NEA Partner Ann Bordetsky on Main Decision Frameworks in Evaluating Companies | Seed To Harvest Ep45

Welcome back to Seed to Harvest, a podcast with founders, creators, and investors about their stories, frameworks, and tactics. Today I'm joined by NEA partner Anne Bordetsky. Anne, thanks so much for coming on today.

I love the jazz hands. You have to give the jazz hands. You have to. Introduction. You just have to. I mean, it's, it's how we go.

It's our attire.

I'm so happy to be here, Paige, and it's awesome to see you again. I'm a huge fan of yours, so thanks for having me on.

Of course. I'm super excited to get to reconnect with you. And then for a bit more context for those of you listening, Anne has helped build some of Silicon Valley's most iconic technology companies such as Rival Inc., which was acquired by Ticketmaster in 2020, and has served in operator roles at Uber, Twitter, and several mobility startups. She's also been an active angel investor in many female founders. So yeah, and welcome to the show. I, I think—

Thanks.

Yeah, we were chatting a bit before the show, but I would love to talk a bit about, you know, it's been a very like fast and furious year in 2022, but also a big reset in terms of how founders are thinking about building companies. So I would love to start with kind of some of the key lessons that you've either learned directly or through the founders that you backed at NEA or in your angel portfolio. Throughout this year, and then we can dig a bit into, you know, your thoughts on 2023 as well.

Yeah. Yeah. Yeah. I mean, 2022, big year. Sometimes when I step back, honestly, I have so much empathy for founders and what they've gone through over the last couple years because, you know, I think sort of big picture, we've been living kind of like crisis to crisis, to crisis, to crisis for a couple of years now. And I think like everyone has their personal life experience with that, but at a macro level, you know, between the pandemic, between sort of, you know, the tech hype and boom and froth of the market over the last 2 years, now coming out of the pandemic, again, changing behavior, Ukraine war, energy crisis, you know, entering a recession, you know, trying to tame down inflation, like I think one of the big lessons of 2022 is we in the startup world are in no way immune to the macroeconomic forces that are playing out globally, right? I think we went through a period of time where, um, you know, we were just focused on building, right? Like if we just built the right product and if we just built the right company, if we had the right idea, kind of, we weren't really worried about the macro so much. And I think 2022 is just bringing home for all of us, you know, founders, CEOs, investors, operators. How much we have to sort of, you know, be resilient in the face of these unexpected crises in the world, but also how they're shaping the global economy, right? And you know, I think that there's a lot of conversations happening right now, you know, around the table, you know, in VC partnerships, and I imagine in boardrooms between you know boards and CEOs around just how different next year and the next. couple of years are going to be. And there's almost no exception to that in terms of industry or stage, right? Like everyone's gonna be impacted. So I would say the big lessons and things that I'm personally thinking about as an investor is one, um, you know, the good times are kind of over in terms of easy access to capital, right? And so that means, you know, we're no longer sort of looking at funding Momentum or just a big vision and kind of, you know, and we're really looking for founders and companies that have viable businesses that are really, really working or have a path to really working in terms of being cash flow positive, profitable companies. And so it's kind of this giant pendulum swing from like, let's just fund whatever's hot and like, you know, and hope it kind of works out and nobody wants to be left out to now everyone getting situated again. in a very rigorous, disciplined, and kind of fundamentals-driven assessment of what products can work, what businesses can work, and what industries are going to be a good place for investments over the next couple of years, given that there might be, you know, a recession, right? That's sort of hovering over all of us here. So big lesson around sort of back to fundamentals, back to efficient growth, back to building profitable companies and having a vision for how to do that. I think the other big lesson of 2022 is sort of, you know, companies that tend to sort of endure during this time, so thrive and hopefully ultimately survive, are ones that make changes, you know, early in order to course correct and to adjust to this new environment, right? And so, you know, the companies that leaned in and made some tough decisions 6 months ago and 12 months ago to, you know, run leaner, cut costs, You know, make efforts to retain their top customers, maybe focus and do fewer things well, like they're going to do very well during this period, right? And I think the companies that were like, probably, you know, had raised a lot during the last couple of years and didn't have to worry to go, you know, to go back to market either this year or early next year, probably have been deprived of some of that discipline and will be catching up and having to make harder adjustments. to course correct next year. So you do get rewarded for acting fast and making tough calls early. And I think like the third, um, the third big lesson from 2022 is you don't get to pick the timing and the macro environment that you're in as a founder and as an investor, you really don't. You think one thing and then it changes, right? And so resilience. And being willing to reset your own expectations and your own assumptions about what is happening around you is really, really important, right? So having that self-awareness, that curiosity, that ability to learn and adjust on the fly and say like, yeah, you know, I wish I wasn't in a tough market now, but this is my new reality. How am I going to win with these conditions in place? And just be having the courage to kind of Not, you know, not wish for something different, but lean in and, and really figure out a new way to win with the circumstances as they are. And like, you know, I think it's been kind of a mixed year, right? A lot of amazing companies got started, but it's been a very uncertain and difficult environment for a lot of startups to navigate. And I think as investors, the truth is we've probably struggled to provide the clarity that founders are looking for because we are also figuring out what the next 6, 9, 12, 24 months looks like.

