Behind the IPO: ACV Auctions & ASV w/ Somak Chattopadhyay & Vikas Mehta

Sarah Chen-Spellings (Intro):

Hey folks, let me just start by saying that this episode is full of gems. And if you're like me, you probably want that notes app out. We take a fun approach this week where I had not one but two guests, a funder and his founder of choice, to talk through everything from building trust and partnership to getting to that IPO.

Today's episode features Somak Chattopadhyay, who launched Armory Square Ventures in 2014 and early-stage VC Fund focused on B2B software, mobile and technology enabled services and what they call under ventured regions. And Vikas Metha, COO of ACV Auctions, one of the first of this generation's B2B marketplaces to go public, a digital marketplace designed for the wholesale transaction of automobiles.

Since its inception in 2015, Buffalo-based ACV - yes, Buffalo in New York State, has facilitated over 750,000 transactions for 28,000 dealers and commercial partners. We get deep here on how Somak first came to identify ACV as a target company and how with Vikas they continue to drive value to what is now one of the most exciting marketplaces investors are watching on the NASDAQ.

Sarah Chen-Spellings:

I want to start with Somak, tell us a little bit: who you are, what brought you to this work, and then we'll pass that on to Vikas as well.

Somak:

Sounds great, Sarah. We're really honored to be on your podcast today. I think your focus on uncovering stories of people and regions that are overlooked is something that really appeals to us and this is ultimately, we believe, as Armory Square Ventures, which is the venture fund that I founded in 2014. We have always been excited about backing underdogs, people who haven't been given their fair chance to tell their story. So we're excited to have a chance to do this today.

I've been a venture capitalist, Sarah, since 2005. I started my career after graduating from MIT in the nineties, which is where I've actually met Vikas.

I'm excited to talk more about how we ultimately, how our paths crossed at ACV. But I consider first and foremost a friend and colleague, and I'm very grateful to work with him in multiple capacities. We started Armory Square Ventures in 2014 with the mission of backing under ventured entrepreneurs in secondary cities.

So I started my career initially in two tech startups, a company that, was called shopping.com that was public, was acquired by eBay. I was an early product manager and business development manager there before I moved to a digital health startup called Medtower, which was a knowledge expert network for the healthcare industry.

Moved to Edison Partners, which was then called Edison Venture Fund. Which has a similar thesis to Armory Square Ventures, where it has always historically focused on backing high growth entrepreneurs in secondary cities across the mid-Atlantic. So I really cut my teeth and learned about venture capital at this fund that has been around since the 1980s, and I continue to work with multiple people in our team today who are with me from my Edison days, which we can talk about later.

And then I moved over to Tribeca Venture Partners in 2007. Tribeca Venture Partners is now one of the more well-known venture funds in New York City Tech, focusing on B2B software. I was there for seven years before I launched Armory Square Ventures. Today, Armory Square Ventures is nearly a decade old. We have, numerous companies across our three funds.

We manage a hundred million in capital across our funds. And we're focusing on leading rounds in high growth startups where we have so much conviction about the team and the market that we would quit our jobs to work for those CEOs full time. And when we go through the ACV story where Vikas will give his perspective, that was very much the case in ACV. And our goal is to be really the first call on everything related to hiring, closing customers, raising downstream capital with a special focus on these secondary cities where that type of capital and knowledge network and expertise is not readily available.

So that's a little bit about me and Armory Square Ventures. Vikas is obviously COO of ACV auctions. I had the good fortune of connecting Vikas to the CEO of ACV. And we'll talk more about the journey of how he got involved, but I'm truly excited that he took the plunge and he continues to work with us on other companies as well at ASV as an advisor.

SCS:

I love the partnership that is really on show here today. And I want to, pass the baton on now to Vikas to tell us all a little bit about his story,

was the entrepreneurial blood, deep within you from a very young age or how did this come about?

Vikas:

Great to be on your show, Sarah, I'm a big fan of your work and it just brings a smile to my face to be on the show with Somak together, given that it brings back memories from our college days.

My background in a nutshell, I'm an engineer by training. Graduated, about 20 something years ago, moved out to the Bay Area. Pretty much most of my career has been in digital transformation. And even from back in the late nineties, early 2000s, it was about helping companies go online and access a way of reaching customers. Think about backend front end, basically new business models, everything around the consumer Internet digital transformation.

As part of that, I spent a decade at eBay. I was at eBay from 2008 to 2018, which was an unbelievable experience, for many reasons, one of it, I moved from a product tech side of things to more general operations and management side of things.

