Where is Venture Today? And How Do You Hack It? A Deep Dive w/ Sunil Dhaliwal, GP Amplify Partners

Hey everybody, it's Saster. I wanted to have another fun informal conversation with one of, I think, the most insightful and smartest cloud investors, Sunil Dhaliwal, GP and founder of Amplify Partners. Interesting for a couple reasons, but Sunil's been investing in cloud internet since before almost anybody, right? You've spent almost your entire career in venture back when a $200 million, $800 million exit might be exciting before any of this stuff was hot. Is that fair to say?

$800 million exit would be insane.

It would be insane.

One of the biggest firms around, and I think we had a $200 million fund, and people were like, I can't believe we're running $200 million in venture capital.

Crazy, right? So not that many people have started so early in their career, so long in the space, and great investments that we know, like Datadog and Fastly, and good at it. You know, Beezer Clarkson just tweeted out that at least one of the Amplify funds was one of the top-performing in the Sapphire portfolio, so that's a good thing. But even more interestingly, I got to know Sunil a bit informally, and I loved his somewhat skepticism of things in the industry, and his founder-centric view of things, which aligns with my values. So his insights I find very helpful. As an insider that's also founder-centric, that's a way that I think we all can learn. And so I kinda wanna dig in on a few topics. He did just raise a $375 million fund. I don't wanna do too much inside baseball, but it's a lot of money when back in the day, Bad or whatever, $200 seemed a lot. So we'll talk about that. We'll talk about fundraising during a pandemic. I want to talk a little bit about how ventures change, and then I want to talk about competing, investing in a competitive space, because we love Datadog as one example. I want to use it as a quick case study, but with 20, 100 vendors in this space, how can founders compete in general and with VCs in a crowded space? But maybe let's kick it off. Talk about like $375 million. Is that a lot of money? And what does it mean to a founder? Like, I read the press release, you guys have raised your fourth fund. What, what, as a founder, what should I take away from that headline number? What does it mean to me?

Yeah, so I think there's a— there's a— the headline numbers are confusing. I think you always want to put a little bit of context around them, and then they'll probably give you some actual data as opposed to just looking at headline numbers. So yeah, for us, the thing that's always managed is— for the thing that's always mattered has been how much money is each investing partner managing. And you go in the Wayback Machine to 2012 when I started Amplify. Amplify I was me and $49.1 million, right? It was— yeah, call it $50. So one person, $50. And then over the course of that fund, I recruited in, you know, who is effectively the co— my co-founder. He runs Amplify with me, um, is Mike Dauber. And Mike and I together raised Fund II, and that was $125 million. So call that like $60-ish and change. '62.

Yep.

And then over the course of that fund, we had promoted up David Byer to partner and recruited Lenny Proust away from Redpoint to join us. And we'd known Lenny from a long way back. And so when Fund 3 went out, we were 4 people and $200 million, and magically we're back at $50 million. And our current fund is actually $275 million. And we'll come back to the select fund in a second, but $275 million is now divided amongst 5 of us. With Sarah Catanzaro also joining us or being promoted up to partner. So magically, we've stayed right around $50— this was $55 million this time around. So we've kind of stayed $50 to $60 per person. And if a founder— you know, what you asked was, what should a founder think about that? I don't know if they should think anything of it.

Yeah, that's the question, right? It may mean less than you think, right?

Yeah. And I think, you know, I guess if my strategy was to show up and to try and lead an $80 million round and write a $50 million check to do that, And you're like, wait a second, $275 million divided by 5 people, your piece of that's probably $55 million. Like, this is the only deal you're gonna do the whole fund? Very small fund to go do that round. But what we always wanted to do is say, we're a Series C and Series A firm. You know, when we're gonna show up and write these checks that over time are gonna be, you know, $2 million, $10 million, whatever, then you start to think about having $50-ish million to deploy over the course of 2.5, 3 years. As probably a more rational number. And, you know, when you're talking about seed and A investors, for us that felt right. For other people that are maybe micro funds, that seems like a ton of money to manage for a human. And for people that are maybe more ABC investors, they might go like, oh, I could go through $55 million in a year. Um, so it kind of depends on the strategy. Yep.

