When IVP lately introduced the closing of its 18th fund, I referred to as Eric Liaw, a longtime common accomplice with the growth-stage agency, to ask a number of questions. For starters, wringing $1.6 billion in capital commitments from its buyers proper now would appear much more difficult than garnering commitments in the course of the frothier days of 2021, when IVP introduced a $1.8 billion car.
I additionally questioned about succession at IVP, whose many bets embrace Figma and Robinhood, and whose founder and earlier buyers nonetheless loom massive on the agency – each figuratively and actually. A latest Fortune story famous that photos of agency founder Reid Dennis stay scattered “in all kinds of locations all through IVP’s San Francisco workplace.” In the meantime, photos of Todd Chaffee, Norm Fogelsong and Sandy Miller – former common companions who are actually “advisory companions” – are blended in with the agency’s common companions on the agency’s web site, which, visually at the least, makes much less room for the present technology.
Not final, I needed to speak with Liaw about Klarna, a portfolio firm that made headlines final month when a behind-the-scenes disagreement over who ought to sit on its board spilled into public view. Beneath are elements of our chat, edited for size and readability. You’ll be able to take heed to the longer dialog as a podcast right here.
Congratulations in your new fund. Now you’ll be able to calm down for a few months! Was the fundraising course of any kind of tough this time given the market?
It’s actually been a uneven interval all through. In case you actually rewind the clock, again in 2018 after we raised our sixteenth fund, it was a “regular” atmosphere. We raised a barely larger one in 2021, which was not a traditional atmosphere. One factor we’re glad we didn’t do was elevate an extreme quantity of capital relative to our technique, after which deploy all of it in a short time, which folks in our business did. So [we’ve been] fairly constant.
Did you’re taking any cash from Saudi Arabia? Doing so has grow to be extra acceptable, extra widespread. I’m questioning if [Public Investment Fund] is a brand new or current LP.
We don’t usually touch upon our LP base, however we don’t have capital from that area.
Talking of areas, you had been within the Bay Space for years. You could have two levels from Stanford. You’re now in London. When and why did you make that transfer?
We moved about eight months in the past. I’ve truly been within the Bay Space since I used to be 18, once I got here to Stanford for undergrad. That’s extra years in the past than I care to confess at this level. However for us, enlargement to Europe was an natural extension of a method we’ve been pursuing. We made our first funding in Europe again in 2006, in Helsinki, Finland, in an organization referred to as MySQL that was acquired subsequently by Solar [Microsystems] for a billion {dollars} when that was not run of the mill. Then, in 2013, we invested in Supercell, which can also be based mostly in Finland. In 2014, we turned an investor in Klarna. And [at this point], our European portfolio at this time is about 20 firms or so; it’s about 20% of our energetic portfolio, unfold over 10 totally different international locations. We felt like placing some toes on the bottom was the best transfer.
There was a whole lot of drama round Klarna. What did you make of The Data’s studies about [former Sequoia investor] Michael Moritz versus [Matt Miller], the Sequoia accomplice who was extra lately representing the agency and has since been changed by one other Sequoia accomplice, Andrew Reed?
We’re smaller buyers in Klarna. We aren’t energetic within the board discussions. We’re enthusiastic about their enterprise efficiency. In some ways, they’ve had the worst of each worlds. They file publicly. They’re topic to a whole lot of scrutiny. Everybody sees their numbers, however they don’t have the forex [i.e. that a publicly traded company enjoys]. I feel [CEO and co-founder] Sebastian [Siemiatkowski] is now far more open about the truth that they’ll be a public entity in some unspecified time in the future within the not-too-distant future, which we’re enthusiastic about. The reporting, I suppose if correct, I can’t get behind the motivations. I don’t know precisely what occurred. I’m simply glad that he put it behind them and may concentrate on the enterprise.
You and I’ve talked about totally different international locations and a few of their respective strengths. We’ve talked about shopper startups. It brings to thoughts the social community BeReal in France, which is reportedly in search of Collection C funding proper now or else it would possibly promote. Has IVP kicked the tires on that firm?
We’ve researched them and spoken to them prior to now and we aren’t at present an investor, so I don’t have a whole lot of visibility into what their present technique is. I feel social is tough; the prize is huge, however the path to get there may be fairly laborious. I do suppose each few years, firms are in a position to set up a foothold even with the power of Fb-slash-Meta. Snap continues to have a robust pull; we invested in Snap fairly early on. Discord has carved out some area available in the market for themselves. Clearly, TikTok has executed one thing fairly transformational all over the world. So the prize is massive but it surely’s laborious to get there. That’s a part of the problem of the fund, investing in shopper apps, which we’ve executed, [figuring out] which of those rocket ships has sufficient gas to interrupt via the environment and which can come again right down to earth,
Relating to your new fund, that Fortune story famous that the agency isn’t named after founder Reid Dennis as proof that it was constructed to survive him. But it additionally famous there are photos of Dennis all over the place, and others of the agency’s previous companions, and now advisors, are very prominently featured on IVP’s website. IVP talks about making room for youthful companions; I do surprise if that’s truly occurring.
I’d say with out query, it’s occurring. We’ve got a robust tradition and custom of offering folks of their careers the chance to maneuver up within the group to the best echelons of the final partnership. I’m lucky to be an instance of that. Lots of my companions are, as nicely. It’s not solely the trail on the agency, but it surely’s an actual alternative that folks have.
We don’t have a managing accomplice or we don’t have a CEO. We’ve had folks enter the agency, serve the agency and our LPs, and in addition as they get to a unique level of their lives and careers, take a step again and transfer on to various things, which by definition does create extra room and accountability for people who find themselves youthful and now are reaching that prime age of their careers to assist carry the establishment ahead.
Can I ask: do these advisors nonetheless obtain carry?
You’ll be able to ask, however I don’t wish to get into economics or issues alongside that dimension. So I’ll quietly decline [that question]. However we do worth their inputs and recommendation and their contributions to the agency over a few years.
There’s clearly a valuation reset occurring for each firm seemingly that’s not a big language mannequin firm, which is a whole lot of firms. I’d guess that offers you simpler entry to prime firms, but in addition hurts a few of your current portfolio firms. How is the agency navigating via all of it?
I feel when it comes to firms which might be elevating cash, those which might be most promising will all the time have a selection, and there’ll all the time be competitors for these rounds and thus these rounds and the valuations related to them will all the time really feel costly. I don’t suppose anybody has ever reached an important enterprise final result feeling like, ‘Man, I acquired a steal on that deal.’ You all the time really feel barely uncomfortable. However the perception in what the corporate can grow to be offsets that feeling of discomfort. That’s a part of the enjoyable of the job.
