On the latest episode of 20 Minute Playbook, we interview the Founder & General Partner at Susa Ventures, Leo Polovets.
On the latest episode of 20 Minute Playbook, we interview the Founder & General Partner at Susa Ventures, Leo Polovets. We decode what he’s learned along the way, from his latest fascination to his favorite books, all in 20 minutes.
Learn more about your ad choices. Visit megaphone.fm/adchoices
Daniel Scrivner (00:00):
Leo, I'm so thrilled to finally have you on 20 Minute Playbook. Thank you so much for making time and for joining me.
Leo Polovets (00:06):
Thanks Daniel. I'm really excited to be here.
Daniel Scrivner (00:08):
So, I always love to start with a recent fascination or obsession. And so, my first question is, what's captivating your attention or grabbing your imagination at the moment? What are you thinking about?
Leo Polovets (00:19):
Yeah, I think, this is kind of cliche, but I think all of the generative AI stuff is really interesting. The ability to describe something, and you get a paragraph about it, or a blog post, or an image, or a video. I'm still not really sure where to invest there, as a venture capitalist, although it's definitely an interesting exercise. But also just thinking about how fast that sectors moved over the last year or two and trying to think about what will things look like in five or 10 years.
Will we have podcasts for example? Or are you just going to have a bot that can mimic me, while you can ask it questions and it'll answer better than I could or something? It's definitely an interesting area and so I've been playing around with some of the tools and reading about it, and it's been fun to go down the rabbit hole. Plus all the generated art is really stunning.
Daniel Scrivner (01:05):
It's amazing. Yeah, it's either amazing or it's totally cringe-worthy, but that stuff you normally never get shared.
Leo Polovets (01:11):
Daniel Scrivner (01:11):
Yeah. Or creepy and never get shared. I want to ask kind of a one level deeper question, which is, I imagine this probably happens somewhat often as a VC, where you see some technology emerge, you have no idea how big it's going to get, how durable it's going to be, if it's going to be monetizable. Do you have a process or a way you approach thinking through those to determine if you want to invest in them or not?
Leo Polovets (01:32):
I think everyone has a bit of a different process. I would say, I do like to chat with people in my network, especially, we're more of a generalist investor. We'll invest across a lot of sectors. But there's a lot of specialists out there. And so, for example, for something like generative AI, I can read some blog posts and go on Twitter, see what people are saying, but I can also try to find four or five AI-oriented investors in my network who probably have a much deeper, more interesting sense of where things might go, and then I'll ask them for their thoughts, we'll compare notes. And I think that's a good way to learn. I do think also reading, and Twitter, and playing around with the tools yourself is interesting.
Daniel Scrivner (02:11):
Yeah, that's a great way. Okay, moving on. You're one of three co-founders and general partners at Susa Ventures, where you've been part of some incredible investments, Flexport, Steady, Andela, Robinhood. With a question that I wanted to ask, I'm going to ask a couple of questions around Susa Ventures, is if you had to compress down the common traits of the best founders you've worked with, what would those be, and how do you think about what those common traits are?
Leo Polovets (02:33):
I've tried to do some retrospective analyses on the investments you've made and tried to figure out, well what made some of the... The ones that have done better, was there something in the early days that predicted that? And I would say on the founder side, probably the three things we've seen that make a difference is, one, is it somebody that is great at inspiring people to work with them?
And that could be charisma, it could be... Maybe it's not charisma, maybe it's like you're in some sector that people are really excited to be a part of, like maybe you're helping with education, or healthcare, or climate change, or things like that. But just basically somebody that because of either personal traits or traits about their company, they're going to have an easier time recruiting investors, and employees, and customers. So I think that's an important trait.
I think another one is founder market fit, especially on the B2B side. And what that means is, whatever product you're making, whatever customer segment you're selling to, you have a little bit of experience with that segment. Maybe you would've been the ideal customer in a previous job, maybe you've worked with the types of customers that you're targeting, or you understand the industry well. I don't think this is a requirement, but it's definitely something where you can avoid a lot of newbie mistakes in a sector if you have a little bit of experience in the sector.
And I'd say the last one that's maybe a little bit more unusual is I think just not afraid to do things that feel uncomfortable or foreign. Because I think especially for a CEO, the company changes so much between one person and 1,000 people, and your job changes a lot, and there's going to be parts of it that you like, that you don't want to let go of, but you have to. Because maybe you write some code on day one you shouldn't be writing on day 1,000.