Well, let's just press on one thing on that. So let's say I'm a founder, let's say I want to raise $1 million or $2 million or $3 million, and those are more different than they sound, right? They could be stage-dependent. Is— so now let's just break this down for a minute. Is a fifth— is a— and your first fund was $50 million, $49.9. For $1 to $3 million, is a $30 million fund too small? Is $375 too big? So the interesting learning for founders is $375 is not too big, right? And why? What's— when is a— how do I know how to do those boundary conditions when a fund's too small or too big to raise X millions?

I'll do the quick fact clarification. Clarification, just to make sure we have it right, and I'll jump back. So our fourth fund is $275 million, and then we raised a separate vehicle alongside of it that's another $100 million, but that can only be— we only use that to do growth investments in our existing portfolio.

Yeah, but I'm as a founder, I don't care, $375 million, but I'm with you. The main— for inside baseball, it's a big difference. It's $275 million and $100 million extra money for the winners, right? For the next Datadog.

And so to that end, you could say, look, if I got a billion or $100 or $50, why do I care as a founder? The thing about as a founder is how me— you know, two things. One is how meaningful is this check gonna be to that firm? And I always, I always tell people to be really skeptical of the $2 billion, $5 billion pool of capital that's like, we can give you a million bucks. They can. And if what you're looking for is money to literally write you a check and get out of your way, that's a really good setup, right? Friction could be low. They might not give a shit. They're not going to spend any time paying attention to you. But if you're looking for engagement, that might not be the right strategy. In most cases, our experience, it is absolutely not the right strategy. So I think there's this engagement continuum where you have to understand how material a check is going to be to that firm you're taking money from. And if it's not that material, you should think carefully. You also should think carefully if like, hey, is this the biggest thing you've ever done? Like, if we hit a single hiccup, are you all going to freak out because like the entire outcome of your firm is riding on our one? Yeah, you know, there's a, there's a balance. So I'd say that whole thing is one continuum to look at, is the how, how well-sized am I from a criticality. The other thing to think about, and this is inside baseball, that's really important is you should understand what that investor's posture is on following on, right? Because if I'm just doing $275 million fund for seed round and A-round deals, you might go like, man, if you're only writing $3 million checks or $4 million checks on average, does that mean you're really gonna do 90 deals out of this fund? And the answer is absolutely not. That's not how we do it because we reserve really aggressively and want to drive in more money in Bs and Cs and Ds and whatever. We put a lot of money into our companies over time, as is our design.

Yep.

And that changes the math too. And you've got to know that about your investor to think about how you should or shouldn't be counting on them for the future.

Let me ask you one follow-up on that, because I think it's an interesting thing for founders to think about. So you talked about, in essence, how much risk a fund would be taking on your investment, right? If it's a token amount of the fund, they're going to leave you alone, but they're not going to help. That's true, right? And if it's too much, it also can create some stress, right? right? What about as someone who's gone from your own solo GP fund in 2012 to a team, how does a founder think about a new partner, right? Because on the one hand, it's exciting, and what I see a lot today is founders often bond with a new partner. I just came out of Stripe, I just came out of Datadog, I came out of Fastly. I'm an engineer, I love the guy that was the CTO of Fastly, who— I'm making it up— I want him, right, or her. And yet, What if it's their biggest check? Like there's pros, but there's how do I decide, do I want, if I could pick, do I want the more experienced partner or the new partner? What are the trade-offs there? The honest trade-offs.

