From college dropout to acclaimed designer to CEO of project-management pioneer Flow, Daniel Scrivner’s path to success has been anything but typical — and he wouldn’t have it any other way. It only took one web design class over a summer break in high school, and Daniel was hooked. He would eventually drop out of college to focus on mastering the art and science of design, first honing his talent as a freelancer, then joining an LA-based advertising firm in 2007. Barely a year later, he relocated to San Francisco to take a coveted design position at Apple. After three years of soaking up every bit of insight and wisdom he could, Daniel left Apple and joined the team at a small but promising startup: Square. He quickly worked his way up to Director of Design, responsible for overseeing everything from product design to video production. In his time at the company, he left his fingerprint on almost every aspect of Square’s design aesthetic. Daniel left Square in 2016 to found his own design counsel and venture capital firm, Blackletter Ventures. Then, in February 2019, he took over as CEO of Flow. He’s spent the last year slowly, methodically, and tirelessly reinventing their product from scratch. Under his leadership, the business is back to profitability and growth — and he’s just getting started.
We Talk About
Why is there such a high turnover at startups?
What was it like before and after square went public?
What it like to switch from working at a startup to being an investor in 100 plus startups?
Linkedin https://www.linkedin.com/in/danielscrivner/
Flow Website: https://www.getflow.com/?utm-source=linkedin
CONNECT WITH SHAWN:
https://linktr.ee/ShawnflynnSV
- Shawn Flynn’s Twitter Account
- Shawn Flynn’s LinkedIn Account
- Silicon Valley LinkedIn Group Account
- Shawn Flynn’s Facebook Account
- Email Shawn@thesiliconvalleypodcast.com
Announcer 00:00
You’re listening to the Silicon Valley podcast,
Shawn Flynn 00:02
you sit down with Daniel Scrivner, who is the CEO of flow. Previously, he was the head of design, digital and square. He’s worked for some of the most respected brands in the world, including Apple, Nike, Disney and target. Daniel advises world class teams and companies like LendingHome, empower trust token, designer fund, and notation capital. And he’s an early-stage investor in businesses like superhuman mixed mask notion, good eggs, and more invested in over 100 companies. On today’s show we talk about what was your experience through the entire IPO process at square as a new angel? How does one get the best access to early deals? And is there a difference in the underwriting you do what it is a company you’re investing in verse a fund this and much more today’s episode of the Silicon Valley podcast. Now let’s be good. Enjoy.
Announcer 01:01
Welcome to the Silicon Valley podcast with your host Shawn Flynn, who interviews famous entrepreneurs, venture capitalists and leaders in tech, learn their secrets and see tomorrow’s world today.
Shawn Flynn 01:19
Daniel, thank you for taking the time today to be on the Silicon Valley podcast. I’m super excited for you to be here. I mean, you’re probably the only person I’ve ever met with this eclectic background of investing in 100 companies ringing a bell at square went public. I mean, your story is incredible. But for our listeners at home, can you give a little bit of background of your career up into this point?
