Changes to the Silicon Valley Investment Community Mindset - Post Pandemic

In this episode, we talk with former WeWork CMO and Silicon Valley legend Robin Daniels (now with Matterport and founder of Nordic investment firm byFounders). Topics discussed include the changes to Silicon Valley over the last twenty years that have occurred after a crisis such as the dot.com bust and now faced with another major reset post-COVID.

This is part one of a two-parter - the next episode will focus on the Nordic startup community.

Learn more about our work at: www.deep-analysis.net

If you have any questions or thoughts feel free to ping us at: info@deep-analysis.net

Transcript

Unknown Speaker  0:00  
Deep Analysis podcast.


Alan Pelz-Sharpe  0:09  
Well hello, and welcome to the Deep Analysis podcast. It's been a while, quite a while, in fact, but the lockdown has given us a chance to record some new episodes. And we've got some great stuff coming up. I mean at Deep Analysis we... well, we help organizations define their technology strategies. And you know, the processes we undertake to do a lot of that research involves talking to people, to industry leaders. That's a key part of what we do. Today is a two-parter. And it does indeed involve talking to an industry leader. In fact, a bit of a Silicon Valley legend in my book, Robin Daniels, formerly of Box, CMO of WeWork, of LinkedIn, and now with Matterport. Oh, and he's also a Founder of the Nordic investment firm byFounders. In this first podcast, we're going to really explore shifts in perceptions within Silicon Valley during this pandemic period, whether all the changes here are really going to affect the way that Silicon Valley Views investments and startups. And in the following podcast, we’re going to look more closely at the Nordic Region and how that differs and how the startup community, the tech community works there. Well, I really hope you enjoy this conversation with Robin. It's a great one, but I have to start by giving a bit of an apology in advance. Because, despite being tech insiders, there was a lot of problems with bandwidth and recording here, but we've done our best to improve the audio as best we can. And hopefully you will enjoy this conversation. So let's join it right now: myself, talking with Robin Daniels. 


Alan Pelz-Sharpe  2:06  
Hi, this is Alan Pelz-sharpe with Deep Analysis. And today I have a guy I’ve known for quite some years, I don’t actually remember how long, but a long time now, Robin Daniels, who's in my book, at least, a bit of a Silicon Valley legend. Robin, welcome. 


Robin Daniels 2:23
And thank you. Thank you for being here. And thanks for the kind words. 


Alan Pelz-Sharpe  2:27  
Oh, well, fill in those kinds of words a little bit. Tell us what you think.


Robin Daniels 2:31  
Yes, yes, I was born and raised in Denmark and I came right at the height of the dot com boom to the United States. I bought a one way ticket. And on February 1, 2000, I came to the United States. I didn't have a job. I didn't have a place to stay. I've never been to California. I never met a single person from California. I just had a dream of going. I was 21 at the time, and everybody was hiring and I had some good skills. I was a web programmer, so I knew how to create websites and so on. So everybody was hiring and I was interviewing a lot for the first couple of weeks and I got a job. I'm like, well that actually wasn't too hard, so everybody got it. And then a month later, in March 2000, the whole market crashed. And I’m like, holy shit, what just happened, you know? I thought this was gonna go on forever. I was young and inexperienced. And it just kept getting worse and worse, you know, layoffs, and the economy got pretty depressed. And then of course, 9/11 happened to kind of be a one-two punch on that downturn. So it was pretty, pretty rough for a while. And it’s interesting being here 20 years later, reflecting back on just my 20 years in Silicon Valley, and so on, again, here in March of 2020. Now we're in a pretty severe downturn, and there's a lot of uncertainty and it's pretty scary for myself and a lot of people because we don't really know what's on the other side. And we don't know when it's gonna end. We don't know what the other side looks like. Of course, if there's some positives that are that are coming out of that time, trying to focus on that. And it can feel just like everything is out of your control, but it's definitely forcing us reevaluate, I think, in many ways, what we value in life now: what we value about each other, how we value about society, the things that we care about and what we want to spend our time on, how we want to share our energy with the world. And I think that there's some good things coming out of it, despite it being obviously very tough right now. And you and I have commiserated a little bit about just the impact it's having on our lives, you know, but it is, I think, in some ways, a reset that, in some ways, hopefully in the long term is healthy, just like the reset in 2000. It was tough during the time, but it actually reset our values in some way and it reset the crazy valuations we had around companies and the skewed nonstop pursuit of just growth, growth, growth for growth's sake or crazy valuations or IPOs. Like it reset the values in some way again, in 2007, with that crash, we reset our values a little bit again, even though it's tough. The only thing I think is a little different here besides economic uncertainties is that people are literally dying, which is of course, something that we want to avoid at all costs, and we don't know the impact that's gonna have on society in the long term, but we have to just look out for each other. But it is again, I think, forcing us to care for each other in new and unexpected ways, and share our love and energy with each other in a way for themselves. 