I also had the good fortune of moving abroad with eBay. So having both the opportunities career wise and an unbelievably supportive wife, we ended up moving across Italy, Germany and Canada in a span of nine years. Nine years after being away and three kids each born in a different country, we finally decided to deliberately come back home, which was California.

And shortly after, I got a call from Somak saying, Vikas, I have an opportunity. There's a company called ACV. You got to go check it out. The rest is history. Been part of ACV for about four and a half years, joined when we had raised our Series C, Series D. We were kind of in that stage.

Hyper growth, tremendous traction, clear product market fit, looking to scale and go to the next level. And my experience has been mostly in the bigger company side of things, although to your question, always fascinated by entrepreneurs and always fascinated by companies that start and then grow and scale and mature. Made the plunge, moved to Buffalo, New York and have been here for almost five years.

SCS:

Yeah, I love that. Somak, we are doing something new here on Billion Dollar Moves where we get the funder of choice to choose their founder of choice and ACV was the first that came to mind. I think truly it's a success story and speaks to the Armory Square Ventures thesis and theory of change.

Can you sort of expand a little bit about, you know, why you chose a CV and a little bit about the story of how you identified and surfaced this tech unicorn.

Somak:

It doesn't always work out this way, but we're obviously incredibly grateful, to not only have had a chance to be an early investor, but to work with people of the caliber of Joe Neiman, Dan Magnuszewski, George Chamoun, who we also persuaded to join a CEO and Vikas, who was also part of the early journey.

We have a strong focus on B2B software businesses that are often targeting industries. In the early stages of digital transformation. From an investor perspective, when we looked at where the automotive industry was in 2014, most dealers, when they were buying and selling their own used cars between each other, were focusing on using brokers. Brokers would come in and they would come with their trucks and say, here's what will unload for you. Take it to a physical auction.

And this was in 2014. We already had really successful companies like eBay where Vikas worked previously or Amazon. The marketplace model has been around for a very long time, but it had not yet really, found it's place in the automotive space.

So we were very intrigued with Joe Neiman, who was the founder of ACV with his vision, his domain expertise as a former dealer himself. But what we felt was missing was a senior team that had experience in scaling technology operations, sales to ultimately turn it into a national and ideally international market. But just to become a nationally in the US.

To Joe's credit, he took our advice, and that's an important point. When you say, Why did we decide to invest in ACV? You could have great markets. You could have great products and technologies. But if you don't have founders who are really willing to work collaboratively with you and really value your advice and input, you're not always going to be right.

And they should push back on you. That was something that we saw that was very unique. And Joe came up to me later and said, I think you're right Somak, in fact, I'd like your help in recruiting some of the rest of the management team. So that was when we then took one of his picks, George Chamoon.

I often say that, when you think about being an investor in a business for the next 5 to 10 years, it's important that you exercise the rigor in evaluating markets, competitive benchmarking, understanding if the technology is defensible, understanding if it's scalable. There's a deeply intuitive feel of being an early stage investor, which is would we quit our jobs to work for those founders?

And I already felt that way about Joe, when he brought George Chamoon in and I remember this day vividly, I sent an email to my partnership. And I said to them, I hold onto this email and I said, if I could invest every single dollar in this fund, I would do this. If I was allowed to do this in this company. I was that excited after meeting George. Great founders and CEOs are great talent magnets, I've been trying to recruit Vikas to numerous companies across my various funds I worked with when I was in New York City.

And he had a high-flying career in ebay and never thought I'd be able to get him. Never in my wildest dreams that I think that we would have a chance to bring him into a portfolio company in Buffalo. It helped that it was 70 degrees in November when Vikas visited.

We can talk more about that. I told him it's always that way. But that was something that was very, very special. I knew they had not only found go to market fit that they were at the right time addressing the digital transformation of an industry. And beginning to show a flywheel in terms of a marketplace that was working and they were attracting world class talent like George and Vikas, that to me was seemed to make it a no brainer.

SCS:

That's a great segue to Vikas, it sounds like you were definitely a high flyer with babies, from the same woman in different countries, that sounds completely exciting. But then to go to Buffalo, New York, what was it about Somak's pitch that made you say yes?

Vikas:

Yeah, it's actually funny the way you framed it. It was definitely from the same woman.. Yeah. so, Sarah, just a minute of what was going through my mind when I got the call and the reason the context is important is it'll tell you how big of a move this was for me.

We had been abroad for a while, and 3 children, each born in a different country has a lot of excitement and a lot of positives, right? Different languages, different cultures. You get to see the world across the globe in sort of different lenses. And we enjoyed our time there, but we were very cognizant of the fact that we wanted our kids to come back home and specifically be raised in a way where family was nearby. Friends were nearby and the adventure began from California and California is what we considered our home at that point. So our stuff was still home. A lot of our friends were there.