Daniel Scrivner 01:40
A quick background, you know, what brought me to Silicon Valley in the first place was actually the opportunity to get to go and work for Apple. And my background is before I began focusing so much on business and investing, I was in design and I specialized in design for 15 plus years, I fell in love with that when I was in high school. In college, I had this moment where there was a really clear fork in the road, at least for me where I could either I at that point in doing design work really whenever I could. And I was doing my undergraduate work. And so none of it was obviously focused on design, it was just all kind of, you know, the basic things that everybody needs to understand and have a good grasp on. But I remember having this really vivid fork in the road moment where I needed to decide whether I wanted to continue with my four-year degree, which was going to be in business administration, or marketing. Or if I wanted to go full time into design. And for me, it was really this choice of like, I already am doing the thing that I love, which is design, do I want to take two more years and just do college right was kind of how I was framing it in my mind and just focus on this experience of this period of my wife, or do I want to just go all in on design and take that leap, and I ended up choosing to do the latter. And that was the best thing I could have ever done. I did drop out of college to pursue what I love doing. Initially, I gave myself kind of six months to try to see if I could make it work and long story short, I made all the mistakes I could make. I learned a lot of hard lessons over that six months, but I survived. And that ultimately led me to getting a job working for an advertising agency in LA called DDB, which then led me to getting offered the opportunity to come and work at Apple and their marketing communications team. And as part of that I ended up moving out to San Francisco, I ended up being there for almost 10 years, I worked at Apple for three and a half years. And it can talk a lot more about that experience, because it was really formative experience in my life. But what I ultimately decided to do was, you know, when I joined Apple, it was this amazing moment of this is a place I’ve always aspired to be, I’ve always wanted to be at some point in my career and feeling like I got to do that super early on in my career, which I was really fortunate to do. There’s plenty of amazing incredible things I can say about my time there about Apple’s aesthetic about their what it was like to be on the design team at Apple working on marketing problems and some of product problems and part of the retail store and packaging. Long story short, I think of that as my boot camp of figuring out really how to do what I refer to as repeatedly excellent design, because I think that’s something Apple’s done really well is a design is largely like you’re heading down a road, you’re and you’re making a bunch of convicted bets. And sometimes you end up with something that’s incredible and works really well and sticks. And Apple I think is one of the rare companies that’s figured out a process for how to do that time and time and time again, so that everything that leaves the door, whether it’s add a piece of marketing, a new product and update to an OS is at a consistently high bar for quality and has some you know, sort of amazing sparks inside it. So I had that experience. But long story short, the three-year mark of being there, I kind of feel like I’ve figured it out in my learning curve and flattened and so for me, just some a rule of thumb I’ve always followed is I always try to bias for having the steepest learning curve. I always want to be in a position where I am being challenged because I think that in order for all of us to grow and evolve that inevitably entails us being uncomfortable, working on things that are bringing, you know, kind of calling us to bring out the best in ourselves in order to continue to perform at our best and move on to higher and higher levels. So I started getting a you know, a little bit uncomfortable just with how comfortable it was at that Apple. So I ended up leaving and joining square, which at the time was a 50-person team. And what brought me there was really two things they very clearly had just an incredible design team, even from the beginning, they had Robert Anderson on the team. We had Chris Clark, we had just had some really incredible people that were there that have all gone on now to work, Robert was the founding designer at square, He then took over all of cashapp Chris Clark then went to June and has done all the design work for June. So it’s been this amazing proliferation of where these people have gone on to work since square. And that ended up being there for five and a half years all the way through the IPO after that, that kicked off the investing portion of my career. So a lot there. But trying to give you a brief encapsulation and
Shawn Flynn 05:52
a question for you. I’ve noticed that a lot of startups, there’s a huge turnover rate. I mean, most people don’t even last six months at startups. Why? Why do you think that? What was your experience in? Is it possible to even change this is
Daniel Scrivner 06:06
something that definitely has, that’s never in anyone that I’ve talked to that’s ever worked at a kind of fast scaling venture backed company knows that turnover is actually very high. Like from the outside looking in, especially for square, it was this really interesting experience of everybody that I talked to who didn’t work at Square was just like, oh, man, that’s, that’s one of the most amazing companies, you guys are working on some really incredible things. And that was definitely true from the outside looking in. Everything was incredible. Anyone that works at a venture backed company knows that it inherently is also really trying, you know, here, it takes it’s like it’s like an ultra-marathon to make it, I would say five plus years that are venture backed company because it involves constant change. Roll is constantly changing, the expectations are constantly changing, new people are always coming in. there’s reorg, there’s, you know, executives that get brought on, at increasingly higher levels. As the company gets bigger, I think the only way to survive, is to really be in it for the experience and kind of surrender and say like, you know, even if my role, it feels unclear, even if I’m uncomfortable, or even if I have to do this thing, and I’m not super excited about I think just what for me allowed me to stay sane and stay there for as long as I did was just, I wanted to be there to learn. I wanted to be there because I was really excited about where we were headed. And then I think you just it takes a lot of just deep belief that through the twists and the turns, you’ll find a way to continue to be really excited and engaged in what you’re doing.
Shawn Flynn 07:37
Did it get easier over time when you were at square from when the company was very tiny, 50 people when you first joined to when it was a couple 100 before going to IPO and I really want to ask about the IPO next. But until then the experience that the startup for you was more and more grind over time? Or was it we got a pattern we got a flow? What was the experience being in the company?
