Nearly a year ago, CapitalG, Alphabet’s growth-stage venture arm, named partner Laela Sturdy as its new director, just as the unit’s founder, David Lawee, stepped down.
Few were surprised that Sturdy was promoted to the position. She joined Google in 2007 in a marketing role, was brought into various departments in the years that followed, and when CapitalG launched in 2013, she was hired by Lawlee, who told CNBC in 2021: “I kind of set out to know who were all the stars within Google, and Laela’s name came up a lot.”
Of course, for many investors, the last year has been one of the most difficult of their careers. We wonder if the same is true for Sturdy, a former college basketball star who is quick to point out that 60% of his team comes from diverse or underrepresented backgrounds. To learn more, we caught up with her earlier this week at CapitalG’s bright and airy office in San Francisco’s Ferry Building; Below, excerpts from our chat are lightly edited for length and clarity.
Belated congratulations on taking over. How is his management style different from that of his predecessor, David?
I still lead investments and still serve on several boards, but I loved being able to pay more and more attention to the team and figure out how we can continue to build the company. there is 1708151219 Many more amazing investors we have at CapitalG.
You have around 50 people on your team; How many of them are investors and how many are not?
Our model is to find ways that Google and Alphabet can help our portfolio companies, so not just the people on this team, but to give you an idea. [of what I mean]Over the past few years, we’ve had over 3,500 different senior advisors within Alphabet who have helped us partner with our portfolio companies. [to help with] price analysis, infrastructure scaling, marketing and establishment of sales incentives. There are all these different technical and business questions that arise for growth-stage companies, which is where we specialize.
Access to 3,500 different senior advisors! How does it work?
An example is in recent years, we have partnered with the Google Training team that provides AI and machine learning training for Google engineers. We said, ‘Hey, this training is really effective and gets really high marks internally.’ And many of our portfolio companies are asking us: ‘How can we upskill our engineering talent and our organizations and prepare them to take full advantage of trends in AI?’ So we partnered with the training team and got our portfolio companies to have access to the exact same training, and now we’ve had hundreds of engineers within our portfolio receive that training. I worked at Google for a long time before coming to CapitalG, and one of the amazing things about Google’s culture from the beginning is a true culture of knowledge sharing.
The AI talent market is very competitive. What can you say to portfolio companies that might be nervous about the information coming in and out of Alphabet through you?
Everything is opt-in from the point of view of the portfolio companies. We don’t share anything; We operate completely separately. We do not share any portfolio company data with Alphabet and we do not share any Alphabet data with portfolio companies. We exist as intermediaries to find benefits for everyone where they exist.
As an example, [Google Cloud] has been an amazing marketing partner [and] All other cloud providers are also important and excellent partners, so we don’t put pressure on anyone. We help facilitate the right product introductions, marketing partnerships and discussions where relevant.
How are decisions made within CapitalG? Do you have the final say on who sees a check?
We have an investment committee [composed of] Me and three other general partners who are really amazing investors. For example, my partner Gene Frantz, who I’ve been working with for the last 10 years, almost since the beginning of CapitalG, is a long-time investor who was at TPG and elsewhere before. [joining the outfit]. So we’ve built a GP bench that’s really strong, and these GPs bring deals to our investment committee and we make the decision as a committee.
How many bets a year are you making? And what size checks are you writing?
We typically invest between $50 and $200 million in each company. We focus a lot on theses, so we spend a lot of time delving into sectors. . and we’re investing in about seven or eight startups a year and then usually [many] more tracking [rounds] for our existing portfolio.
What part of a company do you intend to own?
We are flexible regarding the percentage of ownership. What we’re thinking about is our money-on-money profitability in these companies. For example, I led the Series D round at Stripe in 2017. I think it was a $9 billion valuation. [We closed] a recent investment in AI that was on the older side (it had a valuation of less than $500 million), so we are very focused on the market, how much we think the business is differentiated and whether we can invest a significant amount of capital to scale. .
What are your cash-on-cash returns?
We do not share them publicly. We do not share any returns publicly.
At $9 billion, he will do very well with that investment in Stripe, whose valuation reached as high as $95 billion before it reset to $50 billion last year. Do you think the valuation change was in response to market trends or your performance?
Stripe is an amazing company and [tackling] Absolutely one of the biggest market opportunities out there, so I’m very optimistic about its performance to date and everything that’s to come. When you look at valuations, public or private, from the last 18 to 24 months, they all had some sort of COVID-based reset. . .so I wouldn’t interpret anything about the company’s performance.
Does Alphabet allocate a discrete fund to you each year?
Yes, we invest with discrete funds, that is, with annual funds.
How big are they?
We have $7 billion in assets under management. [dating back to 2013].
So you have a lot of money in a market where others have less. With the IPO market stagnant and other late-stage investors investing less, are you buying secondary stocks?
We are very focused on partnerships with the CEO and management team. We will only invest if we have a commitment to the CEO and have direct data from the company. Our model is that we want to be the best partners for these founders so that they recommend the next best companies to us in the future. That is why we always have a direct commitment
What secondary stocks have you bought?
I won’t share specific companies because that hasn’t been [publicly disclosed by the companies]. And many secondary sales end up structured as primary sales anyway. But the broader trend you’re referring to is interesting because it’s early-stage investors looking for liquidity. And I think that’s in line with our strategy of finding the best companies in the growth stage and in what we believe is very early in their long-term capitalization. [trajectory], so we’re very excited to be on the cap table for those types of companies. . . Our strategy is to partner with these companies from the beginning and then maintain them for a long period of time.
However, it will eventually distribute shares to Alphabet.
We definitely distribute, but I would say we have a long-term orientation.
Does Alphabet really care if you give returns? Are these bets mostly strategic?
We are focused on driving profitability and focused on the mission of using the knowledge and experience of Google and Alphabet to be world-class partners to these generational technology companies.
Obviously, Google is betting big on AI. Tell me a little about your own AI strategy.
We’re as excited about AI as everyone else. We have a really wonderful team of people focused on this within CapitalG, and that’s another area where we have great advisors within Google who have allowed us to lean into even more technical bets. Cybersecurity is a good example in this case. We were in CrowdStrike in Series B when they had $15 million in revenue or something like that, and a big part of making some of those early cybersecurity bets was a differentiated technical point of view. That’s why we’re bringing the same rigor to the AI space.
One of the things that we think is really interesting in the AI space is that when we look at enterprise use cases, we actually think that a lot of the incumbents are pretty well positioned, because they have distribution, they have customers, they have pipelines. job. . . .So where we’ve been looking a little bit more is in places where there is real technical differentiation and where existing workflow and layout are less important. One company we have backed that we believe has strong technical differentiation is Magic, which is focused on creating an AI software engineer.
You’re also on the board of Duolingo, which parted ways with 10% of its contractors last month. A spokesperson said at the time that the company didn’t really need that many people to do the type of work they were doing, in part because of AI. Is that something you’re seeing in your portfolio companies?
I won’t comment specifically on Duolingo, but I will say that across all of our portfolio companies, they are looking at how AI can improve the customer experience and their other systems and processes. I think there’s a lot of surprise and delight around that. There is a lot of rethinking of the marketing stack. Customer service and services are being rethought a lot. We are still in very early innings. But in the same way that I see enterprise customers excited to experiment with how they can use AI in their workflow, I see startups and growth-stage companies really excited to experiment with how they can use AI to rethink how they’re building business. organization and get all of your employees focused on the highest value opportunities. There is a lot of interesting work happening there.
