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“No Rain, No Flowers: Funding Start-ups” Lessons From Davos

"No Rain, No Flowers: Funding Start-ups" panel at WEF 2024

At the World Economic Forum’s 2024 Annual Meeting, Managing Partner Navin Chaddha spoke on the “No Rain, No Flowers: Funding Start-ups” panel. Watch the panel recording or read the full transcript below.

Sara Kehaulani Goo: Hi, good morning and thank you so much for joining us this morning for our conversation. We’re calling it “No Rain, No Showers: Funding Start-ups” here at the World Economic Forum. I want to welcome our guests who are here in person, and I also would love to welcome our guests who are joining us online. If you want to join the conversation, please use the hashtag WEF24. I’ll be your moderator today. My name is Sara Kehaulani Goo. I’m the editor in chief of Axios, a Washington, DC-based news organization, and thrilled to join you here to have this important conversation. And the topic here is we’re going to over the next 40 minutes discuss a global picture of funding for startups. And here we have some great panelists who bring different perspectives, not only from their different geographies but also their different aspects of the business.

And why does it matter? That’s what we say at Axios. The why it matters is that global funding and entrepreneurship is an important engine, of course, of economic growth, of jobs, a driver of the economy. And yet as many of the panelists will probably talk about soon, access to capital remains very tight. And just last year it was down 42%, global venture capital in 2023 year over year. So we’re here to talk about that, but also to look forward to 2024. As many of you know, there’s a lot of excitement also about AI and funding and investment in that space in particular. So without further ado, I’d love to get started and introduce you to our esteemed panel. First I’ll start with Navin Chaddha. He’s the managing director of Mayfield Fund based in the United States. Rishi Khosla is co-founder and CEO of OakNorth of UK. Ahmed Karsli is co-founder, chair of Papara from Turkey. And Jacqueline Poh, she’s managing director of the Economic Development Board of Singapore. So welcome to all of you. I’m so glad that you’re here.

Navin Chaddha: Pleasure.

Sara Kehaulani Goo: Okay, so we’ll start with you Mr. Navin. I read just a few months ago that you are a contrarian, venture capitalist and that you’re writing more checks than ever while others are pulling back. And you did raise a lot of money in 2023. So I’d love to hear a little bit more about your philosophy and this contrarian approach to investing.

Navin Chaddha: Absolutely. So first, for context for people, the firm I manage, Mayfield, we have been in business for 50 plus years. So we have seen many upcycles, many down cycles and have been very lucky to be part of a lot of iconic companies, 120 IPOs, 225 acquisitions. And what we have learned is when markets get troubled and when they are tough, that’s a great time to start an early stage company. And the aim is when you’re investing at the peak of markets, assets are inflated. And when markets dip, you can get in early, you can get in cheap and help build companies. And so our approach is when 2020, 2021 was happening, markets were peaking, money was pouring into venture capital. We slowed down based on our patent recognition over the last 50 years and we said this is the time to sell rather than to buy.

So we created a lot of distributions because paper gains IRR, TVPI is only so helpful. LPs want money back. Our job is to take small boxes of money, make them bigger and send them back. So I think our feeling is the moment the market’s got sanity and they’re tough, just lean in. So we have been growing year-on-year, are investing by 50% and it’s okay. And I think there’s a lot of talk about, and our focus is the United States, that funding levels have gone from 350 billion in 2021 to 240 to 170. But just as a reminder for people 2018 and 2019 was 140 billion and 2012 was 40 billion in the United States in venture capital.

So we should stop complaining, right? 170 billion is still 4X of what it was a decade back. And you can take any amount of inflation, put it cumulative, you still don’t get to more than 4X. So we are still up two to two and a half X. There was a lot of indigestion in private markets. It’s getting cleared up and it’s survival of the fittest. So we are extremely excited to be funding early stage companies, that’s what we do, and help them become industry leaders of tomorrow.

Sara Kehaulani Goo: And oh yes, go ahead.

