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Sarah Tavel on Evaluating Markets, The State of Education, and Crypto
33 segments available
Village Global co-founder and partner Erik Torenberg was joined by Sarah Tavel (@sarahtavel), general partner at Benchmark. Sarah gave a fireside chat as part of Village Global’s Network Catalyst accelerator program in summer 2019. They talk about: * The state of education and what Sarah is looking for in the space. * Why founders need to focus on “getting one thing really right, no matter how big or small.” * What Sarah sees in the crypto space and why she invested in Chainalysis. * The promise of vertical marketplaces. * Why Benchmark say “we are not in the business of predicting the future but rather of seeing the present clearly.” * How she evaluates markets and some of the verticals that she’s looking at investing in. * Company-building tips, including why as a company grows the CEO needs to “transition from CEO of the product to CEO of the system that builds a system.” And much more. — Village Global is an early-stage venture capital firm backed by some of the world's most successful entrepreneurs including Jeff Bezos, Mark Zuckerberg, Reid Hoffman, and many more. — We’re not a traditional VC. We’re a network. From how we invest in startups to how we help founders. When you raise money from Village, you’re not just getting money. You’re getting connected capital. We invest in early-stage technology startups across sectors around the world. — Learn more about Village and submit your startup today: ▶ http://bit.ly/ApplyToVillageGlobal — Become a Villager and subscribe to our newsletter in order to stay up to date on all of our most important announcements, investments and events: ▶ http://bit.ly/VG-Newsletter — Stay connected with Village Global on: ▶ Twitter: http://bit.ly/VG-Twitter ▶ Medium: http://bit.ly/VG-Medium ▶ LinkedIn: http://bit.ly/VG-LinkedIn ▶ Facebook: http://bit.ly/VG-Facebook ▶ Podcast: http://bit.ly/VillagePodcast — Learn more about our own philosophy on venture, investing, entrepreneurship and innovation on our team publication by Village Global: ▶ http://bit.ly/VG-Publication — Listen to our “Venture Stories” podcast on your platform of choice: ▶ http://bit.ly/VillagePodcast _______ Opinions and thoughts expressed by the participants in this production may not be reflective of Village Global. Any opinions, projections, forecasts and estimates contained in this production are necessarily speculative in nature, are based upon certain assumptions, and subject to change without notice. It can be expected that some or all of such assumptions will not materialize or will vary significantly from actual results. This production is not an offer to buy or sell any investments. Past performance is not indicative of future results.
Segments Timeline
The State of Education: A New Opportunity
Sarah Tavel discusses the current state of education and the unique opportunities it presents for investors. She highlights the challenges of student debt and stagnant wages, emphasizing the need for innovative solutions that disrupt the traditional four-year university model. Tavel believes that companies can create alternatives that provide high-paying jobs without the burden of student debt.
"hey everybody welcome to a fireside chat with a very good friend of the firm Sarah travel Sarah is a general partner at benchmark before that Greylock before that Pinterest and before that Bessemer Sa..."
Disrupting Traditional Education Models
In this segment, Sarah Tavel elaborates on the potential for companies to disrupt the traditional education system. She mentions examples of innovative companies that are turning the university model on its head, focusing on practical skills and job readiness. Tavel emphasizes the importance of solving immediate problems for students rather than just promoting self-improvement.
"where is the opportunity that's been notoriously a category that venture probably have not been excited by or been burned by all about that so what yeah why don't you talk about why now and where are ..."
Lessons from EdTech: Focus on the Right Market
Tavel shares insights on the challenges faced by EdTech companies, particularly those that rely on selling to schools. She discusses the importance of targeting parents and creating products that directly address their needs. This segment highlights the complexities of the education market and the necessity for startups to find effective revenue models.
"have this antiquated system when our universities where you go into this four-year program the inflation rate has been obscene because it's been like there's a bunch of different distortions that are ..."
The Importance of Getting One Thing Right
Sarah Tavel emphasizes the significance of focusing on one core aspect of a business to achieve success. She argues that great companies start small, perfect one idea, and then expand. This philosophy is crucial for entrepreneurs looking to build scalable and sustainable businesses in the competitive landscape of EdTech.
