The Inquisitive VC: Geoff Lewis — Bedrock Capital
Geoff Lewis is the Founder and Managing Partner of Bedrock Capital, a technology investment firm that is “in search of narrative violations”, he is also an EHF Fellow. Previously Geoff was a Partner at Founders Fund and an entrepreneur.
We talk about his journey from P&G to VC, meeting Peter Thiel, being an EHF Fellow, investing in First AML and more.
NA: Thanks for joining me, Geoff. I love your journey to the world of VC and I thought we could start there. Can you talk about how you made that jump from P&G? How you met Peter Thiel and went on to start Bedrock?
GL: Sure. I was working at Proctor & Gamble when that first wave of consumer internet was really taking off. One of my first projects at P&G was launching the “Tide To Go Stain Remover” pen. We were targeting college students and recent graduates. At the time Facebook was really taking off amongst my college class. I was trying to advocate to my managers that we really needed to do a Facebook ad campaign and this was in 2006.
Everyone said that’s crazy. It makes no sense to advertise on a social network. I was like, “okay, I don’t really agree with that”. I managed to convince P&G to let me move to the San Francisco Bay area, in late 2006 — early 2007, where I spent a number of months trying to build relationships personally and on behalf of P&G with different technology companies and entrepreneurs.
One day I randomly found my way to a Christmas party that was at Peter Thiel’s house and I didn’t know who he was at the time, but I knew some of the other folks that were affiliated with PayPal. I was standing alone in one of the rooms of Peter’s house and I didn’t have anyone to talk to. There was someone standing by the fireplace, so I struck up a conversation and turned out that it was Peter. He mentioned he was the host of the party and we got to know each other and basically over the next year or so he ended up recruiting me to join Clarium Capital.
I joined Clarium a few weeks before Lehman Brothers collapsed, my timing was terrible. I had the misconception that Clarium was going to be very technology-focused. What I didn’t realize was that Clarium was very much a non-technology focused entity and that I’d accidentally joined the entity that was very far away from all the exciting, awesome stuff Peter was doing in the tech industry.
I course-corrected pretty quickly by starting a startup with my office mate at Clarium. We’d become friends and he was a brilliant engineer. We started the business that ultimately became Topguest and I was the co-founder and CEO of that. We built enterprise software that helped airlines gather social data from Facebook and other platforms to power their loyalty programs, basically think of it as a Cambridge Analytica for loyalty programs. I say that as a joke (laughs).
In any case, we raised about a million and a half dollars in VC. Our lead investor was Founders Fund and I ended up selling that business for US$10 million. It was a fine outcome, not a slam dunk or anything, but everyone made a little bit of money, including our investors. After I sold that, Founders Fund recruited me to be a Principal on the team.
I joined Founders Fund in 2012. I really had a phenomenal five-plus years trajectory there. One of the first investments that I sourced and led at Founders Fund was Lyft. I joined the board of directors investing at a US$90 million valuation back in 2012. I went on to lead rounds in Wish, which just IPO’d. I led the Series C round at under a $300 million valuation, that’s been priced at around US$30 billion in the IPO. I really got lucky and invested in lots of companies around the world very early on in this incredible wave.
What I realized at Founders Fund was I always thought that I wanted to be a technology entrepreneur, I realized I wasn’t an amazing product builder, but I really fell in love with venture investing. I decided I wanted to do something entrepreneurial but keep venture investing.
The natural thing to do was to start Bedrock. I made the decision in late 2017 to team up with, an entrepreneur, an angel investor who I’ve worked with for over a decade, Eric Stromberg. Initially, we were friends when I was an entrepreneur and he was a recent college grad working for Chris Dixon’s early machine learning, startup Hunch.
I invested in Oyster, his Netflix for eBooks startup when I was a partner at Founders Fund. After he sold it to Google, I carved out some of Founders Fund for him to angel invest alongside me. By the time we started Bedrock in 2017, we’d worked together for several years.
At this point, Bedrock’s three years old, we manage about half a billion dollars, really investing across sectors, across geographies. In pursuit of this mission that we call, searching for narrative violations to try to find companies that are counter-narrative and that are therefore underestimated, under-explored by most investors. It’s been quite a ride so far.
NA: That is an amazing journey. You’re an EHF fellow, why did you decide to pursue that and what do you think would be the greatest thing you could get from it?
GL: I heard about EHF initially from Scott Nolan, my colleague at Founders Fund. I was just in the process of starting Bedrock when he became a fellow in the first cohort of EHF, and then subsequently a number of other friends of mine ended up becoming EHF fellows and really enjoying it, including entrepreneurs that I’ve invested in such as, Alex McCaw from Clearbit.
I had visited New Zealand just in a personal capacity several years ago and really enjoyed my time there. I invested in the region in Australia in 2014 in Canva in the seed round. I was a seed investor in Canva and I failed to follow on in the Series A or the Series B and retrospectively, not investing in Canva, I think is one of my biggest mistakes as an investor. I think one of the reasons why is I just was not on the ground. I didn’t have my ear to the ground, in terms of what was really, taking off in the region.
Over the last few years, had a desire to spend more time, get more active, in New Zealand and Australia. I got to know Chris Heaslip, the Pushpay founder and realized I’d always thought, Xero was the one really exciting New Zealand company, then I got to know Chris. I was like, whoa, Pushpay is a really interesting company. The combination of getting to know Kiwi entrepreneurs and realizing there are at least two really awesome New Zealand companies that are worth more than a billion dollars.
Plus, a bunch of my friends becoming fellows, plus feeling like I really dropped the ball on not investing more in Canva. I’m like, okay, I need to spend more time in Australia and New Zealand and EHF seemed like an awesome way to do it.
