Episode 422 of The VentureFizz Podcast features David Fialkow, Co-Founder & Managing Director of General Catalyst.
Entrepreneur, venture capitalist, philanthropist, and Oscar winner – those are just a few of the words that describe David’s legendary career.
As you’ll hear from this interview, he emphasizes the importance of storytelling, which he originally learned from filmmaking, but it goes beyond making a compelling documentary. It is an often-overlooked but essential skill for every entrepreneur. Whether you are hiring, winning over customers, or raising capital, being able to align everyone with your mission through a powerful narrative is critical for success.
Most of you are likely familiar with General Catalyst. They are one of the top VC firms in the world, having backed a “Who’s Who” of tech giants including Stripe, Anduril, Circle, Airbnb, HubSpot, Snap, Canva, and Discord – just to name a few.
In this interview, we cover a lot of ground, plus David shares lots of stories and interesting advice along the way, such as:
- What it’s like to win an Oscar and making impactful documentary films.
- David’s thoughts on the Boston tech scene.
- His long standing partnership with Joel Cutler (which I didn’t know they met when they were seven years old) and the details on their entrepreneurial initiatives in the travel industry including building the largest tour & cruise business in the U.S.
- The story of how a donation to Children’s Hospital led him to compete in the Ironman triathlon with just 90 days to train.
- How General Catalyst got started during the 2001 VC winter after dot-com bubble burst.
- The firm’s myopic focus on founders and their approach to building a firm with long term, intergenerational value.
- Investing in pillar Boston companies like HubSpot, Circle, ITA Software, KAYAK, and others… and their thought process around expanding the firm to the West Coast.
- The importance of surrounding yourself with people who know more than you do.
- And so much more!
Podcast Sponsor:
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Transcript:
Keith Cline (02:41)
David, thanks so much for joining us.
David Fialkow (02:43)
Keith, it’s an honor. I’m excited.
Keith Cline (02:45)
I’m so excited to talk to you. I’m a historian of the Boston tech scene and ⁓ there’s so much that you’ve been a part of to make that happen. So I was excited to talk to you about so many different things, right? We got a lot to cover your entrepreneurial journey, building one of the preeminent venture capital firms and lots of other things that you’ve done throughout your career. And that’s kind of what the other things that you’ve done throughout your career is where I wanna start. So ⁓ you’re, this is an honor.
David Fialkow (02:49)
You
Keith Cline (03:15)
You’re the first guest I’ve had that’s won an Oscar, if not one, but two Oscars, right? So, so.
David Fialkow (03:21)
Yeah, but I’m
on pins and needles because tomorrow morning is the nominations for this year. So let’s see how we do. You’re only it’s like a restaurant Keith in the film business. You’re only as good as your next film.
Keith Cline (03:29)
⁓
Okay, well, I want to bring this up. Like, what was
this moment like? Like, you’re on stage at the Oscars winning for Icarus Like, what was that moment like?
David Fialkow (03:47)
surreal. In many ways, ⁓ filmmaking is very similar or doc filmmaking is very similar to venture capital.
By the way, the gentleman to my right, ⁓ yeah him right there is Jim Schwartz. Jim Schwartz is the founder of Accel and Jim Schwartz is also my film partner on many of our films. ⁓
Both Icarus and Navalny, which we were extremely fortunate to win Academy Awards on, Jim and I co-produced. So it’s kind of ironic that you have two VCs that are doing
For me, my journey around filmmaking, just to start, is kind of ironic. When I went to college, I didn’t have very good academic skills and I was given a choice between
taking studio art or taking filmmaking as a major. And that was looked at as like an accommodation to the fact that ⁓ my sports skills were good enough to get me into college, but my academic skills probably weren’t good enough to get me out of college.
and
I spent a year after college being a doc filmmaker, traveling around the world, making a film called The World Behind Bars, as in Handlebars, you know, because I was on a bicycle. And, you know, that would come back later when, you know, biking would become a constant theme in my life, so biking and film. But what filmmaking taught me was storytelling. And storytelling is such a core part
of being a founder and building a business. In order to get a job, to hire people, raise money, get a customer, anything, a story tell is so darn important because it gets everybody around you aligned around what the mission is. So as I started my life in business with Joel, we’ll talk about some of the companies, it was always about storytelling. And then just to finish the piece about filmmaking,
As luck would have it, I married Nina, my wife, who was a PBS producer, and she’s a filmmaker. just purely coincidence that I fell in love with a filmmaker, right? And so as ⁓ over the last 15 years, Nina and I have been partners ⁓ in making all these documentary films. And Nina’s also the chairman of Frontline, the PBS
So that’s where my two worlds come together.