Rishi Khosla: Can I just pick that up? So I’ll give a slightly adjacent viewpoint. So OakNorth’s a business, which is a digital commercial bank that focuses on really funding scale ups. And to take your point, Navin, if I look at 23 for us, you look at sort of the fall of SVB and then lastly, sort of First Republic and Signature. All of those banks really played into the entrepreneurial class, right, in terms of supporting the entrepreneurial class. And for us, again, it was one of those moments where we stepped up.

Navin Chaddha: Yep.

Rishi Khosla: Right. So last year, 23, we would’ve lent an additional $2 billion in terms of gross lending. We are a UK-based business, but we decided to enter the US because of,-

Navin Chaddha: Makes sense.

Rishi Khosla: Somewhat of the void which was left. And if I look back at our history, we started the business since September 2015. When the Brexit referendum vote happened in 2016, we were still a very small business, but we tripled the size of the business in six months, right, because everyone else retreated. Covid, right, at the beginning of Covid, everyone else retreated, we stepped forward. So I think there’s a lot to be said in that when there’s general exuberance, whether it’s in the equity or debt markets, it’s sort of the time to be slightly more cautious because everyone’s getting a bit heady. But at times like this is exactly when, if you lean in, our view is you end up building a better business and you support great businesses because the entrepreneurs which are actually doing something in this type of environment tend to be the stronger entrepreneurs who actually have the wherewithal to actually grind through.

Sara Kehaulani Goo: And can you go a little deeper on that? I’d love to get your perspective about where do you feel we are now? There’s a lot of buzz and excitement about investing in AI companies. Everybody’s putting AI attached to their business, whether that’s real or not because it does have a lot of buzz. Do you feel like we’ve hit bottom when you think about the market, down market, are we still there? Are you investing more this year?

Navin Chaddha: Yeah.

Sara Kehaulani Goo: Basically.

Navin Chaddha: We are going to be investing more this year and I think markets go through ups and downs. Humanity is optimistic. There’s always a next new bubble which gets created. The next new tulips get found. And I think this wave of AI is actually as big as the PC era, and it’s a fundamental transformation of how humans are going to interact with machines and how AI is going to be able to do cognitive tasks to amplify humans. And whenever that happens, right, like there’ll be a lot of excitement, a lot of buzz, and as a result, fewer companies, more capital chasing again, the valuations will go up. So what we have learned is we cannot, as a venture capital firm, look, as an early stage firm, we were investing in AI for five to 10 years back. And then with GenAI, it happened last September with ChatGPT.

But as a VC, what we have learned is you have to look for the next wave and catch it and be ready when it’s going to peak. But when it passes you, that’s no point if you have so far to go. So you have to have a long-term perspective. We already have like 25 plus investments over the last five to seven years and these will grow and we’ll be careful on which companies we invest in in the AI hype, but the stage we invest in primarily at the inception stage, very difficult to invest. It’s people with paper and pencil ideas and prices are still good. And our job is to find the diamond in the rough. And that’s what we love doing. And it’s a craft, right? There’s no numbers, there’s no market, there’s nothing. Sometimes there’s no teams and then you help build them and the follow on money just gets poured.

So it’s the same story. It’s the same story in which you move from one wave to the next, but this is real. Real companies are going to get created. And you guys do a great job of covering some of these things. You look at the market caps of the magnificent seven, like the way NVIDIA has grown, the way Microsoft is growing, Google, Amazon, Facebook, it’s just amazing. And today the value has been accreted with the hype towards these big companies, but there’s a lot of open problems.

Sara Kehaulani Goo: Yeah.

Navin Chaddha: So I’m very, very bullish, but very mindful of how VCs invest because everything is not going to be worth 10, 20, 30 billion. And also a word of caution to entrepreneurs, whether you take debt, whether you take venture money, it’s all borrowed money. Let’s build real companies and not just focus on just growth, growth, growth. Look at, hey, when can I be self-sustaining? So I think hopefully all of us have learned from what we have seen over the last 20, 30 years and apply those principles. Otherwise, our job is not as a venture firm. We’re not a media company to accumulate logos and buy beachfront properties. Our job is to create financial returns.