Alan Pelz-Sharpe 5:14
So we, I mean you, physically arrived, and I guess I did in spurts around the same time, actually, yeah. I was there at the peak of the dot com boom, and I will literally never forget going back to London and back, I'm going to say six months later, driving down the 101 with hardly any traffic. I mean, I use this word cautiously, but it genuinely felt apocalyptic. It was hard to fathom that I was back in the same place. So as you say, we've been through these things. But I'm just wondering, I mean, with Silicon Valley and the Silicon Valley mindset, do you think this is going to be a bit of a reset for them? I mean, yes valuations, etc. and who's going to invest in who. But let me be provocative here: a lot of enterprise IT, I’d argue virtually all enterprise IT, has always been focused on, it's going to be faster, it's going to be efficient, it's going to lower cost. We never actually say it's going to cut lots of jobs, but it is. And of course that’s actually how you save your money and get more efficient. Right? Do you think maybe there's going to be a little bit of a reset here, that that is not, maybe, better? It might be faster, it might be more efficient, it might cost you less. But is it, in the fullest sense of the word, right? And is it the right way to move forward? 


Robin Daniels 6:53 
It's a really great question. And I think you're right, it is a proper question. And, I mean, I don't have the full answer, but my sense is, and what I'm seeing and what I'm hearing from my friends and so on, is I think it's starting to put a really sharp focus on what is essential and what is not essential. And there's a lot of technologies out there and platforms and companies that have done well, and help in some way your company and probably in the best of times, will make your life easier. But could you live without them? Probably, you know. Have you lived without them before? Yeah, probably, and your company has done fine. And so I think it's going to be a much sharper focus on what's essential and what’s not. And I think, that has a couple different effects. I think buyers are going to look at that way more closely, which is, which is obvious. But I also think it's going to mean that talent or people who want to work for companies are going to start looking at that a lot more. And I would say there's a lot of companies that I engage with that are great, amazing platforms that are going to do well, but I would classify as non-essential. And as the crisis started taking hold, and I was starting to think more seriously about engaging with “Where do I want to spend my time?” “Which company do I want to join?” I really started. like, thinking about companies in three different categories. I thought they are, the first category of companies that have found something that's missing in a lot of other platforms or something that they could probably do a little incrementally better. Now, we know, there's not a great way to do marketing and analytics. So let's create a company that focuses on that. And let's create a company that is really around better engagement on your website, and so on. They’re going to do great at growing fast. But have you lived without them before? Yeah, you probably have. And are they absolutely essential? I don't know if they are, but they'll probably do well, in good times. And they'll probably have good exits. I think a second category of companies are companies that are really trying to fundamentally change how people work, how people engage, how people interact. You know, I would put companies like Slack in that category. Asana, Box, Dropbox, they really fundamentally changed how we think about work and getting work done. It has at a mass scale and changed our behaviors in a very deep way, and it would be pretty conventional if you lost these applications. And then I think there's a couple of companies that are in the third category of companies that are really trying to ultimately change the world. And there's not many of them out there, but if they succeed, they're trying to change the relationship you have to each other, to society, to the physical world around you. You know, I think of companies like you know, I know Airbnb is currently going through tough times right now, But they changed our relationship that we have with each other, with society. I think Salesforce in that category, whole economies are created on Salesforce now, whole careers are created on Salesforce. And they've fundamentally changed the nature of reality because of their success. And I think companies can certainly move through the different categories, you can start as a category 2 company, and eventually maybe if you become successful enough, you can graduate into being one of those world-changing companies. And the reason I'm sharing this, as I was starting to look at companies that I wanted to join, I’m really trying to think about what's essential, what can really be game-changing and absolutely necessary. So it's not just about who's selling what and what companies are getting the right valuations, but it's also about how you can attract talent to the right people. 