Keith Cline (06:26)
Yeah,
well, it’s a perfect parallel. I feel like founders don’t always take that serious where they don’t practice enough to get that pitch down, whether it’s, like you said, meeting with investors, hiring new employees, selling to customers. It’s such a critical piece that I think is so under thought about and not practiced enough.
David Fialkow (06:46)
Well, you one of things that you and I were going to talk about is the sad state of, I think, tech in Boston, right? I’m not proud of what’s happened over the last 20 years. It’s been kind of an evisceration of our tech community for a whole bunch of reasons. If you want it to be objective, everybody blames, it’s too expensive to live here. Too expensive to live here? It’s the same price to live here in San Francisco. You know, regulatory issues here. No.
We can ask the government to do whatever we It is not a government issue. It is a people issue. And the reason is that, you know, ⁓ on the East Coast, we do not embrace a culture of entrepreneurship, also a culture that has successes and failures. I think we’re very focused around only doing things that make us successful instead of taking the high risk that sometimes produces the great outcomes. And a lot of this goes back to storytelling.
You’ve got to be able to have a vision and be able to tell the story, but you’re also going to be able to recruit and build a team. And that becomes harder in a city that hasn’t attracted a lot of like kind people.
Keith Cline (07:58)
Well, I do want to go through your background story, right? Because I learned a lot doing my research about growing up, the different roles that you held, it’s not, you know, like, like going door to door selling, like anyone that can do that and survive is going to be successful in many categories. But, but then I didn’t know you and Joel, you know, Joel Cutler for people listening, like had this long lasting friendship. I didn’t know that about the two of you.
David Fialkow (08:04)
What a mess. What a mess.
So Joel and I haven’t known each other that long. We met when we were seven. And we were the best of friends throughout our youth, still to this day. ⁓ when we were 15, Joel and I went to high school together and Joel got very sick with Crohn’s disease and spent a year at Children’s Hospital, which was a transformational time in his life. ⁓ He was very sick and then ⁓ he got cured.
And he’s super healthy now. Um, but that also enhanced our bond. And, you know, Joel came up with this idea when we were in law school to, uh, sell last minute travel, meaning trips last minute. His dad was in the travel business and he just had this idea. this, uh, a friend of ours, Brian Knaez joined us. We all were in school together. And the idea was very simply this, that as.
As you got closer to the travel date, ⁓ leisure travel ⁓ became much less valuable because an empty hotel room, an empty airline seat was valueless once it expired. So Joel came up with this idea of putting trips together that were a half price. if you knew you wanted to go away March 10th, instead of booking that trip on January 10th and paying full price, you’d book it March 4th.
and you go somewhere for half price and whether it was Aruba or St. Martin or St. Bart’s, whatever, it didn’t matter. You got a trip for half price. And that became a really cool idea, especially as in the timing, this is, know, late 80s and early 90s where people were really starting to travel much more. And we ended up selling that business for, you small money because we all wanted to go do other things. It wasn’t going to be a…
a business of ours. went and worked for Tom Lee, the buyout guy. Joel went to work in his family business, which was Comdex. And three years into our other journey, ⁓ Joel and I got together again and said, hey, let’s come back together and let’s build a really great travel business. And Joel is a travel savant. And one of the themes of my life, Keith, is I’m incredibly lucky to always have people around me
that are extraordinarily talented. Whether it’s our film business, it’s my wife, whether it’s Hemant who runs General Catalyst today, ⁓ whether it was Joel when we first started all of our businesses, including General Catalyst, I’ve always been blessed to have somebody with me who’s extraordinarily competent. And that is a very good path to success who you choose to partner with. And I’ve been very fortunate to be able to do that. So yes, Joel and I,
started National Leisure Group, ⁓ and we ended up building the largest ⁓ tour and cruise business in the United States, selling retail. So only to customers. We were early in technology. We were early using computers in those days, early selling on the internet. And that ended up just being a great business as a young person to build. We had a lot of employees. We had offices all over the country. We didn’t know anything what we were doing.
