Inside Intel Capital: How a Multi-Billion Dollar Portfolio Sets the Standard for CVCs w/ Nick Washburn, Intel Capital

SCS (Intro):

Hey folks, today I chat with Nick Washburn, Senior Managing Director of Intel Capital. This conversation is a masterclass for any investor where we cover good ground from the intricacies of reserve strategies to the common pitfalls. VCs often encounter. And for context, here are Intel Capital, the venture capital arm of Intel Corp.. It has long been regarded as a role model and eventual backing companies like Red Hat to VMware, to DocuSign.

They've had north of 250 IPOs in the past three decades, another 500 exits and since 2018 had something like $12 billion of market cap companies hit the public markets. Trust me, this insider look of chasing the puck in venture with Nick Washburn is not to be missed.

SCS:

I hear that you're quite the ice hockey fan. Can you tell me a little bit about, the lessons in ice hockey that I guess you bring to your investments and also to life?

Nick Washburn:

Yeah, I love ice hockey. I still play, actually played the ice hockey tournament this weekend with a bunch of friends. My father who's in his early seventies still plays a couple of times a week too. Um, there's a famous ice hockey player, Wayne Gretzky's, the great one, the best hockey player of all time. And famously, he always said, The reason why he was very good is because he would go to where the puck was going.

And that's where it was. And I think that's venture. That is it just thinking about the future, where markets are going, where consumer sentiment is going, what's next and be able to like think ahead.

And I can honestly say like, I enjoy the practice more than the games, if that makes sense. And why I like venture is I just like the process of learning and like life diving into things much more than like the outcome necessarily.

And so I think that does enable me to take on more risk when I'm looking at opportunities and thinking about things because I'm not necessarily worried about, I'm not fearful of like failing, I'm just much more enjoying the process of it, if that makes sense.

SCS:

Fascinating. I love the systems and processes inputs versus output.

But of course, that isn't necessarily the way that a venture investor looks at his or her investments, right? These days, the question on liquidity, the question on exits is top of mind. What are your thoughts there in terms of, I guess shaping your founders in a certain direction to be less output focused, but still demanding a certain kind of output.

Nick Washburn:

I think it takes a lining of the stars and many things to go the right way over a long period of time, to have huge outcomes, particularly in venture given it's so power lawed. And there's only so much, founders control. There's only so much investors control. And so I think it's really kind of, once again, I try to focus on the practice and the day to day.

And so when I work with founders, it's very similar. Certainly there's a lot of stuff going on in the world right now. There's macroeconomic stuff. That's very much outside of the control. How you ship your next feature, who are the next three people you hire, how you think about really like at the atomic level solving a pain point for an individual buyer that's 20 times more important.

The next best thing that they have to focus on, that's really what's inside your control. And so a lot of it is like, I don't really coach our founders. I'm like planning through or thinking through the exit. It's really focusing on like what's that next incremental thing you're shipping.

I think when teams do that and they do it successfully. The path kind of creates itself a little bit, you know, if there was a playbook for having to do this, it would just be called the way the truth is, is like, all of the biggest outcomes are extreme outliers and there is no path.

I don't believe maybe this like this. This is a little, um, different than a lot of folks in venture, but like, I don't believe in pattern matching

SCS:

Oh, I love that. I love that. And in fact, you know, pattern matching comes up a lot in my conversations, right? Because part of why the gender venture funding gap exists is because we're pattern matching to past patterns that did not necessarily include women and people of color.

And of course, VCs are supposed to be, I guess, contrarians in some way. Why is pattern matching still for many unlike you? So you're the contrarian in this way, still the standard in some way?

Nick Washburn:

Judge me in like 15 to 20 years if my approach is right. School is out. I think it's because it's easy, Sarah. It's easy to say this team went to MIT and Harvard and they're building something where this market has done before and so it's just the path of least resistance.

I think the truth is it's like, there's a bunch of different gates to decide how at the end of the day, you have 24 hours in the day, just like I do. And you have to decide where you want to spend time. A lot of that comes down to the people you want to spend time with and how, when I work with founders, I focus a lot on folks that I think have a learning mindset in the sense of like they're very, have very strong beliefs about what they know very, very well.

And then everything else they have, they lean in towards learning and they lean in towards finding expertise around the table. Like I don't have expertise in quite a lot. And so I focus on a network of people to kind of help me out. And I think I'm really successful founders do the same. And over time, I think that just indexes me a little bit towards highly technical, humble, work really hard.

And I've had the privilege of working with great diverse teams. I mean, I'm on the board right now, of several companies that have incredibly strong female co-founders, CTOs. That like run like Olga at Moderne, she's in charge of all the product strategy effectively the entire company reports up to two or she's one of the best product thinkers.

I've worked with or Dana at Autotune. She had a PhD research in tuning databases and is a really, really strong founder. And so I think you just need a index towards, the kinds of individuals you want to work with because it's not hard to be honest. It's very, very hard to build legendary companies and it takes a village to do so.

