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 a few questions. For starters, pulling off $1.6 billion in capital commitments from its investors right now would seem much more difficult than raising commitments during the 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. Recent Luck story noted that photos of company founder Reid Dennis remain scattered “in all sorts of places in IVP’s San Francisco office.” Meanwhile, photos of Todd Chaffee, Norm Fogelsong and Sandy Miller—former general partners who are now “consulting partners”—are intermingled with the firm’s general partners on the firm’s website, which, visually at least, makes less room for the current generation.
Last but not least, I wanted to talk to Liaw about Klarna, a holding company that made headlines last month, when a behind-the-scenes dispute over who should sit on its board came to light. Following are portions of our conversation, 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 few months! Was the fundraising process a bit too difficult this time given the market?
It was really a volatile period throughout. If you actually turn the clock back, 2018 when we raised our sixteenth 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 grow it too quickly, as other people in our industry have done. So [we’ve been] pretty consistent.
Did you get money from Saudi Arabia? This has become more accepted, more widespread. I wonder if [Public Investment Fund] is new or existing LP.
We don’t usually comment on our LP base, but we don’t have funds from that area.
Speaking of areas, you’ve been in the Bay Area for years. You have two degrees from Stanford. Now you are in London. When and why did you make this move?
We moved in about eight months ago. I’ve actually been in the Bay Area since I was 18, when I came to Stanford for undergrad. That’s more years ago than I care to admit at this point. But for us, expanding into Europe was an organic extension of a strategy that we were following. We made our first investment in Europe in 2006, in Helsinki, Finland, in a company called MySQL that was then acquired by Sun [Microsystems] for a billion dollars when that was not in the mill. Then in 2013, we invested in Supercell, which is also based in Finland. In 2014 we became an investor in Klarna. And [at this point], our European portfolio today is around 20 companies or so. it is about 20% of our active portfolio, spread over 10 different countries. We felt that putting some feet on the ground was the right move.
There has been a lot of drama surrounding Klarna. What did you think of The Information’s reports? [former Sequoia investor] Michael Moritz Vs [Matt Miller]the Sequoia partner who most recently represented the firm and has since been replaced by another Sequoia partner, Andrew Reed?
We are smaller investors in Klarna. We are not active in board discussions. We are delighted with their business performance. In many ways, they had the worst of both worlds. They file 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]. I think so [CEO and co-founder] Sebastian [Siemiatkowski] it’s now much more open about being a public entity at some point in the not-too-distant future, which we’re excited about. The report, I guess if it’s accurate, I can’t find behind the motives. I don’t know exactly what happened. I’m just glad he put it behind them and can focus on the business.
You and I have talked about different countries and some of their respective strengths. We talked about consumer startups. It brings to mind social network BeReal in France, which is reportedly seeking Series C funding now or else can sell. Has IVP kicked the tires on this company?
We’ve researched and talked to them in the past, and we’re not currently an investor, so I don’t have much visibility into their current strategy. I think social is hard. 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 power of Facebook-slash-Meta. Snap continues to have strong traction. we invested in Snap pretty early on. Discord has carved out a niche for themselves in the market. Obviously, TikTok has done something pretty transformative around the world. So the prize is great, but it’s hard to get there. That’s part of the challenge of the fund, the investment in consumer apps that we’ve done, [figuring out] which of these rocket ships has enough fuel to penetrate the atmosphere and which will return to earth,
As for your new fund, this Fortune story noted that the company doesn’t bear the name of founder Reid Dennis as evidence that it was built to outlive itself. However, he also noted that there are photos of Dennis everywhere, and others of the firm’s past partners, and now consultants, are featured very prominently on the IVP website. IVP talks about making room for younger partners. I wonder if this is actually happening.
I would say without a doubt that it does. We have a strong culture and tradition of providing people in their careers with the opportunity to move up the organization to the highest levels of general partnership. I am lucky to be an example of that. 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 do not have a managing partner and we do not have a managing director. We’ve had people come into the company, serve the company and our LPs, and also as they get to a different point in their lives and careers, step back and move on to different things, which by definition creates more space and responsibility for people who are younger and now reaching that prime age of their careers to help promote the institution.
May I ask: do these advisors still get a transfer?
You can ask, but I don’t want to deal with finances or things in that dimension. So I will quietly decline [that question]. However, we appreciate their input and advice and their contribution to the company over many years.
There is obviously a valuation reset going on for any company that doesn’t seem to be a big language model company like many companies. I guess this gives you easier access to top companies, but it also hurts some of your existing portfolio companies. How does the company navigate all of this?
I think when it comes to companies raising money, the ones that are more promising will always have an option and there will always be competition for those rounds and so those rounds and the valuations associated with them will always be expensive. I don’t think anyone has ever gotten to a great business result feeling like, “Man, I stole this deal.” You always feel slightly uncomfortable. But the belief in what the company can become offsets that feeling of discomfort. That’s part of the fun of the job.
