Woman’s voice
This episode is brought to you by Silicon Valley Bank. For over 35 years Silicon Valley Bank has been the bank for visionaries of all kinds people and businesses who have revolutionized everything, from software to social media, from workspaces to wine. With nimble banking services and solutions. Silicon Valley Bank helps startups adapt to the changing needs of a growing company, learn more@svb.com backslash next, Silicon Valley Bank ideas bank here
Trae Vassallo
by was the prototypical super shy nerd. So, you know, it was very book for me. I had a hard time even talking in class and at some point, I realized that this was going to be career limiting. I couldn’t, you know, go up and talk to people.
Scott McGrew
I’m Scott McGrew. Welcome to Sand Hill Road. We’re launching 10 more weeks of interviews with venture capital and entrepreneurs, and we kick off with Trey Vassallo of defined ventures. Trey and I are both from the Midwest and we both got our start with the Apple Computer. Tell me the memories you have of the apple two plus
Trae Vassallo
oh my goodness, I and I think this is not unique to my story too. But I think there’s a whole host of folks who are my generation where he was the first time they were starting to put computers into schools. And so it was a really big change. And I remember being in I think it was like fourth grade. And you know, I was part of this program called gate where they would pull you out of your normal classes and allow you to sort of explore other topics and things and the thing that we got access to were these amazing shiny new Apple tues and I have vivid vivid memories of basically learning all the commands to create graphics on a screen in And you know, and it just created this massive spark of Wow, this is a super powerful tool. I also remember getting killed by dysentery you know on the Oregon Trail Game Over and over again as well. You know, they’re the programming was was pretty minimal at the time but yeah it did did really create a spark for me that made me realize that, you know, this programming thing and being able to use logic to you know to solve problems was pretty exciting. So by the time I was ready to graduate and go off to college, I knew I wanted to be a problem solver and to me that translated to an engineer.
Scott McGrew
It is amazing, those little things and mine was an apple to that my parents bought me. I was fortunate enough at about the same age, same time I would have been a little older but which got me where I am today. I just it was programming, you know, Lion 10 equals one
Trae Vassallo
building. It’s amazing.
Scott McGrew
It’s better So and this is in rural Minnesota, this is in Fairmont. Right, right
Trae Vassallo
in a town that I’m sure no one listening to this has heard of. So I
Scott McGrew
looked it up on the map. It’s practically Iowa.
Trae Vassallo
It is I grew up three miles from Iowa.
Scott McGrew
Yeah. Now, you know, there’s a huge rivalry between Iowa and Minnesota.
Trae Vassallo
Yes, of course, you can’t grow up in that area and not know right
Scott McGrew
now. Do you know why the wind blows North out of Iowa into Minnesota?
Trae Vassallo
So the Iowans don’t have to smell the Minnesota?
Scott McGrew
No, because Minnesota sucks.
Trae is a founder of Defy Ventures. She came to it after a long stint at Kleiner Perkins, investing in nest and other consumer tech hits. She says her first question to every entrepreneur who wants to build a company is why now, I realize it’s been a few years since you launched to five but you asked entrepreneurs this so I’m going to ask you Why now?
