Full transcript: Investor Maha Ibrahim talks venture capital on Recode Decode

This week on Recode Decode, hosted by Kara Swisher, Kara talks with venture capitalist Maha Ibrahim, a general partner at Canaan Partners. Though it’s not one of the biggest VC firms, Canaan has made important investments in its 30 years and continues to take the long view on Silicon Valley investing.

You can read some of the highlights here, or listen to the entire interview in the audio player below. We’ve also provided a lightly edited complete transcript of their conversation.

If you like this, be sure to subscribe to Recode Decode on Apple Podcasts, Spotify, Pocket Casts, Overcast or wherever you listen to podcasts.

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Kara Swisher: Recode Radio presents Recode Decode, coming to you from the Vox Media Podcast Network.

Hi. I’m Kara Swisher, executive editor of Recode. You may know me as the person who will not be pardoning Sheriff Joe Arpaio, but in my spare time, I talk tech, and you are listening to Recode Decode, a podcast about tech and media’s key players, big ideas and how they’re changing the world we live in. You can find more episodes of Recode Decode on Apple Podcast, Spotify, Google Play Music, or wherever you listen to your podcast. Or just visit recode.net/podcasts for more.

Today in the red chair is Maha Ibrahim, a general partner at venture capital firm Canaan. She’s invested in everything from gaming to e-commerce, but currently she focuses on enterprise, the cloud and marketplaces. She’s also a frequent lecturer at UC Berkeley and a mentor to women in STEM.

Maha, welcome to Recode Decode.

Maha Ibrahim: Hi there.

How you doing? Good to have you.

Good. Thanks for having me.

So much to talk about in venture capital, and that’s before we end up talking about sexual harassment and everything else. Let’s talk a little bit about your background. Your firm is not as well-known as others, even though it’s done a lot of big investing. Give me your background in venture capital.

My personal background?

Yes. Your personal background.

I grew up in Boston. My parents immigrated here from Egypt in the late 60s. Had me, and my mom worked for DEC for 25 years, the Digital Equipment Corporation.

Oh wow. What did she do there? I wrote about DEC. That’s dating myself, they sold the Compaq, right?

Yes. Massachusetts at the time was DEC-land. Everybody worked there.

Yeah. It was corridor ...

128.

128, yeah.

Yeah. Which is not even a shadow of its former self.

Right.

My father was in nuclear engineering, and I was just surrounded by tech. My mom took me out to California, to Palo Alto, one winter for her break. I looked around and I was like, “Oh my God, I love it here. Why am I in cold Boston when I can be at Stanford just loving life?” I made a commitment to myself that I was gonna come out here, and that’s what happened. I went to Stanford for college, met my now-husband. We went back to Boston for graduate school, came back to the Bay Area thereafter. I ended up working for BCG for a total ...

As is the want of many.

Exactly.

Consulting.

I thought I wanted to be a professor, so I was dead set on going into academia. And one day, when my venture capital career is over ...

You’re gonna do it for free.

I will go back to that. Yes, I would do it for free. I just love teaching.

How did you get into venture capital? I mean it’s not ... first of all, no women, at all or practically no women. I’m trying to think of who was around who you might pattern after.

When I joined, I joined in March of 2000, it was by far the peak of the market at that time. We’re arguably at a new peak right now. I would argue that back then, there were probably more women in senior ranks in venture firms than there are today. It so happened that the folks that were ushered out of the business, within a couple of years after the bubble bursting, were folks that focused in a couple of areas. Consumer, which were largely the female partners, and telecommunications equipment, optical networking-type folks. All of them are gone. And that was probably the first wave of women exiting the business.

Ha. Interesting.

I think. And it’s slowly built up more and more over time, but we’re clearly in a position right now in the venture universe where there is a dearth of women at the senior ranks.

Absolutely. All those statistics are declining, people at MIT, everywhere. It’s gone from 20s to 15s, the numbers, at Harvard business school, everything, everywhere that these people would come out of.

Tell me about why you started to do that rather than going to operations, your parents are both technical people. What did you take at Stanford?

I have a PhD in Economics, so I wanted to, again, be a professor, that was my main goal. After working at Boston Consulting Group in San Francisco during the bubble, I was looking around and saying, “God, there’s people doing some amazing stuff.” And I’m sitting here working on a pretty boring project for a utility company. I said I wanted to be in tech, and I landed this job with Qwest Communications, which, at that time, was an upstart telecommunications company.

Yeah, I remember.

I knew, probably, how to answer a phone, that was about as much as I knew about telecommunications. But I learned really fast. And the company at the time was really small, it was in Denver, and they gave my 28-yr-old butt ...

Who was the founder, that crazy billionaire?

Joe Nacchio.

Joe Nacchio, I remember him.

Joe Nacchio is the CEO, who then went to jail.

He went to jail. He was so entertaining, though. I remember seeing him at events, “Joe Nacchio! How you doing?”

Completely magnetic personality.

Hot, hot, hot company.

Yes. It was a rocket ship, and the chairman was a guy named Philip Anschutz.

Of course, yeah. Owns a lot of things.

Who, despite his political leanings, is an incredibly successful man. It was an incredibly controversial company, it grew tremendously, and they gave a 28-year-old woman, who knew nothing about telecommunications, a real shot to do something. I headed up business development for them, and in a couple of years, we grew from 1,000 to 15,000 people, and my role was to interface with the startups in Silicon Valley. So my main role was working with venture-backed companies, both on the network equipment side, data center side, and content side to help build out our network and build out the content that would help highlight how much bandwidth we were putting into the ground.

Sure. Which, there was no content at that time.

There was no content at the time, that’s right.

Right, yeah. You’re really taking me back here.

Yes! So our slogan was “Ride the Light.”

That’s right.

And jokingly, internally, we used to say it’s “Ride the Lie.” Because we were putting all this stuff in the ground and we couldn’t ...

But directionally correct?

Right.

Directionally correct?

Yes!