I think that's going to be very firm-specific. And this is, and I don't want to hedge too much. I think, I think you are right. One of the issues you're pointing out is, um, hey, people who are maybe newer in their career don't get all the latitude that people who are more senior in their career or maybe more senior in a firm have, you know, when things are going, you know, not as great as they should, you know, there, there may be a shorter, a shorter rope, so to speak. And that's very reasonable and it's real, right? I think there's a lot of great investors that are learning what they're doing, and but they kind of don't have the full trust and credibility to do everything on their own. And to some people, that's a that can be a risk to manage. As you pointed out, sometimes, and we believe this deeply, right? I believe our Amplify's single greatest asset is that Sunil and Mike have zero monopoly on the truth. And we actually believe that our younger people are far better at spotting new stuff and avoiding the perils of pattern recognition that will like make me a dinosaur sometime, you know, relatively soon. And by that, that's like 10 years, not 2 years. But that matters. And so there's a balance there, right? The people who are going to be believers and see around corners, they may not have all the scar tissue from 20 years of doing this. And that's valuable. Like, that can be your best friend as a founder. But, you know, there is this trade-off. The thing where I'd say it's firm-specific, though, is, you know, there are certain firms that run things different ways. Amplify doesn't have attribution for deals. We refuse to focus individual track records out to our LPs. 100% of our economics are, you know, shared, meaning not that every person has the same compensation in the fund, but it's not that if your deal does better than my deal in a given fund that you're gonna get, you know, juiced up and I'm gonna get juiced down. We create a lot of incentives so that We have to win or lose together. And people that do that really well, I think what you're gonna find is, is you kind of get the support of the organization rather than the support of an individual. I think founders can figure this out when they're going through deal processes, right? If you ever have a partner who's like, okay, great, I really like this, I'm gonna take you in to meet my partnership, I need 2 hours with you before that meeting, and I'm gonna tell you who's who and like which person is going to fall asleep and which person isn't going to get it and like how you're going to stage manage all these individuals. I always walk away from that going like, oh, this is really clear. You're on your own and these people are just obstacles to be overcome. You will never talk to them again in your life. They will never know who you are. They might not even recognize you at the holiday party. That's a good signal that you really need to be focused on who's my sponsor and like, how much do I trust them? And other organizations, you're like, yeah, I've had 4 meetings, I've met literally everybody, and like, I get random intros from this person, and this person is telling me that they can connect me. It feels a lot more— or, um, that's a better signal that you're not kind of solely putting your chips on an individual. But it is hard to figure that out without a little bit of effort as a founder.

Yep. So let me just summarize and let's talk about fundraising like in COVID. Forget about Amplify, but industry-wide, because you deal with this with your portfolio, would you rather have a seasoned partner that can lose the money? Listen, you've got a pretty good track record. You can write— you don't want to, but you could write off a $10 million investment. It's not going to sink you personally, right? You're up. I think once a partner's up 9 figures or more, you can write off 5%, 10%, and like maybe they're cross funds, but it's okay. Would you rather have that person, not you, but that maybe is skiing a little bit or used to be skiing before COVID or is less available, or would you rather have the up-and-comer that maybe will leave and found their own Amplify? Like it's possible these days. Which one would you, just for fun, binary, which one would you pick today?

Yeah, so I'll give you the answer and then I'll give you the rationale. I would always take column B.

The up-and-comer, the up-and-comer.

But it's not because they're the up-and-comer. I think that's a little bit of the false choice. What I think is inherent in what you're asking is, would I take the person that I love and really want to work with because I believe in them and they believe in me, or would I take the safe choice that I think like I'm gonna manage some risk and I'm gonna align with what I believe to be the most powerful individual? I think that's a losing game.

That's a good insight. Take the believer over the power center, right?

If you're an early-stage company, At the end of the day, is you need someone who will work their ass off and irrationally believe at the same time. And I don't think there's a more powerful combo when you get that individual on your side. They will be there to— like, a good investor will be there to buck you up personally when things look horrible. They will remind you why they put their ass on the line and their money at risk to believe in you. They will fall asleep sleep thinking about your company and wake up thinking about your company, and hopefully not in a bad way, hopefully in a good way. That all comes with someone who is a passionate believer. And so I would strike up-and-comer, but I would replace it with like, would I rather have that person who's just all in on me and my company? I personally would take that every time because I think that at the early stages of a company, that is literally what matters.