"problem which is almost can smell more like a so five and uh than a tutoring company which is things like what lambdas doing there's a bunch of different variations of companies right now I won't say ..."
Innovative Learning: Beyond Traditional Education
In this segment, Tavel discusses the potential for companies to create engaging learning experiences that feel less like traditional education. She suggests that future EdTech unicorns could develop platforms that encourage learning in a fun and interactive way, similar to how Duolingo revolutionized language learning.
"look at companies in the past few years that have done it somewhat well if I understand it correctly I think classdojo or clever or more enabling technologies was one of the reasons why people hate ed..."
Transitioning to Crypto: Sarah's Investment Journey
Sarah Tavel transitions to discussing her experiences in the crypto space. She reflects on her initial fascination with Bitcoin and Ethereum, and how her investment strategy evolved. Tavel emphasizes the importance of understanding the present market rather than trying to predict future trends.
"what can we learn from old school do you know you know school I would say with old school what can you learn there's so many things will that company like that you're successful just a full self not v..."
Investing in Chainalysis: A Strategic Move
Tavel shares her rationale for investing in Chainalysis, a company that provides crucial infrastructure for the crypto ecosystem. She explains how Chainalysis helps regulated entities navigate the complexities of cryptocurrency transactions, highlighting the importance of compliance in the evolving crypto landscape.
"opportunity I think sometimes people they don't want to build something small so they start off with a really big ambition yeah and they go for this point you're not gonna win right yeah so if you if ..."
Understanding the Crypto Ecosystem
In this segment, Tavel discusses the broader crypto ecosystem and the various use cases she identified. She contrasts the speculative investments in underlying protocols with her focus on practical applications that address real-world needs, emphasizing the importance of understanding current market dynamics.
"this space and the bet wasn't it's not like the next ethereal yeah yeah it wasn't the sexiest sexiest bet what do you mean yeah exactly yeah so how did you sort of survey the space what would you take..."
The Future of Vertical Marketplaces
Sarah Tavel explores the evolution of vertical marketplaces and their potential to disrupt traditional business models. She discusses the unbundling of various services and the emergence of new consumer-focused marketplaces, highlighting the opportunities for innovation in this space.
"you don't need a third party to to like verify that it's that it's executed but it can just happen automatically and this blockchain was like there's this I remember this quote in the future we'll hav..."
The Future of Crypto: Beyond Transactions
Sarah Tavel discusses the evolving landscape of cryptocurrency, emphasizing the importance of participation over mere transaction volume. She highlights her investment in Chainalysis, noting that the real value lies in the entities wanting to engage with crypto, rather than just the number of transactions. This segment explores the potential for growth in the crypto space and the significance of bridging fiat and crypto.
"you know remodel the patrician Wall Street but helping people buy sell store [Music] to go me there's a lot of companies that I miss corn base it was when I was in Pinterest but I probably would've mi..."
Unbundling Staffing Agencies
In this segment, Sarah Tavel shares insights on the transition to vertical marketplaces, particularly in the staffing industry. She discusses how startups are unbundling traditional staffing agencies to create better matchmaking and lower costs. Tavel emphasizes the need for innovation in sectors like healthcare and finance, and the challenges of competing against strong incumbents.
"but you know so we've stayed I mean we've done we did an exchange called bitstamp a while ago we're zapper which is one of the wallets and in a custody Bitcoin custody product and we also invested in ..."
Market Size Matters: The Billion-Dollar Question
Sarah Tavel addresses the importance of market size when evaluating investment opportunities. She explains why Benchmark focuses on larger markets, dismissing smaller ones as insufficient for venture-scale growth. Tavel warns against getting stuck in a single vertical and stresses the need for natural progression in business development.
"in what else and like I mean we've even within healthcare it's like travel nursing temporary nursing per diem nursing you know it's like there's so many different areas and then think about every cate..."
The Challenges of Healthcare Investment
Sarah Tavel reflects on her experiences in healthcare investment, discussing the complexities and frustrations of the sector. She highlights the broken aspects of the healthcare system and the rising costs, while also mentioning the potential for value-based pricing to create opportunities. Tavel shares insights from her partner's deep dive into the healthcare space and the difficulties they faced.
