Yes We Can

All right. Hi, everyone. Welcome back to Yes We Can. Two episodes this week, my lucky week. And I'm just so honored to have Kara Nortman here today. Hi, Kara. Welcome. Hi, Michelle. Thanks for having me. How's everything in beautiful Hollywood? I can see your Hollywood sign, LA. How's everything in LA today? It's gloomy. It's very confusing. I feel like I'm back in Seattle, and I put on a blazer for you, so I should probably go get my fleece. That's right, your fleece. Well, you look great, and it's a beautiful day here in San Francisco. We bore the sunshine today. Beautiful morning, which I'm not complaining about. So hope the sun comes out for you soon. Great. Well, thanks so much for joining me. I'm really excited for the next 30 minutes. You're someone I've gotten to know over the years, always enjoy all of our conversations. And so I thought we'd start with, for the audience, you've had this phenomenal career as an investor, as an operator. You also own a sports team, which we'll talk about that at the end. But let's talk from your investing lens. Currently, you're a venture capitalist, you invest in companies, invest in founders early, on the early side. What are some areas, like there's a lot of people who want to become an entrepreneur and they need ideas, or there's some who have things. What are certain areas or types of companies that you're particularly excited about at the moment? Well, I am excited to be here because I'm a fan of all things Cloudflare and Michelle. And a lot of what I'm excited about has to do with the growth in cloud. And so in a weird way, it's a lot of what I invested in very early in my career. I was at Morgan Stanley in their private equity group, and then Battery Ventures. And we didn't call it cloud back then, and it wasn't. It was infrastructure behind firewalls and all sorts of fancy words that I had to look up in electrical engineering for dummies books, like OSI stacks and things like that. But I've gotten back to my roots in that area in the last few years, and invested in companies all over the place. But there's a huge community that's emerging in LA around cybersecurity companies like Cloudflare and Silence and Signal Sciences and companies like that. And so I think we're in this golden age of tech transformation. I feel very, very lucky to be doing what I do right now. And I think even before COVID, I was kind of waiting for it to slow down. And I feel like COVID in a strange way has made me even more optimistic about it speeding up. So you guys know this, but trillion dollars will be spent on cloud infrastructure in the next decade. And it didn't exist 10 years ago. And so you're kind of just like you're rebuilding everything that was behind a firewall on the cloud. And then I've looked a lot specifically at cybersecurity. To me, it's sort of if you think about health care, education, and cybersecurity, there's some of the most interesting policy areas and government areas that are also important areas for companies and people. Like consumer is two big companies. So I'm spending a lot of time investing in companies like FleetSmith, which Apple bought and does device management. So definitely open to new device management platforms. OpenRaven, which does data security. I'm spending time looking at API security, developer tools, code hygiene, all those sorts of things. But then for people who have nothing to do with the cloud, I would say what's going on on the consumer side is just fascinating. Like everyone's sitting at home developing new habits and hobbies right now. So I mean, I did like a thing for my high school last night. And I had two 15-year-olds telling me their NFT thesis, which, yeah. And so if you guys don't know what NFTs are, they're essentially like digital trading cards or trading assets. So like think about Pokemon or baseball cards. But you move it online, and there's one of them, and you actually own it. And I won't go too deep on NFTs because I'll start sounding like a VC. But everything from that to the way people are shopping, we see a lot of live shopping sites. It's funny. It's the golden age for individuals, like individual VCs and individuals creating, whether that's like developers or low-code people or creators. And so I think just all sorts of new services and platforms showing up to support the individual running their life the way they want to versus like kind of selling all their rights to a label or a studio until the end of time. And that analogy is, I think, across many different professions. Yeah, the direct to being able to build it direct is really interesting. You kind of think sometimes the thesis, this is outside my wheelhouse. But if Michael Jordan was, if the Bulls existed today, whether what he would have done would have been Nike or something else, maybe something direct to consumer, like how things would have changed can go direct now. And that didn't exist 15 years ago. It's very new. Totally. Though Michael Jordan did OK. He had some good distribution behind him. But yeah. Maybe I need a better example. No, I'm kidding. No, I think it's a really, really good question. And I actually, I've talked to two funds in the last week, traditional venture funds. One of them said they're going to take 10% of their fund and invest in individuals and treat them like a corporation. Meaning