That’s where everything went.

Fast-forward 20 years and that’s where everything is now.

I remember his spiel now, I had forgotten it, but there was ...

Yes. He was a showman.

There was a lot of people like that. Even the people before that. General Magic ...

That was during the time, so we were watching this General Magic ...

Such bullshit. But so directionally correct.

Completely.

That you were gonna have a device in your hand that you were gonna read on and do ... the idea was big.

Timing is everything.

Timing is everything, right.

Timing is absolutely everything. And if there’s one thing I’ve learned in my venture career, that’s it. Timing is everything.

How did you get to venture from Qwest? ’Cause that was sort of a crater, it’s a big crater as I recall.

It was. Qwest was an amazing success, at the time. It was, and I certainly did very well there. I headed up business development there, and again, for a 28-year-old woman, I was one of four female VPs in the company.

Which is a lot, actually.

But for a company of that size ...

Right, it was a lot.

... it was not a lot. And I was incredibly lucky, fortunate, whatever you want to call it, to be given that amount of responsibility at such a young age, with such little knowledge of the industry. But, again, my main role was interfacing with venture-backed startups, so the transition to venture was fairly easy thereafter. And then, again, I found myself at Canaan Partners in March of 2000, being really excited about the industry and excited about the job, but knowing very, very little.

And why did you ... why venture? What was the ... I’m always interested in how people decide to do something. ’Cause you could have gone on to work at any one, any company, all of them were into that idea of bandwidth and things like that.

I found myself very intellectually curious about how these companies that I was seeing and interfacing with on a daily basis were started. From many standpoints, I was looking at how exciting it was to build a company. I was seeing in internally at Qwest, but I was also looking at these founders that I was working with in my business development role, and looking at their psychological makeup. What made these people take so much of a financial, personal, professional risk in starting this company that could easily die within a couple of years from now? And there was something really thrilling about that. There was something really thrilling about seeing somebody’s core nugget of an idea, and watching that blossom over time. And frankly, that’s what drew me.

And you didn’t want to do that yourself.

I didn’t want to do it myself. Because I didn’t have that risk-loving appetite, to use somewhat of an economic term, I wasn’t risk-loving enough to put, to use a poker term, to be all-in on one idea.

Right. It’s interesting because it’s other people’s money, so what’s the difference? Fair enough, and I didn’t care because it’s other people’s money kinda thing. You started to do that, and you focused in ... what were your initial investments? What did you look at?

I was, because I was coming from Qwest, my main ... for probably 10 years thereafter, my main focus had come in was — and has been and is — infrastructure software. I tend to focus on data center stuff. Mainly software, some hardware, but everything that makes the back-end systems work. Storage, security, business intelligence, all the virtualization, everything that’s boring. That’s where I focused on. And then along the way ...

Jaded Cisco venture cap, things that sell the Cisco.

Exactly. They move — sell — the Cisco. That’s right.

That’s over.

It’s not over though. They are a huge acquirer, and will continue to be.

But along the way, decided that, “Gosh, I actually like this consumer stuff, too,” and made a couple of bets there, and I’ve been very fortunate to have some successes there.

Right. Tell me, which ones.

We are Series A investors, largely, at Canaan Partners, so the strategy at the firm is to invest at that Series A, where there may have been seed money put in the company, there might not have been. And when we do that Series A, we’ve raised somewhat large funds. The most recent fund that we’ve raised is $800 million. From a financial perspective, in order to return multiples on that $800 million, ownership is everything. We need to be partners with the CEO and we need to probably take 80-100 percent of that Series A round. We tend not to syndicate at the early stages, and then we’ll syndicate thereafter. Some of the companies that we’ve invested in, that I’ve invested in, have been Kabam, on the consumer side, which recently sold, last year sold, which is a mobile gaming company, and we seeded and led the Series A there. The RealReal is one of my companies, which is a luxury ...

Julie Wainwright.

... yeah, consignment company doing incredibly well.

She was a ... I wrote about her at pets.com and before that, when she was at the movie company.

Yes. Reel.

Is that Reel? No, it had Reel in it. Yeah, she’s one wacky ... she’s great. I love her ’cause she such an entrepreneur.

She’s so feisty. She’s — at the core of everything she is, she’s an entrepreneur. And again, I look at that and I say, “Gosh, I’d love to advise, I’d love to help out, I’d love to push those people.”

She could have been down with next.com.

I could not do that.

I remember, I was sitting at her house in Mill Valley or somewhere like that, they were just over the bridge and she was gonna go public with pets and like, “This is not gonna end well, Julie.” And she’s like, “No, I swear.” I’m like, “No, I’m telling you.” It was funny.

Right. And that perseverance, that dogged determination.

Dogged. I still have a picture of the dog in my bathroom. I have the dog picture in the bathroom, ’cause she gave me one a long time ago, it’s like a collector’s item.

Yeah. It is a collector’s item.

I have an actual sock puppet.

I mean, imagine that.

You’re taking me back here, Maha.

Imagine the stories. I know. We’re both not that old but ...

The RealReal sells, explain what the RealReal does.

The RealReal is a luxury consignment company. They consign goods that you would find in Saks, Neiman Marcus, etc. We take them out of closets of anybody ...

Rich ladies.

Usually rich ladies, but people who love luxury, and we authenticate it, we describe it, we photograph it nicely and then we sell it. And because we have sold millions of items at this point in time, we have a really good database and knowledge of what the price points are to sell at relatively high velocity.

Right. My mom sold $800 of rich-lady stuff.

Yeah. There you go.

She loves the RealReal.

It is an incredible service.

Yeah. It’s interesting. Those are different in gaming, this, and what else?

It’s a lot different from storage virtualization software.

Yeah. I would imagine.

It is. And frankly, I stayed away from a lot of the consumer stuff for a while because I didn’t want to be the woman who is doing consumer stuff. I knew that once I opened the door, I would get a floodgate of it, or I would open the floodgates, and that has happened, but in a much more positive way than I initially thought it would.

