Ebooks are sold. Host so scott cooper what is a Venture Capitalist do . Basically what we do is we provide money to companies that are trying to grow and hopefully become very Big Companies like a facebook or google or apple someday. Forging her jobs correctly we are also helping them grow the company so we do not obviously work in the businesses that we can hopefully provide introductions for them p help navigate new challenges asge they go through the business we like to think of ourselves as a money provider and hopefully a supporter as the business grows. Why does the company like you describe not go through a bank and go through traditional avenues . Speech its a good question the problem is most ofro the businesses that we invest in our very risky businesses that are going to lose money for a long period of time as they invest ine the business and banks unfortunately are just not in the business of doing that or take a risk for losing capital paired for willing to take that risk in about half of what we invest in will ultimately lose all of our money in. Any banker you propose that idea she would not be too excited about backing that venture. Host where does the original money come from that you give to these companies . Speechch of the way our Company Works go out in raise money for different folks University Endowments a good source of money like stanford or yale they have large endowments and they invest those endowments to earn a return that money goes to help s subsidize the cost of supporting the university, large foundations of nonprofit organizations like the Ford Foundation is another example of investor bars. What these companies are doing, theyre trying to use venture as a way to drive a overy, very high rate of return in their portfolio theyre looking for us to generate 25 or 30 returns annually for their businesss and is part of the broad portfolio they will have Venture Capital bill have stocks, bonds at definitely the high risk but hopefully the high reward portion of rtheir portfolio. Host within normal pitch like . Guest its fun to usually a few members of the Founding Team who come in often they have just a Powerpoint Presentation so they generally have not often built the product at this point in time to really and opportunity for the entrepreneur to tells about their expanded vision for the company so how big can the Market Opportunity be . But with this look like to scale when it gets there and ultimately why is this team the right team to go after that. Its a very fun quietly frankly intellectual process wee get to learn all kinds of new and interesting things and ultimately make a decision about whether this is a team we should back that particular opportunity. See what mr. Cooper is this unique to the tech world . Guest its deadly the case that nottu all are Venture Capital companies but those who have take the companys not completely unique it takes a type of financing like venture thats the willingness of someone as i mentioned to take a chance on something were the odds are extremely low and hopefully if it works the payoffs are very, very high so in our business one or two companies in the portfolio will drive probably the lion share of returns we have in the rest of the portfolio just doesnt contribute that meaningfully see half that level of Risk Appetite to be in this business. Host your new book of secrets of sand hill road. Where is sand hill road and why is it significant . Guest that is in california which you would not otherwise know unless its about a mile or two down sandhill road is a more famous neighbor which is Stanford University pretty good think of sandhill road is if youre a music fan its a music row in nashville or wall street in new york its a mythical place where it happens to be aen lot of Venture Capitaliststa congregate it is not anything that exciting to write home about it to drab buildings has lots of capital and lots of opportunity for entrepreneursnd there. Host why is it drab . [laughter] it looks like an Old Industrial park at sling and that has been owned since the very beginning by Stanford University it has never there a are no fancy highrises there is a lot of twostory buildings i think maybe partly there couldve been zoning restrictions at casa but also its upstaged bites must more famous neighbor Stanford University and maybe always had the intention to make sure sand hill road was left glamorous. So you are the managing partner event duration horwich which is sorry yes. Guest we are Venture Capital firm we do the things we talked about earlier in the interview we invest in very, very early stage Startup Companies and help over time wey can help them grow into very large businesses. We are about a 10 billiondollar business which means weve raised about 10 billion of the ten year history from the limited partners we talked about. Again our job is to be on top of the most interesting things happening intact in and entrepreneurship and particularly those businesses have software as a foundational component to them. T guest what sick technical or legal explanation of what a limited partner lat is . Guest sure a limited partner is an investor in a fund like ours in the Legal Definition means they are truly limited in the sense they dont have any control over thehe investments they make they dont have control over winter if we sell those investments for they are essentially we think of them as a passive investor they give us money, we have an obligation obviously to be a fiduciary ofey that money and hopefully earn a good return for them. But the decisions about what companies we invest in, which is to sell them,nd