We had no business experience, no management experience, but we got three things right. Number one, the customer experience, which would, you know, bode us well later. Number two, building great young leadership teams and empowering them to go do it. We didn’t know what we were doing anyway. So oftentimes we had to be honest with people, say, we don’t know how to do this. We don’t know how to open, you know, a dozen new stores. We don’t know how to build this technology, but we don’t understand this stuff. Go figure it out. And what happens?
Keith is when you allow people to own the outcome and you give them permission to go for it and fail or succeed, it’s amazing how you can get young people to do some turbo charge that grow. That ended up being a very successful business. We sold it. Our timing was perfect. Right after we sold it, we got a phone call from our friends at Berkshire Partners, which is a biofirm here in Boston.
They asked us, did we want to join them in buying what seemed like a crazy idea, which was Carnival Cruise Lines duty free stores. And Carnival wanted to get rid of them because they want to focus on their cruise business. So Berkshire and Joel and I bought that business with Steve Karp, who would become a great mentor to us, the iconic
Keith Cline (12:53)
Mm, okay.
David Fialkow (13:11)
⁓ Boston real estate developer. And we just got lucky. We went around to all the cruise lines because we knew them all from selling their cruises in national leisure and said to Carnival and Royal Caribbean and Norwegian Cruise Line and Holland America, all the major cruise lines, hey, why do you run your own duty free stores? Let us do it. And we recruited a great leadership team to help us do it. And it was like kind of like a weird business, but it was massive. We ended up buying a bunch of companies, melding them in with them.
We bought an art business that sold art ⁓ on board. We ⁓ had a business that did tours off the cruise ship so you could spend the day doing something interesting. And we ended up building a virtual monopoly. And then our timing was perfect. In March of 2000, which was right before the crash, we sold the business to LVMH. LVMH has a massive
market position in the duty-free business and they did not have anything maritime meaning they didn’t have any stores on cruise ships. So it was a perfect strategic value and it taught us a very important lesson we figured out this model.
that said it was a triangle. At the bottom of this is value creation in a company. You start with a proof of concept, then you get revenue. So you’re moving up the food chain to create more value. Then you create a business that has strategic value. That’s obviously worth more than the other two pieces. And then the top of that apex of the triangle is what we call SOA. And SOA means
in a nutshell, scarcity of asset. It’s one of one. So the reason why, and we learned this by accident, this is complete revisionist history. So what happened is that we realized owning this duty-free business, it was the only one in the world, and when we went to market it sells LVMH, we got a real premium to sell it. And we were like, there’s something in this. Then what happened next is just serendipity. ⁓
Keith Cline (14:57)
Got it.
David Fialkow (15:19)
I, ⁓ Joel had Crohn’s. We had just sold our Made some money. I, Nina and I, wife and I really want to make a donation ⁓ to help ⁓ Crohn’s research in Boston, because Joel and his parents had devoted his life to this. I went, Nina and I went to Children’s to talk to them about it. And I was walking home with Nina.
And it was a very expensive thing we were about to do because doing things in hospital is expensive. And I went into a taco bar with Nina. And at the time, I had a deal with my wife where I could weigh double what she weighed. She’s been 105 pounds her whole life. I at this point probably weighed 220. I am 175 now. I’m a little more svelte. That’s what age does here.
While I was in this talk of our, some friends of mine said, hey, how’s this two for one going? Meaning, know, weighing double what Nina weighs. And I thought he meant two for one, meaning I got two tacos and one tequila. And we joked about it. But these friends of mine, you know, I had been, you know, obviously an athlete and I got a little bit, you know, let’s call it bulky. ⁓ so ⁓ having a huge ego, I said, listen, guys, I’m a few million bucks short.
Keith Cline (16:24)
Hehehehehe
David Fialkow (16:42)
to build this thing at Children’s that I want. Why don’t you bet me I can do anything physically, but you’ve got to come up with $2 million. You’re $2 million bucks if I do it, my $2 million bucks to to some foundation if you don’t do it. And the bet was on. And the bet was do the Hawaiian Ironman in the next several months. And I had not, I didn’t know how to swim, literally. I I knew how to like hop in the ocean.
and get out. But I didn’t
Keith Cline (17:11)
Right.
