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tv   The Communicators Scott Kupor  CSPAN  July 19, 2019 10:30pm-11:03pm EDT

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there has to be some person pole. can follow her reporting there. congressional reporter with the hill. appreciate it. >> thank you. will be in order. >> for 40 years, c-span has been providing unfiltered congress, the white house, and events from d.c. and around the country. you can make up your own mind. created by cable in 1979. it is brought to you by your cable or satellite provider. your unfiltered view of government.
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>> scott cooper, what is a venture capitalist do? provide money to companies that are trying to grow and hopefully become very big companies. if we are doing our jobs correctly, we are helping them grow the company. hopefully they can provide introductions, navigate new challenges. we like to think of ourselves as a money provider and hopefully a supporter. >> why can't a company such as the ones you describe go to a bank? >> it is a good question. most of the businesses we invest in our risky. they are going to lose money for a long time. thanks, unfortunately, are not in the business of doing that.
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we are willing to take that risk. half of what we invest in, we will lose all of our money. any bank will not be too excited. is the original money come from you give to them? money forut and raise my couple of different folks. bigersity endowments are a source of capital. stanford university. that money goes to help subsidize the cost of the university. large foundations, other examples. doing,ese companies are they are trying to use venture to drive up highway to return. they're looking for some they -- something like 25-30% return.
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this is the high-risk, high reward portion of the portfolio. >> what is a normal pitch like? >> it is fun. in.w members come often they have just a powerpoint presentation. they have not built a product. it is an opportunity for the entrepreneur to tell us about their vision for the company. how big kenny opportunity be? ultimately, why is this team the right team to go after that? process by which we can learn new things. >> is this unique to the tech world? all companies -- many of
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the companies that take venture capital are tech companies. require a type of financing like venture. the willingness to take a chance on something. the payoffs are very high. in our business, one-to companies will drive the lions share. have that level of risk appetite. >> your new book is called secrets of sandhill road. why is it significant. is in menlo park, california. he would not know it except for the fact that a mile or two east, is a more famous neighbor. you arethink of it, if a music fan, nashville. wall street in new york. a bit of a mythical place where
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a lot of the venture capitalists congregate. be a place with lots of capital and opportunity. it looks like a bit of an old industrial park. ownedland that has been since the beginning. there are not any high-rises there. a lot of two-story buildings. zoningay have been restrictions. university always had the intention to make sure it was left there. managing partner of andrey recent horwitz. . we are a venture capital
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firm. stage startuparly companies. a $10 billion business. we have raised about $10 billion. our job is to be on top of the things happening. businesses that have software. >> what is the technical or legal explanation of what a limited artan are his. someoneited partner is who is an investor in a fund like ours. it means they are limited. do not have control over the investment space. when or if we sell. think of them as a passive investor. the decision is about what companies we invest in.
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they are 100% in our purview. >> what is a typical day for you? we will be seeing a couple of different pitches. a couple hour-long meetings with entrepreneurs. we will be doing diligence. someone we may have met earlier. thinking about ideal. a deal. buildinga lot of relationships. a huge part of this business is being well-connected. understanding what professors are doing at different universities. we spend a lot of time on what we would call outbound relations. your expertise you bring? i was a banker. i was at a startup company for
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nine years that got sold to hewlett-packard. i think what i bring is an appreciation for capital markets but also an appreciation for what it means to go through the startup process. and respect for the process. it allows us. go to thegs don't right all the time. quiet's often there is not a product associated with that. is a product but it is often the case early there is no product. what we are trying to understand is not necessarily what is the
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final product, tell us about the idea amazed. -- maze. companies will pivot. they will change over time. that is part of the company building process. we want somebody capable of discerning data points and responding to the needs of the market. >> what is your win loss record? >> we don't think of it that way. answer is it is poor. we have athings, polite way of calling them impaired capital. 20-30% we make a little money. successerence between
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and failure is 10-20%, do they become a google or facebook? it is based on total returns. they will be driven by a small number of companies. >> if you are a $10 billion company, you have had successes. what is one you can tell us about? >> i will give you a great example. a public company called -- people may know about. in the enterprise security space. in 2009.ed back it was what we called a seed investment. we put $500 million in. -- $500,000 in. over the years, we invested more money. it went public year and a half ago. a 10-12,000,000,000 dollar market cap company. that is an example we have been
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working with them from inception. the founding team has done an incredible job. apologize if i missed this. what is it that they do or make? >> absolutely. they are a software company. the way they think about what they do, if you are a business, you might have lots of cloud-based applications you are not running on your premises. you might have gmail for email. salesforce to manage salesforce. used for marketing. user has to every be able to log into and have security controls. provide a single sign on. in and manage those.