So it’s a healthy balance, right? At the end, investors, institutional investors, look at venture capital firms and say, okay, public market bonds do this, public markets do this, buyout does this, real estate does this, private equity does this. I’m giving money to the most illiquid asset class. And you’re supposed to make, as a top tier firm, 500 to 700 pips more per year than some of those other assets which are less risky. So at the end, it looks great. You’re creating startups, building brands, you’re a money manager, right, like at the end to be able to raise money. When you take money from people, you have to multiply it and give it back. And that’s where, right, people who have been in business for a long, long time just realize it’s not about this hype, it’s about making money.

Sara Kehaulani Goo: Ms. Poh, I’d love to bring you into this conversation because I read that your agency has been focusing on AI as a focus for supporting the growth of startups. So what is your perspective? We just heard the private sector perspective, the venture capital perspective.

Jacqueline Poh: I think there are many perspectives on AI, but one of the worst reasons to set up an AI company, or to invest in an AI company, or set up a fund, or aim to raise a fund is to tag AI behind everything in the hope that that’s the only reason why someone will invest in you. So I would be a bit cautious about the hype. Singapore’s put up a national AI strategy, a second version. We’ve put up our first version a couple of years ago here in Davos in fact. It combines governance as well as a big focus on use cases as well as what we’re doing for compute and the development of our own LLM, which is called SEA-LION, the Southeast Asian large language model. Southeast Asia is a hugely vibrant area and location for venture capital.

Singapore alone has 400 VC firms and funds, including some of the PEs as well and some of the biggest ones in the world. We have 1,100 AI startups. And even then I say, show me the business model. I think that we are at the stage in terms of generative AI, where it is unclear where the commercialization opportunities will lie. Just because NVIDIA is making money from GPUs does not mean that an applications company is going to make money on regs. So it’s very important for us, for any investor in any company to figure out first of all where the value is actually residing for AI. But I think that it’s hugely promising. I think the potential is there and I think that it’s given life to an otherwise possibly fairly more abundant sort of VC market in a time of rising interest rates.

Sara Kehaulani Goo: Right.

Jacqueline Poh: But the fundamentals will always remain and the smart money will follow the smart money. My own sense about the overall market is that similar to what my colleagues here have mentioned, it may be time to come in. This is a time where even though interest rates are likely to remain maybe a little higher than anyone would want for a bit longer, they are showing signs of moderating and valuations have definitely come down first in the United States and then in Europe, and then they decided to come down in Asia. And some things are looking a lot more reasonable, particularly growth stage companies being a lot more reasonable. So various ways of funding including acquisitions by existing companies. It is not a bad time if you are an existing company and you want to help that startup exit through an acquisition as well.

Sara Kehaulani Goo: And let me just mention something a little bit provocative here since you talked about AI, and this is really a question really about the distribution of investment globally. Yesterday at an Axios house event, we had Alex Karp, the CEO of Palantir, join us for a conversation. He said, this was the headline, that he criticized. I guess it was, I don’t know if it was a criticism or just an observation from him, but he said that “The European startups scene is anemic on AI and that Americans have a huge advantage in terms of their investment and the innovation they’re seeing there.” I’m not just saying that because I’m American. I would love to hear your perspective to respond to that. And is he right? Do you feel like there’s enough investment either from the private sector, barriers to entry lowered by governments or regulation to help that more even distribution?

Rishi Khosla: In terms of specifically Europe? So I think clearly if you look at where the large innovation has come from, right, so you look at OpenAI, you look at Meta’s model, you look at sort of Google’s model, Google DeepMind. DeepMind is actually based in London. Right. So fundamentally Bard is created in London. So whether the innovation, whether there’s the innovation talent, right, in Europe, I believe absolutely there is. Whether those are European companies which are actually taking those and sort of commercializing, clearly not. Right. They’re American companies. And I think that’s just a wider topic. Right. That’s just like, it’s not AI specific.

Sara Kehaulani Goo: Right.

