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Giants: Sarah Tavel on Companies That Emerge During Downturns
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Topic: Stories of great companies emerging from downturns Sarah Tavel is a General Partner at Benchmark, one of the world’s leading VC funds whose portfolio includes Twitter, Uber, Snapchat, eBay, WeWork, Yelp and others. Before this, she was a Partner at Greylock Partners, where she led an investment in Sonder, and Bessemer Venture Partners. At Bessemer Venture Partners, Sarah rose to the rank of vice president before being personally recruited by Pinterest CEO Ben Silbermann to become employee number 35.
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Welcome to Giants Conference
Sam Wall introduces Sarah Tavel at the Giants conference, highlighting her expertise as a leading venture investor at Benchmark. The session focuses on the emergence of great companies during economic downturns, setting the stage for an insightful discussion on resilience and innovation in challenging times.
"hello everybody good morning good afternoon if you're in the US welcome to the final day of the Giants conference my name is Sam wall I'm a partner I'm based in the Blackbird New Zealand office and I ..."
Welcome to Giants Conference
Sam Wall introduces Sarah Tavel at the Giants conference, highlighting her impressive background as a venture investor at Benchmark. The segment sets the stage for a discussion on how great companies emerge during economic downturns, inviting the audience to engage with questions.
"hello everybody good morning good afternoon if you're in the US welcome to the final day of the Giants conference my name is Sam wall I'm a partner I'm based in the Blackbird New Zealand office and I ..."
Sarah Tavel's Journey to Venture Capital
Sarah Tavel shares her unique background as a philosophy major who transitioned into tech and venture capital. She recounts her early career at Bessemer Venture Partners, her pivotal role at Pinterest, and her current position at Benchmark, emphasizing her passion for supporting innovative companies.
"today's talk will be stories of great companies emerging from downturns I'm going to start by just letting Sarah give a quick kind of potted history of her career to give you all some context and then..."
Sarah Tavel's Journey to Venture Capital
Sarah Tavel shares her unique career path from being a philosophy major to becoming a General Partner at Benchmark. She discusses her early experiences at Bessemer Venture Partners, her pivotal role at Pinterest, and her transition into venture capital, emphasizing the importance of passion and strategic career moves.
"straight into chat I could probably talk all day to Sarah but I'm her interesting journey but this is not about me this is about you guys so please jump on slider SLI do into the event code Sarah to j..."
The Importance of Early Investments
Tavel discusses her experience with early-stage investments, particularly her involvement with Pinterest. She highlights the significance of being proactive in securing investment opportunities and the competitive nature of fundraising in the tech industry, sharing insights on how to navigate these challenges.
"well good - good morning all of you all the super I'm sure most of you have checked out my LinkedIn like the very quick is I am actually a philosophy major never thought I'd be in tech commanded at a ..."
Discovering Pinterest: A Game Changer
Sarah recounts her discovery of Pinterest and the excitement it generated for her. She explains how her background in user-generated content and e-commerce aligned with Pinterest's vision, leading her to pursue a role there after initially missing the seed round. This segment highlights the importance of recognizing potential in emerging companies.
"three years and oh is it three years basically today or three I'm on five boards only one of them in the Bay Area funny enough three marketplaces a SAS company and a consumer social company Oh more li..."
Creating Momentum in Fundraising
In this segment, Sarah discusses the dynamics of fundraising, particularly how to create momentum without being deceitful. She reflects on her experience with Pinterest's funding round, emphasizing the importance of strategic communication and the need to engage multiple investors to foster a competitive environment.
"be late for the a so I'd love to kind of touch on that around because yeah you I think I've heard an anecdote that basically you guys were the only Township they've received yes what I thought it was ..."
Creating Momentum in Fundraising
In this segment, Sarah Tavel explains the dynamics of creating momentum during fundraising rounds. She emphasizes the importance of engaging multiple investors to foster excitement and competition, while also advising against duplicity in the process, ensuring integrity in building relationships.
"product for the discovery team there's the search recommendations and a bunch of other teams from pom feed and then ended up calling hearing the call adventure ended up to sign them that was actually ..."
Lessons from Successful Companies
Sarah shares insights on what distinguishes successful companies that emerged during downturns, such as Airbnb and Uber. She emphasizes the necessity of having sufficient resources to invest in growth when the market improves, and the importance of prioritizing business sustainability over ego regarding company valuations.
"duplicitous as you described yeah yeah got it and then kind of zooming out a little bit obviously some great companies got built through that oh nine ten euros of the Airbnb and uber Twilio etc Pinter..."
