The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

20VC: Index's Shardul Shah on Why Market Size is a Trap | Biggest Lessons on Pricing from Leading Rounds in Wiz & Datadog | Why Benchmarks & Averages in VC are BS | How Index Makes Decisions and Why Growth & Early are the Same Investing Style

Sep 16, 2024

Shardul Shah, a Partner at Index Ventures and a leading cyber security investor, shares his insights on venture capital. He challenges the validity of total addressable market, emphasizing the importance of focusing on strong teams instead. Shardul discusses the necessity of brief initial meetings to enhance decision-making and the difficulties of remote partnerships. He highlights the balance between intuition and analysis in evaluating deals, and stresses the need for authenticity and effective communication in driving investment success.

50:32

Creator website

Episode guests

Shardul Shah

AI Summary

Highlights

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Shardul Shah argues that traditional metrics like Total Addressable Market (TAM) can mislead investors about a company's potential.

The podcast underscores the vital role of strong teams and founders in a startup's success, beyond just market size evidence.

Effective investment decisions hinge on balancing intuition with thorough analysis, adapting to ever-changing market dynamics and competition.

Deep dives

Key Lessons in Venture Capital

Crucial lessons in venture capital include the dangers of being overly cautious with pricing, the importance of recognizing top-tier founders, and the risks of overthinking opportunities. The discussion emphasizes that many of the largest public companies today have market values exceeding initial TAM estimates. Founders who identify and explore market opportunities tend to yield the best results. Ultimately, learning to focus on producing fund returners is imperative, as the power law significantly influences the venture capital space.

Embrace Discomfort for Extraordinary Gains

01:19

Evaluating Investment Conviction in High-Growth Markets

03:52

Prioritize Meetings with Intentionality

01:17

The Crucial Role of Board Members in Founder Success

02:55

Intro

4min

Embracing Authenticity in Venture Capital

5min

Navigating Specialization in Venture Capital

18min

Navigating Team Dynamics and Investment Strategies

12min

The Dynamics of Board Membership and Entrepreneurial Interests in Venture Capital

2min

Navigating Investment Decisions

8min

Navigating Trust and Decision-Making in Startups

4min

Shardul Shah is a Partner at Index Ventures and one of the greatest cyber security investors of the last two decades. Among his many wins, Shardul has led rounds in Datadog, Wiz, Duo Security, Coalition and more. Shardul is also the only Partner investing at Index to have worked in every single Index office from London, to SF, to NYC to Geneva. Prior to Index, Shardul worked with Summit Partners, focusing on healthcare and internet technologies.

In Today's Episode with Shardul Shah We Discuss:

1. Investing Lessons from Wiz and Datadog:

Why does Shardul believe that TAM (total addressable market) is BS?
Why does Shardul believe that every great deal will be expensive?
How does Shardul evaluate when to double down and concentrate capital vs when to let someone else come in and lead a round in an existing company?
How does Shardul think about when is the right time to sell a position in a company?

2. How the Best VCs Make Decisions:

How does Shardul and Index create an environment of truth-seeking together, that is optimised for the best decision-making to take place?
What are the biggest mistakes in how VCs make decisions today?
Why does Shardul believe that all first meetings should be 30 mins not 60 mins?
Why does Shardul believe it is so much harder to make investment decisions when partnerships are remote? What is better remote?

3. The Core Pillars of Venture: Sourcing, Selecting, Securing and Servicing:

Which one does Shardul believe he is best at? What is he worst at?
Does Shardul believe with the downturn we have moved into a world of selection and not just winning every new deal?
Does Shardul believe that VCs provide any value? What are the biggest misnomers when it comes to "VC value add"?

4. Lessons from the Best Investors in the World:

Who is the best board member that Shardul sits on a board with?
What has Shardul learned from Gili Raanan and Doug Leone on being a good board member?
What have been some of Shardul's biggest investing lessons from Danny Rimer?
Why does Shardul hate benchmarks when it comes to investing?

Get the Snipd
podcast app

Unlock the knowledge in podcasts with the podcast player of the future.

AI-powered
podcast player

Listen to all your favourite podcasts with AI-powered features

Discover
highlights

Listen to the best highlights from the podcasts you love and dive into the full episode

Save any
moment

Hear something you like? Tap your headphones to save it with AI-generated key takeaways

Share
& Export

Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more