Key Drivers in Cloud and Security, Wiz's Unconventional GTM Decision, Insights on Earnings Predictability, and Lessons from Datadog, Discord, Slack and Coalition (Shardul Shah)

**SPEAKER_1** (0:02)
Welcome to the podcast about Venture Capital, where investors and founders alike can learn how VCs make decisions and reach conviction. Your host is Nick Moran, and this is The Full Ratchet.

**Nick Moran** (0:17)
Shardul Shah joins us today from New York. Shardul is a partner at Index, a leading venture fund where he's made investments in companies including WiZ, Duo, Datadog, Dropbox, Squarespace, Signal Sciences, Expel and Coalition, amongst many others. Shardul, welcome to the show.

**Shardul Shah** (0:35)
Thank you very much for having me.

**Nick Moran** (0:36)
Yes, sir. Walk us through your background and your path to venture.

**Shardul Shah** (0:39)
Sure. I started at Index 15 years ago, and just before that, I was an intern at Index when I was at college. In between, I didn't find any venture capitalist who came to me at the University of Chicago, so I cold-called my way to Summit Partners on the West Coast and started my career as a healthcare services investor.

**Nick Moran** (0:59)
Okay, so you started at Summit, and then it sounds like you made the transition to Index in 2008?

**Shardul Shah** (1:04)
Yeah, perfect timing for the financial crisis.

**Nick Moran** (1:08)
And you also transitioned focus areas at that time, or talk us through your early years at Index.

**Shardul Shah** (1:14)
Yeah, early years of Index, we had a separate growth fund and a separate venture fund in terms of team organization.
And so I joined at the very beginning of Index's first growth fund to help organize that effort. I joined in Geneva, Switzerland. And at the time, we made an observation that very few countries supported multiple investments for Index for a European fund. We were regarded as among the leading European funds at the time, where there's a very fragmented ecosystem across Scandinavia, London, of course, France, Germany and so on. As part of that observation, I created a hypothesis that Israel could support multiple growth investments over a fund cycle, which is typically three or four years. And so I started to spend a lot of time in Israel. And it turned out that there are two prevalent industries, ad tech, so advertising technology, and security in Israel. They're kind of the same thing, like on opposite ends of a spectrum. Security is like finding someone that's doing something and trying to prevent them from doing more of that, right? And keeping out the bad guys. Advertising is kind of finding someone and getting them to do more of something, like selling them shoes.
So both were similar, but very, very different. Both were prevalent in Israel. And that kicked off almost accidentally, to be honest.
An initial area of expertise for me in ad tech and security.
Separately, it kind of came naturally to me, but it was somewhat accidental. I developed one of our first communities at Index. We created an engineering community. Again, the observation was across Europe, many different companies were encountering similar problems, like how to manage a distributed team, as an example. And while I didn't have any answers, I felt community members could help each other. And so we created an engineering community, and these experts helped me identify another area of expertise around cloud, cloud infrastructure that I still hold today. So I definitely moved from healthcare services, which is a very regulated industry, very North American focus when I was at Summit Partners, to more technical areas. In the very, very early days, I was also a biotech investor, so kind of drug discovery, with a focus on different hematologic malignancies.
So I cut my teeth as a public investor, but very quickly moved to different domains closer to technology.

**Nick Moran** (3:55)
Yeah, I noticed your concentration at UChicago was immunology.
We're going to talk about sectors today, but can you give us some of the elements that underpinned your hypothesis on a geo? You said you guys were going to enter Israel. What was it that you saw there that made it sort of potentially strong market for venture investing?

**Shardul Shah** (4:15)
Yeah, well, we had been investing in Israel for some period of time, so it wasn't particularly new, but it represented an opportunity for our growth fund, which was new for us on multiple levels. That being said, I think we underestimated, frankly, the opportunity set in Israel in the early days. If you look at the last few years, the number of terrific companies that have emerged with Israeli entrepreneurs, many of whom have moved to the United States, it is really stunning. Overall, we've always had a view at Index that there's opportunity everywhere. And again, it's a function of being exposed to a very fragmented ecosystem. The question for us is always where to dedicate our time and energy and to be focused. And so in some sense, we've been more intentional about what we don't do than what we do do. So unlike some of our peers, we didn't build out kind of a business in China. We didn't build out a business in India. We didn't take a view and build out a practice area related to crypto.