those type of things are onere 100 in our purview. Host with the typical day for your customer. Guest usually we will be seeing a couple different pitches on a day that means he htmight have a couple hour long meetings with entrepreneurs for working on deals will oftenn be doing diligence of somebody weod may have met earlier and never getting closer to thinking about a deal will be digging into their business in greater detail to understand the product to more detail, the financial and more detail, and also spend a lot of time building relationships are huge part of this business is being wellconnected into the entrepreneur system, understanding what professors are doing at different universities and might bers relevant for some of our companies we spent a lot of time on what we call outbound investing. Host whats the expertise you bring to thisse position . Guest ive been intact for 25 years i was a banker in my early days and then i was at a Startup Company for about nine years ultimately got sold to hewlettpackard and not been in the business for tenen years. I think what i bring is really an appreciation for the Capital Markets and the financing side ofrk businesses but also real appreciation for what it means to be start up and go to the start up process. I hope that means is not only does it not provide empathy and incredible amount of respect for the process also oallows us to be better investors and more patient investors understanding and recognizing these things just do not go up into the right all the Time Starting a company as a series of ups and downs i think we bring something to that investing process. Host theres not a was a product associate with the pitch is that correct . Guest right is a product idea but often theres a case that early in stages a project is not been belts were trying to understand something with entrepreneurs not necessarily what is the final product battelle us about what we call the idea mays how did you think about the idea of this product how do you believe its responsive to it the market needs are . We recognize companies will we call pipit which means it will change over time as they get products into market. We recognize as part of the process we want someone who is capable of discerning that from the market but being responsive to what the needs ours is a build out that product. What is your win loss record . Switch it funny we dont think of it that way the honest y answers its pretty poor if you look at it that way. We generally ought about 40 to 50 of the things invest in, with a very polite way of callingg them impaired capital which means we lose all of our money and typically about 20 to 30 of the company make a little bite of money in the real difference between success or failure in this business is what happens with that remaining part of the companies do they become a facebook, google, we might make 25, 5100 times your money thats the way the business works the way we measure success is based upon total returns but those returns are driven by a small number of companies. Re host so if you are 10 billiondollar company where your successes . What can you tells about . So we have had some nice success is located great example of a Public Company today called okay ta the people may know about its in the Enterprise Security space. We invested in that company for the first time back in 2009 it was in fact one of our very First Investments may started the business. So we call a seed investment up at about half a Million Dollars in to get the two founders to build out the idea over the years we realized we invested in other capital firms went public about a year end a half ago its a great example of his success case the Founding Team there is an incredible job whats now been very valuable business in freestanding. Host im sorry if i miss this what do they make . What did they do . Speech is a Software Company think about is if they have with a business you may have cloud based applications which could be applicationsou that are not in your premises but may be in theht cloud so gmail it might be salesforce. Com, you might have a software called marquette a which is your marketing, all of the software is because they run the cloud every user has to be a little more into those ande have security controls around the ability to access those applications with this does is it has a single signon into those applications instead of you having to know your passwords for all those applications you log into this and it directly manages your access into all of those applications. Its a tool the it department will used to make a security in their shop what applications we give them access to some it leaves the fern how to make sure we remove access its a tool to manage security and User Administration for a variety of applications. Host for those of us of a certain age nays like general electric, ibm, ford those are number nays were familiar with where did this name come from . So its a very good question i dont know the origin story i will look that up and give no drop you a note. I wish i had a better answer unfortunately i think you stumped me. Host is Silicon Valley successful because of Venture Capital . So know its successful because of entre manures to build these businesses enter take the kind of risks it entails to a build something with Venture Capital were financing source we shouldnt kid ourselves at the end of the day 99 from the hard work and efforts the entrepreneur put in. Host one of the things you talk about in the secrets of sandhill road is that products or ideas are often quote ten years ahead of their time, what you mean