Laela Sturdy: Life Inside Alphabet's $7BN Growth Fund | E1190

Intro (0s)

• Pattern recognition in investing involves understanding how businesses scale, particularly in areas like sales and marketing. (2m7s)
• Insights from past experiences are valuable but should be combined with an open mind to adapt to new trends and market dynamics. (2m57s)
• When evaluating investment opportunities, it's crucial to primarily consider the existing business and market size, while acknowledging the potential for future growth as an upside rather than a guarantee. (5m47s)

Why the Core Offering Matters More Than Ancillary Products (6m38s)

• It is important for companies to have a strong core offering before expanding into ancillary products. (6m46s)
• Investors look for evidence that companies can successfully expand beyond their core offering, such as a track record of launching multiple products or entering new markets. (8m34s)
• Growth-stage companies often wait too long to diversify their offerings, which can make it challenging to achieve durable growth and attract public market investors. (9m58s)

Do Early Investors Pressure Founders to Expand Too Soon? (10m43s)

• Companies with revenues of $100-200 million typically have the resources and operational complexity to handle multiple priorities. (11m57s)
• Common errors companies make when expanding include overestimating their product's competitiveness in new markets and not allocating sufficient resources to ensure success. (14m19s)
• A key difference between private and public markets is the emphasis on predictability, with public companies needing to consistently deliver on their promises to shareholders. (15m55s)

Can a Non-Founder Led Company Still Be a Good Investment? (19m46s)

• Non-founder led companies can be good investments, as demonstrated by the success of Microsoft under Satya Nadella's leadership. (20m10s)
• Companies growing at 15-40% with revenues between 30 and 100 million dollars may struggle to remain independent and could be acquisition targets. (24m13s)
• Generalizations about market conditions should be avoided, as there are always great companies to invest in at fair prices throughout market cycles. (28m17s)

Which Price Seemed Unfair at First but Now Looks Justified? (28m55s)

• Valuation multiples in growth investing are determined by comparing a company to similar companies in both public and private markets. (29m5s)
• A fair price for a company is determined by analyzing its future growth prospects and potential to outperform its competitors. (29m43s)
• Capital Ventures involve the risk of assuming high growth rates for companies, with only a select few achieving exceptional growth and justifying seemingly high valuations in retrospect. (30m33s)

Is Growth Really Dead, or Is There Still Opportunity? (31m42s)

• Growth is not dead, but volume and activity are down from the peak of 2020 and 2021, excluding AI deals. (31m58s)
• There are still good investment opportunities in companies that are growing quickly, particularly in the early growth and pre-IPO stages. (32m25s)
• Companies that received high valuations during peak market activity may face challenges in recruiting and retaining talent if they are unable to maintain momentum and execute on their plans. (34m28s)

Were Laela’s Best Deals Obvious from the Start? (36m0s)

• It is stated that the best investment opportunities may not be immediately obvious and often involve advocating for companies that others may doubt. (36m1s)
• It is explained that thorough due diligence, including customer interviews and cohort analysis, is crucial for identifying truly differentiated companies and understanding their go-to-market strategies. (36m50s)
• CapitalG, the investment fund, aims for 3-5x returns on investments in growth-stage companies and prioritizes long-term compounding over short-term liquidity pressures. (38m0s)

Should Private Investors Keep Public Stock for Asymmetric Info? (38m50s)

• Private investors have different incentives and access to information compared to public investors, which can influence their decisions on when to buy or sell stocks. (39m9s)
• Understanding the dynamics of public markets, including valuations, pricing, and portfolio management, is crucial for making informed investment decisions. (40m0s)
• Factors like short sellers, activist hedge funds, and market conditions can significantly impact stock performance in public markets, making it different from private markets. (40m20s)

The Biggest Mistake on Entry? (43m35s)

• The biggest mistake made when entering a new market was investing in markets without a robust history or local resources on the ground. (43m58s)
• It was discovered that the typical size and number of employees of an Indian tech company, for example, was significantly higher than many US-based companies. (44m28s)
• When entering some markets during the peak of the global tech market bubble, the risk was not necessarily priced in the valuations. (45m2s)

Do the Best Founders Really Need VC Help? (45m30s)

• The best people in the world, even the best founders, can benefit from help. (45m42s)
• The best founders will improve with a strong board of directors or a network of advisors, friends, and colleagues. (45m48s)
• Venture capitalists aim to support founders and be valuable partners, offering resources and acting as a sounding board. (46m7s)

Best Board Member Laela Has Worked With? (46m12s)

• The best board member mentioned is Rich Wong at Excel. (46m15s)
• Rich Wong is supportive of founders and has good relationships with executive teams. (46m22s)
• Rich Wong asks difficult questions, is hardworking, insightful, and a good person. (46m26s)

Quick-Fire Round (46m33s)

• Entitlement is something that is irritating. (46m51s)
• The best opportunities in AI companies over the last 18 months have been found by going earlier into the companies. (48m6s)
• Venture is a business of outsize returns, so making a few big decisions is important. (52m3s)