Yeah. Maybe even later, because when capital becomes more fungible, maybe I do want the one that wants it the most, but it's a good insight, right?

I actually— well, I think when— and this is maybe a broader conversation and how one raises capital and what's the value of different capital at different stages. Obviously, if you can get the whole package, right? They're the most senior person with the biggest stick and they've got like 8 billion Twitter followers and a cult following, you know, around the industry and they are absolutely irrational believers in what you're doing and want to make you successful. Like, that's a great combo to have. But if you're making trade-offs, I think the place where you make trade-offs away from irrational belief and into some of those other things, it's easier at the later stages of a company when you're like, I got my business, I know what I'm doing, and we need to focus on scaling and executing in ways that it's going to take my team doing it, not you doing it. And what I really need is the capital, right? I always, I always say like, the capital you care the least about is the person who buys all your shares the day you sell your company. Like, you don't really care who that human is. Like, you care about the price. When you're doing like a follow-on offering in the public market, you know, you care a little bit, right? Like, you don't want them to be someone who's gonna stick their nose into your business and screw it up. And maybe when you allocate IPO shares, you care a teeny bit more because presumably they're longer and You know, you keep tracing that continuum back to the earliest stages. At the earliest stages, you got to care the most. They're going to be closest to you. They will have an outside— [Speaker:JASON M. LEMKIN] —influence over the life of the thing. And so, yeah, I would always be going, man, really go for the believer early. Really get that person who's just all in on you and your idea and is just going to, going to go for it with you. Whereas in a later stage, capital will look just more like capital. And the further out you go, that becomes more true, and there's certainly a continuum, but I do believe that. That's been informed by a lot of experience. Yep.

Well, let's transition for a minute about a topic that I'm confused about, even though I've seen it, is what is fundraising really like during COVID And we were chatting before, certainly it's hyperactive, right? Deals are getting done faster than ever. They're getting done at Zoom. I actually think they're getting done with less diligence, not no diligence, but you don't have the 4 weeks of in-person meetings. They're getting done in days. We have a joint investment that was a sleepy company before that got 4 term sheets in days, and it's happened again and again. I can— but, um, but I also— and I want to hear your thoughts— but what I also see when I look at the hyper-investment in my portfolio, which is smaller than yours, I also don't see a lot happening with folks they never met before, with companies they haven't heard of, unless they're tiny checks, right? Tiny checks at Demo Days, fine, throw the money in. But is it easier for the well-known and the hot and harder for the rest? How do you break into funding today in a global pandemic? What do you think on these topics?

Yeah, well, I'll give you some observations about what I've seen, and then maybe we can circle back and talk about what I would do if I was a founder in this— Exactly. —environment. What have I seen right out of the gate? Everybody stopped, right? Yeah. Everything just stopped. And I think every one of us that had lived through 2001 and 2002, you know, or 2000, 2001, and then again lived through '08, '09, you know, we immediately pulled out our playbooks and we're like, here it is. This is the downturn. This is how you do it.

Cut everything. The world's over.

And like always, I think what we learned is is that every adjustment correction problem is different than the last one. Like, there are some lessons to learn, but for the first few weeks, nobody did anything. Everyone was just like, prices are going to come down, things are going to get difficult, rein our cash in, focus on the portfolio. And that happened. And then there was this next phase where a bunch of people— and Amplify was included— we raised a very small opportunistic vehicle you know, it was big enough to go do 5 or 6 deals where we looked at our existing portfolio and said, these are all great companies. All of these companies probably have management teams that are a little bit more defensive and want to have more runway. And we normally wouldn't have opportunities to give them capital in any normal environment because it would be outside investors pushing in and they don't want to take the dilution. And we just showed up to 5 or 6 companies and said, If you can take more, if you— we got it for you. And we closed 5 or 6 inside deals in a very short period of time. That speaks to what you're talking about, which is if you know them, right? If you have that relationship, you have that belief, and you have that trust both directions, yep, deals got done. And, and people, you know, people in the market, entrepreneurs wanted capital, and people who had capital to invest were like, I want to go focus on the best assets that are out there. And I think you saw this all the way up to like Silver Lake Partners writing a huge check into Airbnb. Exactly.