Daniel Scrivner 08:01
Yeah, it was definitely easier and easier over time, which I think is if it’s not feeling easier and easier over time, you’re doing something wrong, I think at any company, what you’re really building, if you’re an executive, if you’re a leader in that company, is you’re building a system, you’re building a machine and part of that in the beginning, it’s really difficult because you’re you know, to give you to like zoom in to a really small area. So when I joined initially, you know, I joined as a product designer, one of the things that was very different about being at square versus being at Apple is at Apple, you know, it’s a large company. So you’re working on one small piece of something, and it’s square it, which is the experience at any startup, you’re switching hats constantly. And so I remember, you know, we worked for a handful of months on new software update, we then worked on the website in order to market that we then worked on the keynote presentation that jack was going to give to reporters and all of the collateral for this event, we were going to throw the office to announce all of this and bring the media and the press in to cover this. And we worked on the email announcement for that. And so all of that stuff early on, is your salt constantly solving zero to one problem, you know, you’re being like, okay, we’ve we know what the product looks like? How do we feel about it? It’s all very clearly specific to the design side. But now how does that get expressed into their identity feel right? You know, things like, is our logo type? How’s our logo type feeling? How should our packaging evolve? And so you’re constantly one year like spinning up these new nodes. And so you’re dealing with all of this new complexity, you’re trying to replicate, and keep as much of what you feel like is the spark and what really works with your aesthetic. And you want to make sure that that’s threaded through every part of the experience. And so inevitably, you know, it’s really difficult, but it’s also really exciting. And so I think like that’s what was interesting is, I think the reason that there’s such high turnover is early on everybody by nature of being at a startup you are going to be challenged and you’re going to get the opportunity to work on stuff that you never would at other companies and so there’s It’s both thrilling and frightening at the same time early on, but there’s a constant like a lot of adrenaline running through your system in a good way. And then as the company scales, if things are going well, it should get easier, I would just do and maybe another way of saying it too Is it gets easier meaning the day-to-day work, and the solving the problem gets easier. And it remains difficult because you know, again, all of these environmental factors, things are changing really quickly, and new people are coming in, you’re constantly shifting strategies, you’re focusing on different things are getting reordered, it is challenging to be at a fast-scaling company, period. But it definitely I think, as an individual, your role should be getting easier and easier. And generally, you know, if things are going well in the company,
Shawn Flynn 10:44
so as the company was growing, I mean, there was talks of, we’re about to go public, or we’re gonna go public in a year from now or that type of conversation. I’m sure there is emotion, there was excitement amongst all the employees. In fact, you even got to experience when square went public going to the New York Stock Exchange and ringing the bell, what was it like for those employees leading up to the IPO? What was your experience of that whole process? For me,
Daniel Scrivner 11:13
this was a small window into understanding how very different it is to be from the outside looking in to a public company, and from the inside kind of looking out at a public company or a company that’s about to go public. But you know, today, if you look at square, it is incredibly respected, you know, it’s grown really fast share price has appreciated more than tenfold since when it originally, generally if you talk to if I look at any commentary about square, it is very bullish. And it’s very optimistic. Well, what’s fascinating to me is, if we rewind to when we were getting ready to IPO, it was almost the opposite story internally. We all knew that over the last, this was in the 1218 months before we went public, in that critical period of time, internally in the company, we knew that there was a lot of things, if you were paying attention, you knew that there were a lot of things happening that were setting us up to be able to be a successful public company. And what that really means is, I think, you know, we were doing things like moving into more fully subscription products as a way to bring in more SAS revenue to kind of complement that processing revenue, which is not super lucrative, it’s more like a kind of income a utility would receive because you’re receiving a very small percentage of very high dollar volume of payments that are flowing through our system. Before COVID. We didn’t see any big hits to that that would largely be very stable, and it would go up over time. And so if you’re an analyst or someone trying to analyze a business, okay, cool, you’ve got this not super sexy, but very durable form of income. But I think what’s allowed square to be so successful is by branching out and really investing very heavily into multiple lines of lucrative business, and whether that’s cash advances and loans through things like square capital, fast growth, consumer product, like square cash, it’s all these all the SAS revenue that comes in from things like payroll products, I don’t even know all the products they have today. But I would guess they probably have 10 plus subscription products that you can opt into as a as a merchant. I have always been fascinated by business and investing. I was reading just a numbered by that because to me, it was this really interesting window into decision making, and how do you weigh all of these different? Take an industry? You look at all the players in it? How do you try to make an intelligent decision about who’s going to do well? And why and understand the kind of landscape? And then what does that look like at the individual company level. And so I had already had this training. And I’d already been studying all this for a very long time. But I know, I could see that I don’t think most people in the company were aware of that most people in the company