Trae Vassallo
Why now? Yeah, great question. So for me, I left Kleiner Perkins in 2014. I had spent 11 years there, you know, building up my skill set and how to be an investor. It was an amazing learning experience. And I got to work with some incredible entrepreneurs through nest and drop cam and o power. And so I, when I left Kleiner, I knew that I in some way wanted to continue investing, because I really enjoyed it and love, love the ability to work with some of the best entrepreneurs on the planet. And the question was, what’s the right contract? What’s the organization? What’s the focus? How is it going to be, you know, most impactful and most inspiring for what I want to do next? And, and the thing that I found most frustrating during kind of my final years at Kleiner was just the size of the organization. So, you know, some people are really skilled at being in large organizations. I think what I learned about myself is that I’m I function way better in smaller teams, smaller organizations. And so, you know, there’s something about being in a small, fast moving team, being an entrepreneur that I love. And so, you know, it wasn’t obvious when I was leaving Kleiner that I’m going to start a new fund that actually wasn’t the top thing on my mind. But as I started diving in and understanding, you know, how, how am I most valuable valuable to entrepreneurs without the Kleiner Brandon without the Kleiner pocketbook, I realized it’s this early stage, the coaching and the empathy and the product help and it’s it’s everything that an early stage investor does and works with an entrepreneur to help them grow from a seed back company into something that’s going to scale and get bigger. And, and so I really found my passion for for doing the targeted Early Stage investing, and doing that in the context of a small venture team and, you know, I’d say that the other I think insight is that, you know, venture investing the teamwork dynamic of an investing team, it’s hard to scale, a tool, you know, a team of 10 investors and, and make really tough venture decisions because part of the problem is everyone around the table has a point of view and really good reasons why the company that you’re debating isn’t going to work. And so at some point, actually, the more people you have around the table, it can actually be harder to get really controversial hard investment decisions through and and it’s funny because both both my partner Neil and I have you know, thought back your our histories and experiences of doing investing and oftentimes it is the most controversial investments that have become the most wildly successful companies. There’s a reason it’s controversial. It’s not obvious it’s it’s a big daring audacious bed. And you know, and then conversely, some of the most, you know, well loved opportunities ended up not working out so well you know, that’s what makes this job so hard is that it’s not always obvious and things take wild twists and turns. We kept coming back to this theme of how we liked being sort of counter thesis or orthogonal to where everyone else is going and, and that also embodies the kind of the root of what it means to be an entrepreneur, you have to swim against the tide, you are, you know, doing something that everyone else thinks is impossible. And so in that very nature, you are defining, you know, kind of the status quo and so we really fell in love with the term defy and, and yeah, and I think everyone seems to really like it certainly memorable.
Scott McGrew
You said tough decisions and controversial decision. So can you tell me about some?
Trae Vassallo
Well, so I’m going to great examples like the next conversation right? So that was one I certainly had a front row seat to, you know, Tony Fidel and Matt Rogers and incredible team, you know, that basically created the iPhone, the iPod iPhone at Apple, you know, walked in our door with an audacious plan to build a smart thermostat of all of all things right, you know, really super exciting thermostat. And you’re like, Wait a second. But the interesting thing was, I had actually had been focusing on how to drive consumer efficiency. And so I had been spending a lot of time thinking about, Wow, well, this, there’s something really special about the thermostat. And the problem is, you can’t you know, utilities can’t push a thermostat on people No, and no one wants their monopolistic utility to do that. So if you’re ever going to do something impactful with a thermostat, it has to be in a hugely consumerized branded way. And I and that’s where I was in my thinking and I was stuck because How do you find that team? Right? And then, you know, magically, the timing couldn’t have been more interesting. You know, they walk in the door. And so, for me and for Randy, who had been thinking about this with me, you know, it was so obvious but for for bringing around the rest of the people around the partnership, it wasn’t as obvious because yeah,
Scott McGrew
just so I understand what you’re saying. You were thinking about thermostats before Tony walks in the door.
Trae Vassallo
Yeah, absolutely. Yeah, no, no, it’s a so I was focused on efficiency and how you can drive efficiency in kind of the energy sectors and so I you know, in that time period also invested in low power, which was more of a software platform for utilities and so you know, when you spend time thinking about Okay, how do you help drive consumer efficiency, there not too many places to go.
Scott McGrew
The the I was waiting for somebody to come in and pitch me a thermostat and then somebody did story is one of the least likely stories I think I’ve ever heard.
Trae Vassallo
kind of crazy. And in fact, we had been looking at, can we even kick start a company in China, and just kind of get something made over there for cheap? Or buy something and then hack software on top of it. And then goodness, Tony and Matt came through the door. Yes, that would have been a terrible, terrible product and experience relative to what they built.