David Fialkow (17:14)
know how to swim. And I took the bed on. And then as this was happening in the bar, Nina comes to me and goes,
So said, hey guys, we’re gonna double the bet. The Ironman this year is on my birthday. And Nina said, go for it, double the bet. So I had a 90 day period, I had to learn, swim, I had to qualify for the Ironman. And then Joel and I, Nina, Joel’s wife, Randy, and a bunch of our friends, we all flew to Hawaii. And ⁓ I did it, I got it, I got it done. And I got the money. ⁓ You know, I… ⁓
Keith Cline (17:30)
Wow.
That is extraordinary.
David Fialkow (17:50)
I didn’t exactly win. I guess I won the prize of doing it. I survived. I had to do it under. And so the next day, Joel and I was sitting on the beach like, what are we going to do next? And, you know, I said to Joel, you know what? Yesterday was fucking hard. That was a tough day. I think we should do something really hard because doing really hard things is really fun. And I said,
Keith Cline (17:52)
Right, yeah, but completing, completing Iron Man is extraordinary.
David Fialkow (18:20)
How do you rate us, Joel, as founders? And Joel goes B to B minus. I’m like, that’s probably generous. We were more lucky than smart. What if we started a company, a business, that would help founders build their businesses? The word venture capital never came up. It was like, let’s just do it. Let’s find a way to help founders. How fun would it be to sit in an office in Boston and
you know, and Joe said, it’s a great idea except for three things. We don’t know anything about technology. We don’t know anything about investing. And we’ve never raised money. And I said, exactly. No bad habits. We can do that. And at the time, what we didn’t realize, Keith, this was ⁓ the winter of venture capital, meaning the darkness. This is 2001 and you know, there was no money around and
Keith Cline (19:00)
Right.
Right. Yep. After the dot com.
David Fialkow (19:17)
You know, nobody was going to give us any money. ⁓ we got our friends from Bain Capital and from Highland Capital who agreed to mentor us. We didn’t know anything about investing to put up some money. Joel and I put up, money and we closed on a little fun, little $70 million fund and said, let’s, let’s not call ourselves venture capitalists. Let’s call ourselves mentors to help founders. And the whole idea that we started 25 years ago
is exactly what we do today,
Keith Cline (19:47)
I don’t know if this is the same exact timeframe, but I was going through the archive of, you know, the internet archives and I found this early version website of your firm and Smart Capital for Entrepreneurs.
David Fialkow (19:59)
my God, look at…
I gotta take a picture of that. viewer. No, I just got it. my God. That is our old, that little blue circle was our first logo. Our mission, funding breakthrough ventures, backing exceptional entrepreneurs.
Keith Cline (20:05)
I can email it to you.
Right.
David Fialkow (20:24)
You know what? I think we got it right. So, here’s what we got right and here’s what we got wrong. What we got right is our partnership and the fun that we would have together and the mission of being with founders. We also realize that the stars are the companies, not the venture capitalists, number one. Number two, hatching companies. You know, the deal that
Keith Cline (20:28)
think you did it. Smart Capital for Entrepreneurs.
David Fialkow (20:53)
that the first two deals that transformed General Callow’s, Joel did Kayak, which he started himself with a couple of them. Yeah, it was one of our first deals and it taught us this lesson that hatching companies with great founders is a good idea. So here’s what we got right. We got right the mission of being on a journey with founders, not being investors, but being mentors and business builders.
Keith Cline (21:01)
That was one of the first deals. I knew it was early. I didn’t know it was one of the first. Yeah.