And I just try to not focus necessarily on the background of folks, but more of their understanding of the problem statement and why they feel best position to solve it.

SCS:

What have you seen in the years of investing that you've had now under your belt. You're on the board of Augtera, Fly.io, FreshPaint, Moderne, so many others. What do you see as outlier qualities that makes a really good founder to stick it through?

Nick Washburn:

All these things are really hard to judge. It's like 2020 hindsight, as they say, you kind of always, it's until you see someone and you work with them through that process, it's really hard to ultimately know. I think I try to bring approach of here at Intel Capital and myself in particular, I guess I'd say like trying to be really thematically focused.

And so I focus on like a pretty narrow area. It's kind of like embarrassing to share, I suppose. Like I'm not spending really any time on AI right now, even though we're infrastructure software investors. We're prolifically investors in AI and have been for decades just because, one, we have enough people looking at it too.

I think it's where kind of everyone's going focusing. So I want to kind of go look elsewhere where I think there's other opportunities. I just think like when I talk to folks who are working on more core problem statements that are not the latest shiny object, it's because they have deep passion for those problem statements.

It's usually born out of something like, it's a problem they almost feel like maniacally compelled to solve because it's mind blowing to them and isn't solved. I'll spend a lot of time before I talk to founders just trying to like really inspected like the process of learning. Like I feel like I get paid to learn.

It's awesome. And so I'll just spend a lot of time researching an area, talking to hypothetical line customers, really trying to understand like, okay, this thing's seems very small right now. But like over time, it's a very big problem for you. But over time, like there will be a lot of value capture.

Now I'm wrong all the time, but it's like, that's the approach I try to start out with and then I, once I start to think about a problem statement, then I go try to find the best teams working on it. That's another example. I get inbound deal flow, but like most of the deals that you mentioned, the investments like Augtera, I had already spent a lot of time around intent based networking and like what I thought was a new way to handle the growing complexity of networks.

We reached out to Rahul, Moderne I reached out to Jonathan and Olga, like as part of a mutual connection, but thinking through the problems of like aging code frameworks. And so I tend to do a lot of outbound and just reach out to smart builders in the space where I think that there's underpinnings of probably like a big category that could get created over time, but rooted in like a problem statement that's pretty urgent to a very particular persona, like here and now.

And the question is over time, how does this grow? I mean, we have pretty interesting debates like internally. And I think about this all the time. You hear about TAM, like you need to have really big TAMs and venture markets. I don't focus on them at really early stage. Cause the truth is, I think, There's two kinds of sins in venture, sins of omission and commission.

Now commission, like making a choice, like I think if I over focus on a TAM really early, I'm probably going to make the wrong choice of convincing myself of something that's going to have a big TAM when it doesn't. Or the sin of omissions, the bigger one, you'll pass on something because you don't think it has a big enough market.

But in truth, if you look at all the biggest outcomes in venture, they look like super niche categories to start. And you know, there's like a famous saying, it's not the team you start with, it's the team you end with. And so it's back to this pattern matching thing. Like I just kind of don't. I'm not wired that way, so to speak.

SCS:

Yeah. I love that we are almost excluding AI from this conversation because you're saying you're not spending much time on it, which is almost a sin in 2024. But of course, this is the contrarian on the show. How are you thinking about where the puck is moving?

I mean, in terms of cloud infrastructure, what gets you excited? Where do you think we should be spending our money on instead of, I guess the overblown valuations that anything AI has these days.

Nick Washburn:

Yeah. I admittedly invest a lot in like the picks and shovels, so tooling and like lower level infrastructure of like underlying application software. I won't speak to existing investments. Actually, I'll speak to like just new areas I'm looking at, or we have not made an investment, but I've been treated by, and it's always like starts out with like application patterns. And so in like how you build it. When I look at like the existing software development works of force, like devs live everywhere. People are in different time zones. There's a lot of async work.

And there's been this problem statement around software development that existed as long as software development has existed, which is this works on a machine, not in production. I work on my local laptop. It's the best experience for writing software.

I download all of the libraries and packages and dependencies and stuff. I need to build this application. I'll write a bunch of code. I'll merge it into like our source code management tooling system. And then when it goes through testing and production, it doesn't work. And there's always this like, well, it worked here, but why does it work here?

This is a huge problem statement. Like every company in the planet has it. And I think there's a lot of different ways you could tackle that problem statement. So there's cloud developer environments. If you think about how software is created, everyone builds for the cloud, but developers don't really use the cloud themselves.

They work on their like their local MacBook because it's very, very fast and there's not internet. So how do you bring in that? Or how do we handle like library man, a build tooling and package management, like a very, very big problem too. So there's a lot of like nascent stuff there.

We'll talk about Figma a little bit. It's like people love that product. Why do they love that product? It runs in the browser and it's like instantaneous. It's like such a magical experience using something where you and I can collaborate or think about like Google docs where it's like collaborating in real time on some time basis, 15, 20 years.