Yeah, absolutely. I think one of the questions that I had for you before the show, as we look back at this year, what are some of the reflection questions that you're recommending that your portfolio founders are looking at going into this new year in terms of what worked and what didn't? Are there specific ones that have been sticking out to you?

That's such a good question.

Okay.

I have a couple of questions to recommend. You know, I think some of them are fairly obvious and I think some of them are more reflective and like the thing you do. You know, when you go off for the holidays and you have a couple days of downtime and you gotta go into like deep thought mode.

Yeah.

You know, one is what are the metrics that truly matter, right? So going back to the drawing board on strategy and asking about, you know, what is our differentiation in the market? What is our winning play? What is our wedge product? Like really getting more crisp and clear on what is the winning product that we're going to market with. And what are the metrics that matter that give us very strong confidence that we have product market fit for that product, or that we have efficient growth in how we're bringing that product to market? And, you know, in almost every case, there were too many metrics, right? And too many goals and maybe 2 different projects that were on the roadmap. And so it's really a question around like, Right. focus on what are the few things that matter that are gonna make or break the company in the next year and make sure that that's reflected in the goals That you're communicating to your own team and to the board and, you know, to your investors, et cetera. So I think it's, you know, what are the metrics that matter and aligning the company to them. You know, I think that another key question is how can you grow more efficiently?

Mm-hmm.

Um, you know, you can't stagnate because fundraising gets harder, right? You have to find a way to continue to grow, assuming the product is working in the first place. So, you know, going back to the drawing board on low CAC, you know, efficient kind of go-to-market motions, what does that look like in 2023 with the channels that are available to you? And just kind of almost challenging yourself, you know, this is how we did it last year, but how can we do it twice as efficiently, right, in 2023?

Yeah, more, wait, I guess I'm curious. I have a quick question. Like as an operator, had you been through times like this in the past on the other side of the table and kind of like How was that experience for you?

I have actually, I have. I mean, the, when, especially the early, the startups that I joined earlier in my career, post-business school, you know, that was in the, you know, 2008, '09, '10, '11 period. That was not a great time, right? In the economy, it was extraordinarily hard to fundraise. It was hard for companies to survive and thrive, right? And it required a tremendous amount of discipline. And the reason that I encourage founders to ask that question is my hunch is And I do think this is true sort of on average is, you know, a lot of startups weren't forced to be as disciplined as they needed to be because there was so much capital available in the ecosystem. And so what you find in startups is the more constraints you have, the more creative and lean and efficient you will be in executing that. I love that. Right? And so right now is a time when a lot of constraints are getting imposed again. Right. But that doesn't mean you can't hit your goals, right? Hence the questions around like, move the metrics that matter, scale efficiently, you know, and find a way to still hit your goals, but maybe with less people and less marketing spend than you would have done in years past.