And the flip side that it might be things that you don't want to do. Maybe you don't want to fire people, you don't want to manage a big team or manage managers. And those are also things that you just have to be willing to be like, "It's not comfortable or it's not something I love doing, but I just got to do it for the company." And so I think people that have that attitude tend to do a bit better.
Daniel Scrivner (04:30):
Yeah. It seems like that last one you cited is really helpful in terms of founders not being the bottleneck for their own company's growth. Just obviously going to be important. You don't want to gate that anymore than you need to. Switching over, if you had to try to compress down everything you've learned about making good early stage bets, because you guys are seed focused, so early stage bets on either founders, problem spaces, and products, what would those be? Are there any rules of thumb? Is there anything emerged from that retrospective?
Leo Polovets (04:57):
Yeah. I would say it's a broad question, so my answer will be maybe a little bit higher level. As I mentioned, I think founder market fit is important. And I would say the more complex or antiquated a domain, I think the more value there is there. So if it's the kind of industry where a new college guy could figure it out in a month, great, you don't need founder market fit.
If you're, I don't know, selling software to power plant operators, or you're trying to launch some consumer product in another country, you need to understand how people buy things in that country, or what kind of products they like, or how power plant operators buy software. And if you don't, you're probably going to waste three or six months, or maybe all of your runway trying to figure that stuff out. So I think founder market fit is really important.
This is kind of a generic statement, but I think for problem spaces and segments, you want there to be tailwinds instead of headwinds. And this is kind of an obvious thing, but you want it to be like, "Hey, regulation is pushing for people to adopt your product rather than stop buying it." Or you want something to be a space that people are excited to work in rather than they hate working in it.
And I would say the last thing is, and this one's harder to find, I think something in the company should be exceptional, and ideally tied to the problem or the market that the company's going after. But maybe it's a founder's ability to recruit. Maybe it's our understanding of a space. Maybe it's the product is just incredible in some way that no one else has been able to copy. But I think usually there's something incredible about really strong companies, even in the early days.
Daniel Scrivner (06:28):
Yeah. There's some area in which they spike off the charts and in which they're just incredibly impressive. Yeah, that makes sense. So I want to flash back a little bit. You've been building Susa now, you guys founded it in 2012, you've been building it for roughly 10 years. And so I'm curious, what do you wish someone sat you down and told you before you decided to found Susa Ventures a decade ago. And maybe said another way or asked another way, what are some of the biggest surprises that you've had to learn and overcome over the last decade?
Leo Polovets (06:56):
I think there's two that come to mind. So I'd say one is that you really don't have any agency, and so it's very much... Maybe in later stages, where you have a board seat and you can vote on company issues, you have a little bit more authority. But at seed stage, you're kind of an advisor, and you can give advice, and no matter how good or bad or how much data you have to back it up, the founder can just say, "Well, I don't agree with it, so I'm not going to listen."
And sometimes the advice is just a hunch, and so it makes total sense for the founder to not listen. And other times, you can say something like, "Oh, I've seen 30 companies do this. 29 of them failed. I don't think you should do this." And the founder could still be like, "Well, I think I'm going to be one of the 30. Screw you." And all you can do is sit by and be like, "Well, I hope it works out." But I think that lack of agency is something that surprised me.
And I think the other thing is just the feedback loops are really poor, in the sense that, for a really good company, it might take them 6, 8, 10 years before the IPO or have a great exit. And along that journey, you don't really know was this a good investment or not. And there's short term indicators that might suggest if it was good or not, but even those are pretty misleading. Maybe somebody raises more funding, and so that seems like a good sign, but that doesn't mean anything about long term success. The company could still fail. And so, it's just very hard to fine tune your own ability to pick companies, figure out what's good, and what's bad, and what to look for, and what not to look for. So I think that was kind of a surprise.
Daniel Scrivner (08:33):
Yeah. On the agency side, it's fascinating observation. I haven't heard anyone state it quite that way. Has just experiencing that, I don't know, friction or inability to try to shape things a little bit more actively made you all think about trying to get a board seat? Are you just philosophically opposed to that? I mean, basically, has that made you question doing more to try to have more agency? Or is it just more accepting, "Nope, it's just part of how it works."
