IVP’s Eric Liaw talks Klarna controversy, sticky successions, and why the good valuation reset would not actually matter

When IVP just lately introduced the closing of its 18th fund, I known as Eric Liaw, a longtime basic accomplice with the growth-stage agency, to ask just a few questions. For starters, wringing $1.6 billion in capital commitments from its buyers proper now would appear much more difficult than garnering commitments throughout the frothier days of 2021, when IVP introduced a $1.8 billion car.

I additionally questioned about succession at IVP, whose many bets embody Figma and Robinhood, and whose founder and earlier buyers nonetheless loom giant on the agency – each figuratively and actually. A current Fortune story famous that footage of agency founder Reid Dennis stay scattered “in all types of locations all through IVP’s San Francisco workplace.” In the meantime, footage of Todd Chaffee, Norm Fogelsong and Sandy Miller – former basic companions who are actually “advisory companions” – are blended in with the agency’s basic companions on the agency’s web site, which, visually at the very least, makes much less room for the present technology.

Not final, I wished to speak with Liaw about Klarna, a portfolio firm that made headlines final month when a behind-the-scenes disagreement over who ought to sit on its board spilled into public view. Beneath are elements of our chat, edited for size and readability. You possibly can take heed to the longer dialog as a podcast right here.

Congratulations in your new fund. Now you possibly can calm down for a few months! Was the fundraising course of any roughly troublesome this time given the market?

It’s actually been a uneven interval all through. In the event you actually rewind the clock, again in 2018 once we raised our sixteenth fund, it was a “regular” setting. We raised a barely larger one in 2021, which was not a traditional setting. One factor we’re glad we didn’t do was elevate an extreme quantity of capital relative to our technique, after which deploy all of it in a short time, which folks in our business did. So [we’ve been] fairly constant.

Did you are taking any cash from Saudi Arabia? Doing so has grow to be extra acceptable, extra widespread. I’m questioning if [Public Investment Fund] is a brand new or present LP. 

We don’t sometimes touch upon our LP base, however we don’t have capital from that area.

Talking of areas, you have been within the Bay Space for years. You will have two levels from Stanford. You’re now in London. When and why did you make that transfer?

We moved about eight months in the past. I’ve really been within the Bay Space since I used to be 18, after I got here to Stanford for undergrad. That’s extra years in the past than I care to confess at this level. However for us, enlargement to Europe was an natural extension of a method we’ve been pursuing. We made our first funding in Europe again in 2006, in Helsinki, Finland, in an organization known as MySQL that was acquired subsequently by Solar [Microsystems] for a billion {dollars} when that was not run of the mill. Then, in 2013, we invested in Supercell, which can be based mostly in Finland. In 2014, we turned an investor in Klarna. And [at this point], our European portfolio at the moment is about 20 corporations or so; it’s about 20% of our lively portfolio, unfold over 10 completely different international locations. We felt like placing some ft on the bottom was the precise transfer.

There was lots of drama round Klarna. What did you make of The Data’s studies about [former Sequoia investor] Michael Moritz versus [Matt Miller], the Sequoia accomplice who was extra just lately representing the agency and has since been changed by one other Sequoia accomplice, Andrew Reed?

We’re smaller buyers in Klarna. We aren’t lively within the board discussions. We’re enthusiastic about their enterprise efficiency. In some ways, they’ve had the worst of each worlds. They file publicly. They’re topic to lots of scrutiny. Everybody sees their numbers, however they don’t have the forex [i.e. that a publicly traded company enjoys]. I feel [CEO and co-founder] Sebastian [Siemiatkowski] is now rather more open about the truth that they’ll be a public entity in some unspecified time in the future within the not-too-distant future, which we’re enthusiastic about. The reporting, I assume if correct, I can’t get behind the motivations. I don’t know precisely what occurred. I’m simply glad that he put it behind them and might give attention to the enterprise.

You and I’ve talked about completely different international locations and a few of their respective strengths. We’ve talked about shopper startups. It brings to thoughts the social community BeReal in France, which is reportedly searching for Collection C funding proper now or else it would promote. Has IVP kicked the tires on that firm?

We’ve researched them and spoken to them previously and we aren’t at the moment an investor, so I don’t have lots of visibility into what their present technique is. I feel social is difficult; the prize is huge, however the path to get there’s fairly laborious. I do assume each few years, corporations are in a position to set up a foothold even with the energy of Fb-slash-Meta. Snap continues to have a robust pull; we invested in Snap fairly early on. Discord has carved out some area available in the market for themselves. Clearly, TikTok has finished one thing fairly transformational around the globe. So the prize is massive but it surely’s laborious to get there. That’s a part of the problem of the fund, investing in shopper apps, which we’ve finished, [figuring out] which of those rocket ships has sufficient gasoline to interrupt by way of the environment and which is able to come again all the way down to earth,

Concerning your new fund, that Fortune story famous that the agency isn’t named after founder Reid Dennis as proof that it was constructed to survive him. But it additionally famous there are footage of Dennis all over the place, and others of the agency’s previous companions, and now advisors, are very prominently featured on IVP’s website. IVP talks about making room for youthful companions; I do surprise if that’s really taking place. 

I’d say with out query, it’s taking place. Now we have a robust tradition and custom of offering individuals of their careers the chance to maneuver up within the group to the very best echelons of the overall partnership. I’m lucky to be an instance of that. A lot of my companions are, as nicely. It’s not solely the trail on the agency, but it surely’s an actual alternative that individuals have.

We don’t have a managing accomplice and we don’t have a CEO. We’ve had individuals enter the agency, serve the agency and our LPs, and likewise as they get to a special level of their lives and careers, take a step again and transfer on to various things, which by definition does create extra room and accountability for people who find themselves youthful and now are reaching that prime age of their careers to assist carry the establishment ahead.

Can I ask: do these advisors nonetheless obtain carry?

You possibly can ask, however I don’t wish to get into economics or issues alongside that dimension. So I’ll quietly decline [that question]. However we do worth their inputs and recommendation and their contributions to the agency over a few years.

There’s clearly a valuation reset occurring for each firm seemingly that’s not a big language mannequin firm, which is lots of corporations. I’d guess that offers you simpler entry to prime corporations, but additionally hurts a few of your present portfolio corporations. How is the agency navigating by way of all of it?

I feel when it comes to corporations which can be elevating cash, those which can be most promising will all the time have a selection, and there’ll all the time be competitors for these rounds and thus these rounds and the valuations related to them will all the time really feel costly. I don’t assume anybody has ever reached an incredible enterprise end result feeling like, ‘Man, I obtained a steal on that deal.’ You all the time really feel barely uncomfortable. However the perception in what the corporate can grow to be offsets that feeling of discomfort. That’s a part of the enjoyable of the job.