Scott McGrew
I think if you told somebody, you know, there was going to be a $200 thermostat, and people would buy it. Lots of people would buy it. They would have thought you were crazy. But it’s that when you turn the wheel, it is so excellent. It is it is the design is so wonderful, that it just sort of speaks to you. And it’s a thermostat. Yeah, you were an engineer at IDEO. I was what is it about the Nest thermostat or the owl camera or the things that you’ve invested in that really speak to you?
Trae Vassallo
Well, I’d say one A product person and a product thinker, kind of always a product thinker. And the thing that I learned at IDEO is putting the customer first and always making sure that no matter kind of what you’re building and designing that every single decision is happening in the context of how the users using the product and so it’s really focused on creating that delight, the product delight. And that is something that you know is hard to you don’t i don’t think you can learn that in the textbook you sort of learn by doing and there are a few companies that get it really well and Apple clearly has mastered the the creating consumer delight. And Tony and Matt had that vision for creating consumer delight and that means, you know, obsessing about details in absolutely everything. It’s not just how something looks, but it’s, you know, how the unboxing process goes it’s, you know, every little detail and the flow of the software and the process to buy the product. There’s no thing that’s left kind of untouched at that point. And, and not all entrepreneurs think that way. And so I’d say, you know, the thing that I took away from my, my experience at IDEO is that, you know, building a product is it, you know, requires that obsession on the on the customer, but it also requires a massive amount of iteration. And I think a lot of people, you know, who aren’t in the startup world or haven’t built products before, sort of think you kind of have a direction and you go, but the reality is you are, you think you’re building the right thing. And then you are constantly testing and tweaking and iterating. And you want to do as much of that as early as possible to figure all that stuff out up front before you get too far along. And, you know, and, you know, I learned how to do that at a product level at IDEO. And then I went to business school and I co founded good technology and I got to do that at a company level. Now I get to do that, you know, in a multi company level by, you know, at least helping and working with entrepreneurs who are going through that process daily.
Scott McGrew
One of the things that I think is also beautifully designed is the hero. This is the internet with the little devices throughout your house. You were an early investor in euro and then sold to Amazon. How did that come about? Does Amazon just call you on the phone and say, or arrow on the phone and say, Hey, we think we’d like to buy
Trae Vassallo
Yeah, well, I was a seed investor in euros. I was actually the first investment that I did after I left Kleiner.
Scott McGrew
Oh, so this turned out pretty well.
Trae Vassallo
And well so it was funny because you know, I had done drop cam and nest at Kleiner and so obviously, you know, it’s been a fair amount of time thinking about technology in the home. And the limiting issue for nest and drop cam working well was you had to have reliable and and you know, relatively fast home home. Wi Fi. And it turns out the solutions that are out there, you know, not all that great. And so when I met Nick Weaver and he pitched, you know, this idea of a sort of self healing, super simple Wi Fi with a software interface, it was actually a software front end that, you know, was super easy to use and work with. It just made complete sense. So, you know, so that was part of what got me excited about, you know, investing in Nick and, and, you know, and then, you know, as I got to be an early beta tester as well, which I always love, you know, I think this goes back to my idea days, right, so really getting in there and understanding the product. But your question about Amazon is ultimately, you know, a lot of these, these hardware products, you know, NASA ended up at Google and arrow ended up at Amazon, you know, the reach that these big companies have in how you know, in their customer base And the technology they’re building on top of all of these things is massive. So you know for arrow to go to Amazon you know an Amazon also acquired ring and and you know and has all of these Alexa is in spots in your home now, they are heading clearly in a dominant direction around basically making your home you know, a computing platform, which is pretty interesting.
Scott McGrew
The thing I think that’s missing in the home and perhaps Oh power is part of supplying This is the control panel somewhere in the hallway that just tells me about how what my home is doing. How much how much power is coming in from the solar cells, how much power is going out from everything else? I wouldn’t mind if it tied into the water system as well. This is how much water has been used today. An overall sort of Star Trek heartbeat of my house. It can somebody build that.