Leo Polovets (08:59):
Yeah, I think it's probably more accepting and being zen about it. I mean, because the truth is, in the end, it's the founder's company. So unless there's fraud or something, I don't really feel like it's my place to be like, "Hey, you want to take the product in this direction. I'm going to overrule you and go in that direction." So I'm not really interested in board seats from that perspective.
I think if anything, one is it's made me a little bit more zen about... I said what I said, I tried to give whatever data I could, and then now it's out of my hands. And I think the other part is just trying to find ways to be more compelling. Maybe it's presenting more data, maybe it's connecting somebody to another founder that did something that worked or didn't work before that the founder's considering, stuff like that.
Daniel Scrivner (09:47):
Okay. I want to switch it up and talk a little bit more about just your day to day. I know you work incredibly long days. You're mostly seated, just meeting with an incredible number of founders during the day. So one of the questions that I wanted to ask is what sorts of values or standards you bring to your work every single day? And what's important to you about how you show up, both for the founders and for your team at Susa Ventures?
Leo Polovets (10:08):
I mean, I'd say for me, honesty, and integrity, and personal reputation are probably my top priority. Because I forget who it was, maybe it was Charlie Munger or something, that said reputation takes decades to build and seconds to ruin. So I definitely believe in that. So I always want to feel like I'm doing the right thing or I'm doing right by founders, by my team. So I think that's a top priority. I would say in terms of how I like to work with people, I try to be nonjudgmental and just help wherever I can. And I would say that's regardless of if a company's doing well or poorly.
And I think there's a few reasons for that. I think one is, honestly, being judgemental doesn't really help. So if you do something, and I'm like, "That was stupid," okay, that's not really going to improve the company from here on out. But I think also if you're not judgmental, it creates a much better relationship, where if the first time you tell me about a problem, I say it's stupid, you're not going to tell me about the next five problems. But if you tell me about the first one or two and I'm pretty easy going about it, I'm like, "Well, what can we do to make it better," then. I think that creates a lot more trust and then we can work together even more effectively in the future and just try to make the company more successful.
And maybe the last thing I'd say is, this is a little bit, I don't remember the exact rules, but there's Asimov's rules of robotics, which is robots can't hurt humans, they can't hurt themselves, and I forgot what the third one was. And I think a little bit of that is how I think about working with founders, which is I think the company is the number one priority, which is always just want to make the company successful, because I think that makes everyone happy. And then a very close second is the founder. So unless it's going to kill the company, very supportive of the founder. And then I think Susa and my success are tertiary. But on the flip side, I think if we can help companies succeed and help founders succeed, I think that the success of Susa and myself will follow.
Daniel Scrivner (11:59):
Makes sense. I want to go a little bit more meta and talk about areas where you feel like you have an edge or a superpower. We're not really going to cover it in this episode, but you have a fascinating background where you spent a number of years as an engineer working in a bunch of the best tech companies before becoming an investor, so you have this technical background. So I'm curious, what do you think of as your superpowers, and how do those show up day to day in your work and/or your life?
Leo Polovets (12:21):
A couple of them come to mind. So I'd say one is, I don't talk about it too much, but I'm really good at math, especially napkin math or mental calculations. I used to be a math contest kid in high school and did pretty well in those. And I think that's actually a pretty good asset, because a lot of times somebody's talking about market sizing, or a business model, or showing a financial projection, and I don't need to go home and think about it for a few days. I can look at it and be like, "Oh, you have this number here. You said your margins are this. It doesn't really line up. Can you explain this?" So I think it's given me a good BS meter and a good way of analyzing markets a lot of the time on the fly.
And I would say as an engineer, I think being a structured thinker is something that I'm pretty good at. And what I mean by that is, a lot of times, you have some complicated scenario, and I'm pretty good at being like, "Okay, well let's map out all the paths, and if you do this path, here are the things that can happen," and really thinking about things in that structured methodical way, which I think sometimes uncovers deeper problems or uncovers creative solutions or things like that. So I'd say that's another strength.
And maybe the last one I'll say is I'm not above doing grungy work. So a lot of times, somebody will be like, "Oh, give me feedback on an app," or, "Send me 30 investor intros," and I'm happy to do that stuff. I just want to try to be helpful. I think there are definitely VCs like that, but there's also a lot of VCs that are sort like, "Hey, I'll help you with strategic advice from time to time, but I don't really want to get into the nitty gritty." And I think a lot of times, that nitty gritty is actually pretty valuable.
