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00:00We've had a great number of discussions here today. Fabulous guests throughout the day and we've talked about content we've talked about a lot of things. Let's talk some more about money . Let's talk about what a phenomenal year last year was in terms of fundraising it was a hundred and thirty billion dollars raised by startups 56 billion by theses. That's a 20 year high . This is the most that's been raised by startups and since the dot com boom and you know with this massive amount of dry powder left with all of these RTS funds it looks like it's going to keep rolling for the next few years. So is it good times roll . And everyone's going to raise money and can become good millionaires like what are these numbers not telling us. Lars muscle sun keeps invest. OK so SoftBank. Yeah. OK. That's a major think effect. I think there's so much money from the top down. Every fund think we've known each other for a long time . And I'd say it was a rare event to have a one billion dollar fund. And now every fund is a billion dollar fund it feels like . Well he raised forty five billion dollars and forty five minutes spreading is pretty good. I mean I think that the thing that I would be careful of though is fund raising like raising money is really not that hard at the end of the day. Right. So it's actually getting money back to your investors and and then investors investors. That's the hard part. And so I would say let's not applaud the amount of money that's in the system . Let's applaud the money that's finally starting to exit but we still need to see a lot more exits for people to do well. Know I think one of the legends of our industry who is up here earlier Mr. Bill Gurley reminds us that it's a super cyclical thing and used to be the V.C. total dollars in the ABC would go from a low point of about 17 or 18 billion a year to like 32 or 34. Now that's way warped where it's so much more capital into the ecosystem and typically returns were correlated in the lean years where there was less money returns were better and then the super abundant years returns were suppressed because it was too much money chasing too few deals. I think what's worked at all is the markets are so much bigger now. Got you know what three and a half billion people on the Internet got everyone with a mobile phone. So now the exits can be much much larger but there's still only a handful of them. And so yeah I agree more money is usually not a good thing. You want you need to be way more discriminated during abundant times. So do you. Does this make you extra cautious when you approach different investments. Takes a long time and invested in lifts. How many 2010 five million dollar valuation nine years over nine on the board. All right . So I think it depends on where you're answering. So you're at the day one phase everything's a seven year overnight success . Patient form for me and our team is go with what you know be really precise of why you're doing it. Don't worry so much about five years from now it's hard to tell the future. Look everything's revisionist history. It was Zim ride back in 2000 2010. It took them two and a half years to get to lift right . So when talking with other indices both before this panel and in recent days as we look at other big macro events not only this massive surge in funding that's come in we can still tallying the numbers for this year but it looks like it's going to be on par. You know looking at things like you know the trade war with China or some of that you know anti-trust moves that are afoot in Washington. So these macro issues that are happening but the beasties that I talked to are just like now we focus on the bottom up. Do you guys agree with that or not so much for us. We're a consumer Internet so we're down in L.A. much different from up here and we run a startup studio . We start from inception D zero so Dollar Shave Club when that start our offices I knew nothing about Gillette had knowledge of the market. We don't know anything. We just go build things and eventually Pacman live a we've eventually sold to Unilever. For us consumer behavior is changing in the sense of the phone is everything right. The number one attention grabber is Instagram Snapchat Facebook and you have to go build something that's going to distract that person and go do something else. And today most likely that you're going to get them to pay for it. So for me to really think about the bigger macro is the bigger funds that they did right . Yeah. So I am a computer science engineer complete nerd. I am not a macro economist I never worked on Wall Street. I don't know how to predict the economy. I've no idea how to predict market cycles and I don't even try. So I try to stay super focused on what are the major technological shifts that can underlie a lot of success and then try to pick incredible winners you know incredible CEOs leaders in those areas and just do that with their heads down no matter what's happening at the big macro and sort of dollar cost average rate like invest when it's going up in investment it's going up. We put her on the same amount of money out each year. It changes a little bit in the abundant years like now and prices go up but not not dramatically but our start ups are affected by this macro stuff . I do a lot of physical products companies. All the goods are manufactured in China. They're all you know getting hit by tariffs and their goods are now 25 percent more expensive to the consumer so that has real impact on us. But it's not. It doesn't factor into the investment theme we're series a firm . We average holding period like eight eight or nine years for us . There was good change a lot in that time. Yeah I think about it more from the perspective of floodgate invests early way too early. Barely questionably legal too early and in that stage we aren't thinking about exit. We aren't thinking about growth . The only thing we care about is getting to product market fit . And so we spend all of our energy on that zero to one phase and that means everything looks different. I think our board meetings look different from what they look like at the Series A B C level. The questions that I'm asking the things that I'm trying to teach to our founders are totally different because their questions are different right. Our CEOs are like OK I might be firing someone tomorrow and I've never fired a person in my entire life. What do I do or they're thinking I just got money but I don't have customers. I barely understand what product I am building. I haven't totally told my investors everything that I don't know or everything that isn't going well . Now what do I do. And there's sort of this miracle that's supposed to happen