Trae Vassallo
Well, there are a lot of people trying I can’t tell you how many business plans I get from folks that are trying to be the aggregator of all the services in the home. And my question to them usually is, are you solving a problem with the aggregation? No, yeah,
Unknown Speaker
there’s a curiosity.
Trae Vassallo
And so I actually, I
Woman’s voice
don’t know
Trae Vassallo
that that’s the holy grail of the smart home, I totally understand why it’s an interesting thing to think about what I want as a consumer and I’m a data point one is I just want stuff to work seamlessly in my home. And if it can be somewhat automated, so it predicts and knows and does what I want without me even having to do something awesome. And so ultimately, kind of my judge when I’m looking at a product as it has to make life easier, hopefully out a little bit of delight into the process and, and not all technology products make life easier. They might actually make things more complicated and I and my issue with dashboards to your plane is That unless they’re tied into something that creates automation. You know, it’s nice to get that data periodically but unless you’re turning that into action somehow or behavioral change how you know, I think they can sound great and people love access to data but really turning that into an ongoing consumer.
You know, product or benefit, I think is a challenge.
Scott McGrew
You’ve had great exits with nest and with arrow. You’re an investor in L cam, which is a dash cam in the car very smart death
Trae Vassallo
smart dash cam. Smart
Scott McGrew
dash. Dash Yes, yes. At what point do you start to think about an exit or do you even consider that is this some what point do you think we’re going to build this into the largest dash cam company in the world? Yeah. Or we kind of have our eye on Ford to sell it to Ford.
Trae Vassallo
Yeah, I boy, I wish to World work like that. We want to sell it to, no, it does not work that way, I think the goal that we always have is, you know, we want to build the most value. And sometimes the value comes earlier than you might expect when a strategic or potential acquirer comes by and says, Yes, we see the value of combining our distribution or our, you know, cars with your product, and we think that one in one is going to make five. And, and that’s fantastic. But I think if you build with the intention of being acquired quickly, you know, that is that is not a good place to be. Because, you know, as we all know, the likelihood of, of the stars lining up for those things to happen is very, very low. And so in the case of L cam, you know, this is another story of of backing an amazing group of folks. So, Andy Hodge, the CEO, and how I actually worked with at IDEO, many many years ago, so I’ve known him for a long, long time, he went off and actually was working with Tony Fidel on iPod and apple and, or a sorry, iPhone and iPad. And so he’s one of the Select crew folks who’ve really, you know, gone through that transformative consumer product process of developing these great products. I recruited him to drop cam, a few years ago, which was a company that you know, basically allowed you to put cameras in your home and and have peace of mind and watch what was going on and record things if anything kind of goofy happened. And so Andy came and helped us with drop cam, and was inspired by wow, you know, when you put software on a smart camera, you can do some really interesting things and the insight around owl was when you look at the what happens from a sort of damage and liability and Casualty. And just look at the sheer dollar amount of auto versus home. It’s, it’s like 10 times higher and auto than home yet no one. You know, home security systems are all over the place but no one has some for cars and partly because there just hasn’t been the technology to be able to do anything proactively as a consumer. And now that technology is where it is and you can put a super powerful cell phone like product in your car that is smart enough to record everything it sees know what’s important, send, you know certain things to the cloud alert you and other things. There’s a lot of intelligence going on in the product. And and a lot of data that is handling that you couldn’t have managed even a few years ago and you frankly need the LTE networks and the 5g networks and all that to make the product work well, but they’re smart dash cam now. has over 150 million miles of data and videos and great videos I mean these guys get crazy videos every single day now have amazing you know wacky road rage incidences you know really funny carry car karaoke videos that kind of thing and most importantly though it puts power back in consumers hands are you know whether it’s you know your car getting bumped in a parking lot You weren’t in it but it records it and you know what happened and you at least have peace of mind or you get into an accident and you have at the point of the police officers talking to you and salute recording of exactly what happened so you can determine fault at the point of the accident so so that’s kind of where our cameras at and now they’re really extending into fleets at this point. So
Scott McGrew
I will in arrow and nest are easy to understand stories. It’s very quickly apparent to me why I desire these says, engineers oftentimes have trouble telling story. It’s just part of the beast. Right? You yourself said you came out of your shell at Stanford.