Rishi Khosla: Right. It is a question of, again, the size of the ambition. It’s a question of the availability and depth of capital. It’s availability. I mean, I was at a previous session this morning and the Moderna CEO sort of shared the fact that they had spent $5 billion before they made their first dollar of revenue. Right. And that was in response to Oxford University talking about the fact that they’ve got a part of funding for startups, right, which lets be clear, is probably a small nine figure number. Forget about a 10 digit number. So the size of capital which is available for that for, I mean you look at how much OpenAI has raised, right, clearly from Microsoft and from others. So all of those things I think drive that fact. Now where are the users and where’s the application and therefore the outcomes from AI going to be felt? I think I’d say we’re very high on the hype cycle at the moment, right, but we’re very low on the actual outcomes delivered.

Sara Kehaulani Goo: Right.

Rishi Khosla: Right. And like with most of these things, I mean, I’m not old enough to remember the PC era cycle, but I’m old enough to remember the internet era and I remember sitting there in ‘97, ‘98. Right. And the whole world was going to change in the next 12 or 24 months and it didn’t, but it did in the next five or 10 years. Right. And I think with GenAI we’ll be exactly there. Right. And it may go quicker, it’ll probably go quicker. And I think that European companies will adapt and be users of and innovate with the technology, but they may not be the entities which are commercializing the technology but creating it.

Sara Kehaulani Goo: Right. But Mr. Khosla, you’ve also, I’ve heard your critique of there not being enough investment in certain types of companies, particularly in the UK. So I guess from where you sit, what more needs to be done?

Rishi Khosla: Well, I’m a massive, how can I put it? We’re massively passionate and vocal about the fact that the UK, and I’d extend this to most of Europe, we don’t have the right environment to actually enable entrepreneurs to scale businesses. Right. We have a great environment to help them start businesses, but the funding markets, the availability, or talent, right, in terms of just people who’ve had experience scaling. Right. You see it in the valley. Right. You want someone who can go and spin up a new product line within an existing business, right, and take it from sort of zero to one and then get someone else to take it from one up. It’s like you’ll have a list of people that have done it before, right? In Europe it’s like you’re scratching your head because it’s like the motion hasn’t been driven, right? Because there haven’t been that many businesses which have sort of gone from startup to true scale.

And so you’ve got that aspect. You’ve got the size of the ambition point, right, where if many European entrepreneurs, you get to the point where you create a business for, which is worth tens of millions, hundreds of millions. Right. And they’re willing to sort of say, you know what? That’s good.

Sara Kehaulani Goo: Yeah.

Rishi Khosla: I’m sort of going to step off this and let someone else take it forward. Whereas clearly at least the Valley mindset, et cetera, is that’s getting started. Right. That would not be a failure, but it wouldn’t be like a home run. Right. So I think that there’s the cultural aspect, there’s the availability of talent and then also the availability of funding and public markets. I mean clearly our public markets across Europe just are not, there’s no depth for growth companies and therefore they’re no growth investors.

Ahmed F. Karslı: I feel quite lucky by the way, when I hear about funding cycles, funding problems. Because as a bootstrap company, you actually don’t care. You have a chance to sort of focus on what you build, right?

Rishi Khosla: Right.

Ahmed F. Karslı: Which is one of the biggest advantages. And when it comes to tough times, as you mentioned, for a company operating in an emerging market like Turkey, tough times are just another Friday.

Rishi Khosla: That’s also true.

Ahmed F. Karslı: Just think about what we have been through in the last one year. Last year, only in the last 12 months in Turkey, we had elections; we had many political problems in surrounding neighboring countries. We had massive inflation, even if it’s getting better right now. And we had a massive earthquake where we lost more than 50,000 people. But still that helps a lot as well because you always have this advantage of building some resilience even if it is unintentionally. Just to give you a great example, we grew by four times in revenues only in the last 12 months while having those problems. So sometimes I feel like I’m quite surprised, but I here just said a year ago, close to a year ago, we made an acquisition in Spain and the investors of the company we acquired were actually complaining about inflation. And it was 6%. We were dealing with 65% inflation in Turkey. So sometimes as actually, like you guys said, those tough times might be a good teacher as well.