I think that's how all applications are going to be built because we, as consumers expect it, I think it's going to need to work both offline and online. It's going to need to run in the browser, and it's going to be extremely fast. Doing that is very, very hard, like underneath the hood. And there are lots of ways that you need to kind of handle this, from the database layer to how you do state reconciliation between what's running on a client versus server, to just the building blocks or building applications that way, because most companies don't need to abstractions.

And so, there's a big movement around local for software. I don't necessarily like that term because it's too broad of an umbrella. But once again, pushing much more data and computation, like into the client itself, like into the web browser, into the mobile phone.

There's new lower level primitives like web assembly that are kind of interesting for how you could write applications in any language and run them anywhere, regardless of the operating system. It's very early, but I think that's interesting.

We can talk about all the AI things, but in truth, it's like the largest enterprises on the planet still run workloads of mainframes, and like just have just so much embedded sunk costs and organizational design and heavy monolithic old software that needs to be refactored and make it into something that's more Moderneized and usable.

Not just because they want to be doing the latest and greatest, but you know, it's all built on old aging frameworks that aren't even supported anymore. So it causes a huge security risk to those companies as well. So it's stuff like that, that I'm interested in these days.

SCS:

Yeah. And talking about security risks, of course, we rescheduled because of what happened with a massive security risk, right? That touches a lot of the work that you're looking at.

How has that influenced the way you're thinking about investing? How did that happen? I mean, is that just, a lack of attention in what matters, or is that just going to be the cost of business these days with the lack of real infrastructure that is secure?

Nick Washburn:

I think there's a couple of interesting underpinnings of that. One, it just shows how connected the world is. Now, like, that's such a lame thing to say, because, like, we obviously know it,

SCS:

But until it hits you, right?

Nick Washburn:

Like airline systems and banking. I had friends that were visiting Denver this weekend, who had a lot of flight issues, but they were talking about getting like handwritten plane tickets and stuff. It's kind of interesting, but there's also this giant question of platform versus best of breed.

And it's like, I, it's an analogy is, it's kind of the accordion of the approved vendor list in large enterprises is, is it getting bigger or smaller? Meaning it's like, or is there a platform effect or we're buying more vendors. It feels like in security and in enterprise software and in dev tooling and infrastructure right now because of all like the cost optimizations of large companies, they kind of are going back into this like platform I will buy instead of buying a bunch of best in breed tooling, I'll buy something that's 80 percent as good because it's from a single platform.

Now we talk about that in the venture community because we think about like buying cycles and budgets and stuff. But when you just think about global interconnectivity and cybersecurity. The truth is, is like the vast bulk of the world's IT infrastructure probably runs on like 15 companies, like it's just super, super concentrated, and it's not even necessarily the latest and greatest, uh, aging thing.

The global DNS servers, which is like DNS, it's like domain names went down, I want to say about a year ago, and it took down so many websites. And the truth is, it's run by the DNS director, that is run by like 10 people. It's just kind of like, until it goes down, you don't realize this stuff.

It's like we have a skyscraper where the basement is made out of like, it's something my eight year old boy's made out of toothpicks and like paste. It's, it's very like, it's very delicate. And I think, because people ship code so quick, but things change and it takes time and maintaining that infrastructure is very complicated.

SCS:

Yeah, which is really scary when you know the foundation layer is what's holding a lot of our data that matters to the day to day person, right? From the bank account and all of that. So very worrying times.

And in fact, I just had Sidra on from Munich ReVentures where she's doubling down on cybersecurity. It's a huge market. What else are you doubling down on? I mean, what specific trends that you're looking to in in this environment?

Nick Washburn:

Yeah. So, I mean, just stepping back generally Intel capital, like we invest in the future of compute, which is really ultimately for broad categories, cloud software, silicon, frontier and devices.

And so I'll take them in reverse order. Devices for us is really kind of client mobile technology for just distributed world. Frontiers is what you'd expect. I mean, we've invested in everything from figure AI, the Humanoid robotic company to Joby like vertical take-off and landing companies. So really a lot of applied computer vision robotics.

We have like deep expertise there in Silicon. I mean, at the end of the day, everything that empowers our experience right now is running on CPUs, GPUs, networking interconnects. We've been investing in around that for close to three decades. I think we have a really strong core competency in it. So we continue to invest heavily. Earlier a little bit, we're talking about like exits and paths.

I mean, we had a massive IPO early in the year in Astera, which is a really great outcome. We had been in since the Series B. So much of the world talks about, you know, the AI bloom and GPUs, but in truth, it's a system.

And so like when companies are building and training large models, the hyperscalers, there's GPUs, there's CPUs, but moving the data and the interconnects between them. There's very large bottleneck and that's what Astera solves and why they're a very large public company now.

And then naturally cloud. And so that's cyber security enterprise software developer tools infrastructure. And that's where myself and a couple partners spent a lot of our time and beyond the areas I focused on. and to be honest, this is one of the hardest things for me personally, and why I tend to get investments wrong a lot.

