Nina Achadjian on What It Takes to Win in VC Right Now
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Hello and welcome to another episode of the Odd Laws podcast. I'm Joe Weisenthal. And I'm Tracy Alloway. 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.

It's been fun. We also had some really good Chinese food afterwards. We had really good Chinese food. Oh, and I woke up to the dulcet tones of the San Francisco parakeets this morning. That was fun. There should be 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 talked 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. Are VCs not normies? Well, they're a different class of human. They're like different. 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.

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. Yeah, I think that's completely right, actually. I mean, I think like all of culture has kind of become VC-ified because everyone is just looking for, you know... The lottery ticket. 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 etc you want to find that right tail outlier which has been the vc mentality since the beginning of the industry right everyone is a vc now so we should talk more about the industry 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're going to be speaking to Index Ventures partner, Nina Ishadian. Nina, thank you so much for coming on the podcast. Thank you so much for having me. I'm excited to chat with you guys today. What does a partner at Index Ventures do?

Well, our job is to find exceptional entrepreneurs, really build trust with them and be part of their journey in building a generational company. Setting aside what a partner does or investor, you know, there's a lot of VC firms that

Does Index Ventures have like a specific sort of differentiator or mission or raison d'etre that's different than anyone else? 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

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. I bet, 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?

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. 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 like,

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, you know, 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'd 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 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 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. Yeah, you really want to be that mirror. Yeah.

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. My dream job is to have 16 board memberships for which I'm paid an enormous amount of money. Yeah, well, you don't even need enormous if you have 16, you just rack them up. What is it? Actually, I've never asked this. What happens in a private company board meeting typically? What's the agenda?

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 CEO 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. Oh.

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. 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?

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. Yeah.

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's a promising founder and a promising company that's the next big thing and they want to call you?

you were one of the first calls that they placed. This actually came up in another conversation we did recently about wanting to be a first call, which strikes me as slightly different than you being the one to call them. That, by the way, that was with a credit guy. Yeah. But Nina also has a background in credit. Amazing. She used to be a high yield bond trader. Oh, amazing. But I'm curious about 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. Yeah. So maybe it's taking a step back. 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. Yeah. 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 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. 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 2024, that competition?

Also, sorry, just to tack onto it, but if you can't write the big check, what do you do instead? Do you send like red baskets and nicely written letters? What's your edge in that case? 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 9 a.m. and by 4 p.m. they would send us a text or an email saying, hey, we have four term sheets. What's your decision? Amazing.

And, you know, we sat a lot of those out for a couple of 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 game today because they realized 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 riff 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 re-centered on the original value proposition of venture capital, which is having someone along your side who can really help you build this business. And then how do you compete?

Do you have any interesting instances of, I guess, being really creative when pitching to a potential founder? Yeah. Well, I don't want to share all my secrets. Just share one. Okay. Okay. So look, I think winning is this incredible art thing.

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 posts to try to gauge like, what is this person like? Are they going to respond to a super aggressive, hey, I'm leaning, 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 going to sign by X date and

And most likely we're going to 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, you know, event that we're going to 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 order. Hmm.

Joe, you kind of did that to me when you were trying to get me to go to Bloomberg. I remember that. And it was successful. Yes, it was successful. Which actually dovetails into a question, which is that we have listeners who, many of them, you know, some of them in college, and maybe one of the things they think about is venture capital. And it looks pretty cool. Like, you really do seem to meet a lot of very interesting people, if nothing else, in

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 like, oh, this is a path I want to pursue?

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 entrepreneurs that...

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...

If even that sentence inspires you, 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. 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 going to 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. So it's just your job to fill up that calendar. It's your job. And no one else is going to tell you like how to do it. 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 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. You know, 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, you know, driven by

positive affirmation because you know you do something you do well great next thing next thing you get the sort of immediate feedback yeah exactly the dopamine hit of like I'm good at this at VC like 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 and to the right is lying to you because it is such an emotional roller coaster. Things go wrong. You know, things go right. You think you're a genius one day and then the next day 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.

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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. Yeah. Yeah.

Yes, sure. So I grew up in the Bay Area. I'm Armenian. My parents moved to the U.S. 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 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 PhD 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 not for me. This is terrible.