Navin Chaddha: Yeah, I would say you’re a black swan. That’s what venture capital and success is driven by and we need more and more of that. Right. So here is my take to be complementary to what was said. With a perspective of the United States, right, like first of all, technology innovation is happening everywhere. Right. It’s happening in Asia-Pac, it’s happening in the United States, and this is at research university level, it’s happening in Europe. So what’s different, even in the United States? If you look at 70, 80, this is in information technology, of the value gets created on the West Coast. And why is that the case? So here is what our analysis is: First, the mindset is a little bit different, I would say then ambition. Ambition is there. Is it okay to take risks? And it’s okay to fail.

Sara Kehaulani Goo: Yeah.

Navin Chaddha: So once you have that stuff right, like the sky’s the limit. Right. So you start with that. Second, and it applies to both, people who are starting companies and people who are funding them. Right. But this is what happens. If you are in a hotbed of established companies now you can poach employees from there and at the end people are building companies. It’s not the other way around. And then this business of taking companies from idea and turning them to iconic is all about mentorship. So this is where maybe VCs can add value, maybe they can’t, but there’s enough entrepreneurs and executives who are willing to give back as board members, angel investors.

So I think this is a network effect, this is a community. And what ends up happening is, it’s nothing to do with talent, it’s nothing to do with innovation. Basically scale just creates more scale and that’s what just ends up happening. And I would encourage in some of the other regions for there to be a change in mindset. It’s okay to take risk, it’s okay to fail because as Einstein said, “If you don’t fail, you’ll never succeed.” So to come up with a big success, it’s okay. Failure isn’t only an opportunity to do it right the next time.

Ahmed F. Karslı: I would like to add something on it, Navin. On Monday I had a chance here to listen to Sam Altman. You were there as well.

Navin Chaddha: Yep.

Ahmed F. Karslı: And before this panel I wanted to ask ChatGPT what advice can be given to bootstrap startups or bootstrap co-founders. And Sam Altman said on that day is that every advice is actually given and every information is there. So when I asked ChatGPT about what advice can I give to bootstrap startup founders, there were like 10 different pieces of advice there. And they all were actually more than, what can I say? But on the other side, I totally agree with you that I found out that actually the only thing missing there is the personal experiences. And I found out that currently when I want to give advice or take advice, AI plus personal experiences of entrepreneurs around me, of mentors around me is actually enough to get real advice because that is the only thing missing, which is not online.

Rishi Khosla: But even if you pick up those comments, there was a very clear view that actually his best sort of insight comes from discussions with people like his mentors.

Navin Chaddha: Correct.

Rishi Khosla: Right. And again, we’re massive believers in that, and I personally as well, and I would sort of say I’ve had people mentor me all the way through my career and different people and also for different sort of issues, questions, opportunities, et cetera. But I think that is such an important part of, again, the ecosystem.

Ahmed F. Karslı: We need to have more communities actually.

Jacqueline Poh: I have a slightly different opinion about what you’ve mentioned, which is to take risk and the existence of your company in an ecosystem that scales easily. There are many, many problems in the world, and there are many entrepreneurial ecosystems which are not built on a market that is very cohesive. So for example, Europe isn’t necessarily all one market in some senses. Latin America might not be, Southeast Asia might not be. America is a little bit more homogenous. And if you find yourself in Silicon Valley, you get a product and you get a sense that there’s a community around that, there’s capital, there’s talent, and there’s a sense of scaling muscle that works in a certain way. I think if you go to different parts of the world, and this is relevant in a world that is increasingly maybe a bit less globalized, a little bit more regionalized, that kind of scaling muscle has to change as well. So in addition to the skills that you’ve mentioned, I think that kind of adaptability is going to be something that is relevant.

