How Index’s Danny Rimer Built A Track-Record of Success By Betting On People, Not Numbers
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This is Most Innovative Companies from Fast Company, where we speak to visionary founders to understand how they think, how they innovate, and what lessons they may have for you and the businesses that you run in every shape and size. I'm James Vincent, a founding partner at Foundr.

So this is a story about the fragility of ideas when they first arrive in the world. In my time working with Steve at Apple, I noticed how carefully that was nurtured so that great ideas came to fruition. I'll give you some examples. Actually, Johnny Ives' quote is relevant here, the guy that designed every one of the wonderful Apple devices that you have in your pocket. Ideas are fragile. And

And it matters which people are in the room when that idea is born as to whether it lives or dies.

So what I witnessed was a very careful orchestration of creating conditions for innovation. Conditions for innovation are not 30 people in a room having a big brainstorm. Maybe that's one part of the process, but part of the process was a few people, unbelievably passionate and committed, a lot of them deep domain experts, but really committed to

I would be in a set of meetings with Steve. We talk about one thing. He said, we need to talk about something else. I'm sorry. Do you guys mind leaving? I want to just get the four of us to talk about that. Trying to move away from this notion of this committeeization, where few people with ideas strongly held, arguing vociferously,

constantly iterating to make from good to very good to really, really good to finally get to great. And if they're not great, they go. During the course of that, you have to be also passionately detached because ideas are fragile. The people in the room matter. And if you say the wrong thing, it might be gone. You might literally have just lost that idea.

Today, I'm very excited that I'm talking to one of those people who is in the room when great ideas come about and is actually one of the people that makes sure those ideas happen because he funds them. I'm looking forward to a conversation with Danny Reimer from Index Ventures.

I'm sitting here with Danny Reimer from Index Ventures. Danny is one of those venture capitalists who has a very prophetic view as he meets founders. Index has been this phenomenal success, 40 unicorns, $4 billion under management, and

enormous number of brands from Discord to Farfetch to Patreon and has been in the news recently because a company called Figma just got bought for an astronomical fee by Adobe. And of course, Danny was the guy to see the opportunity. So Danny, great to see you. Welcome to the show. Thank you very much, James. What a pleasure.

to be with you in this setting amongst all the other settings that I get to hang out with you in. So just for everybody's context, you're in London right now and Index originally is from Europe.

You spent a long time in San Francisco and you brought the firm to the heart of Silicon Valley, did phenomenally well, and then moved back to London. So you have this unique perspective. Tell us a little bit about that journey and the things that you've learned along the way. As you know, Mike Volpe and I decided to leave London in 2011 to open the West Coast office. And that was a big decision for us.

because we felt that to better support our European investments, we needed to have a presence on the West Coast. We also passed on some incredible stories and rationalized them by not having a presence in the U.S. And so it was a very important decision for the firm. And

fundamentally, what we decided was that similar to the recommendations that we told our companies, we always tell them, look, if you're going to go after and be present in the U.S. from Europe, you have one shot and you better do it like you mean it. And that means that you have to go over. So similarly, we decided that if we were going to

open a presence there. We weren't going to hire someone to plant the flag, but rather we had to make the decision of moving from London and resettling on the West Coast. But what was it like in 2012 when you first arrived in the Bay Area? We actually chose to move into San Francisco because we didn't want to rustle any feathers by having a presence on Sand Hill Road. So that was different. You had fewer firms. You had very few sectoral

firms, in other words, that raised money to go after a particular sector like crypto or NFT or fintech. They were much more generalist firms.

And many of the firms had been around for many decades. It was really the old guard. And of course, there's been a lot of change in that landscape. I always thought of you guys as the outsiders a little bit. You saw value where others didn't and you were a little more punchy around that time. Is that fair?

Very fair. That, I feel, is part of the secret sauce of Index, that we are a collection of outsiders who relate to different cultures but don't view that culture as our own, so that we can have a little distance and really evaluate what we're seeing on our terms rather than on the herd-like mentality terms of what gets very interesting

popular in our industry. It's very interesting. I'm going to zoom back 40 or 50 years ago.

investing was really a different kind of conversation. It was on the East Coast and at some time it ventured West. And when it ventured West, venture capital created a whole new kind of asset class. It basically said, we're going to invest in companies that aren't yet established, that are using technology with an idea, with a founder, but really no history of success. And

And that's what venturing at its purest is. And it's very different to other forms of investing. I think you're right. I have always seen it as a privilege to invest. So in return for you folks letting us invest in your company,

We're going to roll up our sleeves and do everything in our power to make you as successful as possible. But it really starts with an idea. It really starts with two people in a garage that have this ambition to disrupt an industry with this idea that is predicated on being enabled through technology in return for letting us

be partial owners in this. We're going to do everything in our power to make you as successful as possible. That started with venture capital as it went west. It got out of this dragon's den or shark tank mentality and it really became much more about

How can we tangibly help you in that journey to make you as successful as possible? You probably have heard thousands of founders coming to you with ideas and

So tell me about how you think about looking at an investment. What are the key indicators you're looking for as Dylan, age 19, at Figma, comes to you? How do you make that assessment to write that first check?