at the end of that I get even more funding and I'm supposed to have this thing called product market fit and it's like magic. There's a Miracle Mile that happens in between. And so I feel like my job is to be that coconspirator that helps our founders get through that stage but that looks totally different in the next round and the round after that you know so when you're raising one hundred million dollars then trade wars in China and all this other stuff comes into play . But when you're like the IDF phase and you're just trying to fight to get another customer and live to fight another day then it's like the questions you're asking the questions you're answering the things you're worried about looks totally different. And I embrace that. So sounds like some of those big picture things don't effect as much but there are certain industries that you see starting to pop up starting to emerge as areas that are worth a lot more attention. I you know Peter you and I've talked a lot about the scene in L.A. and everything that you've been doing and science maybe you could talk a little bit about what's emerging in L.A. and and some other act to consume that's what water looks. Look I don't know the backstory on liquid Death Metal murderers there's no look at the relook at the world is we built polished for 15 to call it millennials however Asia that is if you look at it I think there is the I think it thesis of there's evil corporation is part of everything whether it's Monsanto or Boeing or telcos or tobacco they're lying to you and consumers are looking for like the truth the newsman whether it's the start ups that world stage earlier the staffs that are growing the gloss years the world the always the world people want authenticity from beginning to end for us we're trying to take advantage of that in the sense like tell a story this is if you Google this is the most vital thing I've ever touched it's bananas like someone just tattoo our logo on their leg things like two months old. So the idea that you can build and go after big companies. We took 30 percent market share from Procter and Gamble from Gillette from razor blades on the Internet with dollar shave club can be done today. And so we look at the markets of entertainment and you didn't even see it which is more of the television doesn't exists. What are you gonna build here. We have we built to the top hundred apps wishbone and yarn that's just entertaining teenagers more entertaining than the other apps. How do you get them entertained to do those things and then for us we think consumer packaged goods. There's a ton to be done there. And then EA Sports. So we incubator come play versus hopefully some of you know high school sports when 10 states today and so it's all these categories that are new. I've no idea what we're done . Hopefully they work out but you know for us if we believe in it we keep building the world's going to change. I've got about two dozen companies right now. We have everything . I got a jacket what products. I have bags of back everything from CBD to underwear that blocks electromagnetic radiation so running camping gear. Right now it's water and sports cars. David you don't really invest that much in CBD patches or liquid death or anything like that. You're kind of focused on crypto and A.I. and you've done some robotics investments as well. What's what's compelling about any one of those that makes you think that you're going to be able to get the type of return that you promised to investors over this very long term basis that we talked about. Yes really. I've been doing three categories consumer products so I didn't nest and Dollar Shave Club and those are really physical products that are sold to consumers and we haven't done tons. We've done a few couple that have failed. And that was sort of the last six six or eight years . Still looking in that space I think it's gotten a lot harder . And I just troll Peter studio to find the next great one. But lately I think the two biggest themes that we've been focused on say the last two or three years are really automation which is robotics A.I. machine learning and crypto. I think they're the two most interesting sort of technology shifts. One is less a technology shift it's more just a maturation of a bunch of different technologies that solve a real precedent world problem which is the need for automation which is coming from the fact that we've got full employment in this country and having a super hard time hiring people to do a bunch of the less interesting jobs and then in the down economy. The flipside of that is people looking for our ally so incredible opportunities around robotics and automation and in crypto that's more of a technological shift. It's a total total reaction I think to the dominance of the fang companies this dominance of centralized data repository companies that are largely fueling their businesses off advertising and consumer data and the sort of architectural change in crypto and block chain is decentralization is let the consumer data be stored decentralized and no one company has it and the consumer can revoke provoke revoke their authority if they want to. That's not really an altruistic point of view though. I mean I think what's really driving the excitement around block chain apps or decentralized apps called Dax is the liability companies don't want to keep consumer data any more of the cost of keeping it is so high between GDP are in Europe and the you know if you have a breach of consumer data it can put your company out of business . So I think there's an interesting trend around decentralization that we're exploring interesting . And talking about different trends. One thing that we were talking about the other day was you were not fretting but you were a little bit concerned over what many you know scientists are saying at the end of Moore's Law which they expect me to eke out another five years or so of doubling the number of transistors on every integrated circuit every two years. And so you were saying that this is coming to an end it could create this massive stagnation. You know it could stall a bunch of these types of advances that Silicon Valley and other hubs have come to rely on or it could give rise to something else. And you know maybe you're making a few bets on that. I know that you're I don't know for you to actually formally make those much tougher for me right now it's just that I love to pontificate about about things and said this this is sort of it was driven by several conversations I had with electrical engineering professors of mine from Stanford and and they're fretting about the fact that Moore's Law is coming to an end and a plan. Are they frightening. Are they stressed out about it like they