20VC: Index's Danny Rimer on Investing Lessons from Hits like Figma, Discord and Etsy to Missing Snapchat, Airbnb, Facebook & Spotify | Why Valuation is a Trap and Market Sizing, Signalling and Sector/Geo-Specific Funds are all Noise
Jun 17, 2024
auto_awesome
Danny Rimer, a Partner at Index Ventures and a pivotal figure behind successes like Figma and Discord, opens up about his biggest investment misses, including Airbnb and Facebook, sharing invaluable lessons. He dismisses conventional wisdom around valuations and market size, labeling them as mental traps and noise. Rimer advocates for focusing on exceptional founders and product quality rather than chasing trends, emphasizing that the best investment opportunities exist beyond traditional IPO windows. His insights blend experience with a candid evaluation of the venture capital landscape.
Backing extraordinary founders is crucial regardless of market size for success in venture capital.
Developing strong brands naturally through exceptional products is emphasized over deliberate branding efforts.
Discipline in decision-making, analyzing successes and failures, and creating investment theses are key in successful venture capital strategies.
Balancing pricing strategies with ownership stakes and learning from past mistakes to improve future investment decisions are crucial in venture capital.
Deep dives
The Importance of Backing Exceptional Founders Over Market Size
Backing extraordinary founders is highlighted as crucial, even if it means disregarding factors like market size. The podcast emphasizes that exceptional companies can thrive regardless of market conditions and that focusing on the founder's capabilities is key.
Creating Brands as a Byproduct of a Great Product
The discussion delves into how successful companies often develop strong brands naturally as a result of offering exceptional products or services. It emphasizes the value of authenticity in brand-building and the importance of prioritizing product quality over deliberate branding efforts.
Influence of Discipline in Decision-Making and Investment Reserves
The podcast explores the significance of discipline in decision-making within venture capital, particularly regarding exiting companies and effectively managing investment reserves. It stresses the need to analyze both successes and failures to enhance future investment strategies and ensure better outcomes.
Evolution of Investment Theses and Decision-making Approaches
The importance of developing clear investment theses and adopting structured decision-making processes is highlighted. The podcast discusses the benefits of creating investment theses to guide decision-making and the impact of staying true to core principles in successful investing.
Balancing Ownership and Valuation Concerns in Investment Strategies
The discussion touches on the delicate balance between stretching on price and maintaining ownership stakes in investments. It underscores the importance of evaluating the stage of investment and the level of conviction in determining when to adapt pricing strategies to maximize returns.
Learning From Mistakes and Successes to Enhance Investing Strategy
The podcast emphasizes the value of analyzing both mistakes and successes in venture capital to improve investment strategies. It points out the significance of applying learnings from past experiences to make informed decisions and avoid repeating errors in future investments.
Investment Mistake Lessons Learned
The speaker reflects on a missed investment opportunity in Snapchat, where they underestimated its potential due to comparing it to other social media platforms' valuations. They also discuss a failed investment in Nasty Gal, highlighting the importance of learning to let go of unsuccessful ventures and the emotional challenges associated with realizing when to cut losses.
Building a Successful Firm and Prioritizing Relationships
The speaker emphasizes the significance of focusing on partnership building within a firm and hiring competent peers. They stress the importance of prioritizing family over work, citing past regrets of prioritizing business over personal life. Additionally, the speaker shares insights on effective investment strategies, urging humility in decision-making and stressing the value of learning from past mistakes for future success.
Danny Rimer is a Partner @ Index Ventures and one of the most prominent VCs of the last two decades. Danny has led Index to be one of the top global firms on both sides of the Atlantic. Among Danny's incredible portfolio, he has led or been involved with Figma, Discord, Dream Games, Etsy, Glossier and Patreon.
In Today's Discussion with Danny Rimer We Cover:
1. The Biggest Lessons from Missing Snap, Airbnb, Spotify and Facebook:
How did Danny miss investing in Brian Chesky and Airbnb when Brian says "Index is the best investor that Airbnb never had"?
What was Danny's biggest takeaway from turning down Daniel Ek and Spotify multiple times?
Why did Danny turn down the chance to invest in Facebook at $10BN? What did he learn from this?
Why did Index not lead Snapchat's Series B? How did that decision change Danny's mindset towards the concentration of positions in a fund?
2. The Biggest BS Rules in Venture: Market Sizing, Valuations and Signalling
Why does Danny believe that "valuation is a mental trap"?
Why does Danny believe that TAM is "noise" and should not be used to assess an investment?
Why does Danny believe that stage, sector and geo-specific funds are BS?
Why does Danny believe there are no IPO windows? Are IPO markets always open to the best?
Why does Danny believe that signalling is BS and does not exist today?
3. Lessons from the Biggest Wins and Losses:
What are Danny's biggest lessons from Index's $BN win in King (Candy Crush)?
How did the Discord deal come to be? What are Danny's biggest takeaways from it?
What are Danny's biggest reflections from losing 10s of millions on Nasty Gal?
What is Danny's biggest advice to a new investor today?
4. Lessons from Two Decades Building Index into a Premier Firm:
What specifically has Index done to enable them to do what no one else has done and win on both sides of the Atlantic?
How did the Benchmark partnership shape much of how Danny has constructed Index today?
Who does Danny view as Index's biggest competition? How has it changed with time?
Why is Danny more bullish than ever on the UK despite Brexit?
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