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it is a tool they will use to manage security. user access and administration. what applications do we give them access to? manage security. general electric, ibm, where did the name come from? >> it is a good question. i will look that up for you. i will drop you a note on it. answer. had an silicon valley successful because of venture capital? >> it is successful because of entrepreneurs who build these businesses and are willing to take the risks it entails.
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a 10-20 percent chance of success. they are a financing source. we can add value. we should gives ourselves -- get ourselves -- the innovation comes from hard work and efforts put in by entrepreneurs. >> you talk about this secret to sandhill road is products or ideas are often 10 years ahead of their time. what do you mean? >> you see this recurring theme. businesses that did not work at some point in time will work. in the recall a company 1998-19 a new time. van was trying to do grocery delivery. they were tilting massive warehouses and then they would
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use vans literally to deliver that to people. it was a wonderful service for people, but it was a small market opportunity because the number of people who thought about the idea of home delivery for groceries or willing to use their computers, cell phones did not exist. for --pany was not exist insta cart is doing it the same way. the gig part of economy, independent contractors. they are not staffing supermarkets, they are partnering. access to produce. they have the benefit of the iphone revolution, a lot of things people would not have otherwise done, they are willing to do on their mobile phone.
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it is a new technology. where they can extend a market that did not exist. >> when it comes to an insta go to other venture ?apitalists as well raise money in different rounds. people will raise a first round of financing. raise another round of financing. we will be the major when they more, additional investors will be part of the company.
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we have an interesting relationship with our other venture capitalists. we are partly competitors. after a certain number of rounds, -- we are partnering with other venture capital firms. we are investing either in earlier rounds or later rounds. >> do you have a say so and how the business operates? often we will sit in the board in the company.
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we do not govern them completely. the founder of the company, the other shareholders have those as well. quiet have one member on the board. our member was on the board. board foray on the some time after these companies go public. as one of many board members, we own stocks.
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>> marc andreessen is a relative legend out there. waseople may remember he originally a founder of a company called netscape. which was the first company to commercialize the web browser. they famously went public and in august of95 -- o 1995. be involvede to with other companies. he is on the board of facebook and ebay. an important inventor. horwitz got to know marc. companies.mber of
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they started a company called loud cloud. think about it as on-demand -- as we talked about earlier with insta cart, it is a good example of a company a few years too early. very successful idea. and -- theyr decided to take their skills and turn themselves into venture capitalists. hopefully grow the opportunity for other entrepreneurs. >> does netscape exist today? in 1998. sold to aol main product does not exist today. people use google chrome or
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apple safari. most of those browsers over their progeny to the early netscape days. >> one of the realities and criticisms from silicon valley entrepreneurs is inventors, entrepreneurs will come in with a product they are hoping will be sold to a larger company or a larger company will buy that product. there is less competition. will tell you, our experience and how we think about investing, we are not interested in backing founders and companies where the goal is to try to sell the company. the reality is that does happen many times. 80% of the excess, when a company is exiting, happen through acquisition. we want to believe at least they are going after opportunities. the product could support a
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standalone company. acquisitions do happen. i do think about those generally as anticompetitive. we continue to see new innovations constantly happening. some larger companies will acquire these. often, there is another company right behind them going after another segment of the market. none of that. hadfact that it exists has an impact on the weight of new company formation. we are privileged to see opportunities happening. >> is the work culture of silicon valley something you have to get used to? >> i think so. nois a hardcharging culture, doubt. people working very hard. dreams and aspirations. spend moren people
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hours in the office then people would like. say it is a competitive labor market. i mean that in a positive way. there are different opportunities. job mobility is extremely high. on the cultureum within a company. wanting people to achieve a work life balance, there are so many opportunities it does keep the market and check. >> can you pitch an idea on sandhill road if you live in fort wayne, indiana or louisville kentucky? >> that is a great question. one of the things we have seen in the west is the venture geographicallyy concentrated. new york, california, boston, makeup something like 70% of venture capital dollars.