So we had just landed back in the Bay Area. I had taken on a role within eBay that I was really excited about. And we were navigating resettling back in the US with very much the mindset that now we're home, we're not going to move. That was our perspective.

Our littlest one at that point was under three months old. So we were always jet lagged. So it didn't really matter that we had just traveled. There were boxes everywhere. We were trying to figure out immunizations, schooling, all of that stuff. And three weeks or so into still figuring out all the basics. I get a call from Somak and it literally, it's something like, don't kill me, but you got to hear me.

So the call started off with the passion that he had about ACV and what they were trying to do. And I still remember in my mind, we were so focused on settling back that as he described it, and as soon as he sort of talked about the hyper growth and the intensity, my immediate reaction was, that sounds great. Let me think if I know someone that I can recommend to you.

And literally that was my mindset for probably the first couple of conversations with him. And then I also spoke to George, who was the CEO at the time. And again, the more I knew about ACV, the more I realized they were really on to something, right?

The initial signals were there. It was intellectually extremely stimulating about the traction they were creating. But the conversations were also on a personal level. I connected with the executive team. I connected with Somak and the board, but for the longest time, it was more of if I can give them any guidance by all means, I can, but this isn't for us because we had mentally decided California was home.

Now, what changed was the more I got to know ACV, the more I started to realize I can see myself quite happy, if I were focused on helping that company and focused on solving the scaling needs that the company had. It seemed like an intellectual challenge that really was pulling me. And then to some extent, the visit I finally made to Buffalo, New York and to meet the company, it was both, oh my God, there's a lot to be done to oh my God, this is so exciting.

I can't help but be part of it. I guess the takeaway for me there was, I'm glad I took the first call. I'm glad I entertained the conversations and I went from the let me explore and just see if that, if anything comes out of it, that might be beneficial for the partner I'm talking to, right?

If I can help them guide, how do you scale marketplace to the next level? Great. They will benefit from it. If I can learn a bit more around, what another marketplace is trying to do in a different vertical. Great. I'll probably be better off for it. That conversation obviously matured unexpectedly over a course of a few months, and then it led to one more fun conversation with my wife saying, I know we decided we were not going to move, but how about we move one more time?

And so we landed in Buffalo, New York, which, by the way, for all the brand about how cold it is, which it is a few months a year, very cold. It's a great place to raise a family.

SCS:

That's awesome. What a story. Use this opportunity as well, using your lens, can you tell us a little bit about the business model here, how it evolved, you know, a unique intersection between technology and automotive, right? What you saw that was like, “oh, I can't help, but be part of it”. Tell us a little bit about that.

Vikas:

Absolutely. So let me first tell you what the wholesale industry is.

I'm sure your listeners could benefit from at least an insider's perspective and then how that's changing. And then I'll talk about the ACV's role. So, Somak talked about the marketplace model that was pre-digital.

So at the end of the day, wholesale is, when you think about new cars being sold in any single country, over 40 percent of the time a consumer buys a new car, they have a car that they trade in.

And then the dealer that is selling the new car, has a car that they now need to make a decision on. It's a used car. They need to say, do I want to retail it to my customers, or do I want to just get rid of the car and get some money for it? Which is sell it to another dealer and that's a market that's about 10 to 14 million cars a year that end up getting wholesaled.

Why would a dealer who sells cars for a living decide to wholesale a car? Well, it could be an off-brand car. I'm a Mercedes dealer. Someone walks in with a 12-year-old Toyota Camry, it's a good car but I can't really sell it because none of my customers are here looking for that type of car or it could be a car that requires some work, which I don't specialize in.

So I need to do a transmission job or an engine job, and I don't feel like I have the time or the bandwidth. I'd rather liquidate the asset. That wholesale transaction, which again, 10 to 14 million a year pre-COVID, would typically happen at what is called a physical auction. So it would be a weekly getting together in a local, think of a massive parking lot.

And in this massive parking lot, you would have buyers and sellers coming together. There would be a lot of randomness as to who shows up on a particular day, what kind of cars show up. And then the bidding would be supported by a physical auctioneer.

And when you kind of think through that problem statement, which is sporadic nature of buyers and sellers, you think about assets that are thousands and thousands of dollars, that it's hard to truly assess the quantity and the quality of investment you need to recondition the car. If you think about the trust gap that exists from dealers buying assets that other dealers have decided they no longer want to keep. And so at the end of the day, you have effectively the classic symptoms of an inefficient market.