Yeah, I love that theory of creative constraints. I've like talked a lot about this on my podcast, but I feel like that's like what makes the really interesting story is just like you being like, I don't know, for example, in college it would be like, all right, I have like $1,000, I'm planning like a 400-person fashion show, and like, how do I get people from the community to contribute? And how do I do this within budget? And like, that's like a smaller example, but I feel like I was so much more creative with my solutions because I had to be. And then people were like, oh, how did you think of that? And I was like, well, I had $1,000 to put in that budget, so like, I had to be.

And I think there's just like cycle that we've been in where if you raise more than you need, you hire more than you need. And the more people you have doesn't mean you move faster as a company. Most of the time, the more people you hire, the slower you start to move because there's just a coordination problem that you run into at a certain size. So the thing that I've seen a couple of companies go through and have that like aha moment is they pared back their teams. They managed out maybe lower performing team members, right? So they actually have a smaller team today and they are shipping product and executing faster than they ever have before because they're leaner, they're more focused. And I think on some level there's just this urgency of like, oh no, we got to figure out, right?

Yeah, we got to make this work.

Like there's no room for error anymore, right? And I think that that is actually driving a lot of companies to execute better today and in the last 6 months than they were with more resources and with more people. Again, you know, in, in the last couple years.

Yeah, I, I like that phrase of like less margin for error. I think, uh, it's definitely, I wanna go back to creative constraints. One of the books that you recommended founders read is Let My People Go Surfing by Yvon Chouinard, who I think is like one of the masters of creative constraints in his creation of Chouinard, um, which later I think got bought by Patagonia. Is that right?

He's the founder of Patagonia.

Yeah, he's the founder of Patagonia. That's right. But it started as like Chouinard was like the original name of the company. What are other founders, what are other books that you would recommend founders read that help them think outside the box? I think that's a really great example of one.

Hmm. Well, at first I want to tell you why I think that book is really special, just for a little bit of context. And I do recommend like anyone in the business world or in the startup world read it because even though Patagonia is not a startup, never took Private capital, never raised venture capital, never took private equity capital. It's essentially a family-run business, but it is a beautiful and marvelously successful example of someone who built a values-driven company, built incredible products that people wanted, did it in a very, very scrappy way, right? And ultimately created so much value that they could actually whether or not to take on outside capital. And Patagonia never chose to do that. And one of the reasons for that is. They wanted to maintain control and they wanted to stay aligned with their, you know, environmental ethos. And that gave them a lot of freedom. And so I think it's just an interesting counterexample to everything that we see and read about in the startup world, right?

Yeah.

You gotta raise your pre-seed and then your seed. You gotta become a unicorn and then a decacorn. Like, yes, that is a path you can take for building a company, but there are other paths and you should study those as well. So that you know which path is the right one for you. I think the other book I absolutely love is Shoe Dog by Phil Knight.

Yes.

I read this years ago now, like years ago now, but what an amazing example of, again, scrappy company building. Like literally you don't have enough money to make it to the next day. You have to figure out, you know, how to get working capital and, you know, pay for inventory, et cetera. And it's such a beautiful story of how he built this iconic brand and, you know, from the ground up with many points at which, you know, he thought he was going to fail and the whole thing was going to have to be shut down. And yet he made it. And it reminds me a little bit of another, this is definitely not sort of, this is in that, you know, direct lane of startups. So not a great answer to your question, but I think it reminds me a lot of, you know, the Hard Things About Hard Things by Ben Horowitz, which is a classic and everyone should pick up and like read again before 2023, because the themes will resonate of You know, those kind of near-death moments that, you know, every company goes through and, you know, having the fortitude and the creativity to navigate that in the moment. Because I think, you know, a lot of founders will face that next year. Let's see, other creative. I think The Originals by Adam Grant is a good one. Again, read this one years ago, but, you know, he kind of makes the point that people who really truly change the world. And do something that we remember. You know, don't think like everyone else, right? They're not conformists. And I think, you know, that's what founders really are, right? And in some ways we do expect founders to conform, right? There's a certain pattern matching that happens in venture. But if you really study the history of like very successful companies and the founders and CEOs that led them throughout, you know, whether it's You know, Uber or Facebook or, you know, Snowflake or, you know, there's lots of other examples, right? Like, yeah, these people are unlike anyone else and embracing that uniqueness I think is really important for founders.