All right, let’s talk a little bit of it, here you are, doing this, I met with a lot of venture capitalists yesterday, of all things, I’ve got a lot of what’s going on in my mind, I was trying to get a sense of where the market is right now. And pretty much every person felt like it was just too flooded right now, there’s too much money tracking very bad ideas now that it’s really ... there’s been a ... not a lack of innovation, a lack of ideas, a lack of where anything’s going, and so I think everyone communicated that there’s $200 million funds, there’s too many. And one person, which I thought was funny, said to me, when someone asked what he did, “I sell money.”

Wow.

Which I thought was great, actually. It’s exactly what a ven ... “I’m selling money to entrepreneurs.” I thought that was a brilliant way to describe, honest way, to describe it.

It’s honest.

How do you look at the state of venture capital now? And then on our next segment, talk about all the controversies. And then the last thing we’ll talk about, we’ll talk about what’s hot. But what do you think the state is right now?

When I joined the industry in 2000, there were years of ... it was the nuclear dead zone, right? It was just years of slogging and slogging and slogging through a really poor exit environment. And I’d say that lasted up until 2005 or 2006. To give context, we would look around and we’d say, “God, that’s a company that exited for $200 million? Woohoo! That’s wonderful.” That mindset or that changed because of the current environment is remarkable. And we’re now looking at the last nine years of up and to the right. And we’re also looking at a cast of characters in the venture industry that have, a lot of them have only seen up and to the right. And so they do look at their jobs as selling money. That’s not our job.

Our job is to return capital to our limited partners, hopefully, in multiples. And we do that by investing in ideas that we think will become huge and then, hopefully, advising the companies along the way. But what is the most concerning right now, and what we pushed on a lot at Canaan, is kind of the opposite of that. What is most concerning right now is the flood of capital coming in, and I totally understand why, right?

There’s nowhere to go.

Investors, pension funds, etc., they’re seeking alpha. They have nowhere to go. The market, the public market is at an all-time high, and they want to at least put some of their capital into risk capital. We are a beneficiary and, one may say looking back on this, a victim of that. Although I can’t say that venture capitalists are victims, but we are a willing recipient of that.

We have got to maintain, at Canaan, I can’t control the industry. We’ve got to maintain discipline, we’ve got to be intentional about how we invest, and for us, we’ve reacted to the current environment by being very focused on franchise areas. There’s areas that we will focus on, and we’ll go deep and get to know all the executives, entrepreneurs and develop thesis around those areas so that if we’re seeing a white space, we either will incubate a company, of we’ll find three or four entrepreneurs, bring them together, and seed them with that idea.

Right. That’s super thoughtful.

And that’s how we do it.

But you don’t operate in a vacuum.

We don’t.

And there’s all this money flying around. It doesn’t matter ... that’s the worry is that there’s all this money flying around and the entrepreneurs have a lot of choices. Even the worse ones.

Right. That is our reaction to it. Our reaction is to be much more deliberate and intentional so that we can go after those ideas before those entrepreneurs actually are shopping their deals. But there ... you’re absolutely right, we’re in an environment that is high-valuation, highly competitive, etc. When I entered the business 17 years ago, you could survive as a generalist. I could easily invest in a consumer company over here and network equipment company over there and no one would think anything of it. Today’s world is much different. As a VC, you’ve got to be a subject matter expert, you’ve gotta go deep in areas because that’s the only way of differentiating yourself.

And that means what? Given, again, there’s so much money and people don’t ... they’re a little bit loose, I don’t know how else to put it.

Without question, yeah. It’s troubling.

Do you think that we’re in a non-innovative period or a shift of — and we’ll talk about that next — where do you think we are on innovation, ’cause it feels like we’re still at the tail end of the old way of doing venture capital and I want to talk about what the new way would be of doing it because it hasn’t ... I guess Andreessen Horowitz was the last venture firm created in the old style, even though they were talking about being different, they’re sort of the same. What do you imagine happening? And then we’ll talk about it next.

I’ll talk about what we invest in and then we’ll talk about how that trickles down or trickles up to the venture community. We are in a non-innovative ... we’re in a massive transitionary period in one segment of our investments, which is a negative, and then on the consumer side, we’ll talk about that in a second. On the enterprise side, we have been open sourced to death. Almost every part of the stack up to the app layer is getting open sourced. Which is phenomenal for the developer, it’s phenomenal for cost structure of enterprises — it’s a very difficult environment, though, in which to be an enterprise investor.

There are pockets of investing within infrastructure software, but it is, it’s a difficult space right now. To boot, you have companies like Cisco, HP, Symantec, EMC, etc., which, for the exception of Cisco, have had their own troubles and have not been acquisitive. It is a difficult landscape, and there are, again, pockets that we’re finding, but I’m relatively bearish there. The consumer side of the house, it is ... we’ve not seen ... several years ago, we saw ...

A bunch of innovations.

We saw mobile come into the scene, right?

Not just that but Airbnb, Uber, Pinterest, there’s a whole bunch.

Which happened because of mobile, right? Mobile was that core shift in the market that caused all of these massive companies to grow and to own it, to own new spaces. Like Uber and Airbnb, which I would argue at this point, the two of those companies should be looked at as public goods in addition to fabulous companies. But what we’re waiting to see on the consumer investment side is what that next transitionary phase is going to be. What that massive new wave is going to be, and it’s not there yet, but that doesn’t mean that in a year or two from now we won’t see it.

All right, we’re gonna talk about what that might be in the next segment. I’m here with Maha Ibrahim, a general partner at venture capital firm Canaan.

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We’re here with Maha Ibrahim, she’s a general partner at the venture capital firm Canaan. We’ve been talking about where venture capital is and some of the investments she’s made. I’m gonna move into sort of the state of venture capital in Silicon Valley right now. It’s going through a real rocky period, not just in terms of lack of exits or anything else. But let’s start with that and then we’ll get into the problems around gender issues.

