The Wall Street Journal’s WSJ Live, returned for its sixth year to discuss tech innovation, investing and culture on a global scale in an online setting. One of the best sessions IMHO featured Sarah Guo, general partner at Greylock. Focusing on seed and early stage investing, Greylock has lived up to its fantastic tagline – “From idea to iconic” – backing rock star companies such as LinkedIn, Airbnb, Nextdoor and Workday. Zoe Thomas, Host of WSJ’s Tech News Briefing, sat down with Sarah to discuss new technologies that have piqued the interest of Silicon Valley investors, the changing startup culture, diversity in Silicon Valley and more. Here are some highlights from their conversation.
On seed investors “chasing”early stage companies
Noting that Greylock recently raised $550M in seed investing while their “competitor” Andreessen Horowitz raised $400M, Zoe asked Sarah, “Is there too much money chasing too few early stage companies?”
“We actually take the opposite point of view,” Sara replied. “Our raising capital and doubling down on seed investing was less of a reaction to the competitive environment and more about doubling down on the opportunity we see. We were really inspired by the number of founders and technology opportunities today.”
“We’ve always done Day 1 capital and wanted to recommit to see companies be first class citizens.”
“Despite the amount of capital in the overall venture capital ecosystem today, capital has become somewhat of a commodity, but partnership hasn’t,” Sarah noted. “We believe early stage companies are looking for partnership.”
How Greylock differentiates themselves
In a crowded field of investors including later stage investors that are “pushing things down,” Zoe wanted to know how Greylock manages to stand apart from other, less experienced tach investors.
While early stage companies often are “barely companies,” Sarah emphasized that from a judgement perspective, a lot of the time Greylock is taking risks that are “really about markets and people and ideas and less about the financials” (which of course they consider on a long-term basis!).
“We’re active company builders and that’s our business.”
Greylock’s investing criteria
With so much opportunity and competition to fund startup companies, it can be challenging to determine where to place your bets. As Sarah described it, taking a narrow, strategic focus is essential.
“Being an active investor means taking a concentrated point of view,” Sarah noted. “Everyone’s tastes are different but we take a view of what are the secular changes that are happening that are massive and then who are the very best teams. Markets that matter and the people who win them. It’s a very simple lens when you’re looking early.”
“We just have this dump truck of problem statements from the pandemic around the subsequent rethinking of how businesses interact with their consumers and how businesses work internally. If you follow that thread down any individual thesis, you end up looking at a relatively narrow set of companies.”
On being a “technology optimist and security pessimist”
With the shift to remote work and the emergence of more and bigger ransomware incidents, Zoe asked Sarah if Americans are taking cybersecurity more seriously and how has it changed her investing strategy.
“We have to take cybersecurity more seriously,” Sarah emphasized. “We’ve seen critical infrastructure and supply chain attacks – large technology and energy companies that our country runs on.”
“We’re building so much software. Software powers so many things. Every time you add a feature, a layer of abstraction to it, you’re adding an attack surface, and you’re doing it much faster.”
Sarah also pointed out that, “We can’t teach all developers to write secure code all the time. Security is an area of investment more than ever, and in the areas of people building their own technologies.
“The default is that you do business in the cloud. We worry much more about email, SaaS, and ransomware,” Sarah continued. “We’re trying to be pragmatic in being risk-driven in our investments but I’m fundamentally worried that the problem is getting worse and that individual consumers and businesses aren’t necessarily taking it as seriously as they need to.”
Coaching founders to build safe systems
“Every young company wants to move quickly and build the best product,” Sarah remarked. “That velocity is often at odds with thinking through security and risk.”
Sarah also explained that there they have two decision frameworks:
1) What is best for the user and how do they understand their user data
2) What are critical risks to the business
“Having good security is still good business.”
On the changing startup culture
As Zoe pointed out, “‘Move fast and break things’ has always been Silicon Valley’s mentality. It’s what gets people excited about working at startups.” However, the pandemic has changed company cultures, particularly within startups. So it’s interesting to learn Sarah’s perspective on how company’s are adapting their cultures to changing work structures.
“I strongly believe that the pandemic has massively accelerated a total rethinking of our relationship with technology at work, with our relationships at work, and the total restructuring of the labor market,” said Sarah. She recommends that startups approach their new culture systematically. A CEO can look at what has changed within the organization – for example, you may have more global workers so you need different payroll systems. You might also have contractors that invoice for services versus being paid via the company payroll. These changes require better HR and administration software.
“You have to know how to manage complexity. “I have companies with less than 20 people who we have people in 3 different countries.”
“Culture and a sense of connection is mostly unsolved,” Sarah observed. She advises companies to come up with new rituals and ways in which to communicate with one another.
Sarah shared that Greylock in investing in productivity and creative software, saying that “next generation business software is all collaboration software.”
“The connectedness of hybrid teams is an area of opportunity. Every founder, executive, and CEO I talk with think it’s unsolved. There is a huge amount of experimentation and innovation happening here.”
Keeping employees engaged while addressing burnout
Sarah recommends that the first thing companies need to do is recognize burnout. For example, recognizing that the employees of had been working long hours and in new environments during the pandemic, one of her portfolio companies took a wellness week.
Sarah also delved into the importance of social interaction as work saying “The social aspect at work is really an important one. It creates inter-team sense of belonging – that’s really important to motivation and happiness. It creates empathy between teams.
“I think we’re going to look at a lot of the outcomes of workplace interaction and try new things against them because they actually do matter in social interaction,” Sarah continued. I think we’re going to see a lot of innovation here.”
“I love Zoom. I absolutely saved the world economy the last two years. But we can do better than that in terms of the quality experience for other use cases for workplace connection.”
Diversity in Silicon Valley
As Zoe pointed out, Sarah has previously spoken out about the lack of diversity in Silicon Valley. In light of the pandemic and more people working remotely, she asked Sarah whether companies will become more diverse, or if “VC are going to have to put their foot on the gas a little bit and encourage diversity in these companies.”
“If we do not think of diversity consciously in the new world of work, it will have negative impacts,” Sarah responded.
“It’s very common for the parents of young children to be excited about hybrid work. It gives them the flexibility to manage their caregiving as well as their careers,” she continued. “However, if you don’t think consciously about how to create an even playing field for the different audiences and how it will impact diversity, you will have a less diverse company.”
“How do we make sure that people who choose hybrid are also on the leadership track, or can be stars or know the right people in the organization. I think that’s important to invest in.”
“If you tell me we can’t hire women or engineers of color in the Bay Area, that’s ridiculous. It’s challenging but it’s not impossible. It becomes even more possible if you broaden the scope you’re hiring from.”
To learn more about WSJ Live and other Wall Street Journal events, vist https://conferences.wsj.com/.
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