I was fortunate enough to catch the panel entitled “Where I’m putting my money in 2019” at Collision Conference featuring noted investors like Trae Vassallo (Defy.vc), Jeff Clavier (Uncork Capital), Anu Duggal (Female Founders Fund) and Adam Valkin (General Catalyst) and moderated by Diane Brady (BBC World). I captured the majority of nuggets from the conversation and wanted to share them below.
Diane began things by asking our esteemed panel what they felt was very "hyped right now" and what was "underhyped:"
Trae responded with "AI, VML, pick the technology acronym is hyping - it’s too much."
Jeff: "Overhyped, crypto, underhyped, a lot of things we invest in."
Anu: "Overhyped scooters, underhyped, women’s health."
Adam: "Given the amount of capital available and the amount of people giving started, everything is overhyped to some extent, depending on where we are in the cycle. And underhyped, there are some areas where there’s so much opportunity they’re relatively underhyped- insurance, t he future of b2b payments, there’s a lot of opportunity."
Diane then asked them to talk about their investment thesis.
Trae: "One thing about us is both my partner and I have been investors for quite a long time, so over the years we’ve invested in everything from enterprise security and media, we look for companies tackling problems they know well. One area we’re excited about is logistics, technology is going deep to transform a variety of different industries. You can find corners of the logistics market that are very manual still. One of our companies, Airspace technology, is redefining how enterprises move products from point A to point B in a very fast way, so if you have something that needs to go from one city to another in one day, you can do that as easily as ordering an uber.
Jeff: "We were doing a lot of hardware, we were one of the first investors in FitBit. It’s our 15th year anniversary, and we do a lot of different things, we love SaaS, SaaS between the enterprise… the frontier of tech sector is very interesting to us. The way I define that is technology where consumer or market adoption is not around the corner, but the vision of the entrepreneurs is such that you’re going to go for it and fund it. For example, space tech, we have a company that is building and democratizing access to space. One of the sector which is under appreciated is developer tools, and we’ve done a number of those companies. It’s fascinating, there’s millions of people who are writing code, but they are using tools developed 10-15 years ago."
Anu, talking about investing in women and female’s founder fund: "Our belief is the next billion dollar businesses will be built by women, and there’s interesting consumer insights they come to the table with that I think have been proven - whether in the beauty space, d2c space. I think in terms of areas for interest for us, we’ve been tracking the decline of the role religion plays in people’s lives. In the 1960’s, [many] Americans went to church. Fast forwarding to today, 30% of millennials are going to church. So we believe people need these communities: so we have Peanut, a social network for modern moms that gives them the opportunity to connect online and offline."
Adam: "Alpha has a broad focus ranging from enterprise software to consumer business and media. We also invest early stage all the way to growth. What I’ve been focused on recently is thinking about very large markets like banking, insurance, automotive, where the consumer experience is either broken or nowhere near where it needs to be, and working with companies that are imagining the future the way it should be, Lemonade, Monzo, to build the experience of the future. And on the flip side, investing in SAAS companies that are AI driven, thinking about how to help companies in these categories, financial services, automotive, compete in the new envirnonment, using AI software to do things faster, better, and more cheaply. An example is France’s Shift technology, which helps insurance detect fraudulent claims, so you’re helping both the disruptors and the incumbents, because the incumbents aren’t going away."
Diane then asked: What triggers you thinking you want to invest?
Trae responded with: "I always think it’s funny when people think spotting new trends is easy. When I invested in Nest in 2010, it was not an IOT company. It was focusing how to change energy efficiency profiles in homes, and ultimately found its niche in IOT. So trends often start out as something very different. I think the key is finding people who are thought leaders, willing to take a risk. In Nest’s example, they’d built transformative consumer products. Sometimes it can be a little risky, they’re taking a leap with the markets they’re going after, but you have to back these great teams who bring domain knowledge and the desire to change something big."
Jeff replied with: "It’s about painting an evolution of the future from where we are today. Explaining how the product can realize that vision. The most compelling entrepreneurs will be good at that, being storytellers, and VCS will look at that, especially seed stage, there’s nothing we can look at in terms of data, so we look at the entrepreneur, the founder/market fit, and we believe they can actually pull it off, knowing it’s SO hard, will take 10 years, knowing they will almost die several times, but we see ourselves working with them, and then .06% of the time we get to invest."
Anu stated: "What we really follow closely is consumer shifts, and really how cultural is evolving over time. By that, we focus on the millennial demographic. For example, there’s been a pretty marked decrease in the amount of alcohol consumed by this demographic. This has led to the phenomenon of sober bars in New York. So one of our recent investments is an alternative to alcohol. So something important to us at the seed stage, beyond the founding team, is how is this brand engaging? Is the founder’s story authentic? Did they start this company based on not just their own need, but is it a good type of fit for the business they’re focused on?"
Adam responded: "I’d just say our firm is very founder driven. We’re always trying to see if our founders are fast learners, and if they’ve learned everything about the space they could possibly learn…and then looking for inevitable trends. It’s great to know what the future will be, but the question is how long will it take to get there?"
Diane's final question: How do you surface hidden gems, how are you finding them?
Anu's reply: "In terms of geography, we’re betting big on New York, and have been since day one. I think New York offers a lot of industries - financial services, retail - that need disruption. And in the case of engineers, you’re seeing people who are moving from the West Coast, looking for a better quality of life. The majority of our portfolio based there."
Adam's response: "I focus on New York and the major European tech hubs - Tel Aviv, London, Berlin. I was based in Europe for 14 years. And I guess my insight is that the rise of the global platforms, which have had positive and negative impact, that really helps facilitate the ability for large companies to be formed anywhere. With the rice of Facebook, AWS, it meant entrepreneurs from relatively small groups, Spotify guys in Stockholm, Plated guys in Israel, not even being in Silicon Valley or the US, it would have been difficult 15-20 years ago to build a company at that kind of scale. And certainly in Canada you have Shopify, a $30 billion-is company that’s emerged in recent years. So I think the benefits of having a company like that in this ecosystem will be felt 15-20 years from now."