Why Space Matters to General Catalyst

September 2018
David Bergeron

 

About General Catalyst

Since 2000, venture capital firm General Catalyst has helped founders build extraordinary companies, including Airbnb, Gusto, HubSpot, KAYAK, Snap, Stripe, Warby Parker, and others. With General Catalyst’s expansion from Cambridge to Palo Alto, San Francisco, and NYC, T3 continues to help the firm and many of its portfolio companies solve their real estate challenges.

In May, we talked with managing director Hemant Taneja about the history of the firm, the future of technology and investment, and how space and culture can impact both General Catalyst and its portfolio companies.

General Catalyst now has invested in about 400 companies and currently manages $5 billion in capital. Tell me about how the firm was founded?

The founding of the firm is a great story. It was started by two well-known entrepreneurs in Boston, David Fialkow and Joel Cutler, and their core thesis was, “A lot of venture firms lack empathy in how they treat founders. We would be the entrepreneurs investing in entrepreneurs.” In fact, that was the tagline we had for the firm.

The other part of what they fundamentally believed, given that they were entrepreneurs, was that they could actually team up with next-generation entrepreneurs and help start companies from scratch. That’s really how the firm started and created its initial success. A lot of the early wins for the firm, in Boston in the 2000s, were in creating companies like KAYAK, which started in our offices, and Demandware.

After selling a company you’d helped build in the early 2000s, you got calls from several Boston-area venture firms to be an Entrepreneur in Residence. What made you decide to join General Catalyst?

I’ve been with the firm for 16 years, and one of the reasons I’ve enjoyed being here and think of this as my life’s work now is because we don’t think of ourselves as just investors.

The GC culture is very entrepreneurial. So the investors don’t act like investors, they very much think of themselves as company builders. And that was the reason that brought me there, for the same reason that I think other entrepreneurs get attracted to the platform. I just happened to be on the other side now, but I very much had the entrepreneurial hat on when I came here.

What are some of the biggest accomplishments of the firm over the past 18 years?

We always look at our biggest objective, which is to create significant returns for our investors. When you think about the 18-year history of the firm, we have always produced excellent returns, so that’s first and foremost.

We take a lot of pride in the fact that everywhere we’ve gone and become present—in the Valley, in New York, in the Boston area—we’ve replicated our culture. We have a deep interest in helping start companies from scratch. We’ve done that in every one of our offices, partnering with founders and taking a deep interest in being very active investors in the earlier stages.

Culturally, our offices and different investment team members all have the same philosophy. And I do think we take great pride in seeing the kind of impact our companies are having. We’ve always chosen to invest in companies that are generally doing good for society, as opposed to just chasing returns. To persist that over two decades now, it does feel great.

 
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General Catalyst has been able to attract incredible talent, like Ken Chenault from American Express. How has the firm been able to do that?

The firm is in an interesting spot right now. We were successful, by most measures, in making a transition from being an East Coast firm to being a national firm. And we do take this notion of responsible innovation very deeply. We’re thinking hard about how we help choose software to make this secular shift in technology with these modern companies. I think that’s an exciting place for folks to come in who want to have impact in society using technology.

That’s why we’ve been privileged to have Ken Chenault join us, who used to run American Express. He thought about being a responsible steward as a business leader his entire life. And he thinks that to the extent that technology is gonna play a great role, this is a good platform to go do that with. And that kind of a capability, that kind of a mission, is attractive to other investors.

How do you see the role of venture capitalists evolving over the next five to ten years?

I think in a few different dimensions our industry is fundamentally changing. The first is, if you reflect back on the kinds of companies we were building two decades ago, essentially when I got in the business, these were mostly software companies that were focused on efficiency. “How do you help physicians, or teachers, or supply chain managers be more efficient?” It was a lot of application software.

If you think about what entrepreneurs are building today, they’re re-imagining entire industries. “How do you deliver fundamentally different care for the 30 million people with diabetes in our country?” Or “How do you create an online school?” Or “How do you build a new insurance company?” That’s a very different sense of responsibility that these companies have. And so we, as investors, also have to make sure we’re being responsible stewards for these companies and their founders.

Secondly, an orthogonal change that’s happening in our industry is with cryptocurrencies—this notion that you’re not gonna have companies raise equity, they’re going to do token sales. And we do think a lot about “What’s our role in that?” And “How do we help those founders succeed in building their projects?”

How has the culture at GC enabled the firm to be so successful?

Our culture is based on trust, relationships, and collaboration. If you think about how many firms have tried to come to Silicon Valley from the East Coast and build a firm that’s bicoastal, most have not been that successful in doing so.

One of the reasons we were able to succeed was because we focused on replicating our culture first in the offices that we built here, and then focus on “How do we get plugged into the community? And how do we go in and actively start investing?” Because many of us moved from the East Coast, there was a lot of trust between the two teams, and we could be agile and move at the pace that investment opportunities here often move. None of that would have happened if we didn’t have that kind of a foundation.

How has having a space like this in San Francisco impacted the company?

The move to San Francisco and using this space has been very productive for us. One, it brought us closer to the entrepreneurs because there’s so much activity in this area. Two, because we’re all right here working closely in this collaborative space, we’re able to just pop into each other’s meetings seamlessly. A lot of our business is about rapidly deciding on which investments we wanna make, which founders we wanna partner with, and the fact that everybody’s right here and we can just be partners to each other on a real-time basis is really powerful.

What about for portfolio companies? What sort of impact have you seen when their space reflects their culture and is thoughtfully designed?

It matters a lot. Space is part of what defines their culture. So I think you see different companies design their space with different work styles in mind, and you can walk in and get a feeling for how that place is gonna be. Is this a really vibrant, energized culture? Or, is this is a deep-thinking sort of quiet culture? Every company is different. There’s many ways to be successful. So space does have a lot to do with it, and I think great founders put a lot of thought into it.

Generally, the more collaborative a space is, the better. And if you walk into some of these exciting startups, the intensity is palpable: You’ll see folks huddled around a computer screen that are making decisions around a marketing design, and you’ll see people drawing code, architecture diagrams on a whiteboard, or people in Slack conversations. That’s the future. It’s very much real-time collaboration, real-time feedback. And I think a lot of what has led to Silicon Valley’s success is that culture.

 

About T3 Advisors

T3 knows that space is the lifeblood of a business and a major platform for growth. Working as an extension of the team, T3 develops and implements a wide variety of corporate real estate solutions for organizations ranging from startups to multinational corporations. By only representing tenants—not landlords—T3 also offers a transparent, conflict-free look into real estate strategy.

The company’s real estate services include tailored brokerage, location advisory, portfolio planning, consultative insights, project management, and ongoing workplace support. Placed at the center of innovation ecosystems with offices in San Francisco, Palo Alto, NYC, and Boston, T3 has advised thousands of companies globally, including LinkedIn, HubSpot, ASICS, AutoDesk, WorkDay, and Battery Ventures.