like, you think about Michelle as the brand, right? And you might have things you do. I don't know. You might make music. You may release trading cards. You may put out parenting videos and how to build a cloud company videos. They're going to take a stake in your revenue streams, you, Michelle, and give you all the tools to function as an individual. And they're a traditional venture fund who's trying to view the individual as a company. And then on the other extreme, you have venture funds who are actually buying and trading assets like these NFTs. So digital art and digital sports moments and things of that nature. So I think it's a good time to innovate. And I don't know, when you're looking for your idea, that's a harder thing because there's so many different paths to it. But it's a fun time just to find new hobbies and play around with stuff while we're all stuck at home. For sure. And sometimes I think, sometimes there's these feelings like, oh, all the problems have been solved in the world. But I think when you hear you speak, it's like, no. There's so many and they're changing. There's always shifts. And when there's shifts, there's new opportunities that emerge. And I think you've done a great job highlighting a bunch. So thanks so much for inspiring the next generation. I think that's great. It's interesting because I was like, OK, cybersecurity cloud, I'm with you. And then NFTs, consumer, I mean, that's breadth. That is a huge wide range of areas of focus, Kara. And normally when I think about venture capitalists, I think of people going deep in one area. And so how come you are so broad? And is that by design? Is it a feature? Or is it a bug? Or is it just you kind of just fell into it? I'm curious. I love how you ask the question because no one's ever asked it to me that way. And so I guess if you wake up in a good mood, it's a feature. And if you wake up in a bad mood, it's a bug. No, I'm kidding. That's entrepreneurship in its nutshell right there. That is the quintessential entrepreneurship growth company story right there. But keep going, sorry. Well, I always say in life, because I've spent probably about half of my career in operating roles, and I always say, well, I don't know if I'm well-suited to both operating and invested or ill-suited to both operating and investing. But I remember my oldest daughter asking me once how I would rate my day when I was an entrepreneur on a scale of 1 to 10. How every day feels to me. And I said, well, I thought about it. I was like, it's either a 10 or a 1. It's literally almost never in between. And when you're a VC, it's almost like it's almost always a 3 to a 7 because you're one step removed from the making of anything. And then you're working on so many things at once. And so even if something's going terrifically well, there's almost always some empathy or challenge you're feeling on behalf of a person you're trying to help going through something hard. So I think you just strive for 51% of 10 days when you're an entrepreneur or feature days. But anyway, to answer your question, well, look, I'd say one thing because if there are people in the audience who are thinking about being an investor, and I just want to inspire you to think about it because there's so many different ways to play around with it and do it now. And I think one of the nefarious things about trying to do anything that seems scary or you haven't done before is you look for role models in the world and you say, oh, my God, I'm not that person who's going to go sit in the AI lab at Stanford all day trying to become best friends with the professor who's going to help me start the next company and compete with the firms that do that. You might not go into venture. And so there are all sorts of different kinds of venture capitalists. And I think for me, what I love to do is be the first person involved and the first money in and usually the first board member. And so do people want me to work with them because of some one label I have? Is that one label how I treat them as a human being, what I know about finance, what I know about their industry, if I'm going to be helpful with recruiting, what do I know about venture? It's different for everyone, but I tend to think we classify things into industry categories in a way that doesn't actually relate to your long-term product with that founder. And so long-winded way of saying, I've worked in both areas over 20 years, and I need to be deep enough to add value. And so I've spent the last three years kind of getting deep again in cloud and cyber and the like. And that's not a thing I think you can just shoot from the hip. But I want to encourage more and more women in particular to get into cloud and cyber and DevTools because I think it's where the greatest wealth creation is going to be created in the next 10 years. And if you want to learn and you're curious and you dedicate time to doing it, you'll figure it out. And so I think I end up being kind of the investor who what I think about is if I don't know the space well, do I want to learn and commit the next 10 years of my life to becoming as smart as possible? And then why am I there? I'm usually the one who's sort of like the kindest to entrepreneurs and has their back over time and also kind of the hardest and tells them the feedback hopefully in a positive way