Daniel Scrivner (13:48):
Totally. Because there's an enormous amount of work required in something like 30 introductions, as opposed to a 30-minute strategic phone call on something that you're naturally good at.
Leo Polovets (13:56):
Yeah. And I would say, if you think... Maybe going back to the math thing, if you think of, let's say an intro has some value, like 10% chance to close a customer, the customer's worth $10,000. The difference between me sending five intros and 30 is actually a lot of money to the company. And so to me, it might feel like, "Oh, it's kind of annoying. I just have to send all these emails. They all look the same, and it's busy work," but it's actually like it could be really high value. I just have to do more of it.
Daniel Scrivner (14:21):
Yeah. Well, and it's a good example there of trying to compute the probability and the potential value of each of these introductions, and then thinking about that, obviously compounded over different numbers. I want to double click on something you talked about there, which is having a BS meter. And the question I guess I want to ask is, as you think about meeting with founders, hearing pitches, trying to wade through learning about a company to making a decision, how much of that process is where you're using the BS meter to effectively just try to say no to things or find areas of concern, versus more maybe top side or upside maximization?
Leo Polovets (14:57):
Yeah, there's always a tension here. So I think on one hand, you're looking for something exceptional. And sometimes it's obvious, sometimes you have to ask a bunch of questions to see if there's something there. I think the BS meter is a big part of it. There are definitely common categories of BS, right? So I would say numbers is one. I would say self-awareness is another one. If someone's painting a very rosy picture, and any time you're like, "Well, is this a risk? Or is this going to be a problem," and everything's just waved off as like, "No, no, no. Don't worry about this. Don't worry about that," I think that usually signals a little bit more smoke and mirrors and BS.
But there is a tension, right? Because a lot of times, even great companies, they'll have some things wrong with them in the early days or some things that they have to figure out. And so, you are trying to find those things and be aware of them. And if someone acts like there's nothing for the company to figure out, that's usually not a good sign. But also, you don't want to be so blinded by, "Hey, there's a couple minor flaws," that you miss the big opportunity for that.
Daniel Scrivner (15:55):
Yeah. Hey, I want to ask a related question, which is just around... I imagine at this point, you've sat through 1,000 plus pitches. I don't know if you tracked the number, but I'm sure it's very, very, very high. Much higher than...
Leo Polovets (16:05):
It's probably a couple thousand in person over 10 years, and then probably... I can't even imagine the number of decks. Probably like 20,000 decks over 10 years or something like that.
Daniel Scrivner (16:15):
Wow. Okay. So let's just round up. We'll go from 1,000 to 22,000 or 20,000, which is an enormous volume. And you talked about part of that process there, where you're trying to zoom in on things or be aware of things that might be concerning. I guess flipping to the opposite side, the question that I want to ask is, having seen just that volume of decks, what have you learned about what makes a great pitch? And I think part of that is just components, or the way that a pitch comes across. And how much of that is more narrative versus the founder themselves?
Leo Polovets (16:46):
I think there's a few attributes to this. So first, you want to have a good story arc and you want it to be... You want to have this story build, so that by the time you finish hearing the pitch, the success of the company of feels inevitable. And by story arc, what I mean is sometimes pitches just come as disjointed facts, where I can be like, "Oh, I worked at LinkedIn in the early days, and then I started Susa. And by the way, I was born in Russia, and I lived in Cupertino after we moved here." It's just a bunch of random facts, but it's not coherent.
But I think if you paint this arc of, "Okay, here's the problem. And then a bunch of people have tried these different approaches, but here's how we're solving it. And we've got some validation from customers that this is the right approach," and you kind of keep building, and building, and building, and then by the time the investor has heard the whole pitch, they're really excited and convinced. So I'd say that's one piece. You want to have that good story arc.
To the earlier point, I think you do want to be self-aware and have a good sense of, here's our strengths, here's the risks. And a lot of times, that's presented as, "Here's what we're going to do in the next year or two, to eliminate those risks or figure them out." And then I do think some of it does come back to the founder, which is there a little bit of charisma, and energy, and excitement, where you're listening to them and you're like, "Okay, I really would love to work with this person. I think others would love to work with them, both investors, and employees, and others." And so I think that is another element that's pretty important.