It's like, I invest both in developer tools and infrastructure software and quite often they can look the same, but if I don't look at them in the right aperture, I get it wildly wrong. And what I mean by that is, is like, developer tools at the end of the day, it almost looks like a gimmick and you're focusing a lot on like the individual.

Like Sarah, you're an individual developer, at the end of the day, is this new tool, where does it fit in your workflow? How important is it to you? Would you literally quit your job and go somewhere else if they took it away?

So it's almost like a consumer investment. So at the really early stage, like I'm not looking at revenue. There quite often isn't revenue at DevTools companies early. Yes, there's open source behind it, and you can look at things like adoption and GitHub Stars, but those aren't really leading indicators of success and where I've gotten it wrong is I'll look at something that is a DevTool, but I'll look at it more like an infrastructure software investment and what I mean by that is for core infrastructure software.

It's much more of like an enterprise sale because there is info security teams that need to look at the adoption of it. Quite often you need to run POCs with application development teams in the company that need to run some of it on this platform. There's the owners of the underlying primitives, compute and storage.

And so I found like when I don't look at investments with the right aperture, wildly wrong. And it sounds easy, but in truth, like it's very murky at early stage, which path and infrastructure software they'll go. And so that's just something where it's like, always trying to refine the mental model and you're looking at something now that's really early, but trying to think about over time, like how the business around it evolves.

And to me, those are two clear lines in the road, but spending a lot of time on the problem statements I talked about, I'm spending a lot of time on helping some portfolio companies that are growing very well, like navigate, so they've built something and has intense product market fit as evidenced by just a lot of inbound growth, good growth and revenue.

But where's the next concentric circle of value from a product perspective, to start to build more value for your existing customers and laterally transfer within an existing customer and other like lines of business or budget.

SCS:

Before we go into more of your investment strategy and how are you thinking about it, I'm curious. I guess, taking a step back, you are my first Intel Capital GP.

Remind us again, in terms of the structuring, because we've had different, I just mentioned Munich ReVentures, right? The way they're structured, it's slightly different.

Talk to us a little bit about how Intel Capital was structured. Is this a separate entity on its own? I mean, it sounds like a lot of the investments that you're making, for you to admit that you're making mistakes, this is not common for a VC to come out right out of the bat saying like, I make a ton of mistakes all the time.

And of course, with a corporate VC, sometimes that's viewed with some skepticism, because although it's about taking risk, corporates are sometimes the dinosaur, right? Compared to the fast moving startup, how is Intel capital structured? Talk to us a little bit about how this works, balance sheet investing, risk, so on and so forth.

Nick Washburn:

Yeah, of course. I mean, I first say Sarah, it's interesting because you hear CVC or VC. There's such broad categories like venture capital and it's everything from like an angel investing to huge public market investors investing in late stage. It's such a big industry. And so I think no two organizations, whether corporate or regular, you know, financial VCs are cut the same.

We have the benefit of having existed for north of 30 years. The model has been refined over time as largely in the backs of data, because we just have so much data to look at where our best returns are, how we help companies the best, how we best engage and show up for founders, where we have the most access, to the best founders around the biggest problem statements.

And so, Intel Capital, we invest off the balance sheet of Intel, but we kind of run fairly autonomously. So myself and five other partners or general partners, we operate internally a lot like you would think any of the Sand Hill Road firms, or not to be geographically specific, like any early stage venture capital firm.

So we have our Monday partner meeting. We meet kind of all day, we meet with entrepreneurs really whenever we need to. Quite candidly a lot of times ends up on Mondays and Tuesdays. So we invest between three and five hundred million dollars a year. We have about 250 portfolio companies right now of that $300-$500 million dollars a year, around $275 million tends to be our new investments.

The rest are just follow ons. Most of our deals are early stage. So our bread and butter is generally Series A. We'll invest in Seed, we'll invest in series B and occasionally we'll invest later too and that's usually we have deep conviction have met the founders multiple times, just didn't have an opportunity to invest.

We tend to lead 70 percent of our new investments a year. We sit on boards. We have high ownership relative for the venture model to work at early stage, invest in those domains. I mentioned cloud, silicon frontier devices, because We know they drive the future of compute. We know they're going to matter Intel in the long term.

But for the short term we have a lot of flexibility and autonomy and I think Intel senior leadership and the board have always us a lot of runway because we're kind of like the eyes and ears. We like really can be long term to your point. Like corporations, ultimately public companies, they have quarterly reports to the street.

There is always that balance. But we focus in Intel Capital and really like long term thinking because for us to the Intel board, like how is Intel successful? We founded back the next five Intel's like, that's how I think about it. We're trying to find like the next things that will become generational huge public companies in doing it early.

And so to do so, you need to operate at venture speed. We believe in domain experience. Our whole team are all specialists in the areas. They know it very deeply well because we really believe in a prepared mind so that once we've seen something we can move very fast.

Had the privilege of having north of 250 IPOs in the past 30 years, another 500 exits. I think since 2018, we've had something like $12 billion plus of market cap companies hit the public markets. So it's pretty amazing to be in stuff early and see it grow to such scale.