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the answer certainly as you can. we are very interested in to entrepreneurs. in local markets, the seed capital typically will come from the local markets. if they don't have larger firms beyond that, they will come to new york, boston, l.a., other places where there are larger funds for the next round spirit >> you talk about -- next rounds. >> you talk about microsoft and facebook as vc funded companies. . was an interesting phenomena that happened in our business. fromverage time it takes founding to going public has doubled. it used to be the case, they would go public in 6.5 years after the founding. now the numbers are 10-12 years. there are reasons beyond the
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scope of our conversation. the example in the book is microsoft prorated it went public at $350 million. re over $1y a trillion. that happened in the public market. the mental exercise i talked about, if facebook were to grow at that same level, it would be worth more than the entire global gdp. it is probably the case we are not going to see 3000 times growth over the life of the history. examples.extreme they point out an important thing happening in the industry, a lot of money that used to be happening and growth in the public markets, shifting to the private markets. as a policy matter, i think that is a problem. less growth in the public markets means normal investors missingst in retail are
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out on great appreciation opportunities. i would like to see us have more of that growth happening more evenly between private and public. >> why do you think they are staying private longer? >> there are a lot of things. the most significant is the sec many years ago, if you look at introduced a lot of mechanisms into the public markets. do exactly that, make the markets more efficient. they did a great job. this is not alive problem with the sec. -- fec. the trade expenses investors bear, those have been going in the right direction. the challenge is that works very well with large cap and liquid stocks. smaller cape stocks, the market becomes much more challenging. if you are market capitalization
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company, you probably don't have research analysts. sales and trading depth. banks talking to the community about buying your stock. it does not trade very well. it is what we would call not very liquid. that is unattractive. companies are staying private longer. the moneyppened is has followed that. the public market investors have recognized that. fundss why you see mutual investing in private companies. they recognize they have to go into the private markets because of the and long nation of the elongation of the cycle. >> are you still the wild west in the sense you are outside of the regulations banks have to face? >> it depends on the types of
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ture capital firms. we are regulated the same way a hedge fund would be. private equity firms. we are subject to the fec coming and visiting us. lesserr of firms have regulatory scrutiny. it is a function of the types of investments we are doing. we have to subscribe ourselves to a higher standard. it is true for many firms they are not regulated that way. they are responsible if they are doing things like fraud or other bad behavior. they have less regulatory scrutiny than a bank or other institutions. >> what kind of products are catching a ride today? -- your eye today? >> we have lots of ideas about where things will be.
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we are spending a lot of time in the intersection of computer sciences and life-sciences. there are companies trying to generate new drugs or create diagnostic tests. using components of computer science to improve that process. machine learning, that can improve the learning ability of computers to detect cancerous cells. that is one of the most interesting areas. we need to be open to meeting with all kinds of untrue maneuvers and understanding the ideas. we don't think we are smart enough to know all the greatest trends. a lot of our business is giving ourselves in front of smart individuals doing cutting-edge work in software. doing due diligence, will that is dis-have a chance to grow into a large company? >> what are the lessons learned
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from the 1990's? >> the lessons are the lessons of market size. the staff and i like to talk about netscape. in 1998,old our self the size was 150 million people. people were using these screeching dial-up modems. that, a think about company that has been in the news because we have had a recent ipo successfully this year, no matter how great an never beas, it could big enough to acquire enough customers and sustained the economics for the business. theink the big lesson of
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90's, the size of the market matters. it drives how costly it is. how many customers you can get to. a different example, we often live in a world where sometimes you willfully suspend disbelief to go along for some dreams entrepreneurs have about what to do. it is a difference between what it appears to be -- there is a difference between fraud and actually misleading people versus having big dreams and failing to accomplish those dreams. the lesson is making sure we vet those dreams and understand the difference between an ambitious plan that might be feasible and one that might have bad behavior. >> scott cooper is the managing partner of and recent horowitz -- andresen horwitz.
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thank you for being our guest on "the company caters." -- camino gators." mmunicators." >> the house will be in order. providing -- you can make up your own mind. c-span, your unfiltered view of government. on july 16, walter cronkite --
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>> they seem beyond here at our press site. channel basin, where the spacecraft is brought from the manufacturer in alabama. here, there is an interesting sight, too. beyond our press site, there are scores of workers out, permitted for the first time to bring binoculars and cameras of their own to the base. there's a holiday atmosphere. normally during these launches, work goes on to keep things on schedule. indeed, in the vehicle assembly building, they have already directed apollo 12.


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