Lightspeed & Plug and Play – Investing Through Challenging Times
Barry Eggers & Saeed Amidi talk previous experience, current opportunities, and future trajectories in investment.
The COVID-19 economy is one defined by uncertainty, with many firms both large and small facing stagnation as global trade grinds to a halt. Lacking capital security, these times are particularly challenging for start-ups and entrepreneurs, with market downturns leaving many – including Venture Capital (VC) funds – dreading the worst.
However, looking to the US, this future may not be as bleak at originally feared. As part of Plug and Play’s Fireside Chat series, last Wednesday Plug and Play CEO Saeed Amidi sat down with Barry Eggers, Founding Partner at Lightspeed, to discuss past experiences, current difficulties, and future trajectories in VC. Along the way, they also touched on issues of sustainability and the keys to their success, imparting insightful advice to aspiring venture capitalists and entrepreneurs alike.
Focusing primarily on information technology infrastructure investments serving enterprise customers, Eggers track record is impressive indeed.
Boasting 23 years of venture capital experience, and 10 years of operating experience, Eggers previous roles notably include six years at Cisco. Recruited to the company by a friend from his Stanford MBA program, Eggers went on to establish many of the company’s largest distribution channels across OEMs, Service Providers, Distributors, and VARs. Since moving into VC proper, he has been named to the Forbes Midas List of top 100 investors multiple times and is now an incoming Chairman of the National Venture Capital Association, demonstrating both his reputation and skill.
With 28 years in the industry, Amidi’s experience is likewise extensive, a General Partner in Amidzad alongside his role as CEO of Plug and Play. The fund itself has been investing in technology companies for over 15 years and holds successful investments in over 1,000 technology companies, some of which are: PayPal, Powerset, Danger, Bix, Powerset, DropBox, Lending Club and Zoosk.
Sharing a common Stanford background, when discussing their career paths Eggers and Amidi reveal that the networks made during their education have played a crucial part in their success. Eggers, in particular, attributes his recruitment to Cisco, as well as several CEOs and limited partner investment to previous classmates, musing that the networking he gained may even be more helpful than the education – an important aspect to note for aspiring venture capitalists.
Current developments & future opportunity
After discussing the arc of their career progressions, Eggers and Amidi turned to the question on everyone’s minds – how will COVID-19 affect VC?
Beginning with the obvious, Eggers notes that the shrinking market will lead to financial austerity among start-ups, needing to conserve funds in this tumultuous economy.
“Something we often forget is we’ve had 10 years of bull market – you know that old adage ‘cash is king’? We need to remember that,” he says.
When asked about Lightspeed’s involvement in company management during this downturn, Eggers was clear that: “It’s the CEO’s job to make sure companies have the right cash flow to get to the next investment stage,” and not the fund’s direct responsibility.
Continuing in this vein, Eggers added: “I don’t have to go remind my companies to reduce cost, they know runway is important and typically when they reduce cost they become more efficient companies.”
As a result, Eggers is unwavering in his faith that the current downturn presents an exciting economic opportunity for funds to invest.
“The best companies are built in a downturn,” said Eggers “they do more with less. Investing is better because prices are lower, but we also believe companies will be built with more discipline from the beginning.”
Therefore, compared to previous frothy markets, new developments have the potential to be fruitful for VC firms and Investment Funds alike.
Eggers’s optimism also stems partially from the lessons we can learn during this crisis, which highlight the crucial importance of both cleantech, and wider green technologies.
“We’ve learned our food ecosystem is very fragile,” Eggers used as one example, noting recent supply difficulties in the US which meant “people were unable to get enough.”
Rather than simply restoring previous practice, Eggers says we now need to start re-evaluating and ask ourselves how we can change the food tech industry for the better. Whether through secondary markets, plastic packaging reduction, or changing consumption patterns, this is all part of an outlook he defines as “recycle, reuse and reimagine”, encouraging growth and investment towards sustainable, net-zero living.
Although their sustainability portfolio is not large at present, Eggers says Lightspeed need and want to do more to invest in the ecosystem of sustainability, as “huge waste equals huge opportunity”. This is an attitude already in practice in the case of Rothy’s: a company current in Lightspeed’s portfolio that makes shoes and accessories out of recycled materials.
Aptly summarized by Eggers, the sustainability solution is “ready for prime time”, with sustainable entrepreneurialism needed now more than ever.
Alongside sustainable practice, Eggers also notes developments in remote working, with large scale corporate models not only probable, but entirely possible, changing the ways we work for the better. This is especially true with the growth of AI, which Eggers stresses is an area in increasing need of investment, with a huge opportunity for change within the market.
Suggestions & advice
Although Eggers sets an optimistic scene set for the VC industry, there is no doubt start-ups and entrepreneurs are facing a significant challenge in the current economy. To help them, Eggers shared some advice, as summarised below.
What advice would you give to aspiring venture capitalists?
“Get some experience with early-stage companies, understanding how they work, what makes them tick, the issues they need to solve,” says Eggers.
“When you’re looking for VC job you want to pick a firm where the platform is strong enough you get good solid deal flow, you can get mentoring from senior investors, and where there is space to rise up the ranks.”
Essentially, you want to “establish a firm track record of your own success” by putting your name on projects, and building your reputation in the industry.
How do you encourage deal flow at Lightspeed?
Eggers says deal flow ultimately involves a lot of people prospecting.
“It’s a very steep ramp, you just want to soak up as much as you can…try to be there when they start the companies,” he advises. “Go to universities and see the research and how these opportunities could come to market.”
Eggers also stresses another key to success is sharing information, stating clearly: “VC is not an independent study it’s a collaborative environment.”
What do you look for when you invest?
According to Eggers, the most important aspect he looks for in a potential opportunity is the team. An experienced team is the most valuable part of the company, as in VC “The company takes twists and turns, and the team is the one that has to navigate that.”
Crucial to this are individuals who have both EQ (emotional quotient) and IQ; who can communicate, collaborate and understand while also having a high level of intelligence.
This is a combination difficult to master, particularly in California, as Eggers comments: “There’s a lot of IQ in the valley, but a shortage of EQ.”
Market opportunity is the second most important, representing an area Lightspeed devotes a lot of time to understanding as to be successful it has to be able to get grow overtime.
The product itself comes third, as it is the element that often pivots and changes the most, with the go-to-market strategy coming last, as it evolves after an understanding of the customer.