Lessons from Successful Companies
Tavel reflects on the success of companies like Airbnb and Uber that emerged during the 2008 financial crisis. She shares her observations on what these companies did right, focusing on resource management and the ability to invest back into growth when the market began to recover.
"we make we're actually the first check and what we think of is that we always take a board seat and we're buying you know you know we trying to own 20 to 25 percent of the company and really be you kn..."
Surviving vs. Thriving in Downturns
Sarah discusses the critical difference between merely surviving a downturn and thriving post-crisis. She stresses the importance of having sufficient resources to capitalize on opportunities when the market rebounds, advising companies to make tough decisions for long-term sustainability.
"mean for me I actually had a random friend of mine who connected me to the founders of Pinterest before it was a Pinterest it was called tote just kind of kept close with them and then randomly severa..."
The Wartime CEO Mindset
Tavel introduces the concept of the 'wartime CEO,' highlighting the need for leaders to recognize the challenges they face and prioritize ruthlessly. She explains that effective resource management and a realistic approach are essential for navigating difficult times and ensuring the company's survival and growth.
"your business otherwise what will happen is you'll end up in a just a different category that gets harder and harder to - yeah raise money it's not good enough to kind of say well I was trying to cons..."
Ego and Valuation in Tough Times
In this segment, Tavel addresses the pitfalls of having an ego regarding company valuation during downturns. She encourages entrepreneurs to prioritize resource availability over perceived value, advocating for strategic fundraising decisions that support long-term growth and stability.
"think I've heard an anecdote that basically you guys were the only Township they've received yes what I thought it was a really hyper competitive round so I call that great fundraising kind of theater..."
Benchmark's Aggressive Investment Strategy
Sarah Tavel shares insights into Benchmark's current investment strategy, emphasizing their commitment to seeking new opportunities despite market uncertainties. She discusses the potential for companies to emerge stronger by adapting quickly to the digital landscape and the importance of being proactive in investment decisions.
"in the best possible way yeah yeah that makes sense um so just kind of bring it forward to it sir right now like a lot of founders I think you're getting mixed signals around whether VCS are open for ..."
Surviving vs. Thriving in Downturns
Sarah Tavel discusses the critical difference between merely surviving a downturn and thriving during it. She emphasizes the importance of having sufficient resources to invest back into the business when the market begins to recover. Tavel advises companies to make tough decisions, such as layoffs, to ensure they can capitalize on future growth opportunities.
"be able to create the dynamics that you want to create without you without being duplicitous as you described yeah yeah got it and then kind of zooming out a little bit obviously some great companies ..."
Adapting to Virtual Investment Processes
In this segment, Tavel reflects on the changes in the investment process due to the shift to virtual meetings. She notes that while building rapport is more challenging online, it requires more time and effort to establish connections and conduct thorough due diligence through back-channel references.
"have in front of us oh and so you know I actually got you know I got within you know it feels like feet of making a new investment that will we only met virtually so I have no question that we'll be a..."
The Ego Trap in Valuation
In this segment, Tavel warns against letting ego dictate company valuations during tough times. She stresses that maintaining the ability to invest in growth is far more important than holding onto inflated valuations. Tavel encourages founders to be pragmatic about funding rounds, even if it means accepting lower valuations than previously expected.
"and then related to that you know it's the conversation that I saw happen to a lot of companies and I see happening now which is don't have an ego about what the valuation us of your of your company b..."
Remote Work and Investment Comfort
Tavel addresses the perception that investors may be hesitant to invest in fully remote companies. She reassures that Benchmark is comfortable with remote work models and shares examples of successful investments in distributed teams, highlighting the adaptability of companies in the current environment.
"you can't like have a dinner over drinks anymore like and so you have you know you have to have a little bit of this kind of um less natural feeling of games you know someone else while you're looking..."
Characteristics of Wartime CEOs
Tavel highlights the traits of successful 'wartime CEOs' who navigate challenging environments. She notes the importance of being realistic, practical, and prioritizing resources effectively. This segment delves into the mindset required to lead a company through adversity and the necessity of recognizing the current market conditions.
"your business otherwise what will happen is you'll end up in a just a different category that gets harder and harder to - yeah raise money it's not good enough to kind of say well I was trying to cons..."
The Future of Distributed Teams
In this concluding segment, Tavel discusses the long-term implications of remote work on company dynamics. She acknowledges the challenges of distributed teams but also recognizes the seamless transition for those already operating in this model. Tavel emphasizes the need for balance between remote and in-person interactions as the world moves forward.
"think it's true look like what I think what the practical reality will be you know in a funny way I'm meeting with founders all the time and they could be in Stanford and that way one company yesterda..."