Where does it all go? ’Cause nothing’s going public, no one’s buying nothing, really, not that much, what do you all do? What are you all thinking?

The last three years, counter to that, the last three years for my firm have been incredibly productive. We’ve had 30 exits in the last three years.

Exits mean mostly sales or ...

Mostly M&A, some IPOs. The IPO market is certainly rocky, although when I speak with bankers, they’re expecting a rush in October and November of this year of offerings.

There’s not a big one, that’s what they always set off.

That’s the tough thing, what has been sent out into the market ...

Yeah, I know.

I’ve read those S1’s and I’m just cringing.

What makes you cringe?

The lack of profitability and the lack of convergence to profitability. And I’m not just talking about Blue Apron, right? If you look at ... over the last couple of years, exits both on the consumer — sorry, IPOs, both on the consumer side and the enterprise side, they have been ... these companies have been burning tremendous amounts of capital and you don’t see a convergence of the top line and the bottom line. And it’s scary.

You’re essentially saying they’re never going to make money.

I believe that many of them will never make money. And to me, that’s emblematic of what we were talking about earlier, which is this rush for alpha, is causing these companies to, not necessarily be long-term, sustainable businesses, but it is that age-old thing of highlighting growth over everything else. And yeah, it is a concern. It’s caused us internally to look at, to question how we’re doing business. As I said, we’ve been fortunate to have incredible velocity of exits in my firm over the last three years, which has caused us to be able to raise this most recent fund, with so quickly and have the support of incredible limited partners. But as we look at that, we’re saying, “Have we been taking enough risks? Are our companies, given the current environment that we’re working with, are we not pushing our companies to grow fast enough?” Yet we’re having to look at that and push it against our own notion of ...

Which is profitability of real business.

Exactly. Building a real business and being long-term investors and doing this intentionally and deliberately. But it has caused us internally to have a lot of conversations about what we ...

You’re kind of, “Is everybody doing it? We better get in there,” doing the same thing.

Yeah. But hopefully, again, we’re thinking about it in ways that are more manageable. Our highest-burn company is one that burns $300 million a month, we’re cringing at that.

If you’re gonna do it big, do it big.

Exactly. You look at some ...

Think of Uber losses.

Uber is another story entirely, but even ... these companies that are going public right now are burning tremendous amounts of capital and getting rewarded for it.

Right. But where does that end up?

Yup.

Yup, exactly. M&A is sort of the way out, like this company ... how do they get these bigger companies to do that?

About 40 percent of what we do is health care and 60 percent is tech. I’m on the tech side. The answer is the same on both sides of the house, which is, we have to take a thesis-driven approach towards investing.

Therefore, something that will be attractive to Google/Amazon/Apple.

And we also have to look at our investments and say, “We’re not an index fund for venture. We’re not gonna cover a ton of areas. There are areas that, frankly, we will fall on the table, and we’re okay with it,” right? For us, for a number of years, security was one of those areas. We’ve just now started dabbling back in security, but we didn’t see that exit environment for it, we did see differentiated products out there, we thought that it was a highly competitive market, and for a while we just stayed away from it.

Hot now.

Exactly.

I’ve met with another venture capitalist and he’s like, I mean, they’re gonna go into AR or cybersecurity. It was so funny, those were the two areas ... like what? But still, it’s all right, I didn’t mind. AR is a really interesting area in my mind. It’s something I think Apple’s gonna be heavy into, Google’s gonna be heavy into. To me that’s the next hot space.

I hope so.

Are you in that?

No. This is a personal ... and I get very motion sick with all of it.

No, not VR, AR.

I know, all of it. Almost all of it.

AR, you heard it here first.

First. You are the first one ever.

Everyone’s VR, I’m AR. AR, MR, multi, whatever. I just think that Apple and Google are gonna play big in there.

Yeah. Let’s hope so. And therein lies another overarching theme we’re seeing right now, is those big companies, Amazon, Apple, Google, because of the capital they have, and because the public markets want them to continue innovating, unlike their competitors, like Walmart and Target.

They just have to sit around, right?

Yeah. They are innovated, they’re almost out-innovating ...

Entrepreneur startups.

I would agree with you.

And then the projector and the new Amazon Echo.

It’s incredibly impressive. Amazon is, Jeff Bezos, I continue to bow down, just unbelievable.

Yup. And he’s got nice muscles now. Which, is interesting. Let’s not objectify Jeff Bezos, okay? Let’s get into that, actually. Objectification, that’s a good thing, too. There’s also ... venture capital has really been, sort of, focus has been on problems within the diversity and everything else. I’d love to get your ... I often hate to just think, “What does the woman think of it?” But it’s really an interesting ... what is it like being in venture capital, when you see all this stuff coming out? Which is, I think, not a surprise to anybody, it’s sort of the delayed reaction to the Ellen Pao case, it feels like. And she’s just coming out with a book, her book on the subject, which seems highly pertinent now. Looks like Ellen had a point kind of thing. Talk a little bit about that.

I read her article yesterday, and was so moved by it. It took so much courage to do what she did years ago. And I’ve said this before, but what Ellen Pao did was basically putting a nuclear bomb on her career, right? It was such an incredibly risky move that she made. Irrespective of what people think of the merits of her case, there’s so few people who would stand up and do that in her situation. And that, I think, made people question what her motives were in filing suit in the first place, which is why all this derogatory information about her and her family came out at subsequent times.

That Ellen Pao suit was a watershed moment for venture capital and for diversity in venture capital, and not in a good way.

Everyone stepped back.

Everyone stepped back. And everyone felt like they had to ... my son is really into watching “South Park” right now, and there’s a kid in “South Park” named Token. Everyone felt like they had to hire the Token. I was on a plane a year and a half ago, to the East Coast, sitting next to a VC that I’ve known for years, and he said to me that he and other managing directors at firms don’t want to hire women at senior ranks because they don’t want an Ellen Pao-like situation.