Daniel Scrivner (18:09):
Yeah. I want to move to a very different topic. One of my favorite things to ask guests about is just their favorite books. And so, the way that I want to ask this question for you is, I'm curious if you could just share, just zooming way, way out, the books that have had an outsized impact on you just as a person. And then putting your investor/founder hat on, are there any books that either you see have a big impact for a large percentage of founders, and/or are there books you regularly recommend to founders that you all invest in?
Leo Polovets (18:38):
Yeah, I would say on the personal side, one book that really comes to mind is it's called A Guide to the Good Life. Maybe it's kind of a cliche thing to say, but it's about stoicism. And it's the only book I read on the subject, and I found it really interesting, because a lot of it, I talked earlier about being able to be a little bit zen when you don't have agency. And a lot of the book does bring up things like that, which is like, "Okay, you have one life to live. Don't waste it being angry, or sad, or frustrated with your situation, or whatever."
It's more like, "Hey, what's in your control? Work on things that are in your control. Try to make them better. Things that are out of your control, ignore them, because literally they're out of your control, so stressing out or trying to do things to them doesn't matter if you can't have an impact." It also talks about just a lot of these stoicism-related concepts, like being more happy with what you already have and reminding yourself of how much maybe things could be a lot worse. And so I think that that's been just something that's really resonated with me in terms of personal attitude.
On the business side, I'd say two books I recommend highly, one is called Traction by Gabe Weinberg and Justin Mares. And that one's about marketing, but I would say it's written almost for an engineering audience, where before reading it, I always thought marketing and go-to-market was a little bit of a fuzzy art rather than a science.
And this book is very much like, "Well, here's an algorithm. Here's a few dozen channels you could think about, and you should pick 10, do a bunch of $1,000 experiments, pick three, do $5,000 experiments, and then go all in on the top one. And then here's the mistakes people make in picking a channel." And to me, it's this 150, 200 page book, but it's really succinct, and crisp, and tactical, and I found it really a good recommendation, especially for founders that do come more from the technical and non-business side.
And then another book I recommend a lot is called Monetizing Innovation. And that one's basically about how to price products, and how to think about pricing strategy, and how to think about pricing earlier on. And I think pricing is one of those underappreciated areas. Because if I told a startup, "Hey, can you triple your revenue in the next two months," the answer should almost certainly be no from growth, because you probably can't triple your customer base in three months.
But a lot of times, you could probably triple it in a few months with smarter pricing. And I think that's not a lever people think about a lot, and a lot of times the pricing is wildly under-optimized. And so, I think this is a good book to introduce people to how to think about pricing, how to optimize it, how to get more value from customers while delivering a lot of value to customers.
Daniel Scrivner (21:17):
Yeah. Huge plus one there, just to thinking about pricing, because I think a lot of founders either don't think about it, think about it way too late, or think about it two dimensionally, meaning just, "Is it monthly? Is it annual? Is it this price point? Is it this price point," as opposed to thinking in experiments and more three dimensionally. I want to ask a question around habits. And the question I want to ask is, what tiny habit or practice has had the biggest positive impact on your life and your work? And this can be anything including super small stuff, like just reflecting each night, planning your day each morning. What comes to mind?
Leo Polovets (21:46):
There's two that come to mind. One is I started working with an EA a few months ago, and that's been really game changing in terms of just writing down a bunch of playbooks and procedures, some for my EA and some for myself. Just because there are so many things where I do them one off, I do them every six months or a year, and I kind of reinvent the wheel every single time.
There'd be something like, "Oh, I need to renew my insurance," and it's a 20-minute process. It could be three minutes if I just wrote down the steps once and followed them each year, but I never did that. And so I think starting to write down some of these things where I know I'm going to do something on a recurring basis, and trying to make it as streamlined as possible for either for myself or for my EA that I work with, I think that's been pretty helpful. And that's more of a small habit.
I would say one other one that is a little more time consuming, but I found really valuable, is just maybe every quarter or two, I'll try to review all of my investments, basically all my investments ever, and just think about what's happened with them in the last quarter or two, and is there a new lesson I should be extracting there? And then if there is, I'll try to write that down and review those lessons from time to time. And I think that's helped me both be a slightly better picker over the last decade, but also it's helped me have better advice for companies over the last 10 years. Because I actively reflect on what works and what, and then I incorporate that into when I talk to founders later on.