You have a lot of volatility in terms of transaction volume. You have a lot of volatility in terms of price realization. And so the thesis was, well, if we created a digital marketplace, not a similar to an eBay or an Amazon, and we had enough vibrancy, both on the sell side and the buy side, could we start to digitize what has always been or a classically, mostly been a physical industry.

Now, that's the thesis at the highest level, but when you go down deeper, which kind of comes to your question of what made it so exciting, there's a lot of things that need to happen for this stuff to happen digitally. So first the asset needs to be described in a highly accurate way so that the buyer knows the condition of the car that required investigation or investments into condition writing requires investment into productization.

And in some ways, hardware development that did not exist in the market. So ACV today has a few patents. A way for us to hear the sound of an engine, digitize it, and leveraging machine learning and AI data, identify issues that the sound of the engine might be indicating is wrong. It could be an engine knock, or it could be a bell squeal.

And it's hard for a person that's hearing a hundred different cars to determine if that particular noise for that car is normal or not. But our machine learning algorithm, which goes through over a million inspections of cars a year, it's actually quite feasible for that to happen.

So the investment in the inspection was grand in terms of our vision and our ambition. And it was basically to get a level of trust and transparency on the asset that was previously unimaginable. And to get there, we knew what we needed to build was a tech platform that can scale, and we needed to build telematic capabilities to augment what was available in the market that no one had.

So that was sort of point number one. Point number two was we started to talk about data and data got me really excited, right? It's about transaction data. It's about pricing data. It's about markets and clearing prices in certain regions for certain cars and how we could leverage this portfolio of data to try to drive success on the seller and the buyer.

And so I looked at these problem statements, and I thought, here we are trying to disrupt an industry. And we're not doing it just by firsthand digitizing an asset that was done physically, but we're doing it by collecting data through tech that did not exist to build a marketplace that we think could be grand and could be scaled.

I'm one of those people that just gets drawn into complex problems with big impacts. So I'd say, from a problem statement perspective, that was it. The second and this is more of a sort of a statement to the team that was on the ground. I love the culture and the people I met.

I think most decisions, it comes down to that, right? Who are you sitting next to? Are you happy to spend hours and hours with them? And do you feel like there's stuff you can learn from and stuff you can teach them?

Somak:

I was just going to say, just so I don't forget the point that the cost just mentioned about the teaching people, right?

So much about entrepreneurship, whether it's early stage or late-stage scale ups is about mentorship and apprenticeship. And I think one other area that places like Buffalo have really lacked compared to Silicon Valley is having, people like the Vikas' of the world who have successfully scaled global marketplaces, right?

He's managed thousands of people over his career and has such a multifactional background, and that brings a perspective that you really would not find necessarily in Buffalo or in Silicon Valley.

And I'll tell you what gives me so much pride, Sarah, about when I come back to the office - I'm no longer involved with the board. I had to roll off after the IPO, it's kind of very common with early-stage VC funds - is when I go there and I have people at all levels coming to me and saying, I can't thank you enough for having introduced our company to Vikas.

What he teaches me every day about how to be a better employee or manager. I'm sure I'm embarrassing Vikas. But that to me is really, it doesn't always work out that way. Sometimes you can bring some high-powered Silicon Valley person. And that's just going to be like a bowl in China shop and not be the cultural fit.

SCS:

That's a great, great segue into a question that I was going to point to you. Somak anyway, which is, what's your criteria for hiring the best talent? How did you sort of see that fit, right? I think one of the key themes that has emerged from a lot of our conversations with top CEOs and top funders is if you see a gold-plated resume, but the fit is not there, do not hire them.

I'd be curious to hear about your strategy as that investor, being an activist for the company, how you chose the right talent there.

Somak:

Again, the caveat will be is that it doesn't always work out this way, but thankfully we've been right more than we've been wrong, especially more recently.

Like, if I look at the kind of how I learned about the whole talent business, I think that's really the most critical piece of the adding value, Sarah. As a early stage VC, I know you have a lot of experience in VC as well. And I think that's truly where you create the most value at a seed in Series A stage.

Let's start with, maybe some of the lessons learned the things that didn't work out right. Earlier in my career, I would bring people sometimes to companies or introduce them and they might have been very successful at Google or Meta or Oracle, big, big name companies.

But to move from that sort of environment to an early-stage startup where you have to be really motivated, not only by base like cash comp, but by equity risk and not where everything isn't working together. It's not structured, right? It's very dynamic. It's chaotic. A lot of executives at larger companies don't always make the great transition.