Yeah, I love that. Like the sense of uniqueness is like a really interesting one. I feel like it's really interesting when you find a business that's, and you meet the person and you're just like, they're so specifically like intertwined and you can feel like the elements of them imbued throughout their business, which is like really special. So I want to go back a bit in time because I, some of the listeners that we have are aspiring angel investors and you were joking before, but your side gig is merging with your main gig in that respect. But I'd love to hear like, what was, what was your like next hour after you made the decision for, you know, one of those first angel investments that you made? What did that like feel like for you? Or what was that process?

You know, when I first started angel investing, I was very focused. Like my reason to even begin angel investing was I wanted to support female founders. I just felt very strongly, and I, I still feel this way to some extent, that there was amazing talent, you know, women operators, builders, engineers that were getting overlooked by the industry. So that was sort of my mission is like, I wanted to find amazing women Building, you know, big ideas, big companies, and back them on their journey very, very early, that first kind of check phase, and believe before other people believe. You know, that was, that was my goal. And I think that, like, my first 2 checks, one was into a fund focused on female founders. You know, I was one of the first people to be like, yes, you should go do this. I can write you a check. It's going to be very small, but I'm going to help you in a lot of other ways, but you should definitely build a fund focused on female founders. Amazing idea. And the other was, I think this might've been Alpha, which was a community. Oh yeah. Yeah.

And I like, yeah, I see that. You know, I participated on Alpha. I was like at TBC Capital and I think they were like just launching in beta in like 2019.

Yeah.

And I was like, oh, this is so cool. It's like an anonymous social media where you can like post about your experience being a woman in tech. And like, it was awesome.

It was like, I was like, oh my gosh, it was like Reddit for women in tech and designed to be this very empowering community for professional connections. And so it was like a win-win-win. Like, yes, it's like a female founder building for women. And it's, you know, so, you know, I think the moment after you write those angel checks, it's both exhilarating, like, wow, I'm finally doing it and totally terrifying. You know, you're like, oh man, I just, you know, you know, you're putting capital on the line. You have no idea how it's going to work out. And I think a lot of angel investors, like first couple of checks, you sweat it a lot. You sweat it a lot because you're new to it. And you should, and it's a learning journey and a learning process, but you're honing your own, I think, process and philosophy around like, how do you diligence companies as an angel? And then like, what ultimately makes you say yes to backing someone? Because it does come down to your belief in that individual and what gives you that internal conviction that this is someone really special or this idea is very special. So I think angel investing, there are many different ways to do it. I don't think you have to do it at all. I don't know why we like lionize and mythologize angel investing as much as we do, but it's great for the ecosystem. So people have to keep doing it.

Yeah.

But I think there's lots of different reasons to do it. And it's important to be honest with yourself why you're doing it. You know, some people do it because they want to really help certain communities. Some people do it for financial returns, right? And some people do it because they want to provide access. to underrepresented individuals in venture. Other people do it to learn and to stay close to the startup world and to innovation, right? And you can do it at all kinds of check sizes. And so, you know, I'm, anyone out there who's interested in angel investing, I'm happy to give you kind of like my lessons and advice, but I think it's a great way to learn and it's a great way to see for yourself if investing is something that you might be interested in down the road.

Yeah. And, and very clearly investing was something that you were interested in down the road. So I would love to hear more about like what your journey was like joining NEA. I guess like Luke Pappas is the one that introduced us and he's just said so many fabulous things about NEA and he talked a lot about his journey in joining, but I would love to hear more what that was like for you.

Yeah. Well, and I love working with Luke, so, um, shout out Luke.

I'm going to send this to him.