Trae Vassallo
Yeah, yeah, this was something I recognize that I, you know, I graduated with a Master’s, bachelor’s and a master’s in mechanical engineering, but with really a focus on robotics. And I was, I was the prototypical super shy nerd. So, you know, I was very bookworm me. I had a hard time even talking in class. So raising my hand to answer a question was, like, mortifying to me. And at some point, I realized that this was going to be career limiting. I couldn’t, you know, go up and talk to people if I couldn’t talk out in a group and so I forced myself when I went back for business school, I said, All right, Trey, you’re going to really push on your, your kind of ammo this time and you’re not going to just try to you know, get the best grades grades, that you’re not here for grades. You’re here for personal growth and what matters is coming out of your shell and learning how to network and, and being comfortable with that. And so I took improv, which was the first step and learning how to intentionally act Goofy, and then being okay with it. And that was kind of mind blowing for me. And it’s like, oh, I survived this. It felt okay. Actually, it was kind of fun. And then just forcing myself to, you know, take some risks. And, you know, and I’ve talked about how I met john Doerr as one of the most amazing sort of examples of me taking a risk like this kind of putting myself out there. I saw john before class at a, you know, grabbing a newspaper, and, you know, I’m thinking to myself, he doesn’t want to be bothered by a student, and I’m like, okay, but this is exactly the thing I need to force myself to do. And so I walked up to him and I introduced myself and and, you know, at the time, I had just gotten done in nearing the palm five, which was a pretty amazing and iconic product of the time dates myself though, it’s now in the Computer History Museum but
Woman’s voice
it but you know, I basically just
Trae Vassallo
leaned into Hey, I just got done launching this incredible product. And you know, wanted to ask you if there are any companies that you know of, or folks who are working on companies in this area where they want to connect to these products to the internet, it was it was kind of an obvious thing that was starting to happen but hadn’t really happened yet. And and that turned into him connecting me with my co founders of good technology. And then ultimately being able to become an entrepreneur, all because I, you know, basically was able to rally the courage to put myself out there and go ask someone who, you know, is just larger than life and an incredible person, you know, for advice.
Scott McGrew
I used to think of venture capital as money that you use to buy desks and rent an office and buy some plants for the front office. And you know, maybe build an assembly line. Right, right. I’m beginning to understand venture capital is for mitigating risks, getting rid of the things that are going to bring your company down. Is that
Trae Vassallo
a pretty good understanding of it? Yeah, I’m in fact,
working at Kleiner. JOHN used to say one of my mentors, john Doerr, always used to say, you know, it’s about the money you’re taking in, in this round is all about going towards the, you know, the top three risks that are going to kill this business that you want to figure out how to how to get off your plate. And so a good CEO Not only is inspiring the team and had you know, is touting this incredible vision of what they’re building, but they’re simultaneously keeping the laser focus on the top set of risks that are going to kill the business or are going to hurt the business in absolutely focusing on how to you know, mitigate those risks or work around and ultimately put those risks to the side. So, yeah, it is all about figuring out how to, you know, push through these things that just aren’t working.
Scott McGrew
For so is also noted for her involvement in a report called elephant in the valley, as well as testifying in Ellen pals lawsuit against Kleiner Perkins. We’ll start with the elephant in the valley. A study of 200 women with at least 10 years experience found 84% of women had been criticized as being too aggressive 82% experienced clients or colleagues, addressing their male peers when they should have been addressing the women and 60% received unwanted sexual advances. You’ve had to deal with some of this yourself.
