Sramana Mitra: Talk about some of the highlights of your portfolio. What have you invested in that you’re excited about?
Nate Redmond: We have been fortunate to watch the early development of our portfolio. We have this company called House Canary. We have a belief and a thesis that residential real estate, as an asset class, is larger than equities in the United States. Despite its size and fragmentation, the level of opacity is fundamentally different than what you’d see in the equity or credit markets.
As transparency around pricing of underlying security, of how to trade, and how to transact has come to those markets, you see a very significant increase in velocity of transactions. When you look at residential real estate, the behaviors that people have exhibited around how frequently they move and the strategies that they take to manage that home has really not changed over the last 25 years.
At its core is the fact that there are a few people who really understand what their home is worth. If you start by building a clear sense of value of that home, you can begin to not just chip at the edges of improving the existing process but actually begin to rewire the entire transaction process. We are incredibly excited about the long-term prospects of that company.
Sramana Mitra: You’ve been doing this fund now for two years with this investment thesis. What have you seen in the deal flow that could be called a trendline? What are the dynamcis of your deal flow?
Nate Redmond: We came in with a thesis based off of the last 15 years that most investors have sought to differentiate themselves on the basis of access. While access remains very important, it’s no longer sufficient to really drive differentiated insight and performance. In other words, the fact that you could see Airbnb was important.
It turns out lots of people saw Airbnb. Just having access wasn’t a core differentiator. It was about having a strong enough point of view around where this company could go and how it can emerge. When we looked at our deal flow, one of the dynamics that has changed across the venture capital industry is an explosion in terms of the number of companies. For most people, that causes the standard filters to just become overwhelmed. The byproduct of that is, most people fall back on these heuristics of, “I’d love to talk to you. Can you just make sure you get a recommendation from someone I know?”
That’s an easy point to rely on. That causes you not only to miss really important opportunities, it causes the investment process to tend to focus back on people who are introduced and to be like you. Most VCs are white males. Therefore, most entrepreneurs who get introduced by their friends are white males. We’re focusing on different ways of opening up the top end of our funnel and having a very efficient manner by which we can work through a process to really engage a much broader array of entrepreneurs.
Sramana Mitra: Do you have a layer of principles or associates who are fielding a larger inflow of deals?
Nate Redmond: We do have an incredibly talented team that we’ve begun building. A lot of this is a focus on systems. The judgement that we’re developing is one that we’re really intending to accentuate and to accelerate through the systems that we have.
Sramana Mitra: Unfortunately, the industry is very hard to break into for people who are completely coming cold into it from random outskirts and find their way in. We try to bridge that problem for our entrepreneurs. Our entrepreneurs are not just white male at all. It’s very diverse.
Nate Redmond: Just to be clear, I’ve always had a lot of respect for that and for the community that you’ve collectively built here. It’s really wonderful.