And it was also really important to glean is how much of the success of that person came from who they were? Versus are you an order taker when you're at such a large company? That's a rocket ship, you know success as many fathers or mothers like that is a phrase people often use, right?

It's you have to be really careful when you're diligence in someone to understand what they specifically did that can be applied to an early stage startup and could they evangelize a technology product and brand when they don't have the large resources of a large company? I think what's really important, and we put this in our website, the traits we look for in executives that we hire for our companies and for ASV, we look for various traits like intellectual curiosity, grit, persistence, humility, right?

When you look at markets like upstate New York or the Midwest, people don't like fast talking New Yorkers or, and I say this as a fast talking New Yorker, people would say, Somak you've got to slow it down. But they really, they care less about where you went to college or school.

And they're like, do you truly care about the people you're working with? You care about the mission, or are you going to come into our city? Are you going to work at a company for two, three years, make a lot of money you know, from us? Make money and then just move to Florida and never give back to your community.

So there's a variety of things that we look for. It's not just a talent and skill, but it's also are they mission driven? Are they truly driven to not only solve a big problem, but in doing so completely transform their immediate city and geography? Is that something that gets them going and makes them come out of bed every day?

That if you have a person like that, that person is worth their weight in gold.

SCS:

Yeah. So I'm going to ask this question before I turn to Vikas here, a fast talking New Yorker that you are, one of the, not controversial, but you know, I guess it's a polarizing question for VCs and their founders is, how much does a VC really add value, right?

What is adding value versus overstepping your bounds? And I know for Armory Square Ventures, you guys started really early on, co-led Series A, and now have really shaped the company in a large way, even as it's gone to IPO. Talk to us a little bit about that perspective.

Somak:

Yes, it's a very good question. I think you're absolutely right. I mentor a lot of younger VCs, including VCs, I've hired who have made the pivot from operating roles to being VCs. And such a very important point you bring up, Sarah, is that, we can, I think we can add value in certain areas, but there's certain areas where we may not be the best person to add that value, right?

To be an effective VC, you have to earn the right to give advice. So early on in my career, I listened and learned and probably spoke more that I should have. And the entrepreneurs and the VCs told me I was doing that and said, look, why don't you first show your value before you start opining on product, road map and strategy?

I think from our perspective, we make bets on the founders, and so we have to really entrust those founders to make decisions. But at the end of the day, we're really their Sherpas or travel guides to help them go from zero to one from the seed stage to the A and B. And we've been through that movie numerous times so we can provide at least advice.

It's just advice. We are not management buyout funds, we're not patrolling these companies, and we are providing one piece of advice, they can take it or leave it.

But the hope is to say, look, you've got product market fit. Now we really think it's worth thinking about putting pedal to the metal. Or you know what? We're having some issues right now where we don't have product market fit. Let's retool some of your service offerings and bring in smart people to help you come through - basically brainstorm the bright way to get to product market fit, but figure out what's the right time to top grade teams and bring in new people.

I think the areas that we can provide most value is in recruiting C level talent and downstream capital. We do not, we are not well served in a pining on the details of product roadmaps on architectures of the software platforms, interviewing mid-levels, like junior level people. I think it's really important that we make the entrepreneur feel that we trust them and that they run the business day to day.

We want to stay in our lanes, but we always want to be at the service of our entrepreneurs. And we more often than not, sometimes I will say look, Mr. or Ms. CEO, I appreciate that you trust me so much for these pieces of advice, but I'm not really the operator here. You should speak to Vikas, or you should speak to Krystle at BentoBox, or numerous other CEOs we've backed, because they have been in your shoes through the journey, and they can give you something that is going to be more meaningful for the type of questions you're asking.

SCS:

Vikas let me then turn to you. As someone that was brought in by a VC, was there any particular dynamic that you had to navigate in terms of, where the product was heading or the company was heading? Were there any tensions that you can share, for someone else who's coming in the same way that you are.

Vikas:

Yeah. So I would say I've been very, very fortunate. My five-ish years at ACV, I've probably never worked with the board that I felt was so productive, so constructive. We clearly had times when the board challenged us. I don't necessarily think there were any issues beyond kind of a healthy discussion of direction, of strategy, of pace, of investments.

If I sort of look back, probably the one area that was the most interesting one was navigating through COVID. From a context perspective, it was February of 2020, the initial cases that just started to come out. And very soon we had gone from everyone can work everywhere to 75 to 50 to 25 percent to essential workers only.

And when I think back through that time, having the board to have as a sounding board to basically think about what are other companies doing? How should we be thinking about everything from employee safety to business continuity through kind of pivoting in a strategic way? I think it felt really beneficial to be connected to a board that had, I'd say, the larger network and been able to come in and kind of guide us from that perspective.