David Fialkow (21:22)
The second thing we got right is our myopic focus on founders, their journey, whatever a founder needs on a personal level, on a professional level. And we focus on the three main areas that really matter to founders. Help them build their teams, help them get revenue and help them raise money. That’s it. They know what they’re doing. You know, who are we to sit there and say the product should look like this versus that? No, we have, first of all, we wouldn’t have known anyway. But what we got right was that. The second thing.
that we got right is we hired good people. Our first hire was Hemant Taneja, who was at ⁓ MIT. And he was one of these, know, wonder kind 21 year old kids with, I think four masters out of MIT. He had just built a business and ⁓ he was our first Associate. You know, 18 years into it, seven years ago, eight years ago, Joel and I realized that
⁓ running a venture firm is a lot like a Patek Philippe watch. Obviously, I don’t wear one, but you know, it’s a good ad. And the ad is you don’t own it. You merely take care of this for the next generation. And what was very important to us, Keith, very important, was the intergenerational value of a firm. A lot of these firms are built to be disposable. I’ll run it. I’ll make money. And when I move away,
Keith Cline (22:30)
You
Right, yes, yes.
David Fialkow (22:49)
the firm dies. That was not Joel’s and my vision. We want to build something that had enduring value and both to the founders that we would work with and also to our investors. And we built the firm around having the capacity to be here
And then in 2018, we had the opportunity to really sit down with Hemant. We had just brought Ken Chenault in
to be our chairman, executive chairman, ⁓ former CEO of American Express, Lead Director of Berkshire Hathaway, an incredible guy, but a great friend that we had known for a long time. And we said to Ken, hey, Ken, help Joel, Ken, ⁓ help Joel, Hemant and I scale the business so we can continue on this journey. But also it became clear to us at that time that we should transition at some point the leadership of the firm
to Hemant. And the reason for that is, you know, we’re a venture firm. We’re supposed to back young people. We’re supposed to take risks. We’re supposed to build businesses that are dynamic and creative. Yet our industry does not do that. People stick around too long and they get calcified, not so much by age, but by thinking. And we wanted to really open up. And Hemant had a real vision of what, you know, he wanted to build. So
Joel retired a couple of years ago, I’m still full time, but it’s a very unusual situation to work beautifully. I don’t run a firm that I was the founder of. And by the way, Hemant’s done a much better job ⁓ in building a leadership team and growing the business than Joel and I could ever do. So we’ve had the joy of being part of something that has been tremendously fun and enjoyable and really significant
in the entrepreneur community, yet we’ve been able to share this journey with other people, which I think is really important and very few other people have the opportunity.
Keith Cline (25:22)
And I’ve been fortunate to watch the firm develop over the years and I was lucky to be included on the invite for a couple of your LP meetings. ⁓ Jessica Alba was there and it was like an extraordinary, yeah, an amazing founder, amazing. I do want to go to the earlier days of General Callas though because you talked about Boston and
David Fialkow (25:37)
Good founder.
Keith Cline (25:48)
I wanna bring this back up just as another flashback for you. So I remember this website so well. ⁓ So I totally like this, this was when I was probably just getting started with my own business. And I remember I’m like, ⁓ and you guys were like building this Renaissance of great companies in the Boston area. And you were taking companies that were incubated, right? Like so Smart Bargains, right? Upromise these were companies that you.
David Fialkow (25:52)
⁓ my. Who is that guy? ⁓ my God.
Keith Cline (26:18)
General Catalyst to help the founders build like in conjunction, right? Like it wasn’t just like, here’s some money and go build it.
David Fialkow (26:25)
It took us a while to figure out our footing. You know, ⁓ part of it is, you know, we had this offsite. I’ve always been trying to figure out the years, but we invited a guy named Yuchun Lee, who was a local Boston, you know, legend entrepreneur. And we had set up this program called XIR. It’s just a name I made up.
Basically put together a group of former founders who worked with us on a semi full-time basis and they would become executive chairmans of companies or leaders of companies to help founders grow and It really worked well and we had you know, our Yuchun was our first one, Paul Sagan was our second one Rob Gerking was our third one and all of these
folks built multi-billion dollar businesses with us, which is kind of funny, But what what our idea always was was to you build a team that had this mentor mentorship to it. So there was this very famous offsite that Yuchun can came to in San Francisco and we’re going through everything our strategy and everything and he goes like I have a question for you guys. Aren’t you a tech venture firm? We go. Yeah. Well, what are you doing owning restaurants?
What are you doing owning all these other businesses? Media businesses and stuff. And what had happened is we had really oozed. We had really had strategy creep. And it was this iconic moment. This is 15 years ago, maybe more. I forget. When Yuchun went, like, this doesn’t make any sense. Why don’t you guys just go back to focusing on technology? And if you looked at key inflection points, that was one of them.