Alan Pelz-Sharpe 10:13
So yeah, I mean, it's interesting. I mean, for me, it's… You know, I've been an analyst a long time. I think I met you first when you were with Box. 


Robin Daniels 10:23
I think so, I think that's right. Yeah, about 10 years ago, right?


Alan Pelz-Sharpe 10:26
 Yeah, at least, probably. But the thing is, I mean, you're right. People like Box and Dropbox, it was a simple concept, wasn't it? I want to access anything anytime, on any device. Why can't I do that? Fair question. The fact is, you couldn’t. And they fixed it! You know, good for them. You know, I get that box being checked. In my life as an analyst, I've spent so much time working with Silicon Valley companies. I've always been fascinated by the bubble, that we build another Slack, that we build another type of Box/Dropbox, whatever. And yet when it comes to, dare I say it, the real world, of supply chain, of the food chain, of manufacturing, Silicon Valley has seldom ever been interested in that. 


Robin Daniels 11:31
Right. It's true. 


Alan Pelz-Sharpe 11:32
And I'm just wondering if maybe there's going to be a shift there. Because, if nothing else, we’re all actually aware that there is a food supply chain now. So, I'm wondering about things like that. And I'm just thinking, I mean, I know you've worked with VC-funded companies and more established companies, and you've worked with the investment community on occasion. If you were one of the big VCs, would you be shifting... I mean, apart from just getting through this current crisis, would you be shifting your investment priorities? 


Robin Daniels 12:06
This is a great question. I don't have a great answer, because I haven't seen it yet happening. I think there's probably a lot of discussion, that would be my guess, honestly, around that happening. You've been in this industry for a long time, following it. The reason why tech is so, of course, attractive is because you get exponential growth, which is very hard to get in any other industry. I mean, I saw, you know, firsthand, with WeWork certainly, in terms of, it's hard to build great software, it really is. But once you’ve built it, you can really sell it to anyone anywhere and you can scale it as fast as you can. It's just not true of any physical product or physical industry that you're in. That doesn't mean that they can't be attractive and they’re not in essence more essential, that’s the point we were just talking about. I think you're absolutely right. Many people are realizing that the things that we've taken for granted, that have seemed low value, you know, even the jobs that have seemed low value, are actually more essential than ever, than many of the other other things that we have put a value on. So it's a great question. I would, I would have guessed so. I'll certainly guess so, that people are, that investors are going to focus more on things that can really impact the physical world. 


Alan Pelz-Sharpe 13:15
So I think it's also, you know, if we think about it, you know, when I use the term supply chain, I mean, that can mean anything to anybody.. You can have a legal supply chain, you know, various legal offices and paralegals and the justice... That, to me, is the bit that Silicon Valley is never... It's always dealt with silos. It's always dealt with pockets. It's never taken... I'm giving Silicon Valley a really hard time here, I know. But it's never taken a step back and said, Oh, it's part of a big ecosystem. What if I built something that harmonizes the ecosystem? From my perspective as an analyst, there's been few companies that have ever been brave enough to say, I think I could really innovate on a big scale in the real world of commerce. Everybody picks pockets. And I guess that's partly because investors want to get out, right, in X years.You go back to the crossing the chasm thing, focus on this department in pharmaceutical. And if you get that, then you'll get your exit, and then somebody else can jump the chasm for you or whatever. And I'm just wondering if that mindset... Yes, it still works. But if it's in need of a bit of a reset. People need to start thinking bigger, which seems ironic when we're talking Silicon Valley because it's a place of big thinking and big thoughts. But I wonder if, in a strange way, if it's actually small-minded. It's very narrowly focused at times.