that they want to take early. And issue spots and the like. And I don't think you need to be at the layer three of the OSI stack to get that right. Yeah, no, it's so interesting because obviously I run Cloudflare. So I also am in this cloud infrastructure space and what I do and the best part of my job are the people I get to work with. And we have so many amazing women at Cloudflare. And your sentiment of, and we need more women in this part of the tech world is absolutely true. And I think that sometimes people say, well, the advice they get is I want to go start companies that I'm passionate about. And most people aren't like, not, no. And I said, well, you just, can you fall in love with it? Or would you be proud to be part of it? And I think that to me, that's a very narrow question of, are you passionate? But more we have to broaden it to, is this something you'd be excited about? Is this something you'd be proud to be a part of? And I think that that might open more people to the idea of being like, this is an area where I do want to fall in love for the next five or 10 years and really contribute. Because I agree, there's a lot of problems to solve, really smart people, wealth creation, we need more diversity to help solve these problems. So I couldn't agree more. Yeah, and Michelle, maybe one more thing I would say, just because I think it's really important to inspire people to find these like rabbit holes they want to go down and you don't need to know anything. Like I never took a finance class in college, but I was thrown into the deep end of the ocean and went to work at Morgan Stanley. And then all of it, when I went to business school, I placed out of cost accounting, accounting, all these things, because like learning it while you're doing it is the best way to learn. And so what I would say though, is like I tried to find a bunch of different areas that I was passionate about that weren't consumer when I came back in. I do a lot of consumer, I love doing consumer, but when I came back in, so I did a year long thesis on advanced manufacturing. I did a year long and like was hanging out with people from carbon 3D and all the 3D printing desktop metal type companies. Then I did a year long thesis on consumer driven healthcare. And you know, like those two, like I spent a year in both areas and then I just, they didn't really, I didn't really find, like I learned a lot, but I didn't have like the deep intrinsic passion about it. And then I went down, I started looking at skilling and reskilling in the future of work. And I got really passionate about that. And then I went into cloud and I just love it. And so, I mean, and so it's not like every single thing resonates, but I think you just kind of try different things and you find kind people who are, what people like when Fleet Smith was bought by Apple, which was the first kind of cloud cyber, whatever board I was on, they came back to me and this was like the security team at a Dropbox and Wikia. Like they were terrific people where I was kind of like, why are you choosing me, if I'm honest? Because they were, you know, half of- They can go anywhere, right. Yeah, I mean, would want to fund them. And part of why the reason I think they chose me was I ran a good process in July when all the venture capitalists were, you know, hanging out somewhere else in the Bay Area. So, but when they were bought, they came back to me. One of them said something to me that like made my life. And he said, Kara, you were the first, you were the only VC who really wanted to understand who we were and didn't want us to be Okta. And they said, we were talking about beyond trust and Zero Trust and, you know, beyond corp and Zero Trust when nobody knew what it was and you had just this curiosity around it. And so not every team would appreciate that, but they did. And they, I mean, I spent hours having them teach me when, and ultimately through that investment, I've made three or four other ones. And so like one good thing leads to another and you just need to find that thing you connect around and the curiosity. I think whether you're starting something or you're investing in something new. So more women and underrepresented minorities, please go into cloud and enterprise and call me and Michelle. I love it. I love it. There are so many things that you said that I just resonate, that were resonating so much with me. And the curiosity is the best skill you can have in your career is how fast, the rate at which you learn, like being open learning and that growth mindset because there's a lot, you need to know everything on day one. And I couldn't agree more. I think you did a great job. So, okay. So you've invested in all these companies and again, over 20 years. And so you've seen a lot. And some of those investments have been huge success stories. Obviously the whole point of venture is not everything is a success story, but when you think about it, I'm just curious, like from your perspective, when you think back to your best investments, were there any common characteristics among those companies? Because again, this is, if you're a founder thinking about starting something or you've started something, it's like, well, how do I have a win? And so I'm just curious, do you, from your perspective, have you seen any common characteristics among