The second was hatching companies. The third was our XIR program, bringing Ken Chenault in, giving Hemant the leadership role. ⁓ Jim Schwartz, the guy in the picture of the film business with me, was a founder of Accel, a magnificent human being. Accel is a really great firm and he took the time and love of ⁓
of helping our team. He said, I’ll be happy to mentor you guys and help you. I’ve learned a lot being in the venture business. I’ll be happy to teach you what you learn. So I said to him one day, just read a bunch of stuff. I gave him a bunch of information about our firm and tell me what you think. And I remember going to his house like two or three days later with a couple of my partners. And he goes, listen, I’m just going to be candid. If you don’t move to San Francisco, this firm won’t exist in three years. ⁓
This is 2010 or something, so 15 years ago and we’re like, why? He said, listen, Accel had the same issue 15 years ago. It’s all happening out there. And he went this macro, again, Storyteller, he’s my film partner now, and this macro of why San Francisco would be the place where all these companies were being built. And we moved Hemant out there. We said to Hemant you’re going to move out there.
Keith Cline (29:33)
Mm-hmm.
David Fialkow (29:35)
You’re going to build a team out there and this will be your opportunity to really build the firm. And then eventually you’ll run it. I look back, that was absolutely the right thing to do. And for two reasons, but yet we got mentored in doing this. I talked to all the firms that had moved east to west, okay? Very few of them successful. And they all told me the same thing. It’s 8:30 at night.
You’re sitting there at a birthday party on a Friday night and your partner calls you and says, we’re doing a deal, you know, $4 million on $40 pre or some at the time, like some crazy high number. Is your instinct like, this is a pain in the ass, you know, being, you know, you know, multi-coastal. Do I trust my partner? Is this the way I want to run the business? And we set down a very simple rule that we would let Hemant
make the investment decisions on everything out there at a very young age. And obviously he did an amazing job, which is what gave us confidence to eventually take over the firm. But that move, if we had not moved to San Francisco when we did in 2012, I think it was, we would not exist. We also moved to New York right after that. And then today we’re a global firm. But doing that was a great move. We wouldn’t have done it
were it not for the mentorship.
Keith Cline (31:07)
Like the companies on your website, Airbnb, Stripe, Snap, Instacart, Jessica Alba’s company, the Honest Company, and it could go on and on and on. There’s so many portfolio companies of just great, legendary companies. But when I think back to the Boston early crop, like all the alumni that have gone off to do extraordinary things from m-Cube, ProfitLogic, GameLogic, Kayak, Demandware, JumpTap, Brightcove, BlackDuck, ITA Software, which is…
David Fialkow (31:16)
Yeah.
Keith Cline (31:35)
Think of ITA Software just like what the impact that company’s had that people don’t really know about, like with Google and travel. imagine.
David Fialkow (31:37)
Yeah.
We stole that. Imagine today hundreds of millions
of revenue, like a hundred of EBITDA. mean, that business, know, Jeremy did a really good job, but yeah, I mean, we, the Boston ecosystem, first of all, we were very fortunate. We’ve backed, you know, many Boston companies, HubSpot, you know, which is, you know, one of the greatest companies ever built. Brian Halligan tells a great story about coming in and pitching us.
Keith Cline (32:05)
That was the next crop, yeah.
David Fialkow (32:11)
we did that I think it was like two on six or something two million or a million. I mean it was like insane right? It’s a 30 billion dollar business today. Jeremy Allaire, know Jeremy was a tech founder in residence that our partner David Orfao brought and we did Brightcove with him and Brightcove is great. And then obviously 13 years ago Jeremy came to pitch us and said hey I have this idea.
Keith Cline (32:32)
Circle.
David Fialkow (32:39)
And I turned to Joel, go, is this digital currency thing real? Joel goes, I don’t really understand it either, but Jeremy’s really smart, we should do it. And David Orfao, bless his soul, our partner, who is very close to Jeremy, said we should do this, and we did this company called Circle. And you know, yes, it’s one of the greatest outcome in venture capital history, of course, but you know, it was a 13 year ride, and every step of the way,
David Orfao is our partner and Jeremy Allaire is the founder, were lockstep in building that business. And they navigated all of the what is digital currencies to like how this is all going to affect to last year actually being significant on the genius act and building a great company, they went public and it’s just one of the great successes in Boston history, let alone in venture capital history. And it’s an amazing run. That’s what we do.