Robin Daniels 14:57
I don't disagree. I don't disagree at all. This is also one of the reasons... so, a couple of years ago, I was part of the founding team of a new group, of an investment group that was started out in Denmark called byFounders, which was really all about how can we support VX small companies that are starting up in the Nordics and the Scandinavian ecosystem, the Nordic ecosystem. The thesis was they are creating companies that have much deeper tech and a much deeper thesis and and really values that they have, because the values over there are very different, I think, than the values in the US, certainly Silicon Valley, can have a bigger impact on the world. Something I wrote about recently is that I think the world is ready for a reset on not just valuing revenue above everything else or valuations, but also the value you ultimately deliver to people. And this is a hard one to do. I think it's very hard for most companies to know exactly what value you deliver to the world, but I'll give you an example. And I know it’s another tech example. But something I think about, you know, a lot is Spotify, for example. It's a platform, again, started in Sweden, right? And I paid what, $10 a month for. It gives me nearly more joy than anything because I can listen to whatever music I want, whenever I want, and it just enhances my life, my emotional happiness, so much. I would pay 10 times more, if they asked for it, because it's such a value. I purchase other things that come out of, you know, especially Silicon Valley, where you think the goal is the value exchange really that high or is it really that... Again, it comes down to the essence that we were talking about, are we valuing the wrong things? Because you're buying, maybe, a platform that helps you prospect faster or market faster or so on, versus to your point. You know, is it something that is ultimately changing the supply chain of things or the ultimate happiness. I would love to see a customer value or customer happiness ranking, somehow. I think it's very hard to do. But I think it would change the nature of how we value companies, I think their rank would be very different than just looking at the Dow or the Fortune 500, and so on, that are all ranked on basically, you know, just revenue or profit, right? 


Alan Pelz-Sharpe 17:19 
Yes, indeed. And in a strange way, that's a parallel discussion, which I probably shouldn't be talking about on a podcast, actually, but at Deep Analysis we've been talking for some time, and we've been saying, Oh, yeah, we focus on innovation and where, you know, the information management industry is going. And yet, I found, it suddenly dawned on me one day, after a call with somebody, that every time I use the word innovation, I end up sort of apologizing. I end up saying, of course, that could mean anything to anybody. And it's true. And in Silicon Valley, there's certainly been no lack of innovation. But where I think maybe there has been a lack is imagination. In seeing that bigger picture, to your point, how would this really benefit people? How could this be the starting point for something to grow? And you just, I mean, there's a company, I definitely won’t mention their name, who I know pretty well, and they've raised really quite a lot of money. And what they have, I have to say is quite brilliant. It's incredibly innovative. And I've no idea why anybody would want to use it.


Robin Daniels  18:32  
There’s a lot of that out there, Alan.


Alan Pelz-Sharpe  18:35  
I know, I know. They’re on another round of funding. And I think, I'm being serious, this new round of funding, I think, is now to work out where they can sell it. And you've lived this life and people who haven’t don’t believe it, but it's not that uncommon. That somebody’s come in and said “blah blah blah” and everybody’s going to go crazy and Microsoft's going to be scared by this. And I mean, of course they're not. But you don’t get that many… I don’t get early, early pitches. I talk to early startups. They've already got some funding, in most cases. And when I speak to them, I'm just like, I mean, honestly, it's my first question. Why would somebody want to buy this? And they'll say, oh, because it's better than the way they're doing it now. And I always give this terrible analogy, but I always say, Well, yeah, there's a house about a mile from me, which is much better than mine, and it's on the market, but I live here. I mean…


Robin Daniels 19:38
That’s right. It's funny, I was giving a presentation yesterday to a European conference, my first virtual one. And I started off by saying, because the presentation was about marketing, how to think about marketing... And I said, the most fundamental aspect of marketing is answering two questions. Why this product? Basically, why your company? Why this product and why now? And most people are great at answering the first question, and they're really horrible at answering the second question. But there's a lot, there's a lot of like innovation out there, a lot of great ideas, tons of great ideas. So many times I'm introduced to things and I go, that's amazing, I love it, but I don't really know if I need it right now. And unless you can answer the second question, you’re going to really struggle, I think, really struggle with getting any kind of traction. I think, to your point, that's what you're seeing. There is a lot of innovation, not just Silicon Valley, but all around the world, but so many companies fail because they haven't answered the question why anybody should care and why they should care right now? 


Alan Pelz-Sharpe 20:36 
No, and as I say, I use the term Silicon Valley very loosely. I mean, we have a great tech scene here in Boston, and obviously other places in the US and in fact, as you say, all around the world. Obviously, Silicon Valley is sort of the starchild of this. That's why you bought a one way ticket, right? And everybody wants to be there. 


Alan Pelz-Sharpe 20:55
Well, thanks so much for listening today. And hopefully, you'll join us for part two where we look at the Nordic Region. And as always, if you would like some help, some guidance with your technology strategy, your go-to market strategy, your exit strategy, whatever strategy it is, do think about giving us a call and at least having a conversation. We'd love to talk to you. And so until the next one, bye for now, stay safe, and be well.


Transcribed by https://otter.ai