Daniel Scrivner (23:07):
Yeah. Well, and that's a great example of taking something where, to your point, the feedback loop can be just awful and happen over an eight to 10-year period and effectively forcing a feedback loop that's much, much shorter and forcing yourself to reflect. Last question, if you could go back to the start of your career and whisper some words of advice, a reminder, anything, what would you tell your younger self?
Leo Polovets (23:28):
Well, this one's about the venture business, but I think it applies to a lot of other industries. I think there's a lot of cargo cult thinking, if you've heard that term.
Daniel Scrivner (23:36):
I've not heard that term, actually.
Leo Polovets (23:38):
It was this really interesting term. I think Richard Feynman made it popular in some commencement speech a few decades ago. And the gist was, I might mingle this story, but I think it was during World War II, in some of the islands in the Pacific, you'd have US planes fly by the islands, drop off supplies, and then fly away. And whenever that happened, the native population of that island would see somebody on the ground with headphones radioing into a plane, and being like, "Hey, drop off some food over here." And after World War II, the planes left, the American troops left, and some of these native populations, they made headphones out of wood because they thought, "Oh, if I just speak into a device that looks like this, I'll get food."
But that actually was the wrong lesson. It was the superficial lesson. And I think there's a lot of that in a lot of industries, especially venture, which is like, "Oh, this is how things get done," or, "This is what someone successful did, so I'm going to copy that." But it might be that, well, their success isn't from the thing you're copying, it's from something else, and you're spending all your time copying the wrong things. And I think that's a lesson I learned pretty quickly in venture, because there were a lot of these things people took for granted.
I'll give you an example. I was told by a bunch of people early on to not send direct feedback to founders if we passed. And the hypothesis or the thing everyone said was, "Oh, it gives you a lot of option value, because if you don't upset a founder today by telling them you don't like their company, maybe the next round they'll still come back to you, and they'll let you invest, and you can invest later on, even if you missed something good." And my experience has been the opposite, which is I'll give people feedback, and I'll be like, "Hey, here's some things I like. Here's some areas of hesitation."
And I actually get a lot of founders either coming back to me for their next round or sending their friends to me, because they like the feedback and they miss it from most investors. And I think that's something where I just thought about it more from a first principal standpoint, which is if I was a founder, I'd want to know what people don't like, and then maybe I could disagree, maybe I could change it if I do agree, but at least it's some data. And so, to me, it just felt weird to not say anything. I'd just be like, "Oh, sorry. It's too early. I'm passing." So I just gave people specific feedback and it turned out to be a good decision. But that's one of the many things I've seen, where people just do things because it's how they're done versus because of how it should be done.
Daniel Scrivner (26:00):
Do you have any hypotheses around why that's so prevalent in venture in particular? Is it because the industry is not that old? Is it because you have a lot of people that have very varied experiences trying to compare notes?
Leo Polovets (26:12):
I think because venture is such an outlier driven business. Everyone's trying to learn from outliers, but the outliers are very idiosyncratic. And I've given this silly example a few times, but you could look at the last 10 years and be like, "Oh, I should invest in any company with a four letter German name." Because Uber is a $100 billion company, and that's maybe more of a cargo cult learning, which is you're not... That's a superficial thing. That's not why Uber succeeded.
But I think it's very easy to extract lessons from just a few folks, which is like, "Oh, Fred Wilson or Bill Gurley, they backed five unicorns or 10 unicorns, and everyone else struggles to find one, and so whatever they're doing, I'm going to copy, and maybe you're right, maybe you're not." But I think if it was less power law driven and less outlier driven and more methodical and data driven, you could probably just look at the data and be like, "Oh, I should do this because 80% of companies that succeed want this, and I shouldn't do that because of the opposite." But because it's outlier driven, I think it's very easy to just over generalize from really small samples.
Daniel Scrivner (27:17):
Totally. And it's really hard to... To your point earlier, there's lots of lessons you can learn that are the wrong lessons to take away from whatever particular data point or story happened. This has been so much fun. Thank you so much for coming on, Leo. I really appreciate it.
Leo Polovets (27:29):
That was a blast. Thanks for having me.