Yup. We wrote a story like that. It was incredible if you change that out for Jewish, black, anything else, it would have seemed horrible.

I was horrified. I couldn’t sleep that night.

What did you say to him? Did you throw a drink on him?

We had a number of hours on the plane to talk about it and I really wanted to hear his story, because it’s very rare that somebody actually comes out and says something like that. And I had to think about it like, "Wow, maybe he’s giving me a gift. Maybe he is opening up the door so I can hear, really hear, what ...

They really think.

Exactly, right. While I was horrified, I was appreciative that he was saying it out loud. He also said that when they were going to hire females, they were going to do it at the junior ranks where they didn’t have any promise of promotion. So, in a way, the Ellen Pao situation or events were amazing, but the reaction to it was unfortunate. What it did do, supplemented by social media, was allow vitriol to be communicated. And allow that voice to be amplified and magnified in so many ways. I have been heartened by how much support we have amongst ourselves as women in the venture community, and how much we’ll continue to grow because of that shared experience that we have.

That was what was interesting when we were covering ... we covered it very heavily, that trial, here at Recode, we thought it was important, because we thought it was ... we did think it was a watershed moment. We covered as if it was the Super Bowl. This is important, this is a big topic. People questioned it at the time, and I was like, “No, no, this is a great story, it’s a great ...”

It was. It’s just that the problem was that other people looked at it like a “National Enquirer.”

Right. No, I get that, but I think one of the things I’ve found striking, and I continue to find striking is, every woman had a story, and every good man was surprised, you know what I mean? “I had no idea!” And the same thing was iterated with Uber, with Justin Caldbeck, with Dave McClure, “I’m so surprised! I had no idea, Kara!” Why did you have no idea? It was really interesting.

I meet with female entrepreneurs all the time, and out of our eight general partners at Canaan, three are women, so we have a collective knowledge based on the firm that is, frankly, unlike other firms.

Yeah. You need that many.

Yes. Right. We feel like we’ve reached a tipping point. But what collectively we hear, regularly, from entrepreneurs, and we meet with a lot of female entrepreneurs because of the composition of our firm. They all have a bad story. To a person, all have a bad story.

And they’re on a spectrum, very minor to very serious.

Yes. Exactly.

So that ones in the minors are, “Ah, I can put up with it.” And ones to the major side are too horrified to discuss it ’cause they think they’ll be tagged.

That’s exactly right.

There’s no fixing for anybody, anywhere along the spectrum.

Yeah. And I consider myself incredibly fortunate to have entered this business in a group that has allowed me to flourish, and I’ve taken a lot of responsibilities as have my other partners, both male and female, to make sure that my firm, at least, is as diverse as we can make it, and is a reflection of the true entrepreneurial pool. We want to reflect what the entrepreneurial pool looks like, so that everybody who walks in our door feels comfortable.

Promising idea.

That’s right.

A lot of it has been the focus, say, on the Justin Caldbecks and David McClures, the real, the sexual harassment part, ’cause I think it’s more, the more dangerous stuff is less obvious. Those are very easy-to-write stories about and then they’re out kind of thing. Or there’s been six or seven departures ’cause of things like that, but to me, the middle part is more pernicious and also difficult. What has to happen, what has to occur, rather than everyone going back in their turtle position to hide away from it?

I had a VC tell me a couple of weeks ago, after this Justin Caldbeck stuff came out, again, he was one of the “good guys,” right?

Which ... we hate that term.

Right. I hate it.

“He’s a solid guy.”

I don’t know how to put it. He’s on the right side, I don’t know. Anyway, he said, “I wonder if I’ve ever done anything?” It’s reflection, but it’s also that turtle thing, the defensive mechanism will be to meet with fewer female entrepreneurs, unfortunately.

Right.

I have got to — and other female GPs have got to, and we’ve all talked about this, which is good — we’ve got to make sure that we are hiring females at senior and junior levels in the investing world, because those people are going to be the ones that invest in, again, a more diverse ...

So how do you make it so it’s not just Token, then? It’s a joke on “South Park,” but how do you do that so it’s not ...

Why are they? They don’t have to be Token ...

I get that, I know that, but then the mental ... it’s interesting, I’m not joking, I’ve really gotten 400 job offers from venture capital recently.

I don’t doubt it.

I have no investment experience. What are you talking about?

I don’t doubt it, yeah.

It’s insane.

Exactly.

It’s crazy.

And who are the people hiring you?

I think someone to be mean to sexist entrepreneurs. That they’re scared. I’m like a guard dog. I’m gonna be like, “You better not sexually harass or Kara will found out!” kind of thing. It’s not a bad job.

This is social psychology, right? “I am hiring people that look like me,” and that is why most venture firms are predominantly white male, or male. I want to hire somebody that has the shared experience and a likeness, etc. Pattern matching. And it just so happens that as I looked back, I’m guilty of it as well. I’m hiring people that, a lot of the people I hire are first generation. They’re immigrants. They’re people who I have a shared experience with. It’s just that I don’t think there’s anything wrong with that.

It’s fine. Not just gender changes, it’s age. I just was recently in Kentucky and West Virginia, and we’re trying to figure out tech jobs there and how to “here-source” is the new term they use, and I was like ... the one thing that I was struck by is how many talented people are there, stuck there. But they’re not stuck, and I was like, “Why aren’t people finding people here?”

The issue is there’s talent all over the world, and in this country too, just tucked away in different places and it’s a real problem that they’re all here, because they’re not all here. You know what I mean? I’m thinking, who among this audience, and it was all these people who were not traditionally go to Stanford, CS degree kind of thing, and I’m like, “Who here has probably got the next billion dollar idea? There’s someone here, and maybe not this crowd, but somewhere here.” And it was an interesting ... they’ll never be found, essentially, unless they leave.

