When IVP just lately introduced the closing of its 18th fund, I known as Eric Liaw, a longtime common accomplice 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 car.
I additionally puzzled about succession at IVP, whose many bets embody 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 photos of agency founder Reid Dennis stay scattered “in all sorts of places throughout IVP’s San Francisco office.” In the meantime, photos of Todd Chaffee, Norm Fogelsong and Sandy Miller – former common companions who at the moment are “advisory partners” – are blended 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 era.
Not final, I wished 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’ll be able to 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 kind of troublesome 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 “normal” surroundings. We raised a barely greater one in 2021, which was not a standard surroundings. 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 trade did. So [we’ve been] fairly constant.
Did you are 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 have got 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, after 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 technique we’ve been pursuing. We made our first funding in Europe again in 2006, in Helsinki, Finland, in an organization known 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 the moment is about 20 firms or so; it’s about 20% of our lively portfolio, unfold over 10 totally different international locations. We felt like placing some ft on the bottom was the correct transfer.
There was a whole lot of drama round Klarna. What did you make of The Data’s reviews about [former Sequoia investor] Michael Moritz versus [Matt Miller], the Sequoia accomplice who was extra just lately representing the agency and has since been changed by one other Sequoia accomplice, Andrew Reed?
We’re smaller traders in Klarna. We aren’t lively 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 foreign money [i.e. that a publicly traded company enjoys]. I believe [CEO and co-founder] Sebastian [Siemiatkowski] is now rather 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 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 Sequence C funding proper now or else it’d promote. Has IVP kicked the tires on that firm?
We’ve researched them and spoken to them up to now and we aren’t at the moment an investor, so I don’t have a whole lot of visibility into what their present technique is. I believe social is difficult; the prize is huge, however the path to get there’s fairly onerous. I do suppose each few years, firms are capable of set up a foothold even with the energy 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 finished one thing fairly transformational all over the world. So the prize is massive but it surely’s onerous to get there. That’s a part of the problem of the fund, investing in shopper apps, which we’ve finished, [figuring out] which of those rocket ships has sufficient gas to interrupt by way of the environment and which is able to 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 taking place.
I might say with out query, it’s taking place. We have now 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 nicely. It’s not completely 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 individuals enter the agency, serve the agency and our LPs, and likewise 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 happening 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 high firms, but in addition hurts a few of your current portfolio firms. How is the agency navigating by way of all of it?
I believe by way of firms which might be elevating cash, those which might be most promising will all the time have a alternative, 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 awesome enterprise end result feeling like, ‘Man, I got 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.