As I was applying for the fellowship, part of my process was that I wanted to learn about all the companies in New Zealand. In doing a study of all the businesses, I ended up discovering First AML in Auckland, where you’re based, really falling in love with what that business was doing, with the founders and KYC compliance is a huge opportunity such that we at Bedrock led the Series A in First AML several months ago. I invested $6 million NZD.
In terms of what I hope to get out of the fellowship, basically, I’d love to keep working closely with First AML as they scale. Have the ability to spend time on the ground in New Zealand to work with them, as well as find more investment opportunities, and really just hope to be one of the few VCs of choice for New Zealand entrepreneurs.
So, hope to invest more in New Zealand and also just spend time in Auckland and Wellington and use those cities as a jumping-off point to visit other countries in the region.
NA: It’s great to hear that you’re keen to make more investments here. I spoke to Milan a couple of months ago, and we talked about how the Series A came about. I’m interested to know how First AML meets your thesis of narrative violations?
GL: Sure. The honest answer is, I would say that it is not so much the business that’s a narrative violation. Frankly, I think it was more that it’s a really crowded space, why would the winner in this really crowded space come out of New Zealand?
We got to a set of beliefs around the regulatory framework, the phasing of the AML legislation, New Zealand versus other countries that gave us the high conviction that it was likely that a company based in New Zealand actually could capture this large global market opportunities.
It was more that investing in New Zealand, felt like a narrative violation at the moment, it was less about the specific business.
NA: Unsplash is an interesting company in your portfolio, I’d love to understand how that fits your thesis of narrative violations?
GL: Unsplash’s whole pitch to us back in 2018, when we invested was that they were going to create a new ad unit in photos and basically so many companies over the years have tried to do that unsuccessfully.
The whole idea of leveraging stock photography, user-generated stock photography to create a new ad unit that would live across sites, across platforms felt, and still does feel very counter-narrative to us.
You can sort of juxtapose that versus Instagram. It feels very counter-narrative to what Instagram is doing.
NA: What advice would you give someone trying to get into the world of VC right now?
GL: I advise them to rethink whether they should get into the world of VC. The challenge with VC is that it is increasingly becoming a commodity product.
Given the nature of capital markets where interest rates are at globally the reality that, capital is just going more and more down the risk curve, and is willing to embrace more and more risks in search of a return. There’s just so much capital that’s flowed into the asset class, meaning it’s harder than ever before to make it work as a business.
I would definitely encourage folks to rethink that as a career path. It doesn’t mean you shouldn’t do, I mean, you should have a very compelling narrative for oneself as, as to why you can really win as a VC. It’s actually very hard to be successful financially over the long run in this industry.
NA: That’s a fair point. What would you say are some of the core economics of venture capital that entrepreneurs should really understand?
GL: I mean the major one would basically be the dynamic stuff. That the number one to two companies in any given portfolio really have to return the entire fund in order for the fund to work.
There is this sense in which the economically rational thing for a VC to do is to really focus the vast majority of their time in the extent of their portfolio on the companies that are working the most.
There’s no economic incentive to help the companies that are not working or that are struggling, but there is a reputational incentive to do that. You’re incentivized to help the companies that are struggling because you want those founders to want to work with you in the future or recommend you in the future, but the economic incentive is really to, focus on what’s working and double down on the winners.
There’s a disconnect between how the VC’s are incentivized and what an entrepreneur needs, because an entrepreneur who’s already crushing it and successful doesn’t really need the help of the VCs and entrepreneurs who is really struggling, oftentimes does need their help, but there’s not an economic incentive for the VCs to help.
The other thing would be that, there can be these warped incentives where VCs want to have their investments validated by other firms and by other investors. So, there could be an incentive to push a company to raise more capital, have a company maybe raise more before it’s ready. Give up more dilution other than they should because a given VC wants to be validated by another VC firm and have a markup on their investment.
We at Bedrock are very much not into that. Our whole MO is that we don’t really care about other investors. We don’t care about validation. We want to double down on our positions and part of the way in which we are able to do that is we have a very small portfolio in any given fund and we partner very closely with our LPs on follow-on finances. We try to deliberately push against looking to the market for the validation on the investment.
NA: That’s great to know. what’s a secret obsession of yours that not many people know about?
GL: Architecture. When I was a kid, I always thought I was going to be an architect. I would spend hours and hours locked in my bedroom with a pencil and paper making architectural drawings. As soon as we got our first computer in 1995–1994, I was using early architecture software to draw floor plans and buildings.
I have always been sort of a systems thinker and I feel like architecture is a really interesting way to express being a systems thinker while also being artistic. It’s still a major hobby of mine. If I ever retired from venture capital, I might end up trying to get an architecture degree and pursue that as a second career.
NA: That is a very interesting obsession. Finally, what’s the latest, publicly announced investment you’ve made and why did you make it?
GL: A good one would be Flock Safety where we recently co-invested in a Series C. We initially, led a Series A one round. Co invested in the Series C alongside Meritech. We were really excited about the opportunity to leverage, basically what Flock Safety does, computer vision-enabled, crime-solving camera that sells to neighborhoods and police forces.
I believe that more security and safety while respecting privacy is going to be increasingly important. It’s a sort of interesting company in that it’s sort of a hardware company that monetizes through enterprise SaaS. It doesn’t fall easily into either category. It’s interesting to us for that reason.
NA: Sounds like a great company. I really appreciate you taking the time out to do this Geoff!
GL: Really appreciate it and thank you for reaching out!