Understanding Virtuous Loops
Tavel introduces the concept of virtuous loops in social companies, explaining how user engagement can enhance product quality and drive growth. She provides examples of how collaborative products, like Pinterest, benefit from this model.
"and look like I still have a bias you know and I'm biased because I I worked in a when I was operating I was in a office and I felt how easy it was to just you know kind of sit next to someone and get..."
Benchmark's Investment Strategy
Sarah Tavel shares insights into Benchmark's current investment strategy amidst market uncertainty. She reassures that the firm is actively seeking new opportunities and raising a new fund to support emerging companies. Tavel believes that the digital transformation accelerated by recent events presents a unique chance for startups to thrive.
"in the best possible way yeah yeah that makes sense um so just kind of bring it forward to it sir right now like a lot of founders I think you're getting mixed signals around whether VCS are open for ..."
Adapting to Remote Investment Processes
In this segment, Tavel discusses the changes in investment processes due to remote interactions. She explains how virtual meetings require more time and effort to build rapport and emphasizes the importance of back-channel references. Tavel reflects on the challenges and adaptations necessary for effective remote investing.
"have in front of us oh and so you know I actually got you know I got within you know it feels like feet of making a new investment that will we only met virtually so I have no question that we'll be a..."
B2B Examples of Virtuous Cycles
In this segment, Tavel discusses B2B examples of virtuous cycles, highlighting collaborative tools like Airtable. She emphasizes the importance of creating native collaborative experiences to foster user engagement and product growth.
"talk about virtuous loops and the idea what virtuous loops is that when you're building a social company you want to eventually get to a point where when users are using your product they are helping ..."
Investing in Remote Companies
Tavel addresses the perception that VCs are hesitant to invest in fully remote companies. She shares her experiences with successful remote investments and highlights that companies already operating in a distributed model have adapted more easily to the current environment. Tavel acknowledges the benefits and challenges of remote work.
"it's just not the same and so you have to put more time into it the process just takes longer and then I find that doing a lot of back channel references is a big part of it because it's kind of more ..."
Characteristics of Seed Round Investments
Tavel outlines the key characteristics Benchmark looks for in seed round investments, focusing on the importance of strong founders and the potential for 'winner-take-most' opportunities. She discusses the dynamics of network effects and the need for a clear market leadership strategy.
"they're you know doing things for blocks to kind of get more data in and it becomes a fabric that we're all working on together that's a great example of a virtuous loop in a b2b context make sense so..."
Vertical vs. Horizontal Market Strategies
Sarah Tavel shares insights on the preference for vertical versus horizontal market strategies in investments. She emphasizes the importance of starting with a focused approach to ensure product-market fit before expanding horizontally.
"mmm-hmm do you think that's not that means you're more likely to invest in companies in a vertical players versus horizontal plays I mean tables clearly not a vertical play it's a horizontal one but I..."
Investing in Remote Companies
In this segment, Tavel addresses the question of investing in fully remote companies. She shares her comfort with remote work models, citing successful investments in distributed companies like Elastic, and discusses how these companies have adapted to the new remote environment seamlessly.
"to encourage more questions to come through on sliders or hash tag Sarah and up foot as well if you if you don't have a question on the mind just put some other good questions instead I might start wi..."
Navigating Uncertainty in Business Plans
Sarah Tavel addresses the challenges companies face during downturns, particularly in hospitality and travel. She advises founders to abandon outdated plans and adapt to rapidly changing circumstances. Tavel emphasizes the need for businesses to focus on what they can control, such as burn rate and product strategy, while remaining flexible in uncertain times.
"may be so I might generalize Phil's question and I think it's a good one around some you've invested in companies like sort of Reiki I think is is one of your more recent ones which is been in hospita..."
The Advantages and Challenges of Remote Work
Tavel elaborates on the behavioral changes associated with remote work, acknowledging both the advantages and challenges. She notes that while remote work can slow down processes due to communication barriers, it also offers significant benefits, especially in high-cost areas like the Bay Area.
"comfortable with with that model do you find that they have adjusted to this new environment faster or more easily to then then on yeah yes yeah I mean I think everybody yes because you know it's a be..."
Understanding Virtuous Loops in Business
Sarah Tavel explains the concept of virtuous loops in building social companies. She illustrates how user engagement can enhance product quality and drive growth, using Pinterest as an example of how user interactions can create a better discovery experience.
"it too especially with you know resources like people being so expensive in the Bay Area yeah sure I'm gonna just touch quickly and rephrase the question around evaluations and you know a question aro..."