Navin Chaddha: So what I would say is having invested in India and China since the mid 2000s, I completely agree with you and my advice to entrepreneurs is focus, and this is a little bit different, focus first on your home ground because there’s faster iteration cycles. Perfect the product, perfect the GTM, and it’s hard for an international company to come in and understand the local stuff. And at the end, the problems you’re solving there are very, very different. Right. I grew up in India in the late ‘80s, came to the US in early ‘90s, and there was like years before you could get a landline telephone. And necessity is the motherhood of all invention. The landlines never happened. It all went to basically cellular.

So that’s where the entrepreneurs have to innovate rather than saying, Hey, I’ll come from India to the US. First nail the problems. They’re there. The folks sitting in the US can’t even sell at those price points. They don’t even know the distribution channels. So you need something more than technology in today’s market. And if your product teams are closer to where the customers are, you win. Right. You win. And there are many, many examples, not only in tech, in CPGs, in financial services, in healthcare, the local companies in some of these markets have done phenomenally well because, so my feeling is it’s a little bit different than US, Israel, but some of these emerging economies are big. They’re big. So go solve the problems there and raise less capital. If the markets are 110th, it’s okay. You can still deliver a lot of value.

So I think that’s what I’ve learned, that get it right with something which is near to you where you have domain expertise and insight rather than somebody sitting in Silicon Valley. Right. That’s where I’ve seen the local companies we have been involved with, which are innovating and especially some of these low income markets at the bottom of the pyramid. Right. Those kinds of income levels just don’t even exist in the US. So I think that’s where my learning has been. Change the problem, focus on your unique advantage, whether it’s what you can charge, whether, how do you distribute it, like what do you do? Right. And the markets are very, very different in these countries.

Sara Kehaulani Goo: Mr. Karsli, I’m curious about your perspective. We didn’t get a chance to talk a little bit about your company. I wonder if you could share a little bit about your experience and whether the comments here and about culture, about regional versus local investment in communities make a difference. Was that the case for you?

Ahmed F. Karslı: I totally agree with everyone. Just to give you an example, the panel’s name is “No Rain, No Flowers.” But I think overwatering is also a problem, right? And I think one of the reasons why many startups didn’t focus on their own local markets, as you mentioned, was actually over raining. Because I have seen that many companies had a huge potential in their own markets, but they were actually pushed to grow as fast as possible. So they had to operate in multiple markets where they tend to lose their focus from their main market. And as a bootstrap company, another advantage is that you become really creative because you don’t have enough funding resources, which means that you have to do everything to be profitability, and you get really creative about when you’re building a product, designing the product, building a fee structure, et cetera. And that actually helps you a lot to do something in your own local market as well. That is a big advantage.

On the other side, culturally, we talked about AI. This year’s main topic is AI here. We all are talking about AI, but when it comes to AI, I really struggled in the first five years of Papara because it’s a regulated business. It was quite difficult to deal with regulators, especially when you’re a new and young startup founder.

So I noticed that we were trying to build something for some time, but the regulator might be a road blocker as well. And I’m really happy that we are talking about AI here for the last five days. It is great to see that many policymakers are happy to discuss AI. But on the other side, I’m a bit skeptical as well because I have seen many policymakers here in Davos. Actually, we’re talking firstly about the potential effect of AI on unemployment. And I can easily imagine right now that in five or 10 years, some political leaders will be campaigning against AI and they will be on the rally and campaigning like, we are not going to let robots steal your jobs. And probably there will be people there who are shouting like human first, human first.

So to prevent that, actually we need to have more connection with the regulators. And to do that, I recently, OECD did something great, OECD, maybe you have seen that, published a report on sandbox use cases of AI. We need more sandboxes like that to actually, like to have this connection between regulators, policymakers and startups. Because in the last five years we had this huge issue with policies about crypto, but crypto was only an interest for financial policymakers. AI will be interesting for any kind of policymaker including health, transport, whatever it is, which means that you have to have more connections. And it is also like the startup founders’ or startups’ responsibility to educate policymakers as well. So we need to think vice versa. I think maybe in the next five years, if you are working on AI, if it’s an AI startup, we should really start thinking about hiring a public police officer, maybe even before hiring an HR officer. So otherwise that roadblocks actually may prevent technology a lot.