Keith Cline (33:38)
I remember in the early days of Circle with Jeremy O’Leary, he’d be in the evangelist out there talking about what is Bitcoin, right? And he’d be like just constantly talking. And I think there’s a picture out there. I’m sure I could find it if I dig it up. And if I do, I’ll throw it on here. In their headquarters, like on Summer Street or somewhere, there was a picture of Bitcoin here was in that window of the office. And this is like gazillion years ago. ⁓ But Visionary, to do online video first for enterprises,
David Fialkow (34:03)
He was a visionary.
Keith Cline (34:08)
and ColdFusion, for Allaire, like just a crazy entrepreneur. ⁓ And now to the…
David Fialkow (34:15)
David Orfao
our partner, who the last deal he did 11 years ago was Circle. It’s a great way to end your career, right?
Keith Cline (34:26)
So what are you interested in now? Like you’re still actively involved making investments. Like what’s on your radar these days?
David Fialkow (34:34)
So we’re a big firm today. We have 400 plus people. We have, I think, depending upon the day, we have nine, 10 offices. We’re 40 billion plus or minus of AOM. We’re big for a venture firm. But we run it in a very lean entrepreneurial way in that we have a great leadership team.
We’ve approached the business quite differently than other firms have. We’re not looking ⁓ at this as just venture capital. We’re looking at this, what do founders need to build their companies? So we have a very creative, ⁓ we don’t call it credit or debt, but call it the customer value fund, which allows founders who are scaling their businesses to use ⁓
⁓ borrowed capital ⁓ that’s unsecured as a way to do their CAC LTV. So saves them an enormous amount of dilution. But we work with them and do the work on the CAC LTV and understanding the value of the cohorts. So we’ve never had a loss. This is money that we loan to companies. ⁓ And it’s a genius idea that ⁓ two founders came to us with to start this new fund with us. And that’s a great tool for founders. When we invest billions of dollars a year,
in companies that have no equity, have no security, yet they produce a very high return for us and save an enormous amount of value and dilution for founders. And we also have a team that really understands the CAC LTV so they can really help partner with founders to do that. The second thing made some bold bets. We bought a hospital chain. Why? And we bought it at our management company level. We did not buy it through our fund. Why?
because in healthcare, which is our largest area, ⁓ virtually all of the solutions in digital healthcare are point solutions, meaning one vertical at a time. And trying to sell those into a hospital chain or a healthcare system are impossible. So what we did is we bought our own hospital chain and we’re gonna integrate all of our digital solutions into this one. And it allows us
to be able to have everything kind of come together. So our portfolio companies can work together on the digital transformation of Summa which is the name of the hospital we bought. And so this will be a model that will allow other hospital chains or healthcare systems to see the way digital healthcare can be produced and therefore help our portfolio companies expand away from point solution. So it’s a really genius idea that the leadership team at GC had. So we’re doing creative things like that.
⁓ What turns us on these days? There’s so many great founders out there in the world. ⁓ There’s never enough money or human capital that can be put to work. I mean, we are in the very early stages of massive transformations. Obviously, AI is a big part of that.
So, you know, one story that’s really interesting, Keith, is, you 7-8 years ago, we invested in Anduril And it was one of the most interesting moments in General Catalyst history, because the question came up in our partner meeting, why would we be investing in a drone company that could deliver, you know, deadly capabilities at a time when it looked like there was peace in the world, and people were far less focused
around America first and ⁓ defense, cetera. So we’re having a really great partner meeting and we couldn’t totally resolve how do we get over this idea that we’re going to invest in a company that potentially could have lethal capabilities. So ⁓ one of our partners, ⁓ I think it was Hemant said, let’s get the leadership team on the phone and let’s ask them. it was the founders of Anduril Palmer and Brian.
And they answered it in the following way. This is like one of the greatest moments of my learning. They asked the question back to us, do you trust your government? Remember this is 2017, not 2026 or 18. And people said, yes, of course we trust our government. And they said, well, if you trust your government, don’t you want your government when it needs to act to have the best possible precision capabilities so that it can minimize damage and maximize the outcome.