Seizing Opportunities Amidst Crisis
In this segment, Tavel discusses how companies can find growth opportunities even during challenging times. She notes that while some industries are struggling, there are unique chances to innovate and capture market share. Tavel encourages businesses to remain proactive and leverage the current situation to their advantage.
"wartime mode which is that we also we can't pretend to make a 2020 plan now because a week from now to eternity and you know we'll have so much such new Daniel and learned so much and so I think step ..."
The Role of Market Dynamics in Success
Sarah Tavel reflects on the unifying traits of successful companies, emphasizing the importance of market dynamics as a 'wind in their sails.' She explains how favorable market conditions can significantly impact a company's ability to succeed, allowing for more mistakes and greater flexibility in execution.
"these moments yeah and don't you know it and there could be an incredible time of growth if you position yourself in the right way about to take a more general question here which is around companies ..."
B2B Examples of Virtuous Loops
In this segment, Tavel discusses B2B examples of virtuous loops, highlighting collaborative products like Airtable. She explains how these products leverage user collaboration to enhance functionality and drive user engagement, contrasting successful models with those that failed to integrate collaboration effectively.
"talk about virtuous loops and the idea what virtuous loops is that when you're building a social company you want to eventually get to a point where when users are using your product they are helping ..."
Execution and Market Pull
In this concluding segment, Tavel shares a powerful formula: execution times market pull equals results. She highlights the need for founders to remain vigilant about their execution quality, especially when market conditions are favorable. Tavel's insights serve as a reminder for entrepreneurs to balance market opportunities with their operational effectiveness.
"always paying attention to what you know how what's the balance between those two yeah fantastic well I think we're on time we want to be respectful and not go over so I just want to thank you very mu..."
Key Characteristics for Seed Investments
Tavel outlines the key characteristics Benchmark looks for when investing in seed rounds. She emphasizes the importance of a visionary founder who can execute a unique idea and the preference for companies that can create 'winner-take-most' opportunities in their respective markets.
"they're you know doing things for blocks to kind of get more data in and it becomes a fabric that we're all working on together that's a great example of a virtuous loop in a b2b context make sense so..."
Vertical vs. Horizontal Market Strategies
Sarah Tavel discusses the strategic considerations between vertical and horizontal market plays. She shares insights on how Benchmark prefers to invest in companies that start with a narrow focus to achieve product-market fit before expanding horizontally.
"make those investments so it's always about a founder who we think sees something other people don't see and has the ability to execute and the vision to execute I think we bias very much towards comp..."
The Mindset of Successful Marketplace Founders
In this segment, Tavel describes the mindset of successful marketplace founders. She highlights the importance of having a clear focus on a specific market need while also articulating a vision for future growth, emphasizing the need for strategic thinking in navigating market dynamics.
"vertical sounds I mean what the SAS company I mentioned I'm it's a vertical SAS company called chain alysus we're on the boards of you know a company called bench lling which is like a super version w..."
Navigating Crisis with a Long-Term Vision
Sarah Tavel shares insights on how companies can navigate crises by maintaining a long-term vision. She encourages founders to accept the current lack of control and to focus on what can be managed, such as their product roadmap and operational strategy. Tavel highlights the importance of resilience and adaptability in the face of uncertainty.
"may be so I might generalize Phil's question and I think it's a good one around some you've invested in companies like sort of Reiki I think is is one of your more recent ones which is been in hospita..."
Seizing Opportunities in Adversity
Tavel discusses the potential for growth during downturns, emphasizing that companies should not adopt a defensive posture. She points out that challenging times can present unique opportunities for innovation and market capture. Tavel encourages founders to identify and leverage bright spots in the market to drive their businesses forward.
"wartime mode which is that we also we can't pretend to make a 2020 plan now because a week from now to eternity and you know we'll have so much such new Daniel and learned so much and so I think step ..."
The Role of Market Dynamics in Success
In this segment, Tavel reflects on the unifying traits of successful companies, particularly the influence of favorable market dynamics. She explains that a strong market can significantly enhance a company's chances of success, allowing for more mistakes to be made. Tavel emphasizes the importance of recognizing market conditions and adjusting execution strategies accordingly.
"these moments yeah and don't you know it and there could be an incredible time of growth if you position yourself in the right way about to take a more general question here which is around companies ..."
Closing Thoughts and Future Insights
As the discussion wraps up, Tavel shares her gratitude for the opportunity to speak and encourages the audience to engage with the content. She highlights the importance of continuous learning and adaptation in the entrepreneurial journey, setting the stage for future discussions on building resilient companies.
"always paying attention to what you know how what's the balance between those two yeah fantastic well I think we're on time we want to be respectful and not go over so I just want to thank you very mu..."