My political ... politically, I’m very left. And when Trump came into power, it was a huge blow to me because I just didn’t see it. I didn’t see why people, for many reasons, why they were voting for him. And as I reflected back, and I talked with a lot of people, it became very clear that the people in those regions have been left behind. In Silicon Valley, or in other innovative places, we have not tapped into those resources, and the government has not done enough to educate those folks in those areas, and bring industry to those areas. That’s certainly not the job of venture capital or entrepreneurs to do that, but certainly, as we look towards other areas for outsourcing, I believe, given the cost basis in whatever state you’re talking about isn’t California or New York, that they will be competitive.

It was just interesting. They didn’t even fit in their version of white guys. They’re these white guys that didn’t look like the white guys that you’re used to. You know what I mean? I was just sitting there, I was thinking there is really someone here that is probably very special of all these people and we’ll never get the chance, which was interesting. You know, this analog idea that they all have to be here, or they have to be in one place, which is interesting.

Well, I mean, the concentration in Silicon Valley, there’s nothing like it.

No, there isn’t. What’s the solution to ... if you were to take one step, like you had a magic wand to start off this gender problem, everything, the whole diversity problem, Decency Pledge seems the most ridiculous thing I’ve ever heard of. I love Reid Hoffman, but honestly, come on. What would be the thing that would have to happen?

The Decency Pledge is, it’s a step in the right direction, but it is the lowest of low bars.

Yeah. “Don’t be an asshole,” oh wow.

Exactly. “Don’t grope me today, please. I promise not to grope you.” Thank you, I appreciate that. Thank you. No.

So what?

First of all, we’ve got, as females, as minorities, in this community, the first thing is that we’ve got to be successful. And once we are successful, we’ve got to make sure that others are successful, right? There can be no ceiling, whether it’s glass ceiling or plastic ceiling, there cannot be a ceiling. You’ve got to make sure that others are given the shot that we were given. And not take this as ... not take individual success as representative of everything else. The problem is that, in the entrepreneurial pool, this is specific to women, there’s no icon, right? There’s no Steve Jobs, there’s no Mark Zuckerberg, there’s no one that we can point to right now and use them, highlight them as an example of building a truly world-class company from the ground up.

I believe that that’s one of the reasons, not the only. But that is one of the reasons why we don’t see females getting funded in the numbers we see men. I’ve heard stories, I’ve been in panels where male investors have said, "We feel like women shoot for the moon, not the stars. We feel like women are not as ambitious as men." And they are using that as an example that ...

That’s the James Damore argument.

Exactly. And they are using that as an example of, "Gosh, there is no female Mark Zuckerberg,” there doesn’t have to be, there are plenty of other companies that can be very, very successful, and I and we, have just got to be ... we’re striving for a post-gender world. And that may be too idealistic, I recognize that, but it’s the best thing I could do.

Well, at least we stopped groping, I suppose.

No.

No, we have not stopped groping.

A) we haven’t, and B) I can’t ... That can’t be the line.

All right. We’re here with Maha Ibrahim, she is from Canaan Partners, talking about a wide range of things and investments. When we get back, we’re gonna talk about what the hot areas are. We’re gonna argue about AR versus everything else, and where she thinks that we’re all going in Silicon Valley.

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We’re here with Maha Ibrahim, she is a partner at Canaan, which is a venture firm that invests in a lot of stuff, health care, enterprise, consumer, stuff like that. It’s not one of the famous venture capital firms, there’s lots of them, but what’s your funds, they’re $800 million a month?

The funds have been around for 30 years, and my hope is that it will be around for another 30 years.

30 years. How much do you have under investment?

We have $5 billion under investments.

That’s a lot of money.

Yes, it is. And the most recent fund that we raised is Canaan 10, it’s a $675 million fund, and we just announced Canaan 11, which is an $800 million fund.

Wow. That’s a lot of money.

It is.

Is it easy to raise money now with these? ’Cause there’s nowhere for money to go, that’s what all the ... all these sovereign wealth funds, just washing around worldwide money.

That’s a lot of money in the system. We want to make sure that we’re, our partners that are giving us money, are there for the long run. We believe that the money that’s coming in the system right now may ebb and flow as the venture industry ebbs and flows. And right now we’re at the peak, I don’t know how long it’s going to last and we want to make sure that our partners understand that we’re committed to long-term returns, but there will be variability.

Right. So here you have all this money, you guys are investing in all kinds of things, what do you think the next turn is for venture?

What do you mean by that?

What do you think the hot thing is? What’s hot right now versus what you think should be hot?

We are 40 percent health care, and on the health care side we are continuing to build franchises in areas, like anti infectives, immuno-oncology, areas that are incredibly valuable, but where there is still an immense amount of innovation to take place. Clearly, with the superbug issues, that’s not getting better, it’s getting worse, we need to be developing new drugs, new anti infectives that can handle that, particularly for a massively growing, close population. Immuno-oncology for obvious reasons, there are massive innovations happening with cancer therapies and we want to be on top of that.

There are areas in health care that we, like in the tech side, that we won’t touch because we feel like they’re either overfunded, or the acquisition-

Such as?

Cardiology. We haven’t been there, right? Whereas, we will fund an ophthalmology company. Diabetes is one that we’ve had some interesting companies in, but we haven’t gone long there, because again, it’s been an overfunded space. On the tech side ...

Genetics, too, right?

Right. But there are very interesting areas and we have some interesting portfolio companies there, but we want to be very, very selective. Again, our premise of the fund, and why we’ve lasted so long, is that we aren’t an index fund for venture, there are areas where we will simply not cover. There are exceptions to every rule, but we won’t cover them, which is one of the rationales for what you were, or one of the reasons for what you’re saying. It is important for us, as a fund, to make sure that we are known within the areas that we care about, and for everything else we don’t spend much time.

Why a bunch in health care? What is the hot-hot thing that maybe you think is going to go over, cancer or?

Immuno-oncology, anti infective, genetics.

Right. But what are the areas that are, right now, hot maybe not among what you’re doing. What is being really ...