your best investments? No, the crazy thing is, as I was thinking about this, the variety of things that I think of in the best category are so different. And so it's literally, and when I was at Battery, I was a senior associate. So take it with a grain of salt that I consider them my investments. But- You're involved, you're definitely involved. Those associates do a lot of work. They do a good, like they make those funds, those firms run. But I've found them in a couple of cases. In one case, I joined the team for six months as their business person, but these were companies, like some you've heard of, some you haven't, but there was one called Kasha, which was one of the first virtualization companies and was bought by EMC. There was one called Metro PCS. There was one called C-Beyond. These were all telecommunications companies. And then as I get into the latter years, when I was at IAC, I was essentially, I incubated. So I was sort of like the seed investor for Tinder when I was pregnant with my third child, no less. And then since coming back to IndaVenture at Upfront, it's companies ranging from Parachute Home, which is a direct-to-consumer company that's on a path to something big and special right now. And companies like FleetSmith. And so very different, right? And so I think the one characteristic are people who can inspire other people to join their journey. So hiring. Two, decisiveness and subjective decision-making. So getting feedback and having like learning from others is really important, but this idea of like the full body yes, or as Glennon Doyle would say, sitting in your knowing and recognizing that this is an A-B test no one's ever run and making decisions in hard moments is one of the things I look for broadly in anyone. And anyone who can do that, who's a woman in particular, I try to convince to go into venture. Like it doesn't matter what you do because it's so subjective. The same thing with corporate communications. I think some of the best people in corporate communications are just like exceptional at sitting in gray areas and risk and making decisions. So hiring, decisiveness. And then I think some level of self -awareness is important. Just sort of, you really do have to understand I think your strengths and weaknesses over time if it's not an overnight success. If it's this viral overnight thing, which is what we hear more about and very few companies actually do that, then it doesn't really matter if you have any sort of psychological disorder, you're gonna be fine. But if you're gonna kind of keep going and figure out how you fit into your own story and how to compliment yourself, I think that's really important. And then I think the final thing is, is like people who are doing it for the right reasons. But those right reasons are not, like I have this framework. I used to actually have a spreadsheet and it was almost like an Apgar test for the baby test they do for what I look for in companies. And there was like 10 things and I would kind of then look at my decisions and cause I get very excited. And so like I have a lot of energy after a lot of first meetings, I need to kind of unexcite myself, right? And that's what I would use. And a lot of the things that I do think are important, I don't think all companies need and some of the best companies are exceptions. I'll give you one example. Like one of my favorite things to say about what makes a great startup or I believe in is like a real earned insight. Why are you building this thing? And not just wanting to be an entrepreneur or to be an entrepreneur. But honestly, I've seen incredible companies. Like I've seen a women's, like we have a company called FabFitFun and I've spent a lot of time with the team over time. And there are two guys who built a women's health and wellness company. And like, it wasn't obvious, that these two guys were gonna build this women's company but like they were so good at so many things and they were so self-aware and they brought in so many different kinds of people and they were really passionate about building this thing. Even though there wasn't necessarily something that jumped out around their earned insight when we first funded them. And they're, I mean, they're enormous now. I don't know if I'm allowed to say their statistics but they're very, very large and it would defy my APGAR test. So it's, I've kind of, this is something where I used to have much stronger opinions you gotta do this, this, this. And now I'm like, there are lots of ways to be successful. Like it turns out you don't need to get out. There's so many ways to be successful. People are on different paths and for every nine companies you see have those characters, there's the one odd ball out and you're just like, all right, they are successful too. So you only, the one thing that I've really appreciated as the Build Club for over 10 years is you don't have to get every single thing right on day one. You'll have to get a few things really right. And then that is, I do think, gives you more swings at the bat and then you can kind of make the history you want. I mean, I should turn the question around to you but I'd say the one thing I think is consistent across all companies is setting yourself up to be mentally healthy and be in, find energy when you need it and find people who give you energy. And