I would say having the right set of advisors and the right set of partners on the board, definitely was one of the key reasons why ACV is where it is.

SCS:

As the COO I mean, you came in about series C, right? Where there was, I guess, a point of inflection and scale before the IPO. How has your roadmap changed over the years as a company. And I guess for you as a COO in terms of where you focus your time and attention these days.

Vikas:

Yeah, absolutely. I think we were a series C company, about to close our series D when I joined. And at that point, it's kind of funny to think about, the company was from a people perspective much smaller, from a process perspective way more immature.

We were in the classic hyper growth, when they kind of say the analogy, the wheels are falling off the bus because you're going so fast. It's a lot of fun. Every week, every month we'd have these company calls and we'd break records month on month and we'd light up new regions and new territories.

And it was almost like we were accelerating into the future, but at the same time, it was harder and harder for us to keep up because on the product investment, on the processes, on the operation side, the complexity and the pace with which we were executing just was not sustainable.

So probably for the first 6 to 12 months, a lot of it was to build the infrastructure. And that was basically I started to, I think it was week one to week two, kind of do a very quick audit of where are we doing well, but the rest where are we on fire and where do we potentially need to need to slow down to go faster?

I think within the first quarter or so, I also realized I didn't want to just build systems to be better versions of what existed. But to look at what else could we do to leapfrog everyone else, and I'll give you one example, Sarah.

Every time a car transacts on any marketplace platform, a title transfer needs to accompany the car transaction. And so titles are these like archaic pieces of documents that essentially have ownership information, talk about the car, the VIN number, the mileage, the make, and any sort of liens associated with the car, so a bank or any financial institution.

A car can be sold if the title is transferable and the rules of transferring titles from one state to the next are similar but not perfect. So if you have a car that is transacting from Massachusetts to California, the requirements for that title to be reissued in California are slightly different from if that same car transacted from Massachusetts to Florida.

So anyway, long story short, every day, depending on the number of cars that sold in the last couple of days, we would have envelopes of titles coming in and we would then essentially need to help the buyer transact the paperwork into a transferable title.

Most people in this industry do this manually, which is title coming in, you look at the requirements and then you essentially process it. It's almost like going in the line at DMV and scaling essentially meant getting basic first order continuous improvement process improvements done. But if you truly needed to scale, we needed to figure out a way to digitize it.

So one of the first things we did was we looked at where the industry and where the government was realizing they weren't quite ready to have digital title transfers. We built a bunch of software and hardware that allowed our teammates to, upon receipt a title, scan the title in.

And then extract from the title, different pieces of metadata go through some sort of a validation process to say, is there an error? Is there any reason why the title cannot be transferred and then essentially guide the recipient title clerk to then fill two boxes and go on.

Long story short, things like that were investments like this one in particular took a couple of quarters, but we weren't even sure when we started. If OCR technology we were using was going to be accurate enough and was going to give us the scale that we needed to support all of our use cases.

There's a bit of a leap of faith. We built that. I'm so glad we did because now when we do 50,000 cars a month back, from the 5,000 cars a month when we were in the early days, the only way we were able to keep up with high level of accuracy is because we had the tech in place.

Your question of how have things changed? So our tech teams have scaled massively. Our operations teams have also scaled commensurate to the volume growth. Was initially a lot of blocking and tackling and decision making and being in smaller meetings to help either architect first principles; has now gone to hiring, mentoring, coaching, setting strategy, working on outside of a few pet projects where I still have the pleasure of going deep, working on guiding the teams. And ensuring that we are thinking a year to two years ahead.

Being in a public company also has had, sort of an interesting, positive experience and helping us mature, be it on the compliance and the reporting side of things on the forecasting and the predictability side of things.

And it's about, maturing in a way where you keep a lot of the culture and the agility still there. But then you become a more scalable, more predictable company.

SCS:

Yeah. And that's a good turn for Somak. Hindsight is 2020 as we say, how do you reflect on ACV auctions, the timing of the IPO, was what 2021 when this happened. And the subsequent market performance to the extent that you can speak about it, were there unexpected challenges in this process?

Somak:

We've been extraordinarily fortunate to be early investors in ACV. We invest in the Series A stage and we continue to invest in every round, B, C, D, E. We were very much high conviction through the very end. I continue to be personally a shareholder in ACV.

I feel like when you see a company that's this interesting and this exciting and valuable, like this is one that you hold for the long term. In terms of the, your question about performance, 2021 was a very good year for companies to consider exits. The good thing about ACV is that the thesis that they originally had when we did in the Series A, it continues to be the case today and there's still so much room for upside and growth.