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 lawyer path of just sitting and doing spreadsheets and PowerPoints. But a few of my friends had done trading. And it just struck me as, wow, 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. That's amazing. Okay, so here's my other question. What is the Venn diagram overlap between baklava baking and venture capital? Okay, I thought you were going to ask me about trading and venture capital. Well, I thought I'd ask the harder one, which I think is baking.

Yeah, I mean, I think the analogy is probably number one, like you're serving customers at the end of the day. And for us, 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 like 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 got to 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 help. Those things I think have been good training ground for being a VC. To 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 the one out of 10 batches that's transcendent. Right? Like you just want to keep that consistent process.

That was a stretch, Joe. It was a stretch, but 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

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? 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 Claude and Gemini and some of these others because

Because there's still many, many entrepreneurs that are coming out and saying, hey, I want to build like 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. What is your view on this question?

Yeah, my view is kind of Dust is settling on and consolidating with these players. And I think it's really hard to catch 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.

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? Yeah.

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 100, you know, 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's 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. 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? 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 zero to one. 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 Vizcom. 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 chair,

H&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.

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 at wellsfargo.com slash say do. Wells Fargo's philanthropic support includes contributions from Wells Fargo & Company, Wells Fargo Bank N.A., and the Wells Fargo Foundation. From the Delta Sky Club to the Jet Bridge, Delta Airlines 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 Airlines with T-Mobile for business. Take your business further at T-Mobile dot com slash now. The 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 A.I.?

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.

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 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 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, you know, demand and supplies is what drives valuations. And so that's why we're seeing that.

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?

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 HVAC, electrical and plumbing to run their business.

And these are incredibly important mission-critical industries that I think AI will certainly be a feature for. But fundamentally, they're things that people need software to run their everyday business, like dispatch or customer CRM or figuring out procurement and 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 1,400...

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 one of them is not successful in breaking out as the clear winner, I could see startups starting to join forces and go after the space together. 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 there 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? Yeah. Well, I think, again, it all comes back to the density of talent, which I know everybody was talking about the doom loop in San Francisco and all of that. 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 probably the top 15 minds in AI that all of their offices are within a

five 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, like fantastic. So I think the density of talent is still in San Francisco, but Google had a huge deep mind presence in Europe, for example, and we've been seeing a lot of companies spin out of deep mind and meta there

I think Mistral is a great example. They're one of the fastest growing, you know, open source models. So there's definitely talent there because a lot of these big tech labs have had presence, you know, in Europe for a while in AI. You know, when you mentioned the types of industries that you're interested in, like Europe may not have a booming AI economy the same way San Francisco does. It probably has a lot of companies, you

A lot of problems to solve.

if nothing else, for the types of technologies that you're investing in? Absolutely. I'd say like time to Europe as like a market for US-based companies is getting shorter and shorter. 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. 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? 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. This is an agent is an AI that can actually go and do things.

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. Okay.

I just have one last question, I think. 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, etc.,

I'm not going to ask the Lena Kahn 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 an 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?

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, OK, you know, when the IPO market opens, are we ready? And they're getting their systems, their CFO, their IR person all ramped up. But why isn't it open with stocks at all time high?

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. Nina Ishadian, thank you so much for coming on Outlaws. That was fantastic. Thank you so much. That was really fun. Thank you. That was really fun. Thank you.

Tracy, I really enjoyed that. 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 100x 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. 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, right? 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. I've always wondered about that too. And, you know, the degree to which a good VC can...

I'm just 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. Don't worry. We have a place to put you. Yeah, you know, entrepreneur.

from them, residents, whatever it is. The other thing I was thinking about just in the context of Europe-US competition in 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. Right. This is the story of our time. Productivity boost. This is a story of our time that there is the story

still important industrial giants of Europe. And the fear is that they're unproductive. Yeah. 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.

technology. A contrarian approach to Europe's future, I think. I'm going to invest in BASF as an AI player. I'm not actually suggesting that, but that would be a good... I think this is actually an interesting investment thesis. It's a good enough take for Twitter. Yeah. Okay. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts Podcast. I'm Traci Allaway. You can follow me at Traci Allaway.

And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our guest, Nina Eshadian. She's at Nina Eshadian. Follow our producers, Carmen Rodriguez at Carmen Arman, Dashiell Bennett at Dashbot, and Kel Brooks at Kel Brooks. Thank you to our producer, Moses Andam. For more Odd Lots content, go to Bloomberg.com slash Odd Lots, 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 24-7, discord.gg slash oddlots. And if you enjoy 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

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