That's the canonical example, right? Just let's pick it. As long as I get a great deal, I'm in. Yeah.

And it wasn't even a great deal. I think, well, they got a great deal, but I think a lot of people looked at it, and we talked about this too, was when I remember past downturns, past downturns didn't create fire sale prices for amazing companies, right? Amazing companies went from being horrendously impossible nosebleed valuations to like "Alright, I guess I could live with that." And getting into like a great company with an, "I guess I can live with that." Like, that's still a win.

It's a win.

Yeah. So I think a lot of people started behaving that way. We did this big survey of all the growth investors, the C-round, D-round investors, thinking about this for our own portfolio, saying, "Hey, what are you gonna do?" And it very quickly came down this dynamic you described, which is for management teams that we've met before, we've had that face-to-face, we've kind of seen the business over some period of time. Those are the companies that we're gonna feel comfortable running a virtual process. And then we asked a question like, could you ever do something entirely over Zoom from first meeting to close? Everyone was like, ah, hell no. And even the ones that were like, oh yeah, we would do that, we asked the question like, okay, well, has that happened in your own portfolio? Any new investors showed up for your companies? And they're like, oh no, it hasn't happened to us yet, but maybe we'll do it. That was maybe April, May we're talking about. I was certainly surprised by the fact that even that has gone even more liberal than that point of view in July, August, September, where it feels like, you know, when the public markets kind of rebounded and, you know, SPAC activity took off and there was just, you know, the capital interest in the innovation economy was as strong as it ever been, I think all those same dynamics came back. I do think it's still harder to raise capital with people you haven't met before, no doubt about that. Yep. But whereas before the beginning of COVID the answer was no chance in hell, I think it very quickly changed over the summer to if you got a good business, your business will speak for itself, and people are getting more comfortable with the idea of writing those checks to people where processes are virtual. Than they ever have. Like, just like a whole bunch of people said, I'll never hire remote, and all of a sudden they're like, I guess I can hire remote now. I think you're seeing the same thing in some investor behavior. The takeaway for founders, maybe the most salient piece here, is you need to get to know— like, never worry about getting to know folks too early, right? And getting to know folks doesn't mean you gotta walk them through slide deck after slide deck and turn over pipeline and customers. There's a different way to get to know people where, you know, they want to know who you are too. They want to stay in touch. You know, they want to know that you think you're going to add 4 customers the next quarter. And then when you come back to them, you know, n number of months later and you didn't add 4 customers, you actually added 6, right? There's nothing more that inspires more confidence in a prospective investor than you telling them where you are and what you're going to do and then seeing you go do it. That is more valuable than it's ever been because you can't rely on, I'll get a whole bunch of people in a room really quickly and they'll all just decide on something.

It's a good insight. I love getting, you know, no one likes to get spam, but I love getting that monthly investor update from a founder I met, whether virtual or not, and you just watch that metric, like that great investor update, right? And you see it, and that was always a winner before COVID but you're right, everyone should do that. Like if you're post-metric, and you meet whoever, Sunil or Jason or Eileen or Hunter, whoever, send that monthly investor update. They can unsubscribe. Don't do it, maybe don't do it in Mailchimp. I love Mailchimp. Do it yourself and send it, but they'll tell you if they don't want it, but they want it. They're going to open that email. Send it in Mixmax. They're going to see it and it's wonderful. Even over 3 or 4 months, it does build a relationship, right? Even if you didn't see them in person. That is the best hack of all and send that monthly update the first of each month with confidence and It's going to get opened, right?