It is that period of creation when the founders come to see us. 75% of our investments are seed and series A. So even though we have a growth fund, the reality is we take a seed and series A lens to it. So we are really excited about journeying that journey as early as possible.

And it all starts with the person. It all starts with the entrepreneur. The rest is noise. Total available market size is noise. Talking about what the exit is going to be is noise. It's really honing in on that individual or individuals. Usually they're co-founders, thankfully, because it is

one of the loneliest jobs on the planet. And then it's drilling in. That's the starting point. And just honing in on the sincerity of what they're trying to do and the level of passion that they have

I can probably knock out 90% of the folks that I meet with. So you're sitting in front of an individual. Is it the cut of their jib? Is it the idea? Is it the EQ, the IQ, the aptitude, the cultural senses? You've mentioned Dylan. So let's talk about Dylan a bit. So Dylan was 19.

And he showed up with his co-founder, who was his prof, the teaching assistant of this computer science class that he had taken at Brown. So he had convinced a scholar well on his way to quit and start a company with him when this kid was 19. So that's a pretty good sign.

And of course, as we back channeled Evan, his co-founder, he came out with Flying Colors in terms of being just a brilliant engineer and developer. There are so many elements that I look for. Certainly one of them was his mission. His mission was to democratize design through a new platform. And he genuinely meant it. So irrespective of me investing or anyone else, he was going to go after this.

The second was with questions that I asked, like, guys, you realize this is not going to be something that you can

code in six months, throw it out on the web, see if people are reacting, and then decide whether you want to pivot or you want to continue or you want to shut down. This is going to be a three-year commit. And they were signing up to that. Another one for me is entrepreneurs who step into anecdotes and metaphors, who have been students of other businesses and

and can bring up what they've learned and why that's relevant to what they want to do. So instead of thinking, I have to reinvent everything, they have the humility of saying, this company is an incredible example. And

And we really respect them. And they are a source of inspiration for us. And here's why. When I first met you, I remember, and you said to me, I feel like I'm the guy in the boardroom always making the comments that you talk about. What's your role in culture? How are you telling your story? Why are you the next wave, right? I hear you saying that in this story about Dylan and Figma. No question. I look for...

cultural relevancy in the companies that I invest in. I challenge the entrepreneurs that I work with about brand because other than Apple, most of our industry think they're interested in brand, but actually the brand is a byproduct of a great service or app that they've built. They actually haven't done the hard work.

of thinking through proactively about it. I remember that amazing story you told me when a CEO is seeing me every Wednesday and on Sunday before the next Wednesday is calling me to find out what's the new work. You're going to come up with great branding. That's been a very useful tool that I've shared with a lot of my entrepreneurs.

Just this week, I was on a stage with Brian Chesky. He told a wonderful story. He had a bad dream just before they were about to IPO in the middle of a pandemic. He woke up and he realized that he wasn't running the company correctly. And kind of his inspiration was back to Apple and creating this incredible community-driven super brand. He ended by saying, I just wish there were more designers and creative people leading companies. People believe that there's just

a way to run a business. I'm hearing you say that as you're creating companies, that you see a whole different approach to how business might interact with the world. There are many different ways of getting to the right answer. As you know, with VCs, often wrong, but never in doubt. So when it comes to

my filter, but a lot of my partners' is filter, and we have very different filters. The aspect that I think we agree upon is that you can't really be passionate about business. When someone comes to us and they're excited about business or they've gotten a degree in business, that means nothing to us. We're not the right partners for them. It doesn't mean that they can't build a fantastic business. It's just that we're the wrong partners because the

We're going to dig a lot deeper. That's great if you want to ride a wave and you're a momentum builder, but companies are going to hit hard times. We're talking about Figma, and back to Brian's point, the fact that Adobe is paying the most that any company has been paid for that is private, and that the company is fundamentally providing a tool for collaborative design tells you

where people are going. My view is that design is for the 21st century, what literacy was for the 20th century, and what oration was for the 19th century. This is the century of design, and everyone wants to be a designer. Virgil Abloh was a designer in every which way, and unfortunately he passed very early. But what a brilliant designer in so many different walks of life.

Bringing it back, the notion of being excited about business means that you have to ride a wave.

