When IVP not too long ago introduced the closing of its 18th fund, I referred to as Eric Liaw, a longtime common companion with the growth-stage agency, to ask just a few questions. For starters, wringing $1.6 billion in capital commitments from its traders 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 automobile.
I additionally puzzled about succession at IVP, whose many bets embrace Figma and Robinhood, and whose founder and earlier traders nonetheless loom massive on the agency – each figuratively and actually. A latest Fortune story famous that footage of agency founder Reid Dennis stay scattered “in all types of locations all through IVP’s San Francisco workplace.” In the meantime, footage of Todd Chaffee, Norm Fogelsong and Sandy Miller – former common companions who at the moment are “advisory companions” – are combined in with the agency’s common companions on the agency’s web site, which, visually at the very 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. Under are elements of our chat, edited for size and readability. You may take heed to the longer dialog as a podcast right here.
Congratulations in your new fund. Now you may chill out for a few months! Was the fundraising course of any roughly troublesome this time given the market?
It’s actually been a uneven interval all through. For those who actually rewind the clock, again in 2018 after we raised our sixteenth fund, it was a “regular” surroundings. We raised a barely greater one in 2021, which was not a traditional surroundings. One factor we’re glad we didn’t do was increase an extreme quantity of capital relative to our technique, after which deploy all of it in a short time, which people in our trade 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 present LP.
We don’t usually touch upon our LP base, however we don’t have capital from that area.
Talking of areas, you have 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, growth 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 grew to become an investor in Klarna. And [at this point], our European portfolio at present is about 20 firms or so; it’s about 20% of our energetic portfolio, unfold over 10 completely different international locations. We felt like placing some ft on the bottom was the correct transfer.
There was quite a lot of drama round Klarna. What did you make of The Info’s stories about [former Sequoia investor] Michael Moritz versus [Matt Miller], the Sequoia companion who was extra not too long ago representing the agency and has since been changed by one other Sequoia companion, Andrew Reed?
We’re smaller traders 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 quite a lot of scrutiny. Everybody sees their numbers, however they don’t have the foreign money [i.e. that a publicly traded company enjoys]. I feel [CEO and co-founder] Sebastian [Siemiatkowski] is now way more open about the truth that they’ll be a public entity sooner or later 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 might deal with the enterprise.
You and I’ve talked about completely different international locations and a few of their respective strengths. We’ve talked about client startups. It brings to thoughts the social community BeReal in France, which is reportedly on the lookout for Sequence C funding proper now or else it may promote. Has IVP kicked the tires on that firm?
We’ve researched them and spoken to them up to now and we aren’t presently an investor, so I don’t have quite a lot of visibility into what their present technique is. I feel social is difficult; the prize is huge, however the path to get there may be fairly onerous. I do suppose each few years, firms are capable of 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 accomplished one thing fairly transformational world wide. So the prize is huge but it surely’s onerous to get there. That’s a part of the problem of the fund, investing in client apps, which we’ve accomplished, [figuring out] which of those rocket ships has sufficient gasoline to interrupt by way of 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 footage of Dennis in every single place, and others of the agency’s previous companions, and now advisors, are very prominently featured on IVP’s web site. IVP talks about making room for youthful companions; I do marvel if that’s truly occurring.
I’d say with out query, it’s occurring. We now have a robust tradition and custom of offering individuals 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 properly. It’s not solely the trail on the agency, but it surely’s an actual alternative that individuals have.
We don’t have a managing companion or we don’t have a CEO. We’ve had individuals enter the agency, serve the agency and our LPs, and in addition as they get to a distinct level of their lives and careers, take a step again and transfer on to various things, which by definition does create extra room and duty 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 may 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 happening for each firm seemingly that’s not a big language mannequin firm, which is quite a lot of firms. I’d guess that offers you simpler entry to high firms, but additionally hurts a few of your present portfolio firms. How is the agency navigating by way of all of it?
I feel by way of 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 ideal enterprise consequence 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.