And I think there's another piece to just sending metrics, which is don't be shy about setting some expectations, making some claims about where you're going to go, right? Yeah. Really, you're going to say in the next so such period of time, we confidently feel like we're going to get these things knocked down. Just the simple act of telling someone what you plan to do and then actually in hindsight having delivered it, there's no greater credibility builder to me than when somebody actually is willing to put those stakes in the ground and then delivers what they say they're gonna do. Because it's very easy to like have a bunch of arrows against the wall and then go, "Oh yeah, that was our target," you know, paint some bullseyes around where those arrows hit. But when you actually go out there and say, "This is our plan," and then you deliver 90% on this metric and 120% on that metric and are right on target on this other metric, as an investor, you get a lot of confidence that what you're telling me is not a story just meant to get me excited and show up, but you're actually showing me that the business is doing what I said it was gonna do. And that's a huge deal. Yeah, it's a good insight.

You know, a related point, and then I wanna spend our last couple minutes talking about Datadog in crowded spaces, but the other reminder why, based on what you said and why I love that monthly email is we, you know, when I'm a founder, before I'd invested, when I was a founder, sometimes I feared I was almost wasting VC's time. I took my time seriously, you'd roll up to Sand Hill and you'd wait for the receptionist and he would get you a Perrier and sit you, and then you'd wait 20 minutes in the conference room and plug in your laptop. It wouldn't work. I felt like I was wasting a little bit, wasting batteries or Sequoia's time, but that's wrong. If an investor that has been doing this more than one week takes their time out to spend an hour with you, even half an hour, they give a shit, right? They care. And they're gonna remember that meeting probably. And if you send that monthly update, there's going to be a connection, right? No one's wasting their time out there, right? And the VCs do care. They may only care about you as an object to make money, but that— but forget— but remember, they care. No one's wasting their time out there, are they? That meeting never happened. That Zoom isn't— it's going to end in 5 minutes if they don't care. So take advantage of that and show, show that you hit the goals you set out, and the interest will remain, right?

I, I completely agree with that. And, and one of the— I mean, the great tools in the entrepreneur's favor is you have this the update is asymmetrically in your favor from a time-invested point of view, right? I can write the update once. I can deliver that to 25 people rather than taking 25 meetings. And of those 25 people, if 10 of them never open it, God bless. You just figured out 10 people not to spend a minute with. But for the 15 that do, and the 5 that write you back, and the 2 that are like, "Hey, this is really cool. Let's catch up in email." Like, what a fantastic way to optimize your own time and your own outreach to really think about who gives a shit. Because I always tell people that this is a truism I throw around a ton and I believe it's true of all sorts of early-stage fundraising is it is a search problem. It is not a sales problem, right? You rarely are gonna go in and pitch your heart out and overcome objection over objection to get someone who doesn't fundamentally believe or isn't fundamentally primed to be excited about you to overcome that inherent bias to the negative. But what you're really trying to do is identify the people that gravitate to what you say and are like, oh, that really makes sense. Like, I really love that idea. And tell me more about this. And you know, those interactions, like you've been in them, you've been as an investor and as a founder. I'm sure you've been in these meetings. Where you just, you get this dialogue. There is nothing more important, I think, in a fundraising process than getting to that moment. Like, where do I have engagement? And if you think about how you get to engagement, man, it sucks if you got to do 25 one-hour meetings with, in pre-COVID days, the travel time and the laptop setup time. But right now, if you're keeping a whole bunch of people drip-fed and updated on your company, you get way more efficiency in your time to figure out the 3 or 5 or 7 that actually give a darn. That's way in your favor as a founder, and people should not be afraid of using that as a tool.

It is a good one. It's way in your favor, right? In this digital world, you can— there's so many signals if these investors you keep warm are interested, right? Even just opening that email. So you're right, it's so much better than schlepping up and down or flying, flying to the Bay Area, losing a week. I mean, you meet some customers, but Boy, I'm going to fly out from Belgium to meet a bunch of— I mean, you blow 10 days doing that, right?