so, that comes up a lot in the co-founder question but I don't think you need a co-founder for example but I do think you need people around you who help you through hard moments. And so, I would say like when you have a co-founder dynamic that isn't working as well, it's like the, it really is the calories you burn in that relationship and negative energy that takes away from figuring out how to make it work. So, people who give you energy and surrounding yourself with those people and moving on from those who don't is probably the other common characteristic. Oh, that is so, I a thousand agree. And one of the things, and we hadn't talked about this but I'll just throw it out there. I don't know if you agree with it is, one is that when we first Cloudflare, I just remember there were a lot of other founders a little few years ahead of us and like burnout and depression were very prevalent back in 2010, 2011, 2012 or something like this. People were talking about a lot in the tech world. We haven't talked about it as much recently. And now there are so many kind of a new influx of entrepreneurs, which is amazing. I have a prediction that over the next couple of years it's gonna come up a lot more and hopefully we do it better this time around because it is, building companies are hard and lonely and the 10 and the one, the 10s are amazing but the ones are not amazing. It's not fun to have many days of ones as you rightly pointed out in your operating career it was like 51% of days were 10s. That means 49% are ones, which is a lot. And maybe it's not quite that extreme I'm putting a bit of words in your mouth but I'm trying to make a point of the rollercoaster is incredibly great when you're on the high but it is also really hard on the low. And back to your other point of it's not an overnight success story. It takes many years. And so the resilience and sticking through and being like, oh my God, you're not alone. You're not crazy to get through it is a lot. And I hope we do it better this time for the next generation of entrepreneurs. I don't think back when our early days there weren't very good resources. No, I hope so too. And I mean, one last thing I'll say because I feel like one of the things I'm pretty good at with founders is trying to just be able to what we call safe space and being able to talk through these things. And I was very into coaching and therapy before in our generation, it was a little stigmatized but before it was like a thing. And I'm still surprised on the other side of whatever it is, an acquisition or a founder who decides to sell even though you think from the outside it's going terrifically well. Like I'm still surprised by when we have the kind of the drink or the coffee or the sparkling water afterwards, how hard it was for them. And it's like, I always say, I spent 10 years operating. I had my own startup. I made all the mistakes that I would coach people not to make that the half-life on my operating skills is somewhat short but the half-life on the empathy for how hard it is, is really long. And still I forget how hard it is until we sit down and have that conversation. So only to say, if it feels hard to you, it feels hard to everyone. And TechCrunch really just kind of doesn't focus on that part. No, maybe that's good content for a summit going forward. Cause I, again, I don't think there's good content on it. So maybe that's an opportunity, Kara. Maybe add it to your list. I hear you volunteering, Michelle. Anyway, okay, good. So amazing. So we have about six minutes left. And so I just want to, one question then I want to go to the, how you brought the Women's Soccer League to LA. Cause that's incredible. But before we do, you know, now you've been, now you also run this amazing venture fund. I mean, not only are you an incredible, you've been an operator, you've been an entrepreneur, you've been an investor across a breadth of industries, which I just think is so cool. Now you also are a co-managing director of Upfront, which now you're running the place with Mark, with your partner, which I get it. And so what's different? I think in a lot of ways, you know, the nice thing about venture capital is you can be an exceptional individual investor and that's the most valuable role. That's one of the most valuable roles. Or you can be an exceptional team builder and leader and then you, or you can try to be both. But if you get incentive structures right, everyone can find a place where that is their joy. And so I think you can venture more than maybe even any other job. I think you tend to like fill the role you want to do. And so Mark would probably say I was sort of like doing leadership stuff and I didn't realize it. I mean, I ran a search to bring in our newest partner, DT Mollywall, who's amazing and is a former operator, worked at Google and is the only person in my life who has ever asked me to be on her personal board of directors, which was an honor to serve with her father. It was me and her father. And- On her personal board of directors? Yes. You hear about those, but sometimes they're like mystical creatures that they don't actually exist, but you've been, that's great. Yeah, yeah, yeah. I'll tell you all about the board meetings later, but, you know, I kind of talked to 50 different people, most of whom happened to be women and she's