudly Sponsored by Invesco. Q. Q. Q. Register@Bloomberglive.com futureinvestoratlanta.