are because they're worried that the industry hasn't fully reacted to that and that there are there are large companies still very much in denial. So so you know moving to seven nanometres so how small these you don't really print your big basically a chain using chemicals in order to pursue Moore's Law which is basically you're putting more more transistors into the same amount of space and basically with the same amount of cost. And that's really what's given us the headroom to create more applications that run faster that do more cool things. And the question is like how do we get more of that power . If if the actual semiconductor industry is hitting sort of this this this top of the market for them and so one of the things that that we've been thinking about is well does that really move things more. And I was thinking about sort of this notion of well decentralization is that what's happening or if Moore's Law does come to an end does that mean more things actually move back into the cloud. So there's like these weird trends that's pulling you in all these different directions. We do believe that things will become much more specific to a particular type of application so if you look at the PGD research that's coming out of Stanford in this area you'll actually create specific types of hardware for specific applications. And so when you move that to the consumer it's like we really hold like 10 different devices probably not. So what does that actually mean for infrastructure what does that mean for the consumer experience. There's some things that we need to figure out technically and as investors you should just know that all of this stuff that we've been investing in it's all because of these exponential laws so exponential compute capacity that we have out there that enables us to have this great investment that then grows exponentially. And the truth is data actually is now growing exponentially and there's still a lot more headroom for data because so many more devices are now finally coming online and the amount of tweets and Instagram photos that people are doing is just increasing at a rate that we've never seen before. So if data is being captured by autonomous vehicles by consumers in ways we've never seen but compute is actually more and more limited you have to ask the question where's the opportunity there's going to be stuff in things that are very technical. But then there's going to be really interesting consumer solutions that you will discover along the way that I think will be game changing for the way we interact with technology . So one thing that we we were talking a little bit about before this in addition to some of these major changes macros models kind of what it means bubbling up you know when they reach certain scientific limits. Is this the sense of of tech flash that's been happening recently. Culture Well I'm sorry tickle rage culture rage culture but some tech lash happening with you know some people rightly or wrongly feeling very frustrated that a lot of tech companies contributed to homelessness because of the rising housing cost or that they haven't been good stewards of our data. So I'm curious as you are advising these very early companies what advice are you giving them now and how are you helping them navigate this so they don't become an evil company later on or something like that don't be evil corp. Oh come on. Look I think there is the pros and cons at all. More than any time founders investors are paying attention the nuances in little things that you may have not noticed . Whether that be composition of board diversity on the team . It's right. You were paying attention. Like I'm counting heads and telling you. What's the count what are you doing. What are we doing this week about this in terms of I think GDP are data . It's interesting as we put more regulation in the space whether that's data protection GDP or particularly privacy you end up letting the big players stay in power because the overhead costs for a startup to moderate all their content. I was talking to somebody said we got a moderate on our concept like how many users. One hundred thousand. No a million. No. That's startup has 10 employees 50 employees. Facebook has tens of thousands of people. So the budget to make sure every piece of content is monitored. GDP are at full staff for legal privacy . The burden means this small staff will afford to do some of the things that all the big companies can afford all day. So to me that's all we do pay attention to that. So it's a risk. So is the risk higher then because they're younger and not as developed. I mean I'm like and honestly half the ship is half the stuff it is probably you know maybe on the edges. Yeah we'll see where the line goes. We pay attention obviously and there's tools and technologies to actually build against to protect yourself. I think it's more you know I love seeing the people here today who are investors because you know when I when I first started investing 11 years ago there was very common for me to be the token woman and I was the person of color on the on the board or the investing team. And so this is sort of what represents more of what the world ought to look like right. And if you are putting your dollars into companies that you believe in alongside other investors that's the voice. And if you are then going out encouraging the cap table the full cap table to be diverse and then the teams to be diverse and the viewpoints to be diverse that's the way we create change. We're not just changing technology ultimately we have to change culture . Twenty five years ago when I started at Apple tech was the underdog. We didn't rule any industry tech did not dominate any industry except for pure tech like personal computers. Now tech has totally dominated music media television. Not not yet sports but certainly changing impacting sports. Soon automobiles CPG advertising. So when you become dominant you have to behave completely differently than when you're the underdog. And this industry has not woken up to the fact that it has a totally different set of responsibilities humility and behavior that it needs. And the journey continues and on that we are out of time. Thank you so much .

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Players* Technology Summit - State of Venture Capital and Theme Investing

Speakers Ann Miura-Ko Co-Founding Partner, Floodgate David Pakman Partner, Venrock Peter Pham Co-Founder, Science Inc. Moderator Lizette Chapman Reporter, Bloomberg (Source: Bloomberg)

Bloomberg Technology
The only daily news program focused exclusively on technology, innovation and the future of business from San Francisco. Hosted by Emily Chang.
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