He's a great part of NEA. I mean, look, for me, once after Rival, I was at a career decision point where I, you know, really wanted to try venture. And the question I think for anyone who's interested in trying venture is sort of what, how, how do you wanna practice venture, right? There are many different ways to do it. And I think part of my journey in joining NEA was one, you know, I wanted to be part of an organization with really kind, smart, collaborative people who had a lot of experience in venture, who would be great sort of mentors that, you know, I could learn the craft from, and where my operating expertise and my experience at Uber, Twitter, and other startups would be really valued, right? Because it would add something to the firm and add something to the organization. So finding that overall fit is really important, and I saw that in NEA. NEA is known for Being very founder-friendly, which is important to me. It was like one of the first things on my list. High integrity and really, you know, I think humble in, in, in sort of always putting companies and founders first as opposed to like chest pounding about like, look at how great we are as a firm. Like we truly put founders and companies first in the way that we interact with the world and we stand behind them. But I think part of it too was that I wanted to be in a position where I could Lead investments, be a lead investor, and really sit on the boards of the companies that I invested in because that is sort of the highest level of commitment that you can make to a company. Taking that board seat, being the lead check, that means you are long-term committed to working with that founder, working with that company, and really taking them from initial check to hopefully exit or IPO.

Mm-hmm.

Um, and it's really interesting and, and challenging work, but I think, you know, NEA is a multi-stage firm. We do everything seed to Series B. We have a growth fund. And so it was a place where I felt like I could really, you know, work with a lot of different, you know, founders and companies and find those, you know, really special relationships to cultivate for a long period of time.

I love that. Well, yeah, super cool to hear more about your experience there and digging like a bit deeper. So we're talking about this a bit before, but at Twitter you had a dual role in terms of working on Twitter Commerce and then the team that led partnerships. So I wanted to get a bit into the weeds of kind of your thoughts on the future of Twitter as we see different product changes from like Review shutting down, which is Twitter's newsletter service, to rumors about having more longer form content on Twitter. I think like that Twitter had like an incredible amount of like tech debt that it worked through in the past couple years. So it's been really interesting to see.

Yeah.

The company pushing out different innovations in commerce. I'm sure these were things that you were thinking about when they were there. And yeah, I would just love to hear like some of your thoughts on the future of the platform. It's one that's dear to my heart based on kind of like, it's like how I ended up running a venture fund. So yeah, I would love to hear more about it.

So that, I mean, I think that's the most interesting thing about Twitter is that we are all constantly in our own way kind of co-creating the product together. Right, and what we experience on the platform. And obviously, I think, you know, within the tech community, Twitter is still a product that does a lot of good, right, in terms of making connections and bringing people together and knowledge sharing. You know, I left Twitter many years ago, but I will say that, of course, it's a topic du jour, so it's fun to pontificate on it. I'm under no illusions that I can predict where Twitter is going at this point or what will even happen tomorrow, right? With the product that feels like an impossible task. But what I will say is that, um, you know, I think something that's been true about Twitter for many years now is it is this amazing platform, but one that has, you know, stagnated in many ways in terms of really keeping up with the times of the way that we consume content. You know, TikTok, right, came along and did short-form video, right, and got us all addicted to this amazing, really positive, fun, entertaining experience on there every day. You had Snap come along and really, you know, disrupt sort of conversation and chats with friends and creative self-expression. And so time and time and again, I think Twitter has let these kind of trends and opportunities go by and hasn't really innovated, you know, you know, in terms of introducing new product experiences, right? And Twitter Spaces, just as a reminder, only came about because of Clubhouse. You know, and so, you know, I think that the reality is there's a lot of low-hanging fruit for the product, right? And where it could go with the right kind of leadership and the right kind of product and engineering leadership at the top. And so, you know, you could introduce live streaming, you could introduce video, you could, you know, enable more creator monetization on the platform. You could certainly, you know, give another shot at commerce, right? Which Instagram ended up doing very, very well and Twitter never fully committed to, right, as a company. And so it didn't see the benefit of sort of mobile commerce and creator commerce within its own platform. But none of that really matters if you don't maintain engagement and if you don't maintain trust. And that's where, you know, Twitter is falling on its face right now, like day in and day out, is losing trust with its users and its advertising base. And if you lose trust, that is something that is very, very hard for any consumer product to come back from. It's very rare that if you have a fundamental loss of trust in a platform, you know, that you can still maintain engagement over time. And so, you know, I think we're still kind of in a downward cycle with Twitter where it's going to get worse before it gets better. But I think if Elon and whoever he brings into the company to lead it from here can maintain and encourage engagement. Content creation, you know, participation, and actually increase that engagement over time, then it's kind of the world's your oyster for, for, for new products that you can introduce because now you're a private company. You know, you're not subject to quarterly earnings calls. You have a lot of room to run in theory for trying and testing, you know, new features.