And that if you hit hard times, you might not stick around. And so that's why we really didn't do any NFT business or crypto. And we're Web3 skeptics in a lot of ways. It doesn't mean that we're not interested in crypto, but just believe that the Web3 approach was not a well-narrated story. It was trying to package something that actually isn't a leap.

into the next generation of the web. And the folks that we saw were really interested in a get-rich-quick scheme rather than irrespective of market, irrespective of financing, they were going to build a very meaningful company. I'm going to change topics because there's probably no one better to the core of entrepreneurship in both Europe and in the U.S.,

How would you characterize the difference between the two in terms of the role that commerce plays, the entrepreneurship plays, the kind of founders you meet and the opportunities that you see in Europe versus the U.S.?

Certainly things have changed quite a bit. So those differences are getting to be much more subtle over time. Generally, what we've noticed is that the U.S. founder has a tendency to be incredibly polished.

and is a much better storyteller about their business and might embellish it quite a bit. Whereas the European founders are selling themselves short. They usually don't think that they're as good as they actually are and are almost apologetic about their success. Obviously, I'm generalizing.

But those are clear approaches that we've seen. And the second one is the European folks, companies are super excited about what they're doing and so therefore have a tendency to be less sophisticated in terms of what the financial outcome can be for the company, but are typically going to stick around.

for a lot longer. And I don't want to make it sound like the U.S. folks are mercenary and the European folks are loyal. It's not the case. It is more nuanced than that. But what's really interesting about U.S.,

folks who join U.S. companies is that because they're more sophisticated in their way of thinking about companies and the whole startup journey, they switch on much faster to what has to be done.

sort of registers a lot faster. Oh yeah, right. We need to do this because that is going to have implications on our positioning in the market in this certain way. There's actually strengths in both. And there's no question that the most successful companies are the ones that are most diverse.

in terms of backgrounds, in terms of culture and ages and gender and ethnicity. And that's an absolute fact. So the more cross-pollination we create or those companies have, the better the outcomes.

It's so interesting, isn't it? The role that commerce plays in society is different. In America, at school, it's show and tell time. My kids were at school in Belgium. Those kids did not want to go up to the front and show and tell at age six. It's kind of cool to be an entrepreneur. There is a generation of kids coming up now who are excited to build things. And there are all these tools now. So are we looking at...

a new era. Absolutely. What you're pointing out is very consistent with also the creator economy. 75% Gen Y want to be creators.

So folks are not really interested in joining someone else's party. They want to make it their own. And I think that's super positive. And actually, as apprehensive or critical as I've been about early crypto NFT space,

I'm super excited about the AI-enabled tools that are out there, like Stable Diffusion and Mid-Journey, providing AI and ML to enhance individuals' creative output. Not replicate, not replace, but enhance.

I suspect it's going to level what table stakes are and the innovation and the creativity that we're going to witness is just going to be incredible. Obviously, it would be remiss of us not to mention the fact that it's been a tough six months in venture. Up until a few years ago, it seemed like everybody got into venture.

because the returns were so good. And so everybody and their mother was getting into venture. Hopefully no VC listening to this is going to get upset, but I used to characterize them as Empress Penguin and obviously not

the best ones, but there's so many people looking for eels. You know, I'm an Empress penguin. I'm on the ice. I'm hungry. I waddle over to the edge of the ice. I'm looking into the freezing cold water and like, Ooh, there's fish. There's also kind of killer whales and it's kind of scary in there. So I'll just hang out for a minute. Another one comes, another one comes. Pretty soon there's a hundred. One more waddles up at the back. They all get pushed forward. Someone dives in. They all go, Oh my God, he saw something. And they all dive in after.

And my sense of the last few years was a little bit of that. Seemed like venture had so many newcomers that weren't looking at business the same way.

I might argue almost too much money. Can you speak to that? What have you witnessed up until six months ago in the venture industry? The industry, as you pointed out, is changing quite a bit. I think what's happened in our industry in a lot of ways is that it's actually migrated from being just a craft-oriented approach, which is index are super passionate about doing and continuing, to

to more of an asset aggregation play, to more about having massive coffers of cash that you deploy across

across all stages and all geographies, acknowledging that technology is the primary driver of wealth creation that's going to happen over the next decade. That's probably not explaining the last six months, what happened prior to the last six months. We've just had this drop in public markets that turned into a readjustment in private markets, valuations. What does the future look like now? And what might happen next?

It's going to take a while for the private valuations to really reflect what's going on in the businesses because there was so much money raised by so many businesses fairly recently. So the companies, especially if they've rationalized their spend to take into account the fact that there's less demand globally for whatever you're doing, there's less demand.