SCS:

Yeah. And remind me when you say that it's structured just like any Sand Hill firm, are the GPs and the employees salaried employees or are you GPs in the sense that you have economics and carry just like most of the venture funds out there?

Nick Washburn:

So we're a hybrid between the two. So like we're all very much blue badge carrying Intel employees and but we are a compensation program and how we kind of recruit investors, like we're paid up, carried interest. So like our success is the success of our portfolio, the success back to Intel and Intel shareholders, our investments.

We're compensated very much to line interest with our founders, and with Intel more broadly does just take risk and we ultimately need to perform. And perform very well to obviously earn carry and have large DPI back to Intel.

SCS:

I tuned into a pretty awesome episode with your misfit founder, Avram Miller, who talked about how he felt like a misfit and his job in Intel Capital was really to do things, to push Intel in a direction that they didn't necessarily want to go.

And of course that really shaped how Intel Capital was formed to be a sustaining, but not all CVCs have succeeded. In fact, it is a challenging model to really continue to return in the way that's expected, right? What do you think, Intel has done right here in terms of structuring?

Nick Washburn:

Patience, to be honest, I think it's like understanding and having the patients to realize things take a long time to mature and also understanding its relationship business. And so when you look at the composition of our team, even it's folks that like have been venture investors, we actually have a lot of folks that I have a very nontraditional background.

It's like kind of ridiculous. I'm a venture capitalist to be honest. I think it's a unique Venn diagram of patience, of intentionality around the strategy, and then lastly, having a structure that matches those two things. And what I mean by that is I actually will do a lot of calls with other folks in the CVC ecosystem who are setting up new corporate venture firms and actually they'll reach out to us and I'm happy to talk to them about that.

And it's interesting because to be honest, a lot of the calls will get tactical pretty quickly. Like how do you do your investment committee? How do you do comp? I'll kind of step back and be like, well, what's the goal? Because it's like, you shouldn't lead with process. You should lead with the goal and then reverse it in the process.

If the goal is to be a late stage pipeline into MNA, which we are not, we have a completely separate corporate development group. I think over those 700 exits, like under 30 or so have been to Intel. Like we're not a pipeline into MNA, but if that was, that's completely fine model.

If that was your strategy, that probably behooves late stage investing because it's companies of size and scale that are different. If your strategy is to be really, really nascent, take a lot of risk and see early things, well then that's not only early stage, but if the process is then the public company board needs to approve investments, that, that will never work because of the timing.

We've had many iterations of board and management over the past 30 years that I think have all carried a trait of patience and then as that patience just bought more time, we then had a lot of data. And so we know we have the best returns, both strategically.

And financially for Intel, when we are early stage, We have high ownership, which we're on the board because we're deeply involved in those companies. And because we're deeply involved, we have an economic and moral obligation to work very hard and partner closely with Intel to make those companies a success.

And the data shows that. And so like that's why we kind of stick to that bread and butter. I think one of the other problems is to behoove the venture industry. It's like, there's a little bit of lack of discipline. It's just like when I look at fund sizes increasing and just like multi strategies, I mean, some people can make that work really well, but in truth, there's a lot of interesting perverse motivations for doing a lot of that stuff.

But just staying disciplined in what you can execute very, very well, it takes confidence, but it also takes, there are firms out there like that are don't have big funds that are some of the best in the planet. They can raise the biggest funds on the planet if they wanted to, just because they're so successful, but they've, they've turned that down because they know their model works well for them. And I have like a very high respect for that, just because I think discipline is, it's hard when you get pulled in a lot of different directions.

SCS:

Yeah, absolutely. And I do want to come back to the fact that you, you think you come from a non-traditional background and you do, right? You started from counsel, really. How has that transition helped you?

Nick Washburn:

Yeah. Like I fell completely backwards in the venture. Just rewinding a little bit, I was poly sci undergrad. I went to college up in New England and coming out of that, I actually was intending to go work on Wall Street and finance. And so I graduated an undergrad in the spring of 2002. So the fall semester of my senior year, 911 happened.

And at that time, the path to like entry level wall street jobs kind of just dried up because most of those firms, pull back on hiring. Also at the time, like the dot com bust was in full swing. I can't really tell you why I had taken the LSATs.

I don't really remember, but I went to law school. I was the only lawyer in my family. I got to law school and I realized I'd be a terrible litigator. Like I'm just not like wired that way. So I ended up going down the corporate law path.

I lived and worked in New York City for a couple of years. I was doing kind of large public company M&A and IPOs. Then I came out to the Bay Area in 2008 and that's where I started getting exposed to technology. So I did a bunch of work for some large technology focused private equity firms, semiconductor companies, large hyperscaler companies doing M& A and venture capital.

And I just kind of knew being a law firm partner wasn't for me. And if I had to boil it down to it, Sarah, is because it was a very transactional job. Now there's nothing wrong with that, but I would feel like a mercenary. I'd go in and work on something very intensely for 12 months, but then we'd be done and off to the next thing.