What did you do with a week of your time? I had 7 VC meetings. That's insane. Like, you killed the week.

I couldn't meet with my customers because I had to do— oh my, I want to cry when I hear that from a founder, right? Alright, last one. Let's talk just for a minute about Datadog, and the reason I want to talk about Datadog is you invested early, and there's a lot of great things about Datadog. The reason I find it interesting is a case study, and we kind of highlighted it at our first SaaS Europe in Paris. We did it with Olivier, but it's such a beloved product, right? And obviously it's done incredibly well on the public, and better than we thought, right? I don't know what Datadog— I remember talking with some folks right before Zoom went public, and they were thinking it would be worth $4 billion, and it's worth a little bit more today. We could check right now. And I don't know what the expectations were on Datadog. It's a great— like, the growth is, you know, top 3%, right? But they weren't— but this one is another one that outperformed. But what's fun about both of those is they're iconic. If you talk to developers, especially if you talk to folks that have put significant products into production, right, that are stressed about— they love— the next generation loves Datadog, don't they? They just love it. All the founders, all the CTOs, they love it. But yet it's a crowded space. It is a crowded space, and certainly probably when you invested. So What are the learnings for founders in both winning in crowded spaces and why did you invest in a crowded space?

Yeah. And I think what's a crowded space or not is gonna shift based on your perceptions at the moment and the perceptions in hindsight and who do you define as your— For sure. And all that sort of stuff. So, I mean, I will— let's continue down the path to answer the meta question, but in a lot of ways, Maybe this is the right answer for the meta question. I didn't look at Datadog as the most crowded space in the world. What I looked at Datadog as was these are founders who deeply understand their domain. They have lived this problem. Olivier and Alexis ran engineering teams and as running in their context of running engineering teams, they knew the tools that they wish they had or they had to build for themselves. There's this emerging thing called the cloud was showing up and there was no systems management tools. There was no server, you know, like basic stuff that they had relied on in the client-server world or the end-tier world. Like you just didn't have those tools. And so they found themselves making them or at least really understanding what the gaps were. And so it's a thing that we believe deeply in, which is this founder market fit. This idea that you as a founder are in a prime position to understand what the customer needs, maybe because you've been the customer, maybe because you've worked on similar solutions. That was number one, is I just— it really was a bet on individuals that we thought got the problem better than others. The other thing was there was a catalyst. They just didn't go out and say, you know, Zoom sucks. Making this up, the 2020 version. Zoom sucks. Zoom would be better if it had these 3 features. That can be a successful company, but it can't be as big of a company. What would have been— I'll make this up— if all of a sudden in 2020 Zoom magically only worked on a desktop, right? And somebody was like, I think this video conferencing thing can go can go way beyond that. And the catalyst here is like, we think mobile is going to take off. And, and what if there was no product for mobile? We could go make it for mobile. There was a catalyst there, right? And in the early days of Datadog, the catalyst was really clearly people. If you go to the cloud, as soon as you decide to stand up your first cloud instance, all that old tooling, the monitoring and the performance management, and ultimately the logging and other things, they got it like is gone. Like, that entire stack, forget it. If your new world is going to be built off of cloud, you're going to replatform all of these key building blocks to support you as an ops and infrastructure person. And so not only do we feel like these people have the right answer for what the product should be, but the belief was there was going to be this pull that if they got it right, that at that moment people are going to show up, they're going to flip on their cloud instance, they're going to go, "This Amazon thing's really cool. What's the first thing I need to do to make my life easier? Well, I got to have a monitoring solution." And in hindsight, when you think about why it's bigger than anyone ever has expected, I think there's 2 or 3 reasons. The first is, it's the best proxy for AWS growth in the private markets.

That's a fair insight, right? It is a proxy, right?