were just like, Oh, cool. We’re going into these different lines. And we would talk about that a little bit. You know, one thing that Square was big on before we just walk throughout the history of the company has always been transparency. And I think they did a really good way they continued to find ways to really push the envelope there overtime, like one thing that we had in the company that I really enjoyed was, we had something called notes that were anyone in the company that was in a meeting. And there were certain parameters, I believe it had to be like two plus people in the meeting. If it was an internal meeting, if it was an external meeting, everyone had to share notes. But basically everybody in the company would take notes in their meetings and send them out for everybody else in the company to see, which became this great way as the company got bigger to know what was going on in the product management world of this product or on the sales team in this part of the world or in this market in Japan or that stuff is still very underutilized, I think by most companies. So squared it that way. They also openly shared their board of directors’ deck inside the company. I mean, you would see some of that conversation about what we were doing not really to go public, but what we were doing on the business side in order to just improve the business. But I knew that all of this was being done with an eye towards how we could be successful as a public company. I remember super vividly when the news was announced that we were going to go public. There was if you look at and you know most people today can I’m sure if someone wanted to, they can go and find coverage from that period of time. But it was not optimistic, it was very pessimistic about the business, it was very much like, square could be interesting, it could be big. But from the business standpoint, it just looked and felt like an early-stage company, not a ton of profit, was seeing losses, had a lot of interesting metrics to point two around growth and underlying growth that if you know, how businesses work, profitability, and cash flow, and all of these things that investors put a lot of weight in and are largely, you know, the outcome of this growth and positive movement and metrics at lower levels in the business. And so I knew all that was there. But what was still so fascinating to me is just how naked, you know, internally, I knew that square, the way I would think about it, and this is still the way I try to make decisions, especially in the public markets today is think about something. So think about a company and think about what its prospects look over five or 10 years, and if you can become an if you can be incredibly confident that this will be something really big, really meaningful, really interesting, over a longer period of time than I think that allows you to see through some of the fog, and some of the misperceptions or some of the misreading of metrics or information. Because again, all of that stuff is credibly qualitative, yes, it’s metrics by their very nature are quantitative, but then you do interpret them. And so it’s just so interesting to me at the time that externally, people were very pessimistic about square internally, I felt incredibly optimistic, especially with all the things we were doing and how successful we were being with square cash and capital and the subscription parts of the business. It was also super exciting to be able to go to the New York Stock Exchange to be there for the ringing of the bell that still got my badge, my visitor’s badge was there. And what was fascinating about it, just to give people a window into it is this is obviously changing. So now we’re seeing a lot more direct listings, people are kind of skewing the traditional IPO process. But what was fascinating to me about being on the New York Stock Exchange that day, I and everyone else there literally got to see what it was like to take a new security public. And nobody really knows what that process looks like. We all see the sexy ringing of the bell where you know, if someone just pushes a button, all the confetti goes and it’s like there’s a ticker symbols live, the New York Stock Exchange what you know what you first need to do until you before you can even officially race. So you know, the way it works for companies is when you’re going out and doing a roadshow, which is, you know, you’re basically saying to the public market, we are going to go public, here’s all of our here’s our s one and all this information about the company, but then you actually go and do a roadshow. And at the roadshow, you’re presenting to hedge funds, you’re presenting to large institutional investors you’re presenting to people that can be the first equity holders, you know, that are external parties in the business and go and do that everyone kind of gets their initial allocation, but then you still have to go and actually price on the market. And so it was fascinating that market it would that morning is sitting there watching literally traders around the floor give different price quotes and orders that they were receiving and trying to do the human version of how do we arrive at the right balance of demand and supply. And you know, square had a really nice pop that day, and it felt great. And then from there, it went down for a long period of time until it finally started its meteoric rise. But I think what was fascinating to me, the things I still remember is how divergent the perspective can be from the outside looking in, we’re really you know, almost nothing about the business. Because what you’re seeing is just the things the information that they’re kind of leaking out through reports through press releases. So you know, almost nothing, and how wrong that can be. And I think how different of a perspective people can have inside a company, about where it’s going and why to be optimistic or pessimistic about it. It was a fascinating time, it was a fascinating experience, especially because of how well square has gone on to do and how and pessimistic. Just negative people were on the stock and the company initially,
Shawn Flynn 18:45
after it went public, what was the feel in the company itself, where people go, and oh, it’s now it’s public? I’m gonna exit and leave or were they more excited to keep pushing forward? What was the internal feel? Since you had mentioned that, you know, outside is all this negative pushing in, was inside, you know, positive pushing out? What was it like?