by that . Guest ec recurring theme businesses that didnt work will work so let me give you a simple example you may recall a Company Called web and which is the 9899 time from what we had the tech bubble. Webb at bay and was trying they way they were doing it is their building massive warehouses in order to basically stock all the produce and they would you bands, literally as the name implies to go deliver that to people it was a Wonderful Service for people it was a very small Market Opportunity very small number people p thought about Home Delivery for groceries are willing to use their computers at the time but of course selfless didnt exist to do that ordering just was not the day if you fastforward to today, when a Company Called insta cart which is basically doing the same idea but executing it in a different wave or their executing it with a workforce that is in many times in the gig economy which is independent contractors on their own doing at the not staffing supermarkets themselves but theyre partnering with supermarkets the access to the produce in all the things i need. They have the benefit of course of the iphone revolution which now means a lot of things people would not have otherwise done at their desktop theyre willing to do on their mobile phones and so its those kinds of examples of things were new Technology Actually can create a market and expand the market that just could not exist in a prior timeframe. See once when it comes to insta cart or this, do they go to other Venture Capitalists as well besides yourselves . Guest yes they do the way this business works is they build and raise many different rounds those respond to the scale and development of the company paid so often people have a first round of financing that will last them 18 to 24 months on average and then theyll go raise another round of financing and of course of their doing well get the valuation of course be higher on that second round in general for each round of financing the early phase there tends to be one major Venture Investors differ lucky enough to have that opportunity will be the major investor but when they go out and have subsequent rounds of funding additional Venture Investors will join be part of the company. Weve got a very interesting relationship with her other Venture Capital firms in the industry we a are partly competitors there certainly deals and rounds that we directly compete against but many has herec partnering with their other Venture Capital firms because we are investing alongside either an earlier roundou later rounds with the same company. Host do you have a say so and how the business operates during that first round of financing . Guest the way our business works is we have a set of governance rights that are typically attached to the financial interest we have in the company. So often we would sit on the board of a company so we will have obviously the rights and duties of board member might have too obviously make decisions about whether the ceo is appropriate for the business or strategy the company may be doing and that we also tend to have stock that allows us to vote for things like g is the company get t a raise more money, so get a try to sell themselves . Those types of things we have a say in. We dont govern them completely up to the founders of the company and other shareholders as well theres a little bit of balance of power that comes from that type of government structure. Host do you have a say so in this company or the cart today when their freestanding companies or did they pay back the money that youre gone . Guest they dont pay back their money obviously we own equity in stock in these companies in the case of this when it goes public we have the option if we so choose to sell the stock thats how would make a return on our investment. In this case we have one member of the board, our founder is on the board and are typical mo is we will stay on the board for some period of time after the companies go public butc over time look to exit the board as the companies become mores mature. So today are only saying the company is one of many Board Members and of course we own stocks are just like any other stockholder we can vote through a proxy for other Corporate Activities that would require. Guest mr. Cooper, and horwitz are legends in Silicon Valley. So mark and reason people may remember was a rigidly made his fame and of founder of netscape it was the First Company to actually commercialize the web browser, netscape famously went public in august of 1995 and harold and what many people believe as the first real Tech Revolution for kind of the modern internet era that started in the 90s. He has gone on to be involved in other important companies. His action on the board of facebook hes on the board of ebay, hewlettpackard so very, very important inventor and now we are lucky to have him as a partner of ours. Then horwitz actually got to know mark because he worked at netscape he ran a number of the products on behalf of mark and he was at netscape and they became very Close Friends in college through that. They ultimately start a company together 1999 called loud cloud which many people probably have not heard of we were trying to build something thats very akin to it Amazon Web Service does today its kind of computema a on demand. As we talked about early with the insta cart example its a good example of a company that was probably a few years too early but now as we see with Amazon Web Services a very successful idea. Ben was a cofounder and ceo of that business was a very successful business he and mark in 2009 decided to take the e