20VC: Spark Capital's Alex Clayton on How The Best Growth Investors Source, Evaluate and Win Deals, Why Market Depth Is Crucial When Analysing Markets & Why Capital Is Only A Temporary Competitive Advantage
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
The Twenty Minute VC
4.4 • 637 Ratings
🗓️ 25 March 2019
⏱️ 31 minutes
🧾️ Download transcript
Summary
Alex Clayton is a Partner @ Spark Capital, one of the leading firms of the last decade with a portfolio including the likes of Slack, Postmates, Oculus, Cruise, Twitter, the list goes on. As for Alex, he co-led Spark's investments in Pendo and Outreach and then led Spark's investments in Justworks, Braze (Appboy) and JFrog. Before Spark, Alex spent three years at Redpoint Ventures as a senior associate where he sourced or was actively involved in the firm's investments in Duo Security, JustWorks, RelateIQ (Salesforce.com), Infer, Lifesize and Sourcegraph. Prior to joining Redpoint, Alex was in the TMT investment-banking division of Goldman Sachs where he worked with Intuit, Yelp, SanDisk, and others. Fun fact, in the past Alex played on the ATP World Tennis Tour, competing in the U.S. Open and many other ATP events.
In Today’s Episode You Will Learn:
1.) How Alex made his way from the world of investment banking with Goldman Sachs to one of the valley rising stars in the world of enterprise investing? What were Alex's biggest takeaways from his time at Redpoint and working with Tom Tunguz?
2.) How does Alex think about and approach sourcing today? How does Alex find most of his deals? How does Alex breakdown both thesis and network driven sourcing? How does sourcing at growth differ to sourcing at the early stage? If Alex has to meet founders when they are not raising, what does Alex advise founders who are told that you should not "always be raising"?
3.) How does Alex think about market sizing and evaluation today? What does he mean when he says he closely examines "market depth"? How does Alex determine whether a company has the ability to scale from a niche into a much larger TAM? What are the risks Alex is willing vs not willing to take when it comes to market?
4.) How does Alex think about competitor analysis when evaluating an opportunity today? In a world of almost infinite capital, does Alex believe that cash alone is a significant moat for competition? In customer calls when they discuss competition, what excites Alex to hear? How does Alex structure those customer reference calls?
5.) Alex has studied some of the best in class when it comes to SaaS, what do the best in class look like when it comes to: 1.) Quota attainment. 2.) Payback period. 3.) Net dollar retention and churn? 4.) Capital efficiency? Growth rate? Ultimately, what does Alex believe that it takes to go public having studied so many S1s?
Items Mentioned In Today’s Show:
Alex’s Fave Book: Zero to One by Peter Thiel
Alex’s Most Recent Investment: Braze
As always you can follow Harry, The Twenty Minute VC and Alex on Twitter here!
Likewise, you can follow Harry on Instagram here for mojito madness and all things 20VC.
Transcript
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| 0:00.0 | We are back for another week in the world of the 20 minute VC with me, Harry Stebbings. As always, |
| 0:04.0 | you can find me on Instagram at H. Stebbing's 1996 with 2Bs, where you can suggest both questions |
| 0:09.4 | and guests of future episodes. I really do love to see you there. However, to our show stay, |
| 0:14.0 | and I've actually wanted to have this guest on the show for a long time, having been a massive |
| 0:17.6 | nerd fan of his S1 breakdowns on medium. Links will be in the show notes. |
| 0:21.7 | They are awesome and you must check them out. But I'm thrilled to welcome with that, |
| 0:25.3 | Alex Clayton, partner at Spark Capital's Growth Fund. A little on Spark. They're one of the leading |
| 0:30.1 | venture firms of the last decade with Check This Portfolio out. The likes of Slack, Postmates, |
| 0:35.3 | Oculus, Cruise, Twitter, the list really does go on. |
| 0:38.6 | As for Alex, he co-led Sparks' investments in Pendo and Outreach, and then Led Sparks' investments |
| 0:43.7 | in JustWorks, Brays, formerly named Appboy, and Jay Frog. |
| 0:47.7 | Before Spark, though, Alex spent three years at Red Point Ventures as a senior associate, |
| 0:51.9 | where he sourced or was actively involved in the firm's investments in |
| 0:54.8 | duo security, JustWorks, Relate IQ, Infer, Life Size and Source Groff. |
| 1:00.1 | And prior to joining Redpoint, Alex was in the TMT Investment Banking Division of Goldman Sachs, |
| 1:04.5 | where he worked with Intuit, Yelp, Sandisk, among others. |
| 1:07.7 | And fun fact, which I think must be a first of the show, in the past, |
| 1:15.8 | Alex played on the ATP World Tennis Tour, competing in the US Open and many other ATP events. Incredible to see that. I do also have to say a huge thank you to two dear, dear friends |
| 1:20.4 | in the form of Alex Curland and Glenn Solomon for some fantastic question suggestions today. |
| 1:24.9 | I really do so appreciate that. But before we dive into the show |
| 1:28.2 | today, a lot of what we do on the 20 minute VC is talk to experts, pick the brains of founders |
| 1:32.7 | and investors who tell us which trends to watch out for, offer tips on fundraising, and teach us |
... |
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