Daniel Scrivner 19:07
One thing that I vividly remember is, before anyone knew we were going public before we actually saw what Bryce that Square was actually trading for publicly, internally, the company gives out equity grants, you know, and they give out and so I remember one of the first things that happened after square price, and I can’t remember the first price, but I want to say something like maybe $8 or $10, or something like that. But I remember that the last series of equity grants over the previous six months were given out at $12 $16. You know, it was all the 409 a private Yeah, evaluations. And so one of the first things that happened was everybody that had recently been hired was just like, what the hell I got my equity this granted at two X for some people the price that it’s trading on the public market, so I’m actually technically underwater right now was a window into all of the nuances of how you take a company that has been valued privately which is very, very, very different. Then at some point has to become valued publicly and have an agreed upon price based on supply and demand and how people feel about it at that moment in time, and how that can show up. So you know, there was that going on, there was people that had been hired recently saying, my equity is actually underwater, what’s going on here? There were people in the company, who I definitely switched into a mode where they were checking the, you know, ticker symbol daily, and their mood would be dependent on if things were going well, and if things weren’t. And I think in my mind, that’s where did you know, and the approach that I took was really just, I have zero control here, I can control my point of view about with my equity, do I want to sell? How do I want to approach this? You know, I’m happy to talk about that, for anyone who is at a company for me definitely leading up to knowing that all of this equity that I had vested in exit, and a lot of which I had exercised, was going to be public. You know, that’s a whole another moment of like, Oh, god, what do I do now? You know, I was kind of bought this equity hoping and expecting that this would be worth something now, it actually is. And it could be liquid, how do I want to approach that, and started getting counsel from a lot of people it was it was very mixed, it was very mixed on how people approached it, I tried to ignore it, I tried to stay super head down. And I tried to think about personally, for the equity that I had, just try to make the most thoughtful decisions there. And the most intelligent and informed decisions about how to go about kind of liquidating that how to hold on to it. But it was definitely mixed in and mixed internally. And I would say, it gave me a little window into I think one of the I want to preface it to have like, I fully I believe that that a lot of that has now dissipated, you know, at square because it’s been public for so long. And you know, it’s been on this great positive kind of move up into the stock. But I think for any company that’s been private for a long time, and has just gone public, it’s a super anxiety read, kind of, it’s like one of those moments where everything is changing. And everybody is trying to grapple with that and figure that out for themselves. And you can just really feel that in the company.
Shawn Flynn 22:02
So when you see other companies that may be started even before square like Airbnb, they’re still not public, what’s kind of your thoughts for these companies and their employees.