Okay. I have one. Question for you as we wrap up, and this is more for the founders in the room. How do you think about evaluating companies that you are interested in investing in? Yeah. What are kind of like your, I would say your 3 main decision frameworks?

So I would say, you know, broadly speaking, you know, whether it's consumer or SaaS, right? Consumer SaaS, you know, fintech marketplaces, right? I think this is true across any of those categories. I'm looking for a truly differentiated product, a product that has kind of a moment of magic in it that really feels fundamentally better or brings fundamentally more utility to the user than what they've experienced before. There's a lot of incremental innovation that we see from startups and, you know, but I think it's rare to kind of start from something incremental. And build your way into something that feels very disruptive. And so what I'm looking for is products where it is 10x better, or it's a magical experience that we just have not seen before. Because that, you know, if we look back to like that first time you used the Uber app and you pressed the button and you got a ride, it was like mind-blowing, right? And then we didn't wanna go back to the, to the old normal.

Yeah.

And so that is where the bar is and should be most of the time for new products. So I look for that, or at least a vision for how to build that, right? In a particular category. Then I really look for just business fundamentals, right? How are you acquiring your users? You know, how efficient is your go-to-market strategy? Do you have some powerful forces at play that can really accelerate the company, whether it's built-in virality or network effect? You know, and are you kind of designing virality into the way that you're building the product?

Yeah.

Or for SaaS, you know, that could be bottoms-up adoption, for example. And the third thing is really around the founder, because the founder matters almost more than anything else. You know, is there founder opportunity fit?

Yeah.

You know, does the founder have an incredible command of how they're going to build the company over time? Are they thinking about, how do I build a category leading company or a category creating company? What's my wedge? How do I win? Like, can they play the chess game that is required on the field? In order to really, you know, truly win a segment or a category and therefore create some enduring, you know, value out there. Because the reality is, you know, ideas are a dime a dozen. It's all about execution. And almost every startup has a copycat. So it does come down to the founder's ability to lead and navigate and attract amazing people to the cause. And when all those 3 things are there, I get very, very excited. But I don't predict the future. Like, I don't think VCs, and I would say this for myself in particular, I'm not sitting here being like, here's a company that needs to be a builder. Here's the perfect trend. And like, if only someone were building against that, like that's, that's not for us to decide. I think founders come up with the ideas. Founders see the trends, founders see the future. We just have to make sure that, you know, there's a viable business there and that we are the best investors, you know, to Awesome.

Well, Anne, thank you so much for joining us today. I so enjoyed our conversation. Um, and then where should people follow you slash find you on the internet if they wanna follow you?

Oh yeah, so you can follow me on Twitter @AnneBordesky. Very easy to find. You can definitely find me on LinkedIn. You can @AnneBordesky find me on Medium, pretty much any platform. It's @AnneBordesky. It's very easy. You'll find me. I'm there. And thanks for having me on, Paige.

Yeah, of course. Special thank you to producer Riley Jennings and podcast editor Tate Doherty for your help on this episode. If you're listening and you'd like to connect with me, follow me on Twitter or LinkedIn, Paige Finn with 3 N's. Thanks again for listening. I really appreciate it. You can look out for new episodes every Monday at 5 PM PST. And if you'd like to learn more about those strategies and tactics of seasoned institutional investors and rising venture stars, check out our YouTube channel at Seed to Harvest. Also, my TikTok channel is Seed to Harvest, where I post a lot of behind the scenes. Um, and if you like this episode, please rate and review this podcast wherever you get your podcasts, if that's on Apple or Spotify. Anyways, thank you so much for listening.

I hope you have an awesome rest of your day.