The health care space is ... we talked about the acquisition market a couple of minutes ago, but the health care space is one where you’ve seen a ton of M&A because of the macro issue of big pharma needing to enhance its pipeline. I don’t think that’s gonna change anytime soon, but I’m very ...

And they’re not particularly innovative companies.

Exactly, because they’re P&Ls, right?

So these are experiments that they then buy out?

Yes, and that’s gonna happen, I think, for decades to come. It is a flywheel that just needs to keep going and going and going, and certainly the population is not getting any smaller, so disease states are getting more enhanced and more acute.

What’s the craziest thing in health care you’ve seen? What’s something that you ...

Oh, Jesus.

Like printing livers or ...

That’s what I love about the healthcare team, they bring them some wacky stuff and that’s awesome. I love it.

I was asking at Google about the, remember they had the thing with a head, the eye-thing that did diabetes and a bunch of other things. It’s like, where’s one of those? I like those.

Incredibly transformational things are happening in health care because of the blend of tech and healthcare. Because we are one of the few diversified funds, and I don’t mean that from a gender perspective. I mean health care and tech, out there right now, we get to see that mix of both, and it’s been a fascinating place intellectually for ...

What about devices? I’ve seen a lot of those.

We do some, we don’t do a lot. Actually, this goes across the board, whether it’s tech or health care, we tend to stay way from consumer devices. We think that the innovation cycles are so tight that if you are in the hardware space, whether you’re in a regulated hardware space, like in health care or in the consumer space, it just, you only have a view of your window, and you’ve seen this with Fitbit, right? You only have a view of your window where you can take advantage of that, and if we’re alone ...

What happens to all those then? Embedded.

I’m not bullish, and this is on the tech side, I’m not bullish on consumer hardware investments. That’s not to say that some won’t be successful, because they will, and we’ve seen several, it’s just that the innovation cycles and the cost of innovating is still ...

To be like an Apple?

Yes.

To be able to sustain it.

How else do you do it? How else do you do a next foot ... if you come out with version two of a product, you’re announcing version two, no one’s gonna buy version one six months leading up to that. And you’ve seen that with Apple. And then all of a sudden, your costs go up, because you’re spending so much inventory on version two.

I’ve seen it in all of them.

Yeah, and your sales of version one go down, so it’s a cycle that a venture-backed company has a real hard time with. And on top of that, it’s a ...

They did get a lot of money, they all got a lot of money.

They sure did.

They sure did and there it went. Good-bye!

There it went!

See you! But cool for a while, I still like their speakers, I remember getting it and it was so cool, and then like, “I’m gonna rip this up in China in 14 seconds.” Or yesterday. Cool, but no.

That’s right. That’s what I thought too. And that’s exactly why we stayed away.

What about in a consumer space, where do you think the biggest trends are? What do you think is the craziest, over-hyped trends? And then overall, not just you guys.

Gosh, I think there’s no VC that’s going to say anything different than this, when it’s incredibly hyped right now, I’m sorry that I’m being boring here, is AIML. We spend a lot of time in it, but we are taking a vertical ...

Please define that. Artificial Intelligence Machine Learning.

And there are horizontal places that are building platform place around AIML, we are trying to take a much more of a verticalized approach which is using AI and ML to focus on a specific problem within a specific industrial setting. We’re also investing in space, so we’ve done four or five investments.

Mars?

Yes. You’re going to live on Mars. Four or five investments in space. Our first, and in this approach that we, at Canaan, have long taken when we look at new franchises, which is crawl, walk, run approach. We’ll say, “Gosh, it’s an interesting area, we think it’s big enough to house some multi-billion dollar companies, we’re gonna do one, see how hit goes, and then we’re gonna expand our learning and expand our learning from there, etc.”

So your thesis is that we’re gonna live in space.

No. I was joking.

Well, why would you invest in it if you don’t ...

Other VCs do think that we are gonna live in space. That’s gonna be far past my lifetime.

But you’re getting into that area anyway.

We think that the economics of space, delivery from a communication standpoint, can be a lot cheaper in a commercial application and using commercial technologies versus being researched within large, governmental organizations. We’ve invested in a lightweight satellite company called SkyBox, which Google bought. That was our first investment in space. We have then subsequently invested in balloon companies, lightweight rocket companies, which will allow the transport ...

Gary Miller had one where he sent it out, a tiny rocket into the ...

Right. And that’s what I love about ... At the heart of it, getting back to what you first started asking me: Okay, that’s what I love about what I do, it is constantly changing, it is never boring and I am such a lucky person to be sitting in this seat.

All right, I’m gonna move along. Space, what else? Food? Are you in food?

We are in food delivery, we’re not in food.

Oh, food delivery, tough.

If you think food delivery is tough, think about food manufacturing. No, we are not in food manufacturing, we’re going to stay away from that, again, one of those areas that fall on the floor. We were seed investors in Instacart, and we think that that has an enormous amount of promise as a business.

Okay, all right. A lot of those delivery, last-mile, to-the-home things.

Yes. And that is ...

Aren’t you worried about Amazon kicking your ass everywhere? Everyone’s worried about Amazon kicking their ass everywhere.

Amazon, I said this earlier, I’m in love with that company for many, many reasons.

They’re good at execution.

The fact that they are a bookseller, but they weren’t 20 years ago, a bookseller, and are now the largest cloud provider.

They do everything.

Yeah. They’ve put other tech companies to shame.

He’s coming up against a really interesting thing. Trump, of course, attacks him all the time but ... I think Trump has a lizard brain, he understands that people are getting mad at Bezos’s layover jobs and everything else. He’s attacking him on the wrong thing, but it’ll be an interesting challenge for them. To present themselves as lovable.

Amazon?

Yeah. I think you’re gonna see a lot more profiles of him, laughing. He’s gotta move into the Warren Buffett zone, or else he’s in danger of being in the Bill Gates zone, which is, “Let’s sue him.”