And we’re like, that’s it, we’re done. That is the right answer. You are going to give us the best capabilities when they’re needed. And I look at that, that was a transformational investment for us. You know Anduril is a great investment, a great company, but also led us into, you know, a great area that we call resilience. You know, which is, you know, food security and energy security and cybersecurity and national security.
And that business today is massive for us, run by ⁓ Paul Kwan and Alexa. And we have one of the best portfolios in the world to do that. So I look at times where we had the vision, the luck, the leadership team, whatever you call it, where we made investments and invested in companies with founders who were transformational at a time that wasn’t exactly clear what the transformation was going to be. That was Anduril.
Okay, that was certainly Circle. So sometimes you call, I call it luck as well, but sometimes that’s the way you got to build a business.
Keith Cline (40:20)
Piece of advice for entrepreneurs. Like one of the superpowers I’ve gathered from you is your ability to build relationships. We talked about the storytelling piece, which is obvious now, but the building relationships and connecting people piece, that’s something that I think, ⁓ I don’t know, like I’ve been fortunate to be blessed with something similar where I’m constantly like recognizing networks and how people should connect and hopefully do amazing things. So like, how is that your superpower?
David Fialkow (40:46)
a really good question. I always relied upon the fact that when you have people around you that know more than you do, or in my case, more than I did, which was pretty often, being inclusive creates much stronger teams. What I didn’t realize is it also gives you a much stronger buy-in, both from your own team
and also the teams you’re investing in. And very often we think we have the answers. And I think sometimes that’s a mistake. We should be in listening and in receiving mode versus in ⁓ externally talking mode. And we have always looked at the venture business as building teams. It’s not, very rarely is the idea that you’re back
end up being the idea of the Circle being, you know, went through 19 different iterations before it came out. You know KAYAK had a very different model, you know, ⁓ you know, we look at some of these businesses that we just talked about. ⁓ And you got to be willing to work with founders over a very long period of time ⁓ to see where market and creativity meet and leadership capabilities meet. And so, ⁓
the direct answer to your question is that gives you an opportunity to be connected with a lot of people who can be part of a mission of building a business. Because when you do that and you’re inclusive, you build better teams, you get better insight, you get better buy-ins from people, your customers appreciate it more. Even our LPs, early on we took a very different tack. We included our LPs very much in everything. You know, I give my partner, Bill Fitzgerald,
who was one of the founding partners at GC, credit for this. We have full transparency. In the early days, we let LPs come to partner meetings. We would tell them everything that’s going on. And then what do you think happens, you know when the time comes to fund raise? They already know what you’re doing. They already know the firm. They already know the personalities. They know the people. So instead of the opacity that a lot of other firms had in those days and maybe still do, we were much more transparent. And that also allows you to bring better people together.
Keith Cline (42:50)
Right.
David Fialkow (43:04)
And I think that’s the reason why GC has always been a place where, you know, we call it today, famiglia ⁓ which is, how do you build a family around the businesses that we’re building? So you get the best people working on this stuff.
Keith Cline (43:20)
Yeah, so true. And just one parting story that I am so grateful for. I started VentureFizz in 2009. It was, you know, after the financial crisis. I was a recruiter. I didn’t have any search work. I had this idea for a website. I launched it and I think I sent out an email to people about, hey, I’m looking for sponsors for this website. Joel Cutler, I think was the first one that reached out and General Catalyst was a sponsor of this site, VentureFizz, back then. And that helped me
get on my way and I’m so grateful for GC and Joel and obviously everything you and the whole team have been up to. So thanks for sharing the story and the lockdown memory lane here.
David Fialkow (43:56)
Well, thank you. Yeah.
Well, thank you. And, you know, it’s been a wonderful journey. What’s really great is the people that we’ve been able to do it with and the future is bright. If I look at the people that are running the firm today and the young leadership team that’s in place and the work that’s being done, Joel and I could have never dreamed that we would have been part of this journey. So thank you for letting us talk about it. And thank you for letting us ⁓ reminisce a little bit about the old days. But you know what?
The best is ahead of us. So thank you.