And I kind of wanted to see how it worked out. So I spent some time, I ended up joining Intel Capital. I went from being a revenue generator to a cost center. So, like, that was a very interesting transition being a law firm where it's billable hours to, like, you're a cost center company, over time was our managing counsel. Then I became our chief operating officer. I was involved, I was then sitting on our investment committee. I was involved in looking at a lot of that data I'd mentioned about like how we should invest or our operations.

I had a little bit of an outside in perspective because I had been kind of newer to Intel Capital at that time and I worked with other venture funds. And then, I think the path to investor just kind of naturally happened. I had a different network than folks. I was living in the Bay Area. I was a little bit younger than our other GPs.

And I had friends who were engineering managers and a bunch of up and coming hyperscaler companies. So I'd talk, kind of talk to them. It was also right around the time there was like a couple of paths that macro changes I was just kind of observing and it wasn't just me. We were observing with it as a partnership and through my network of, the individual developer was becoming the path of technology.

Adoption in large companies and then similarly like cloud native infrastructures out of like the Googles of the world were very in their infancy, but it was just kind of a nebulous. That's where large enterprises would run their it states. And so I kind of just looked at like the Venn diagram once again, of you can tell I'm structured, in thinking of like where my network was, these macro trends and where I thought were opportunities.

And I kind of made that transition. All my partners are supportive. We now have a wonderful COO. I've been a registered attorney in quite some time. but to answer your question, I think when I first started, I had a lot of imposter syndrome. I mean, we all do, like if anyone that doesn't say it, they're completely, they're just not self-aware because venture is like really long feedback loops about whether you're good at it.

You go and deploy a bunch of capital and then you go into like the trough of disillusionment because losses come fast. Like companies that don't have product market fit, like they don't have product market fit. And then success, like it is not linear. You'll have things that are doing amazing and they go off a cliff and you'll have things that you think were, everyone just thought were going to die and kind of take off.

But I had more of imposter syndrome because I didn't have a technical background and I was focusing on like highly technical spaces. I overcompensated by like So if I'm not diving too deep into things, you know, I just spend hours reading like developer docs. And I still do that. But like, really, really deep.

And it took me a while to realize there's a point in diminishing returns. It's much more about understanding the motivations of the buyer and the problem statement being solved. And so I spend a lot of time changing my network to focus on like end customers, different sized companies and really like spending a lot of time on them to understand their needs.

SCS:

I know we're proud of all our babies, but what is one that really, Maybe caught you off guard and then you just grew like deep conviction in it. And then the opposite is the anti-portfolio. So what did you miss? How did you miss it?

Nick Washburn:

I'll talk about so I have a Portfolio company FreshPaint that announced a large series B. So it's like timely and perfect and it's a great example. So I led the Series A in FreshPaint, in the summer of 2022. I want to make sure I get this right.

So at the time we had just a general thesis that customer data platform. We had a couple of theses operating generally. That first party data was the most important data to give a business. First party customer data. Meaning like third party cookies are going to go away at some point. They keep getting pushed out.

But like your own customer data is the most important. Capturing that data, particularly through like web, software product analytics is really, really challenging, involves like heavy engineering resources, precision tech and code, but the users of that data product, marketing, sales, growth. Like there was just this misalignment like why they have to rely on engineering to get all that.

So I got connected through a good friend of mine, who is a seed investor in FreshPaint and met, Fitz and Malis, the team. And they immediately checked the boxes on all those things. There was great capital efficiency in the business. Like they had gotten a certain level of ARR, burning like less money since inception. They were like very frugal and you know, they had gone through a hard seed raise, which they had raised in like March and April of 2020.

So like they're very, very gritty. But what's interesting at the time is, a lot of their customers were health care companies. And when we poked upon it, why is this? Because they could do this in a HIPAA compliant way. And I want to share this. It's really important because if you go look at FreshPaint now, they are a health care privacy platform.

They have not pivoted. They haven't built anything new. They just like reposition because that's where the market demand was coming. But when we brought this to their partners, I pitched the health care exposure as a risk to this business because I looked at it and said that health care is too hard to sell to it's like very complicated.

Yes, they can do this, but maybe other people will catch up like they need to diversify. I was so wrong on that. We closed the deal about four or five months later. Health and human services, one of the many agencies in the U. S. just put out a bulletin that didn't even change the rules. It's just like clarifying some guidance about like what does or doesn't Impact HIPAA.

Meanwhile, the FTC has been doing a lot of like fines against healthcare companies and like just broader consumer sentiment of like, we have privacy expectations. Nothing's more private their health information. So these like these things happen and the founders came to us and we're like, we need to lean into this hard and you know, I credit to them and they'd done their work and I was like, of course, trust your judgment.

They were so right that business has grown a thousand percent in the past 12 months. It's just scale. It's one of the fastest scaling enterprise software companies relative to capital efficiency we've seen. And I just wanted to share that because it's like such an amazing company, but the growth drivers for that business.