Trae Vassallo
I think anyone? Yes, yeah, clearly the data shows that it’s more systemic than I think any of us understood or believed. So, yeah. And you know, I was part of the Kleiner Perkins trial. And you know, my process of sharing my story of having to deal with some harassment issues, basically caused this incredible outpouring of folks who reached out and said, Thank you for sharing your story. The same thing happened to me. And it was this interesting catalyst for me where I was like, Oh, I didn’t do something wrong. because inevitably, when this stuff is happening to you, no matter how you handle it, you’re like, what am I doing to cause this? And so it’s some level there was this relief that Oh, I’m not I’m not alone. I’m not the only person who’s had to deal with this. But then there was this shock that Oh, my goodness, this is like an epically large proportion of people. And, and friends, it felt like over half who’ve had to deal with a lot of stuff. And so that Inspired myself and Michelle Adamski and a handful of women were like, we can get this information. Let’s, I’m curious. Now let’s go figure this out and at least get the information out there in a way that’s not that can stimulate conversation and help move the conversation forward as opposed to just try to have people point fingers. And so yes, we did the survey, we got a bunch of amazing responses, and it helped catalyze a whole host of interesting conversations. And this was a few years ago now because this was right after the trial, which I can’t remember. I think that was 2014 or 2015.
Scott McGrew
And I think the numbers came out in 2016. Yeah, that’s right. Yeah. Do you think because the me to movement has since happened, that if you went and ran these numbers, again, they would go down because the world is a better place or go up? Because the world is a better it does a better job of reporting this?
Woman’s voice
Yeah, I think
Trae Vassallo
that, you know, this was a not An academic survey and it was not, you know, hugely it was we surveyed a bunch of folks for their, you know, for their emotional responses to these questions. And so I think there was no reason to withhold answers here. So I don’t think that people were holding back. So I do think that was fairly representative at the time. And I’d like to think that given all the conversation today that these trends can only get better, it’s hard to get much worse. And, you know, people are not talking about it. And so I think that’s the big difference is that if you go back to 2016, and earlier, people just weren’t talking about these topics publicly.
Scott McGrew
I do sometimes when I’m doing interviews struggle with the conversations about gender equality and things, because I find myself asking women about them and not man. That’s right. Yeah. Yeah. Now you’re the one who authored this study. You know what I mean? You know, I talked to this person about this investment I talked to Trey about, yeah, arrow and L. And oh, by the way, let’s talk about gender diversity, right? Does it ever, which would you have preferred?
Trae Vassallo
Well, I think the important thing is, you know that it’s not just that right. So I think the important thing for me is, first and foremost, I want to build a successful career. I want to work with amazing entrepreneurs, I want to help lots of people. And if part of that platform includes helping bring up, you know, some topics that might be hard and complex to have a conversation about, I’m okay with that, as long as that’s a subset and not the lead on everything that I do.
Scott McGrew
Traver Salchow, co founder of defy ventures. Now before we go, I want to go back to something Trey had said earlier.
Trae Vassallo
So for me and for Randy who had been thinking about this with me? You know, it was so obvious but for for bringing around the rest of the people around the partnership, it wasn’t as obvious because yeah,
Scott McGrew
just so I understand what you’re saying you were thinking about thermostats before Tony walks in the door.
Trae Vassallo
Yeah, absolutely.
Scott McGrew
No, Randy is Randy commissar and we’ve talked to Randy on this podcast, just check the previous interviews for that. And Tony, as Trey mentioned, is Tony Fidel, the creator of the iPod, and of course the Nest thermostat. I look around and I just see so many products that once you connect them and once you add smarts to them, you’re going to see innovation all around. You can find a talk with Tony on my TV project, press here. archives of that interview are available at press here tv.com
Transcribed by https://otter.ai
No Comments, Be The First!