Daniel Scrivner 22:13
I was there for five and a half years, I in that time, I joined when the company was around 50, when I exited it, you know, 1500 2000, something like that, when I left square. so much happened in that time, you know, we raise multiple venture rounds, we ended up going public, we ended up having the kind of negative experience of going public initially. And then that’s turned into a positive experience, as people started to really see what we were and why Square was just a really interesting company to invest in, I recognize that I have a very outlier experience and a very, and I was very fortunate to be able to see all of that happen at one company in five and a half years. But that is not the norm. And so for people that are at other companies, and I know many someone who was on my team at square and moved on to Airbnb, you know, it’s been multiple years there and has been grappling, you know, with like, are they going to list now all of the news that’s, that’s about the kind of imminent listing that’s going to happen there. I had no outlier scenario, it’s definitely not the norm. I still think you know, and it’s a lot of the approach that I take of just investing my own capital in early-stage companies now is I think you really need to the baseline as you should set for yourself is, if you see liquidity, that liquidity will likely come more at the 10-year mark than something like the five-year mark. And I think if you are hoping or expecting or wishing for liquidity at the five-year mark, or earlier, it’s gonna be very hard to come by it’s very rare. So it’s definitely shaped some of how I invest and how I think about when things could become liquid and when things could become when we would be able to actually sell our equity stake in a company. But yeah, it was a very different scenario.
Shawn Flynn 23:43
Now let’s talk about your role after the IPO, you switch to more of an investor invested in from understanding over 100 startups, what was that? dive into it like, and how did you go about screening companies.
Daniel Scrivner 23:58
When I was getting ready to leave square, I had a few distinct thoughts. One was that I had just had an incredible experience. And I needed to take a little bit of time to process that. And what that was, and kind of let those kinds of lessons sink in a little bit. And the other was just a really strong sense of I cannot go and do this again, at another early-stage company. I need a little bit of a break. I started thinking about Okay, well, what are some of the things I might want to do that don’t dead are, you know, things I’ve always wanted to do that now, with the new resources that I have from square going public and becoming liquid. All of the experiences that I’ve had at square helping build the company helping see it public? What can I do with all of that, and what was really interesting to me at that point in time was one, seeing if I could work for companies as an advisor. And just really quickly, you know, for context, their advisors are pretty common in Silicon Valley. They’re typically not I would say most CEOs or founders experience with advisors that they don’t actually add a lot of value. So I think you have to be very thoughtful and methodical about when to bring them on. The reason that I wanted to do it was because while I was at square, I had multiple experiences where you’re in San Francisco, you’re running into talking with people that are building companies at all points in the spectrum. You know, some of these are haven’t received venture funding, some of them are ideas. Some of them are, you know, people are actively trying to recruit a team and really get their first round of fundraising, then you have people that are at later stages where maybe they’re raising a round, or they’re raising a growth round. And so in San Francisco, you’re just in this amazing world. And in Silicon Valley, generally, you’re in this amazing world, where you can just have conversations with people all the time about things that they’re building, and no two of those conversations are alike. But I remember multiple of them, where I would talk with people who were working on something that I thought was fascinating, they clearly had, they would typically be overweight, say something like engineering, where like, I knew that the technology that they were building were incredible. But I think one of the difficult parts about being successful for venture backed companies, you almost have to, you have to be at a super position where you know, you’re not only good, technically, you’re good. from a design perspective, people really recognize and value your brand. And people will choose you over other of your competitors. And so it takes you being an eight out of 10, nine out of 1010 out of 10 in multiple axes of this spectrum, and not just being overweight, and one. And so I would find all of these teams that I was like, it was primarily be an engineering driven team, I thought they had a really incredible idea. But I didn’t think they really knew how to make it something that people could understand that people could recognize, and that people could actually could build some excitement. And really what that was, for me is largely branding, marketing and product design. It was like, Okay, you’ve got solved this problem, technically. But no one unless you’re building an API, no customer is going to really appreciate or see the deep technical side of this problem that you’ve solved, they’re going to see the user experience later, they’re going to see the design of it. And if that doesn’t hold up, and if that doesn’t reflect a similar level of quality, then people are going to leave. And I think that’s something that people have learned more and more over time. But I still find a I still run into, I still talk with a lot of founders and teams that I think get that wrong, I encountered a bunch of these, I started working with some board just not even formally as an advisor, I would just go and grab coffee with them with founders. And I just was realizing that I think that my experience at Apple, my experiences square would make it so I could help a lot of these