I viewed as a deal risk. And so it just kind of shows of like how much like luck is involved, but also like market timing and having backing founders who really know their spaces and have the ability to recognize that singles and like signals and lean into it.

SCS:

So how do you come back from that? Admitting that you're wrong, I think that's a great thing, right?

For any investor, but at the same time an investor is seen to be for a lot of founders as well, like a guiding hand in many ways. Do you not agree?

Nick Washburn:

Think when I've talked to, Fitz, Steven Fitzsimmons, he'll say, there's a lot of stuff there technically of help with, recruiting and thinking through organizational design and thinking through how we set up like alignment between functional areas.

When raised in series B, like who we should raise from and why. I think Fitz a lot of times said in that moment after investing, to when that transition happen. It had been great growth. It was like the classic, I invested, it was growing great. We close around and then like the quarter after it was flat, like this happens a lot.

It's kind of interesting. And I think if you went and asked him, he'd say, like, I gave him space. It was just kind of like, I'm not gonna, you know, we disinvested it's early. We have several years of runway. I'm not going to freak out over like one quarter of flat growth. I even too, I like it, but it was just more of like, I remember that first board meeting where it would flatten it, a bunch of churn.

It was just more conversation with like marketing, sales, engineering product, making sure there was an alignment on how they thought through, like making sure there wasn't silos of data and how they thought through the framework of like customer value. But then like giving them space to go figure it out.

There's someone I deeply, deeply respect Sarah, Charles Hudson. I had the pleasure of working with Charles on the NVCA board where he was the chair, but he came into one of my Kauffman Fellow sessions a long time ago, he's got this two by two, he calls it when to intervene, but then like the way I've thought it through:

The x axis is, your certainty, your subject matter expertise, and the y axis is the consequence of the decision. So obviously like lower left, like low consequence, you don't know anything, I call it like the who cares zone. Upper right, like super consequential, you're the expert in it, like that is the intervening thing.

In truth, I think with working in startups or like honestly just in life in general, you're never really in those buckets. You're in the other two. And they're the hardest ones to deal with. I just like think about this all the time when I'm working with founders. So like where things were like.

Where it's high a consequence, but like you're not the expert. That's like, I call that the destruction zone. Cause I think advice without context is so dangerous. And so like, that's when you should be like, Sarah, I do not know that. I've never done pricing packages. We should go find someone who does.

Like, to be able to admit you don't know something, but so many people aren’t wired to do that, and I just see, like, people just throw in opinions. Even if there's not ill content, but they'll just say something. It's kind of like inception.

Once that idea is planted, it grows into this other thing. And then the upper left, where I think where you have like deep expertise, but it's like low consequence. That's like the learning zone. I think that's where you'll see like, it'll be something about how they structure like a sales team or something about options where it's not like a legal risk, but it's like, this is going to backfire.

But you also know, it's like, it's not going to kill anything. It's so hard. I find it like you just so want to intervene and help. And I think that's when you just, you don't. And so I think like knowing when to intervene is like one of the hardest things about this job that I'm like constantly trying to improve on.

Then I wish everyone in the venture ecosystem would like think through and focus on, because I think it would make board meetings way more productive. I think more companies would be successful and I think as a venture capitalist or like serving on a board, it's like the most important other than obviously being prepared and punctual and present, that's just basic stuff.

SCS:

So it's funny that you bring this up in this way and love Charles, he's going to be on the show next as well.

You sit on the investment committee of Intel Capital of a large corporate managing billions of dollars. What do founders need to know about the dynamics inside the investment committee?

Nick Washburn:

So Intel Capital, we intentionally have an investment committee where everyone has different subject matter expertise. So my partner, Anthony, he has deep silicon experience. Mark does a lot of cloud stuff. So we try to bring different perspectives and I think importantly are also set up where we don't need unanimous votes.

And so, like, we'll have everyone meet it, but we're willing to move forward with things when there's dissent and we do it. Now we certainly need like a majority of us to go forward with something, but we really try to ensure that like. We're not getting into group think, which is really important.

Now, another thing we do is we actually do a lot of work amongst the GPs before it even gets to that. we operate Intel capital, like we have the cloud domain and frontier and silicon devices, where we talk about opportunities very early or quite often, like a GP or two has like met the founders of we're not personally investing the deal and spend a lot of time with them.

So by the time it comes up to investment committee, really like the conversation is more about like, okay, the subject matter expertise are like signed off on this. We think it's important for someone who has no idea about this space to like look at it and poke holes on it because we always have biases.

Like you have blind spots, you have biases and it's like quite often someone who doesn't come from that world can spot stuff. You're just like, we'll be in the forest, like looking at a little handheld when they're like, Hey, the whole like quarter of the forest is on fire over here, go pay attention.

Naturally there's internal controls and procedures and you need to run things up the chain, but for our bread and butter, like classic series a investments. Like our follow ons, like it's, it's the Intel capitals.

We run this like a partnership. We're compensated like a partnership. We try to have a prepared mind. We seek risk. We have a power law portfolio just like any other commensurate with an early stage venture firm. And, you know, I, I think we really try to tell the team in an embrace of like It's okay to make mistakes.