But we think about, I get public good, what he’s doing in buying the Washington Post, I would argue ...

Yeah, but that was different than Amazon. It’s been dangerous for him.

Right, but none these newspapers ... It’s a dangerous, political move, but I admire him tremendously for doing so, right? You’re buying a newspaper that will probably never make money ...

It actually makes a little money.

Okay.

Well, not much.

May never make money or ... but he’s doing it for the public good. There’s a benefit to society for doing it irrespective of the P&L. And that’s, frankly, how I look at Uber and Airbnb at this point as well.

All right. Let me talk about those. They’re the ones that are sort of the hot, have been the hot companies. Cars ... are you guys in car sharing? Car innovation? There’s so many car companies right now, self-driving car companies, seems like they’re coming out of the woodwork. Everyone’s moving into that.

And they’re getting priced from evaluations standpoint to the moon.

To the moon.

To the moon. We are looking, we have not invested in any.

What’s your worry?

We are investors in a company called Turo, which is a peer-to-peer car rental service. Actually using that asset, renting it out. My worry about the autonomous car thing is not that it won’t happen, it’s the timing therein. I invested, my first investment at Canaan 17 years ago, was in a card swipe reader for the mobile device. Remember when those RIMs or the BlackBerry pagers, the very small things, it was an attachment with software therein that allowed you to take mobile payments. That was 2001. And that was my lesson where timing is everything in this business. And that’s not to say that we can’t innovate ahead of that, but in terms of making money, it is directionally correct ...

Directionally correct. But there’s so much money being shown. It’s like the train business, I’m guessing. Railroad business, which had ... or the cars business, originally, had hundreds and hundreds of carmakers.

Yeah. And sometimes it is the fast, fast follower that makes all of the money. One lesson that I’ve learned is that timing is everything.

Okay, all right. So car, not yet. And what about Airbnb, what Airbnb is doing, same kind of innovation.

What do you mean by that?

In that area, in the travel area.

We invested several years ago in a company called Want, Find, Stay, which was bought by ATCORE Hotels, and it was a concierge-based Airbnb. They would take properties and, very nice luxury properties, and concierge it. Make it nice and put more bells and whistles in services around the Airbnb concept. I love the concept, Airbnb is a tremendous company, I wish we had invested in that company, that’s one of the ones on the anti-portfolio. And we just got it wrong. And there’s plenty of ones that we got wrong, and that was one of them.

I think they’re ... he’s a lovely CEO, too.

It’s an amazing company.

He’s the anti-Travis.

It’s an amazing company.

Of these companies, which one of them ... does it have to be a public offering of any of these? Of Uber and Airbnb, despite all their troubles, it looks like that’s where they’re headed. Or Airbnb or Pinterest or any of them, there was a class of hot companies there that just suddenly ... the unicorns, I guess, that’s what they called them at the time, does it have to be a public offering of one of them for venture to thrive?

Yes.

Which one?

Airbnb. Uber ... by the way, let me actually do a side-note on Uber, the fact that they don’t have a CFO or functioning board right now, and are still managing ...

No CMO.

Okay, fair ...

No head engineer.

Go down the list, all of them, the fact that they are managing to make the strategic decisions and moves that they are, with the absence of all of that, is remarkable, right? They’re raising money, they’re making the strategic move to get out of certain countries, they are shutting down the car leasing program, and the list goes on, right? With a company that large ...

This is in the absence of Travis, who was doing all those things.

But the absence of leadership and making those strategic moves, it’s surprising, in a very positive way, right? You are looking at whomever is running that company right now, is making very hard decisions and, I think, doing the right thing, objectively from the outside.

Anyway, what was the question you’re asking?

Going public, which, Airbnb is one ...

Yeah, I think so.

What happens to Uber, then?

I thought a lot about that. Again, I think about that as a public good, I believe that it needs to be a monopoly. I believe that Uber and Lyft, at some point in time, need to be one company, and they need to stop marketing into the ground ...

For Uber and Didi.

At this point, it’s a losers dilemma.

Why not merge them?

I’m saying in one geography, there needs to be one in each geography, because they are outspending each other.

More, not just one.

Yeah. That’s what I’m saying, yeah.

Just one.

Well, I’m not even looking worldwide, just in the United States.

I think about Amazon that way. Amazon didn’t actually have a lot of competitors, really. And they built moats.

That’s right. Amazon would argue that their competitors are Walmart and Target, and they’re just out-executing, right? And I think the Uber-Lyft combination is, you could argue the same thing with taxis.

I like that. I agree with you on that one.

That’s strategically what I would do.

All right, good. Well, maybe you should be the CEO. Oh no, wait. You’re a woman.

Why don’t you?

I’d be the worst CEO. I’d be the most entertaining CEO, but I certainly would be the worst. I’m not a C ...

If somebody wants to hire you into venture, you should just do it.

No. No on all the things. I’m gonna stay just where I am, where I enjoy being irritating and have no responsibility for my irritation.

Is that different from my job?

No, you have to be nice to people, I don’t. And eventually.

Anyway, Maha, this has been ... it’s great talking to you. It’s really interesting. Can I ask you one last question? I ask everybody what mistake they made in their career, for entrepreneurs or anybody. What was your biggest mistake? You don’t have to learn from it either, you had just made it, and that’s that.

Oh God, I’ve made so many mistakes in my job.

Or a tip, you can give a tip.

Timing.

Timing, you mentioned that.

I look at the investments that I make today, and I look at all of the ... in early-stage, we lose a lot of companies, right? Forty percent, on average, of our companies go to zero. We’ve been very fortunate to have a loss ratio that’s less than that, but it is, it’s a lot of losses. And by and large, the reason that our companies fail is that we got the timing wrong.

Okay, timing. Always be well-timed.

Yeah. And again, how do you do that?

You don’t. You live in the future and come back in that time machine that Google owns, that’s how you do it.

Anyway, thank you for coming by, it was great talking to you.

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This article originally appeared on Recode.net.