A lot of these companies have many years of runway and they're going to try and hold their valuation the same and get to the other side of this period of the desert and then raise. And so I think it's going to take a long time for these valuations to

to actually reflect what's going on in the business generally. The second point that I would say is there have been a lot of sectoral funds raised specific to games, specific to crypto, specific to fintech. And so those folks looking for the best companies in that sector

They're not looking for the best companies across the board. And they are going to continue to back the most promising companies in their portfolio, even if that sector has been totally crushed. And so that's also going to extend this suspension of disbelief between the reality of the situation and where they're being valued. Do you still think...

good ideas, great people will continue to get funded just in a different way? Or will the Dylans of this world not have the opportunity they once had? Quite the contrary. I think the best companies and the best entrepreneurs are going to be backed at this time. Because if you are starting a company right now, you mean it. So we're going to love that. You're not going to start a new company today, right?

in this climate without really wanting to do it. So you already get that check. The second point is you're ready for a very difficult environment. You're ready for the fact that you're not going to raise as much as you would. And I can't prove this, but I think that companies' success is inversely proportional to how much they raised in the earliest rounds.

The fact that you don't have that much money on your balance sheet is actually going to make you a much more creative, much more resourceful company. And then the third part is if you are creative,

starting a company and it is going to work in this time, then it's probably an amazing business. So if we look at our own portfolio, Skype was one of our first fantastic opportunities and it got started in 2000, 2010.

It was a terrible time. Adyen got started in 2008. Uber was started then. Salesforce got through 2001, 2002. So the resilience and the resourcefulness of the entrepreneurs who kick off businesses now

implies that they're probably going to create much better businesses than the last crop of companies. What I'm hearing from you is that the moment calls for a certain tenacity and passion. And in fact, those were the characteristics you were looking for, just as relevant today as they might have been a year ago when there was tons of money sloshing around. You're going to make the same judgments because...

They're not counter cyclical. They're not even cyclical, those things. You're looking for great people with great ideas. You're absolutely right. Our business is a lot about discipline, I think. Not getting distracted by doing all these super sexy opportunities that might come our way, but just staying the course, maintaining our craft, trying to perfect our craft. And the reality is,

One of the major disciplines, which is very hard to maintain, is that we actually should deploy the same amount of money

irrespective of economic climate. So we should never be more bullish in bull times and more bearish in bear times. We actually will get the best results by deploying the same amount of money in all types of markets and therefore have the best

portfolio composition for our companies. I think that's fascinating because I think most people would assume that you write smaller checks in the bad times and bigger checks in the good times because you should.

Dan, it's been a fantastic conversation. I'm going to ask you the last and most important question. When you look back at the impact you may have had, what would you like people to have thought? That I championed and enabled exceptional individuals.

who were viewed as quite esoteric and marginal to be amazing contributors to our culture and society. That's a fantastic answer. It's a new renaissance. I think your answer is just right on the money. That was a really fun conversation. Thank you so much for joining us today. And I look forward to seeing you soon. A pleasure, James. And thanks. I always feel like I learn so much when I chat with you. So thanks for bringing that out in me as well.

The takeaways from my wonderful conversation with Danny from Index is that not all VCs are made the same.

I think Danny represents a venture mindset. He sees ideas in people, invests not in total addressable market or the analytics or the existing, but is a true venturer. In a time when venture capitalism is at a turning point, having expanded beyond what it could or should have been, and now retracting, there are still those fundamentals about

great people with great ideas. And that notion of the outsider and being diverse and ideas coming from culture, what it took for Danny to see the 19-year-old Dylan in a company that wasn't even called Figma yet,

that only just two weeks ago sold for $20 billion to Adobe. This is the guy who sat with Dylan and saw the promise. And that is a true venturer. I really thought that was very interesting and compelling and exciting for the future. I think his observations about the difference between European and U.S.,

ways in which founders operate, the role of culture in those two different places, the diversity that he looks for, not really criticizing one nor uplifting another, but saying they're two different approaches. And it's in that diversity that I think that they see the promise. It's going to take a minute for venture to come back, but

but that great founders with great ideas will continue to get funded because there are still the Danny Reimers and the indexes and many other super smart and awesome venture capitalists out there that are looking for great entrepreneurs to invest in, even when perhaps times don't appear to be optimum for such investments.

All right, that's all for this episode. If you're a new listener, be sure to subscribe to Most Innovative Companies wherever you listen. And if you like this episode, please leave us a rating and a review on Apple Podcasts. And we also want to hear from you. So let us know what you'd like to hear more of. Send us an email at podcast at fastcompany.com or tweet us.

at hashtag most innovative companies. You can also follow me on Twitter at FNDR underscore James. Most Innovative Companies is a production of Fast Company in partnership with founder FNDR. We couldn't afford the vowels. Our executive producer is Joshua Christensen.

Our sound design is Nicholas Torres. Writing is Matias Sanchez. Alex Webster and Nikki Checkley helped with the production. This podcast was done in collaboration with my wonderful partners at Founder, Stephen Butler, Becca Jeffries, and Nick Barham.