Sara Kehaulani Goo: Wow.

Rishi Khosla: Can I pick up on a couple of those points? So I think on the bootstrapping point, the first business that my co-founder and I created was purely bootstrapped. We used $60,000 to build it into a 3000 person company. And the discipline that teaches you, like you say in terms of just business model, in terms of making sure you’re always doing the right thing in a way, is just dramatically different to, like you say, overwatering the business. Right. And the overwatering, I mean, we know very clearly from the last five, six, seven years that the, I mean, as some people have termed it, there was a fiscal easing rate, a monetary easing off the whole private capital market obviously caused by one very large fund and a number of other funds, which sort of went in proliferated after that. And that created a lot of, in a way funding of and spending of sort of money, which wasn’t necessarily anchored in a true business model. Right.

And clearly for that exuberance to being taken out of the market, our view is that’s good, it’s healthy. Right. I’ve been speaking to a couple of other sort of founders of businesses which are arguably larger than us, but similar stage in terms of maturity. And their view as well is that you sort of got the annoying ankle biting competition who didn’t have a model, but were just spending a lot of money to try to go and acquire customers, et cetera, that sort of paired away and therefore there’s more money to put in products, there’s more money to actually put in the right things which deliver a better experience for the customer. So that’s the first thing. And then on the other point, on the regulator, your point about having a policy officer, et cetera.

So again, like you we’re a fully regulated bank in the UK and from day one, again, we over invested in actually that regulatory relationship. Right. So we actually had someone to manage our relationship from that world almost from the get go. Right. And actually doing that and understanding where the regulation’s concerns are, the way that we think about it now is that 99% of regulation is aligned with creating the right long-term business. Right.

So if you work backwards, not from the rule book, but you work back from the spirit and the principle of which a regulator’s thinking through, how do you do the best for your customer? Is that a good thing for a business or not? I’d argue yes. Right. When it comes to financial services, how do you make sure you have the right liquidity, you have the right capital, are those good things for longevity of a financial business? You think so.

Sara Kehaulani Goo: Right.

Rishi Khosla: Right. So therefore, if you almost align yourselves with actually what’s the regulator’s mindset about what is the right long-term outcomes for communities, and you just think to yourself, how does that align with actually what would make a long-term success for your business? There is so much alignment there, and that’s the way we’ve always thought about it. And in a way, I say to our teams that sometimes when we interact with a regulator and they give us feedback, we should view it as good consulting advice. Right. And actually it makes our business stronger.

Sara Kehaulani Goo: Yeah.

Rishi Khosla: Right. So it’s just a different way again, to sort of think about these things.

Jacqueline Poh: I think that regulation is one of those interesting things. I’m very fascinated by your title, “No Rain, No Flowers,” because I thought about it a bit more and I’m like, here’s the assumption that all you need for flowers is rain. You don’t. You actually need sunshine, you need oxygen, you need carbon dioxide, you need a fertile soil, you need a whole range of things for companies to flourish and to be productive and to be profitable, make money, to be honest. And so it’s the whole environment, and regulation is one of these big pieces. Actually, you need a whole bunch of things and, because Singapore’s been trying to build this startup ecosystem for decades now. So each one of these little pieces, it comes into play. So not just the capital piece, which we’ve been speaking about, but the regulatory piece, the talent piece, the enabling environment piece, and the demand piece.

So these are the key pieces that you need, which is the soil. The regulation works really well when there is a less disruptive new technology. The minute there’s a new disruptive technology, regulators don’t really know what to do. They don’t know what to make of it. And when you have something like generative AI or precision medicine or quantum, I’ve been a regulator and you get stuck. You do get stuck.

Rishi Khosla: Because it’s not siloed.

Jacqueline Poh: It’s not siloed and all regulations are built for the last war, the last problem. So I do support the idea of sandboxes. And I think in any good enabling environment for entrepreneurship, you have to be very, very conscious about identifying the disruptive technology. In our case, it was alternative proteins. In our case, it was FinTech, it was Web3, now it’s AI. And create a little bit of a sandbox around that so that your entrepreneurs actually have room to play.