teams that I wanted to see be successful. But I knew that they needed help. And they really needed to know how to solve the design side of the equation, how to think about branding, how to think about naming how to think about positioning, all of those things, which were things that I had took that and started doing some advising work, I also took some of the money that I got from square going public and began investing in that. And what I ended up doing is investing around a million dollars into 100 companies. And the approach that I took at the time in kind of my thinking of it, and it’s evolved a lot since then this is just you know, I don’t know, probably eight years ago, something like that now, but initially, in my mind, it was I have this super nuanced experience of helping build a really successful venture backed company, I have a lot of experience that I’ve been starting to gain. And this was at that point in time of advising teams. So now I’m starting to see how multiple is almost like I was thinking of the advising and investing work as being a scientist having multiple experiments running in parallel. And being able to learn from those initially with investing, it was like, let me just, which is very common in Silicon Valley, let me invest in some of the ideas I’m most excited about that the people I know are building that other people are building. And it evolved a lot from there to what I ultimately ended up doing. And this is the strategy that I still pursue with early-stage investing is I take a supremely agnostic approach. So I invest at the earliest stages, people are raising friends and family rounds, I invested seed stages, I invest all the way through all the ABC, you know, kind of more substantial rounds. And I also do secondary investments or late-stage investments if I think it makes sense. And I not only invest my own capital, as an individual within companies, I also am a GP and have LPs that invest alongside me now in bigger deals that I think are really interesting. And then I also am an advisor and investor and a handful of funds that I really believe in. And the idea there I think we sometimes when I explain that to people, I think one thing that people can take away or maybe misunderstand is Oh, cool. So you have really no clear strategy for how you invest. And it’s like no, that’s actually not true at all. I think in venture what I also the big aha moment for me and venture is that it’s an access class, not an asset class. And what that means is ultimately, all that matters in order for you to generate incredible returns is to be in the best deals. And if you can be in the best deals as an individual and you don’t have to pay anybody carry. Great. That’s the ideal scenario. If there’s companies that you really want to be in there. Now they’re not taking Angel capital as an individual investor, I’m likely not going to get an allocation in the round as an LP in some more standard funds. I can get into allocation there and I will pay carry, I’m okay with that. If I’m investing late stage, it’s largely because I think there’s a really promising opportunity once this company becomes public. Now, just to zoom out a bit and talk about my strategy now. Now, the way that I think about venture capital investing is it’s one component of my primary allocation in my primary allocation, as I think about it is into entrepreneurship. And what does that mean? That means that we think about capitalism all investing, ultimately, what you’re doing, if you and this is, you know, the real estate aside kind of income generating things aside, if you’re investing in something as an equity, you’re, you’re expecting that this entity, this business becomes more valuable over time. And so you’re really making a bet on entrepreneurship and people’s ability to innovate, disrupt builds, build a moat around their business, and be able to take this and scale it and build it larger and larger over time. So if that’s what you’re investing in, at the end of the day, early-stage investing is basically investing in the private side of that equation. So you’re investing in companies super, super early, when very few people have access to it. And if you can do that really well, you can get in at very, very low valuations. There’s a bunch of other risks that come with that the majority of those investments are not successful. In my mind, it’s just a way to invest in entrepreneurship at the earliest stages. If you and you know, the public equity investments that are do our investments in entrepreneurship at later stages in the business, I think it’s really helpful if you zoom out and take that perspective, I think it’s really clarifying what you’re investing in with venture capital, it helps you understand that that’s a tip, it’s honestly, just another form of private equity. And I think it just helps connect some of those dots. And so the approach I take now is every investment, you know, the vast majority of my portfolio is invested in entrepreneurs, and entrepreneurship, a large portion of that is an early stage. And that’s all of the venture investing I described. And so the approach, there is just I want as many ways to win as possible, I want to recognize that All that matters is that I get into the best deals. So clearly, you know, what I want to focus on is getting access to those Personally, I think it’s also anyone that cares more about their returns, and less about the optics and is still proving their own track record, I think it makes a lot of sense for you to be supremely agnostic with how you invest, invest through vehicles or through syndicates or through funds and pay carry if you can get access to better deals that way or more great deals that way, take your own capital and try to get into companies. But I think for a lot of people going more diversified in your approach makes a lot of sense.
Shawn Flynn 32:23
I really want to ask you questions on getting access. But before even doing that, you’re investing you’d mentioned stage agnostic, but friends and family very, very early on, how do you look at the company to see if in your mind, you think they’re gonna fall apart or move to that next level.