What's a cardinal sin is, is like not learning from them. If like you make the same mistake five times in a row, it's like, okay, now we have a problem. We need to talk about this. Like where did our systems and processes go wrong where we keep doing the same thing.

SCS:

Do you believe in like a 50:50 reserve strategy or how do you think about follow on capital? What's the design framework there?

Nick Washburn:

Yeah. So we actually, because we're a balance sheet, like we don't have, it's not like the 2024 vintage where we'll invest X dollars and we'll reserve the same. It's like that vintage, like we'll have new investments come out. I mean like the $300 to $500 million, but we will do like follow ons as well.

So there's a pros and cons to this. on the one hand, like we are a deep pocket and we have the ability to be patient and continue to invest in our companies and follow ons. On the other hand, we can't just sit there and point to like reserves and a fund size and pull our pockets out when things are tough and be like, sorry, I don't have any reserve capital for you.

So now I say that because there could be times where we're like, maybe we shouldn't have followed up. Like maybe like emotionality got too much into it. And like, how do we have that forcing function? So I would say like we, and truthfully, we look at every investment with the same set of lens, like the same aperture of like, it's not a new investment because we have more information at this point, but we're looking at the like risk adjusted return profile of that investment.

What did we say was going to be done? What was done? What's changed? What direction are they going in now? Like now where they're at based off of the price and ownership, like do we think this is mixed for a large venture outcome?

SCS:

It's a big signal if you don't, right?

Nick Washburn:

Absolutely.

SCS:

Yeah. So tough call and I want to be respectful of your time here. Very quickly, market conditions have not been great. We've got a lot of uncertainty to say the least with what happened over the last few weekends, from crowd strike to the elections coming up.

What are your thoughts on the market? Are we going to see something positive? Is it a wait and see? Are we gonna dry up?

Nick Washburn:

Macroeconomics where the political landscape goes, it is so impossible to forecast. So I kind of go back to where we started with of like talking to my founders, like you cannot control any of this. I cannot control this as an individual investor.

I'm going to focus on like what I really kind of think I can control, which is my process, how I meet founders, the areas I'm focusing on, if there is one macro thing I would say generally, not be disingenuous, I certainly kind of talk about this enterprise sales cycles are very hard right now.

Like there is just more eyeballs in size, large companies, budgets are tighter, new tools, new software procurement processes are harder. So when I do look at investments and I do counsel our boards and our portfolio companies, it's like, A lot of the assumptions that were from like the past five years, like you just throw those at the door, like everything is going to take longer, growth rates are gonna be smaller.

A share of wallets just going to go down. And so I like we take that into account in our underwriting.

SCS:

Yeah. Okay. Well, tempered optimism it seems, from Nick Washburn here from Intel capital. All right. We're transitioning to quick fire round, Billion Dollar Questions.

First job you got paid for.

Nick Washburn:

I worked at the Tampa Greyhound track doing maintenance and example that doing an example that is cleaning gutters, going out to a massive parking lot and repainting the yellow lines in the yellow parking curbs, when I think, Florida in the summer in July. It was marvelous.

SCS:

What's a book that you've gifted to others the most or recommend and one key tenet from that book that you love?

Nick Washburn:

I'll give a fiction, a non-fiction if that's okay. Fiction, Confederacy of Dunces by John Kennedy O'Toole.

It's an amazing backstory. He was, like 17 or 18. He wrote this book, before he sadly committed suicide and his mom found the manuscript amongst his belongings. And they're in New Orleans and sent it to a bunch of publishers who wouldn't publish it. Sent it to a professor at Tulane, I believe, who read it, thought it was amazing, got it in the hands of a publisher and got published and won the Pulitzer Prize.

It's just an incredibly funny book. The protagonist is just ridiculous. It's just hard to even describe. And as far as like nonfiction book, I like historical pieces.

It's good learning. It's very sad book, but Buried My Heart at Wounded Knee, which is just the story of just Native American history, United States and kind of what happened to indigenous people in the U.S. with colonialism and the settling of America and the expansion of the American West.

It's a travesty, it's really a horrible time in America's history, but I think it's an important thing for people to understand.

SCS:

Yeah. And just to bring us home here, you mentioned your twin boys that you're proud of, and I can actually hear them running back and forth in the house behind you there.

What are three principles, if nothing else that you want, years later, if by chance Spotify is still a thing and they're tuning into this, from their dad, what's the three key principles you want your boys to remember or live by?

Nick Washburn:

That's a great question. I'd like them to have a learning mindset on anything they want to do. Approach things with humility, like seeking to learn, listen before you speak and maintain a strong moral compass as evidenced by how you show up and treat other people.

SCS:

I love that. And with that, right on the hour, Nick, thank you so much for your time and for making the billion dollar moves that you have over the years and decades of your career.

And I'm excited to see more billion dollar moves from you and Intel capital.

Nick Washburn:

Thanks Sarah. I really appreciate this. This is a lot of fun.