the one I brought in. I had no idea, honestly, that I was going to be moving into this role at the time. So I think it's just like, I mean, it's the, like the experience is moving into a mentality of ownership versus being an employee. And I think a lot of us do that naturally. And those are the kinds of people you want to work with at every stage. And then it's like, do I like to do these other things? Cause I don't have to do these other things. So it's almost like going to school with no grades, like, cause you can just be good at investing. And I really love doing this stuff in venture because the teams are small, and it's really intrinsically motivated people and all these different things. I love doing it at IAC when I had big teams too, but I think it'd be harder to do with huge teams given I also sit on many boards and invest. And so, you know, I would say it's evolutionary and I probably always think of myself as an owner and then just kind of look for where there's holes and try to fit into them, so. That's good. Well, you know, obviously there's just so many, obviously you're a very special, ambitious person and it really comes through and there's been a lot of opportunity that you've grabbed and made the best out of it. And I think that that's, feels good that you've also been recognized and rewarded for it, which is a happy story. So I love that. So, okay, so you switching gears, in addition to this amazing day job, by the way, like investor running the firm, I mean, two big day jobs, you also brought a professional women's soc team to LA. And there's actually tons of you talking about that. So if people want to learn more about it, it's an incredible story. Go follow Cara on Twitter, Cara Nortman at Cara Nortman. And actually you just did a podcast with Something Ventured with Kent Lundstrom. And it was amazing where you told more of the story. So I don't want to rehash that here, but I do want to know like, since you've done this and you brought this professional women's soccer team to LA, literally a co-owner of it, what's surprised you in that process so far? I mean, the whole, it surprised me more than anything I've ever done in my life. And I still pinch myself because I never thought I would be here. I think what surprised me the most is it never remotely crossed my mind that this would be anything other than a hobby. And I just kind of got wrapped up in wanting women's soccer to be brought to more people, media rights and players getting paid and being able, I mean, the whole reason it started was because I was in your homeland. I was in Canada for the 2015 World Cup and I couldn't buy my middle daughter a jersey. And I went to nine stores and I had to pull like 8,000 connections to get a Michelle or Megan Klingenberg jersey. So I think the most surprising thing is just the butterfly effect of caring about stuff. And that has been, I mean, it's very similar to All Raise, which is the nonprofit that a bunch of us helped start, Aileen Lee brought us in and Jess Lee and Alden, now Pam Koska. And we all just like, it's just like you do things that you're inspired to do that are not your job. And nine times out of 10, they're not gonna go anywhere. But if you build community and you kind of like, you keep talking about it, you've energy around it, it leads to the most unexpected places. So it was a pure activist slash sports interest hobby. And then the fun part is, we don't have time for the story, but I became friends with Natalie Portman through Time's Up where we're both very involved. And I was just having lunch with her and we're getting to know each other and after, yeah, in a random way. And at the end, I just mentioned to her, she was like all in. And we just started like talking about soccer and going to games and trying to help the players with their pay equity fight. And then one day she texted me and said, let's buy a team. I mean, it was literally, it was like, it was crazy, but it was hard. I would tell you it was hard. It was like an entrepreneurial, a hard story too. And it's fun to tell the fun parts, but everyone thought we were nuts. I'm sure, but I'm sure, and back to, but amazing what you can do. And just a couple of fun. The one thing that really, when you were telling the story, it's just like, you just, you threw it out there and it's like one conversation can have huge ripple effects and that you don't even know. And I think that that is probably the best definition of my life the last 10 years too, building Cloudflare. One conversation can lead to something that you didn't even know was possible. And I think you just use that, the butterfly effect to describe that. Yeah, and I just say, what I say now to people is look for where you have bursts of energy and where there's someone near you that you want to spend more time with and then just make a friend around that energy and see where it goes. And that changed my life. Always changed my life. Angel City changed my life. The community of, kind of that's come out of both of those things have changed my life. And so I feel really grateful that I finally had enough energy after having so many kids to like have hobbies again. Amazing. Kara, this was fabulous. We'd come back and do it again. We have so many things left to talk about, but thank you so much, everyone. Thanks for tuning into Yes Weekend.