We are as investors, long-term investors, and even though we don't, you know, through an IPO, most early stage VC funds have a limit, there are some things like Sequoia and other funds where you were allowed to hold stock after an IPO for a long time. We aren't, you know, we're structured like most traditional VC funds. So we were very happy about the IPO.

And more importantly, on a personal level, seeing the whole team there at the NASDAQ and Vikas remembers is vividly like, right? Like it was still in the middle of the pandemic. They were, I think we were one of the first IPOs, to like begin ringing the bell, the NASDAQ, we were wearing masks this was before the vaccine.

But watching the emotions on the face, especially of the founders who I remember had so much trouble raising sometimes the original seed round and A round and were borrowing money from family and friends, to see suddenly the whole world trading the stock.

It just sends chills down your spine. So that's, it's an amazing, amazing experience.

SCS:

Yeah. And of course, you know, a lot of good news here, but I want to flip the script here before we towards the end of this, what were some of your mistakes in this process?

Vikas coming in, guns blazing to see a lot of, change in a short period, it sounded like an intense period, was there anything you would have done differently?

And I guess the same thing maybe more broadly for your career, Somak.

Vikas, maybe start with you.

Vikas:

Yeah, I'll start with two. So one, I would say just broadly, even before my time at ACV.

I think I, and the funny thing, Sarah, is like this is not an uncommon one. We read this in many books and we hear this all the time, which is, be more risk taking.

It's always hard to get out of your comfort zone and, I do very much think the deliberate decision to leave eBay after being there for 10 years in a very comfortable, and growing career path was taking that risk.

If I sort of had to give myself advice, I would say I probably could have done it a few years earlier or at an earlier point in my career. So I would say being more risk taking would be one that I would kind of tell my younger self.

And then within ACV, I would say, when there's a lot going on, it's easy to then want to do it all yourself early on. I think hiring a few key unlockers of acceleration slightly earlier than I ended up doing. And again, it's hard because you're trying to do a lot. So you think it takes time to hire, but in hindsight, I think there were a couple of key roles that have given me so much leverage. That I think in hindsight, I would have benefited from getting them earlier.

SCS:

And Somak, how about for you?

Somak:

Yeah, there's so many mistakes, Sarah, that I've made over the years. And I'll try to be brief because I honestly, that could be its own episode. But I think you learn so much about being an investor, right?

As it relates to ACV, I think I want to bring up an example that Vikas noted about the pandemic. I think many people on the board were unclear about whether it made sense to keep a certain level of staffing in place. And the reality was, we all remember this, the market kind of was tanky for a little while.

And then suddenly we saw some of the most incredible growth, like in our lifetimes. And you saw a lot of interest in people, in the tech sector in particular as investors. What's interesting iis that George and because we spent time with executives, they had intuition that things were going to turn the corner and that we should make sure we don't get too conservative about our staffing.

And thankfully, we did listen in general to George and Vikas, but I think, in particular, sometimes you past is not always a predictor of the future.

When the pandemic started, many of us were looking from a pattern recognition perspective on what was happening in 2008 and 2000, 2001. And the reality is that every time frame is different. And you also have to think a lot about intuition that the founders have what they're hearing on the ground. That's one mistake I would say.

More broadly, if I think about mistakes that I've made, it's often been a question of as an investor, maybe sometimes being too early or sometimes, you know, because we have such limited data and it's very opaque at the early stage, right? We're not investing in public company stocks, and we don't have, if it was a straight line from zero to one, then it would be like a series B series investment, right?

So sometimes you get false positives. Sometimes we make the wrong read on the people, like sometimes people, they thought they wanted to build a venture scale business, but they realized, Oh, my God, especially in 2023. This is really hard, right? I mean, people's life circumstances change, right?

There's when you're investing in people inevitably, there is that messy middle of Scott Belsky talks about, who the founder of Behance. So these are all things that I think all industries learn over time.

SCS:

Yeah. So what a year we've had. I'm sure we're all glad to say goodbye to 2023.

What does 2024 look like? I mean, the automotive industry, Vikas specifically has had significant challenges, right? An era of transformation that's still underway. But we just heard news, I mean, self-driving cars is not out of the woodworks yet, right, with Cruise slashing something like 24% of their staffing.

What are we looking forward to in your industry?

Vikas:

Broadly, we're all trying to figure it out, and I think in one way, post-COVID, supply is coming back. So we'll start to see more and more new cars being sold next year after a sort of a big plunge over the last couple of years.