Daniel Scrivner 32:40
But initially, I tried to take a very quantitative approach of like, let me think about this, like I am actually investing in a public company, and try to get a sense for what those metrics are. The sense that I got over time, was that what I was doing is like playing a game in my own mind like that. You can’t do that at the earliest stages. You’re fooling yourself, if you think that by asking for a data point, you know, or another data point or a handful of metrics, that’s going to tell you anything meaningful. And the reason I say that is, I think if you’re hearing that if that’s something you’re hearing for the first time, you’re probably like, Wow, so it doesn’t really understand that. But the way I got to that point of view is just by doing all the advising work, and investing work that I’ve done by seeing so many companies, it really gives you a very broad window into all the ways that companies can fail. And yes, they can fail because certain metrics and the business aren’t working, and the company is not able to be successful at a given stage or scale or break through to that next level. But a lot of it is honestly super silly, dumb mistakes, like I’ve invested in hardware companies that did not take the kind of CFO and finance role seriously, and didn’t treat the financial aspects of their business with a ton of discipline. And if you’re in a hardware company, where it’s incredibly capital intensive, if you do that, and you make that mistake, that’s an amazing way to just commit business suicide, and an unforced error that can take you out of play. So I’ve seen that stuff happen. I’ve seen companies blow up for interpersonal reasons. I’ve seen companies that we’re doing really well. But then a competitor comes into the space with a different approach. And they are able to compete on something that’s different. And sometimes it is just the right strategy, the right approach at the right time. And that really takes off. And so I think once you have enough of those real tangible lessons learned one, you become very humbled in knowing that if you’re early-stage investing, by very nature, no matter how much due diligence work you do, there is always a tremendous number of factors that are in play on whether this company is going to be successful or not, and to what degree it’s going to be successful. So you get really humbled by that. And I think it changes the way that you approach investing. And I think number one, it makes you really understand like, you know, it’s very commonly quoted, just the failure rate of venture backed companies and yet I find it incredible that the majority of people You talk to investors if every investment is a guaranteed success, and it’s like, sorry, you’re investing in a market that has these broad statistics in play, you’re going to see this and feel this in your own portfolio at some period of time, you know, by seeing all those factors. Yeah, it just, it really humbled it, it really humbled me. And so the approach that I take now is supremely qualitative at those earliest stages, and it very much is about the leader of the company. And a lot of it is honestly, I want to know, I want to try to gauge emotionally. Are they going do they have? Are they passionate enough? Do they have enough skin in the game at all levels, in this idea, being the thing that they’re going to give 110% of them themselves to over the next 510 years to actually see this through and try to make sure that people in teams are talking about the stuff that aren’t going well, and are able to course correct really well, because I think so much of surviving and thriving and moving on to the next level, is just constantly having not so awesome conversations about, here’s what’s not going really well, and making sure that you lean into those and that you don’t ignore problems, and you don’t let them fester. And you realize that a lot of success is just grinding through and trying to iterate and refine and make sure that, you know, you’re taking a little bit of luck out of the equation one day at a time. And so it’s very much qualitative. I think for a lot of people, one that can be a little bit difficult to describe, I know that pattern matching at this point is a big part of that. And my subconscious is playing a big role in what I say yes to and what to say no to all of this stuff is stuff that I think people broadly don’t want to talk about. But I think every investor that I know, that is has been investing in venture for a very long time, has these hard to describe parts of their process and realizes that most of the time it’s much more qualitative than quantitative.
Shawn Flynn 36:47
And that concludes part one of our two-part series with Daniel Scrivner. Stay tuned for next week, where we launched part two, where we really dive into what is he doing right now? What’s with this company flow that we keep hearing about? What’s the exodus from Silicon Valley to other states and much, much more. So don’t forget to like, write a review on iTunes, and share with your network that is that helps us and encourage us to create great content like this. All right now, I’m looking forward to seeing you on next episode of the Silicon Valley podcast.
Announcer 37:21
Thank you for listening to the Silicon Valley podcast. To access our resources, visit us at the Silicon Valley podcast calm and follow our hosts on Twitter, Facebook and LinkedIn at Shawn Flynn SV. This show is for entertainment purposes only. Before making any decisions, consult a professional.