We are very cautious about over regulating. We’re particularly cautious about over regulating AI because that might kill use cases that have yet to be born and we don’t want them to be stillborn or we’re stillborn somewhere else where the regulation is more fruitful. But you need other things for this ecosystem. You need talent. You need to be able to bring in the best engineers, if that’s the case. You need to grow them indigenously, if that’s the case. You need a kind of funding environment that allows debt, that allows family offices, that allows angel investors to step in.

You need the kind of demand that is very fruitful for your company. So like in a B2C market, it’s a big consumer market. In a B2B market, it means that you do need all the companies present that can help you scale your company. And in this regard, the rain may not be venture capital, it may be venture procurement. And if you find that company that’s willing to buy from you something new and innovative on a venture procurement basis, that’s even more productive. So I’m just suggesting that the rain is not all you need.

Sara Kehaulani Goo: Yeah.

Navin Chaddha: Yeah. So I think, let me give you the history perspective on what happened in the United States because it’s getting repeated in other regions. So if you go back to 1960s, 1970s, I wasn’t also born at that time, but having Mayfield been around there, great companies like Intel, there was no venture capital industry. Arthur Rock essentially was in New York. He used to go to high net worth individuals, sell the business pitches and got the business going. Mayfield’s first fund, $2 million in 1969, and probably like 10 iconic companies came out of that. A lot of it was syndicated with other people and the best companies, Microsoft to a point, you mentioned Oracle, Apple. VCs didn’t give them money initially. It was too speculative like the AI wave is. They didn’t understand what it is. They got money from friends and family.

Even if you go to this date, Google, Yahoo existed, Excite existed. Every Silicon Valley firm passed on their seed and inception round, and then the first one or 2 million came from angels and they all became billionaires. When Google became the largest search engine, VCs came into it. They hadn’t figured out monetization. So I have seen this movie with all the iconic companies till the internet happened and after that, even Facebook didn’t raise money till it had gone to all the campuses when one of our peers invested in them. So my feeling is bootstrapping, getting customer validation, getting the customer to pay and establishing product market fit without any venture money. I would encourage every entrepreneur to go do that, right? And a lot of our companies, I would say 50 companies, which had IPO, didn’t get money at the first time. Twitter didn’t get money, right? Genentech, when the idea was there, like people look at it and say, you’ll discover biotech.

Sara Kehaulani Goo: Yeah.

Navin Chaddha: So I think whenever the idea is the crazy, it doesn’t get money, right, like basically whether it was Airbnb, all these companies, when you are the next, next thing. So I won’t get discouraged. Right. The bootstrapping point you have met and friends and family is a great way because everybody cannot, as a VC, predict where the future is. You just can’t.

Sara Kehaulani Goo: Right.

Navin Chaddha: Right. The other thing on the regulator stuff, I would say, it’s a healthy balance. So since the topics here have been genAI, my only request to policy makers and regulators is there’s a lot of fear around GenAi. Will it take jobs? What happens to trust, safety, privacy, security? Can we all get together as public and private and agree on the guardrails and norms and then let’s just go implement that, right? So if we can do that, please tell us all the fears and we’ll operate within it. Because many regulated industries, financial services, healthcare, we’re already doing it, right? Entrepreneurs are smart. You put constraints, figure out a solution. So I think time has come to lean forward and collaborate with private companies, financial investors, any kind, public policymakers and say, come on, let’s sit down. What are you afraid of?

Sara Kehaulani Goo: Yeah.

Navin Chaddha: Let’s find the solution.

Sara Kehaulani Goo: And maybe that could be our conversation for next year because I don’t think this issue is going to go away. Thank you so much. We have to leave it here. This has been an incredible conversation. I just want to thank all my panelists for the perspective you bring from the region you’re representing. It’s been fascinating. I’ve learned a ton. I hope you have too. And thank you to our panelists. Please join me in thanking them.

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