"so your life partner Christine yeah is a CEO of a bodacious which is a scaling health care company how have you and a benchmark approached health care you made you guys make you better she has been te..."
The Participatory Era of Social Media
In this segment, Sarah Tavel explores the evolution of social media, predicting a shift towards more participatory experiences. She contrasts the current passive consumption of content with the potential for a 50/50 read-write dynamic. Tavel discusses the implications of this shift for platforms like Facebook and the rise of group-based interactions in social networks.
"is really hard bill is the one who he spent a year learning about the space talking to everybody he could trying to unlock it and and I and you know and we just we made a couple investments but it's j..."
From Luxury to Mass Market: The Path of Innovation
Sarah Tavel discusses the trajectory of companies that start by catering to the top 1% and how they can transition to mass-market appeal. She uses examples like Tesla and Uber to illustrate the challenges and strategies involved in scaling products. Tavel emphasizes the importance of solving difficult problems and building the right habits to achieve broader market success.
"yeah and do you think that's enabled by a new platform shift or is it similar but just radically different approach I think it's gonna look more it's gonna be more about groups yeah you know groups is..."
Identifying Growing Markets
In this segment, Sarah Tavel shares her insights on analyzing market growth potential. She uses Hipcamp as an example, highlighting the increasing demand for outdoor experiences and the supply-demand imbalance in national parks. Tavel discusses the importance of having a 'wind in your sails' and recognizing market trends to ensure success.
"of Amazon to me is far more common which is that you start with something that's really hard and really thin margins and then you get that really right you train yourself you get all the right muscles..."
The Power of Adjacent Markets
Sarah Tavel explains how companies can leverage their initial success to expand into adjacent markets. She discusses Hipcamp's evolution from basic camping to offering more luxurious options, illustrating how businesses can grow by tapping into new customer segments and enhancing their offerings.
"for hip camp was like one national parks like the attendance in national parks has never been higher people are like you know living these urban environments are connected to technology all the time a..."
Challenges in Media Ventures
Tavel discusses the difficulties of scaling media companies, citing the cost structure and monetization challenges. She contrasts media ventures with Pinterest's successful model, which relies on user-generated content and network effects, making it a more viable business in the long run.
"yeah so when in your sales in adjacent market so if the pr2 teal school evaluating markets is owned own Anish dominate that nation the / yes adjacencies and the kefir boy school market Alice or look a..."
Pinterest's Unique Business Model
In this segment, Sarah Tavel highlights what makes Pinterest a successful venture. She explains how user-generated content and network effects contribute to its growth, and how its monetization strategy aligns with user intent, making it a standout example in the tech landscape.
"scale businesses and there's also the risk I mean like what would BuzzFeed be without Jonah I think that's pretty tough what Pinterest got right is that well a like the users create the content yeah a..."
Unbundling LinkedIn: A New Opportunity
Sarah Tavel discusses the potential for unbundling LinkedIn, drawing parallels to Craigslist. She explores the opportunities in vertical markets and the need for specialized platforms that cater to specific demographics, suggesting that there is significant room for innovation in this space.
"combination yeah we were talking earlier about marketplaces were talking unbundling David Sachs had a post recently where he said that LinkedIn is the new Craigs yeah is there an element of that that ..."
Transitioning from Product to Team Leadership
Tavel shares insights on the critical transition CEOs must make from being product-focused to leading their teams effectively. She emphasizes the importance of creating systems of accountability and empowering executives, highlighting her experiences with Pinterest and the challenges faced during this transition.
"interesting opportunity like what it will the Airbnb like company come out of it to use a Craigslist example like will it be you know LinkedIn for devout like for the specific categories are yeah I kn..."
Building a Leadership Team
Sarah Tavel shares her insights on building a strong leadership team as a company grows. She highlights the importance of aggressively pursuing top talent and ensuring accountability among team members, stressing that great CEOs excel in recruiting and empowering exceptional individuals.
"do you define product market fit when people think they have it but they don't or people don't realize they have it what does it look like I mean I love the Shaun Ellis question which is asking I hate..."