I do think, whether it's EVs or hybrid, five years from now, the composition of the cars on the roads are dramatically different from what we see today. I also think there's a level of innovation that's going to follow almost a phase two with some of these new vehicles, whether they're autonomous or electric that are coming out.

SCS:

And Somak with that, how about for venture? We've seen capital dry up quite a fair bit in 2023.

Are we going to see a better vintage year? Is this going to be the best vintage year yet as we always hear?

Somak:

I know a lot of people say it's the best vintage year ever. I mean, I think that it's true that there are some amazing things about being an investor in that first round.

I mean, truly, the pendulum has shifted more to the investor today. If you are leading rounds like there are indeed, there is capital out there, there's dry powder. But the idea is that not everyone's really comfortable writing the same checks they did from a pacing perspective. That puts for those of us who aren't triaging 100 companies like, we're grateful that, we're mostly out of the woods across our portfolio.

We had one casualty last year, but most companies have found a path to stability, profitability in case if they don't want to raise around and there's always going to be challenges. I'm sure you saw that too, Sarah, right?

I think in 2024, I feel that there are some green shoots of opportunities, and I see already that there is more activity happening in the series B and C and beyond for high quality companies. And so our goal is to do everything we can to make sure we connect those funds to our companies where it makes sense well in advance of when they raise those rounds and make sure we understand their milestones.

So I think in general, I'm feeling very happy about having a fresh pool of capital to begin backing companies, right, and to add to our portfolio. But you know, it's a double edged sword. That same capital scarcity that you're talking about is also a challenge for companies, even real high performing companies, right? It's just much, much more difficult to handicap who raises the series B or C or needs to figure out a path to profitability or exit.

But truthfully, that was what I spent most of my first 10 or 12 years in venture before the go go days of 2015, 2016 and beyond. That was what we always assumed when we were early stage investors, that there's a 50 percent chance of a series B, there's a 50 percent chance of an exit or a path to profitability.

SCS:

Yeah. So we end with some words of wisdom here.

Vikas you've been in the front lines, right? In the trenches of really operating at scale. If there was a founder tuning in, as we have a lot, I mentioned of 1 to 10 type founders who are considering an exit and their options in 2024, what would your words of wisdom be to them?

Vikas:

That's an interesting one. I think it would be twofold. One, it's true every year, but you know, no one has a crystal ball.

So being agile is going to be key. when you think about opportunities that might come up and you might think about macroeconomic headwinds that might come up, just thinking through proactively how the world is predicted to be is rarely how it ends up being, especially in the short term, so that's sort of one.

And then the second one, just in general, is probably more than ever before. We're at a stage of technological innovation and almost proactively and regularly taking a step outside of your normal workflow and thinking about all the technologies that are out there and all the disruptions that are out there. And thinking about, is that an accelerant or a threat to my business model? And doing that on a regular frequency.

SCS:

Somak, what is your one call to action to everyone who's tuning in?

Somak:

I wrote a post about this, how to talk to venture capitalists, and kind of looking at the if there was a book that came out in the late in the nineties, men are from Mars, women are from Venus.

I use a similar analogy about investors and founders today, right? I think that we're in an environment now that if founders, investors are going to be able to successfully grow their partnerships and see the outcomes that they want together. They have to be in much closer touch with each other, and they have to also just understand the people side of managing their own businesses, whether it's managing their executive teams as well as their boards.

I feel this is something that I know people might say, okay, boomer. I know you like offices. I believe that we do need to take all that it works well about having remote distributed workforces. That's not going away. But sometimes the really tough conversations can only happen in person.

And that's something that I saw happen over and over again. We would have heated conversations sometimes, whether it's my team members. Vikas advised me in all of these situations. I always value his input as an operator or executives on boards. And right, like it turned out we weren't even having as much of an argument as we thought when it was over zoom.

But if we then flew into each other's cities or spent time together, had a beer and just kind of talked it out, it just totally it made the relationship so much more secure and we got back each other's trust. So don't rely on zoom and teams or whichever tool you have as a crush for everything.

Maybe using it for your day to day operations is fine and for interviewing and being efficient time in person, whether it's with your team members aboard, there's no substitute for that, even if you've worked together for a very long time.

SCS:

Yeah, love that. Well, gentlemen, what a conversation in a short amount of time.

I mean, that could be separate episodes for each of you. But thank you so much for all that you're doing your leadership. And we can't wait to see the billion dollar moves that you both create in your different fields.

Somak:

Thank you so much, Sarah. Such a pleasure. Really enjoyed the podcast session with you.

Vikas:

Likewise.