Yeah. It's a very good proxy for that. So they already got so much pull. The second thing, and you highlighted this when we were talking offline about how excited your team was about something like New Relic, they, they were very smart in understanding a very consistent product experience and having a very good relationship with a buyer that allowed them to extend into a few other product categories that were very natural extensions. So monitoring went to APM. And so when they launched and went after New Relic, it was, it was, it's been a huge hit to the New Relic market cap and a big opportunity for Datadog. And then they kind of then went after logging with Splunk. And I think one of the— another reason why they've both— they've grown is not just because the market size is so big and the market growth is so big in cloud, but because they have found really nice ways to extend into adjacencies. And this is like a big company move. This is not like a small founder move. Small founders should not be thinking about this in like the first couple years of their company. First 10 years.

Sure. But they are— but everyone gets there to build a billion— a billion ARR. Everyone has multiple products, we've learned, right? So you've got to do it.

And then, and then I'd say the third thing, which was absolutely unclear at the time or unknown, is, you know, you just have founders who turn out to be execution animals. Like they are just really, really good executors and hires and product thinkers and they wake up and they fight to win every single day. And, you know, Datadog is a very execution-oriented culture. And they have done— they have taken the hand of cards that they were dealt and did every single thing right. Not everything, but like they've made the right call many more times than they've made the wrong one. And, you know, that's— I don't know what their market cap is now, $30-something billion. It's an insane amount of money, especially for guys that probably raised their seed round at something like a $4 or $5 cap. They've done every single thing right along the way in building a really efficient scalable business.

Yeah, that— and maybe we could break on this, this is good coverage. That— I forget what term you used— that insane commitment thing to— or it's just, you know, it just turns out that's what builds the decacorn and the unicorn. It's not enough, but it's just, it's next level, right? If you want to go join a CEO or a company, look for that. Look for that insane commitment, right? It really is true. It's not a trope. And you talk about what I think your term was founder product fit, or what's the term that you use?

Yeah, founder market fit.

I like it, but on the other hand, I almost feel like it's table stakes. Like I just know. Like if you don't deeply understand your market, even if you weren't an engineer in the space, if you don't deeply understand the market, at least after 10 customers, it's a no. So I'm with you, right? But if you have to combine that with this insane insane, insane level, next level commitment, right? It is so hard, right?

There's a difference there between when you're writing a pre-product, pre-customer check and when you can actually talk to customers. Because you're right, right? With our mutual investment in Gorgeous is not a place where Romaine and Alex were like, we have lived the customer support problem so deeply and insanely. But once they got to the point to the point where they had enough interactions with customers, they understood it as well as anybody. Before then, you know, I would say there was a question as to how perfect they were for that domain, and they've really built that experience. But I think a lot of times when you're looking at particularly really technical products, putting yourself in my shoes, particularly really technical products and very early before you even have, you know, a beta product You do have to have a really deep level of confidence that those founders really have an understanding of the customer they're going after and the problem they're trying to solve for certain domains. And at least for us, that's been a— has been a big recipe for why, you know, some of these companies have worked, worked extremely well, and some of the ones in the portfolio that are still growing, why we think they've got this unfair edge. But That is our approach. It's not everyone's approach. There's no monopoly on ways that you can be a successful investor. One learning over 20-something years is that. So yeah, for whatever it's worth. Well, Sunil, this was great.

We went really long, but I learned a lot. Congratulations on the new fund. No pressure, right? You only have to turn the $275 plus the $100. Let's see, let's do some quick math. If you want a top-decile fund, how many unicorns do you do? We don't even want to think about how many unicorns you need in that fund, right?

We gotta return a billion, and if we're owning, you know, 15%, so here's to creating somewhere like $8+ billion of market cap.

Yeah, in one fund alone. You have to have 8 unicorns to really hit the top decile performance. Founders, think about it. It's so much easier to be an investor than a founder, but 8 unicorns per fund is not easy. It is not easy. All right, with that, we'll break. Thanks for taking the COVID break. We'll chat soon.

Awesome talking to you, Jason. Bye.