Accountability in Leadership
In this segment, Sarah discusses the necessity of establishing accountability within a leadership team. She explains that hiring great talent is just the first step; CEOs must also ensure that these leaders are aligned with the company's vision and held accountable for their roles.
"away you know but like uber went away I mean yeah like that would be a pretty big deal I mean I guess we could you slip so there's kind of like that's actually part of their challenge you know but so ..."
Recognizing When to Uplevel Talent
Sarah emphasizes the importance of recognizing when team members may no longer be the right fit as a company scales. She discusses the need for vigilance in identifying gaps in the organization and the necessity of adapting the team structure to ensure continued success.
"and so when when I folded wrapped FM which was the Skype of Rap Battles website people were very disappointed and I'm telling myself it was still a good idea because it wasn't that big of a of a commu..."
Choosing the Right KPIs
Sarah Tavel shares her perspective on the common mistakes companies make regarding KPIs. She stresses the importance of selecting a single, core metric that reflects the company's success, warning against the pitfalls of focusing on vanity metrics that do not accurately represent business health.
"talent that are just so ahead of what you would expect and that's actually one of the things that we look for when we're evaluating a company or a founder is how is this person going to be for recruit..."
The Dangers of Vanity Metrics
In this segment, Sarah warns about the risks of vanity metrics that can mislead a company’s focus. She explains how an overemphasis on a single KPI can create blindness to other critical areas of the business, advocating for a holistic approach to measuring success.
"and the third thing is like look people are good for a period of time and a company and then they stop scaling and you have to just be hyper vigilant about where the holes in your organization and who..."
Philosophy and Investing
Sarah draws parallels between philosophy and investing, explaining how both involve forming premises and reaching conclusions based on data and beliefs. She discusses the importance of rigorous analysis in making investment decisions and how this approach can lead to successful outcomes.
"it's all about finding a metric that really captures the full value that you want to create then you can have other metrics but into the intellectual rigor around that core metric is so important and ..."
The Role of Venture Capitalists
In this closing segment, Sarah reflects on the evolving role of venture capitalists in the industry. She discusses the balance between leveraging partners and maintaining a hands-on approach to investing, emphasizing the importance of being actively involved with portfolio companies.
"content ethics and you know you learned deductive logic right and what like what is a philosophy proof a philosophy philosophy proof it's kind of hearing my premises and deductively like you can reach..."
Scaling Challenges in Venture Capital
In this segment, Sarah Tavel reflects on the challenges of scaling venture capital firms. She shares insights from her experience at Greylock, discussing how increasing assets under management can lead to a dilution of partnership quality and decision-making effectiveness.
"approach that I'm about to describe but when you are growing your assets under management what that means is that you have to invest more money per partner and in order to do that you have to figure o..."
The Importance of Clear Business Models
Tavel critiques the common pitfalls in e-commerce and the necessity for businesses to have a clear path to profitability from the start. She uses examples like Instacart to illustrate successful scaling while cautioning against relying on future margins that may never materialize.
"start and they used to end up having more territorial nests and politics that come into play after six partners that we we experienced I mean benchmark went through an empire building phase it was not..."
Finding Founders with Vision
Sarah discusses the challenge of identifying founders who possess a clear vision for the future. She emphasizes the importance of aligning with entrepreneurs who have a realistic understanding of their market and the potential for their ideas to succeed.
"question question you mentioned premature Trainspotting so I think that's the heuristic is probably part of what we think our job is as VC's which is you know founders will founders see the future not..."
Data-Driven Decision Making in Startups
In this segment, Tavel shares her insights on the significance of data science in building successful companies. She contrasts Stitch Fix's data-driven approach with other e-commerce models, highlighting how data can create a competitive advantage and improve unit economics.
"hard to predict things it's about looking for look trying to distill from tea leaves as much as you can if there is something that's actually working yeah yeah yeah we're so we're very we have not inv..."
The Value of Starting Small
Sarah Tavel reflects on her evolving perspective regarding market size and startup potential. She shares lessons learned from her experiences, noting that many successful companies began as small ideas and emphasizes the importance of recognizing the potential in seemingly minor opportunities.
"very beginning of data science and so they were what they the insight they had is that we're gonna create these stitches in the beginning like their box so they put like five things in a box and they ..."