When IVP recently announced the closing of its 18th fund, I called Eric Liaw, a longtime general partner at the growth-stage firm, to ask him a few questions. For starters, getting $1.6 billion in capital commitments from its investors right now would seem much more challenging than getting commitments during the frothy days of 2021, when IVP announced a $1.8 billion vehicle.
I also wondered about succession at IVP, whose many bets include Figma and Robinhood, and whose founder and previous investors still loom large in the company, both figuratively and literally. A recent Fortune story noted that photographs of the company’s founder, Reid Dennis, are still scattered “in all sorts of places in IVP’s San Francisco office.” Meanwhile, photographs of Todd Chaffee, Norm Fogelsong and Sandy Miller (former general partners who are now “advising partners”) mix with those of the firm’s general partners on the firm’s website, which, at least visually , leaves less room for the current generation. .
Lastly, I wanted to talk to Liaw about Klarna, a portfolio company that it was news last month, when a behind-the-scenes disagreement over who should serve on its board of directors came to light. Below are parts of our chat, edited for length and clarity. You can listen to the longer conversation as a podcast. here.
Congratulations on your new fund. Now you can relax for a couple of months! Was the fundraising process more or less difficult this time given the market conditions?
It really has been a hectic period throughout. If we really go back in time, back in 2018 when we raised our 16th fund, it was a “normal” environment. We raised a slightly larger one in 2021, which was not a normal environment. One thing we’re glad we didn’t do was raise an excessive amount of capital relative to our strategy and then implement it all very quickly, which other people in our industry did. So [we’ve been] quite consistent.
Did you receive money from Saudi Arabia? Doing so has become more acceptable and more widespread. I wonder if [Public Investment Fund] is a new or existing LP.
We do not normally comment on our LP base, but we do not have capital from that region.
Speaking of regions, you were in the Bay Area for years. You have two degrees from Stanford. You are now in London. When and why did you make that move?
We moved about eight months ago. In fact, I’ve been in the Bay Area since I was 18, when I came to Stanford for undergrad. That was more years ago than I care to admit at this point. But for us, the expansion into Europe was an organic extension of a strategy we’ve been following. We made our first investment in Europe back in 2006, in Helsinki, Finland, in a company called MySQL that was later acquired by Sun. [Microsystems] for a billion dollars when that was not common and common. Then in 2013, we invested in Supercell, which is also based in Finland. In 2014 we became Klarna investors. AND [at this point], our European portfolio today is about twenty companies; It is approximately 20% of our active portfolio, spread across 10 different countries. We felt that putting our feet on the ground was the right decision.
There has been a lot of drama surrounding Klarna. What do you think of The Information’s reporting on [former Sequoia investor] Michael Moritz versus [Matt Miller]the Sequoia partner who recently represented the company and has since been replaced by another Sequoia partner, Andrew Reed?
We are small investors in Klarna. We do not actively participate in board discussions. We are excited about the performance of your business. In many ways, they have had the worst of both worlds. They are presented publicly. They are subject to a lot of scrutiny. Everyone sees their numbers, but they don’t have the coin. [i.e. that a publicly traded company enjoys]. Believe [CEO and co-founder] Sebastian [Siemiatkowski] They’re now much more open about the fact that they will be a public entity at some point in the not-too-distant future, which we’re excited about. I guess if the reports are accurate, I can’t understand the motivations. I don’t know exactly what happened. I’m glad you have this behind you and can focus on the business.
You and I have talked about different countries and some of their respective strengths. We’ve talked about new consumer companies. Reminds me of social network BeReal in France, which is reportedly seeking Series C funding right now or else could sell. Has IVP kicked the tires on that company?
We’ve researched them and spoken to them in the past and we’re not currently investors, so I don’t have much visibility into what their current strategy is. I think social is difficult; The prize is huge, but the road to get there is quite difficult. I think every few years, companies are able to establish a foothold even with the force of Facebook-slash-Meta. Snap continues to have a strong pull; We invested in Snap from the beginning. Discord has gained some space in the market. Obviously, TikTok has done something pretty transformative around the world. So the prize is big but it is difficult to get there. That’s part of the challenge of the fund, investing in consumer applications, which we have done, [figuring out] Which of these rockets has enough fuel to break through the atmosphere and which will return to Earth?
Regarding his new fund, that Fortune story noted that the company is not named after founder Reid Dennis as proof that it was built to outlive him. However, he also noted that there are photographs of Dennis everywhere, and that others of the firm’s former partners, and now advisors, are featured very prominently on the IVP site. IVP talks about accommodating younger partners; I wonder if that’s really happening.
I would say without a doubt that it is happening. We have a strong culture and tradition of providing people in their careers with the opportunity to advance through the organization to the highest levels of mainstream society. I am lucky to be an example of this. Many of my partners are too. It is not exclusively the path in the company, but it is a real opportunity that people have.
We don’t have a managing partner and we don’t have a CEO. We’ve had people come into the firm, serve the firm and our LPs, and also when they get to a different point in their lives and careers, they step back and move on to different things, which by definition creates more space and responsibility of people who are younger and who are now reaching that optimal age in their careers to help move the institution forward.
May I ask: Are those advisors still receiving carry?
You can ask, but I don’t want to get into economics or things in that dimension. So I’ll quietly reject it [that question]. But we do value his contributions, advice and contributions to the company over many years.
Obviously, there’s a valuation reset happening for all the companies that are apparently not a big language model company, which is a lot of companies. I guess that gives you easier access to top companies, but it also hurts some of the companies in your existing portfolio. How is the company going through all this?
I think in terms of companies that are raising money, the most promising ones will always have an option and there will always be competition for those rounds and therefore those rounds and the valuations associated with them will always be expensive. I don’t think anyone has ever achieved a great business result thinking, “Man, I got a steal on that deal.” You always feel a little uncomfortable. But the belief in what the company can become compensates for that feeling of discomfort. That’s part of the fun of the job.