This venture capitalist has backed 40 unicorns by focusing on the things most VCs overlook
By James Vincent
Venture is all about the entrepreneur, says Danny Rimer, a partner at Index Ventures. “The rest is noise. Total available market (TAM) size is noise. Talking about what the exit is going to be is noise. Thinking about where the company should be based is noise.”
On this week’s Most Innovative Companies podcast, Rimer shares his investment ethos, his thoughts around the evolution of the venture capital industry (is venture still venture?), why he believes it’s a privilege to invest in someone else’s idea—and how, in return for that privilege, he promises to roll up his sleeves, get to work, and do everything possible to make that company as successful as it can be.
While it might seem counterintuitive, Rimer doesn’t pay too much attention to metrics, but instead makes investments based on individuals, on ideas, on their relevance to culture and what he might be able to build with them.
He has been a true venturer in every sense of the word, consistently seeing value where others haven’t—and has more than 40 unicorns to his name to prove it. His most recent headline-grabbing success is seed investing in Dylan from Figma, which was recently acquired by Adobe for a staggering $20 billion—a new financial record for the acquisition of a private company.
Rimer first met Dylan Fields (Figma’s cofounder & CEO) as a 19-year-old entrepreneur, and backed him while Figma was still a figment of his imagination. In fact, it wasn’t until Rimer invested that the URL was purchased. What swayed Rimer to make this decision? A combination of Fields’ tenacity, the questions he asked, and his mission to democratize design through a new platform. “He genuinely meant it,” Rimer says. “Irrespective of me or anyone else, he was going to go after it.”
Over the course of a decade-plus relationship, they’ve built Figma into an industry-leading solution that allows creatives to work within the cloud—as opposed to on it. As Rimer says, it’s a matter of zeroing in on the founder to understand what drives them. “I can probably knock out 90% of the folks I meet with, and then it’s a question of the fun part—talking to the person and really understanding what’s motivating them, why it’s motivating them, and how they’re going to approach the space.”
His approach has made him an outsider on the inside—someone who is constantly seeking tenacity, passion, and resilience. These are the hallmarks Rimer looks for, although his filter differs from that of his partners.
“There are many different ways of getting to the right answer,” he says. “The aspect that I think we agree upon is that you can’t really be passionate about ‘business.’ When someone comes to us and they’re excited about business or they’ve gotten a degree in business and [are] interested in anything that’s a great business—that means nothing to us. We’re not the right partners for them. It doesn’t mean that they can’t build a fantastic business, it’s just that we’re the wrong partners because we’re gonna dig a lot deeper. We feel as though that’s great if you want to ride a wave and you’re a momentum builder, but companies are going to hit hard times.”
Rimer also reflects on the element of craft that has served him well over the decades, and how that differs from the norm. “In a lot of ways, the [VC industry] has migrated from being just a craft-oriented approach, which is what folks like Index are passionate about.” Since, he says, the industry has become “more of an asset aggregation play—more about having massive coffers of cash that you deploy across all stages and all geographies acknowledging that technology is the primary driver of wealth creation that’s going to happen over the next decade.”
As for the present market downturn, Rimer offers why now is the time to invest—with opportunities for both entrepreneurs and venture capitalists. He says: “I think the best companies and the best entrepreneurs are going to be backed at this time because if you are starting a company right now, you mean it. You are not going to start a new company today in this climate without really wanting to do it,” he says. “You’re ready for a very difficult environment; you’re ready for the fact that you’re not going to raise as much as you would.”
He’s seen the latter work out in a founder’s favor. He believes that companies are inversely proportional, with respect to how much they raise in the earliest rounds, because you’re going to be more creative and more resourceful out of necessity if you don’t have as much investment. “If you are starting a company and it is going to work at this time, then it’s probably an amazing business.”
Listen to the episode for the full interview.
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