General Catalyst’s Niko Bonatsos on the unexpected pressures of finding your dream job
Niko, thanks for taking the time to share your thoughts with us. How did you get started in venture capital?
I’d like to take you back to the beginning. I was born in Greece and grew up there and in the UK. I found myself in the magical world of Silicon Valley in 2009.
After traveling, working, and studying in several other places in the world, it was when I was at Stanford that everybody and their mother seemed to be building social networking apps—it was the year the social network movie came out. Of course, I, too, was developing a social networking app with the help of a few of my really smart technical classmates, and that is the beginning of the story.
Unfortunately, we were not as successful as the movie; we very quickly realized that we wouldn't make it. Because of this talented and enthusiastic entrepreneurial spirit at universities like Stanford, there are always a lot of venture capitalists on campus trying to figure out who—whether student or professor—was going to have the next big idea for them to find.
During that period, one of the visiting venture capitalists gave me the opportunity to join the industry, which I did in late 2010. I joined General Catalyst (GC) just as we were getting started in the Bay Area. I'd say it was more serendipity than an intentional start in venture capital. I was deeply inspired by the people at GC and was very curious about the day-to-day work of VCs because, for a student founder who built a system at work, I found all of them to be smart and compelling, and I felt like this was something I could do for a couple of years.
So, you thought you could do it for a couple of years and 13 years later, you're still at it?
Yeah. Who would have thought, right? I do remember, very vividly, a moment during a long-haul flight from San Francisco to London. I had this moment of truth in which I realized that there hadn't been a single day during the last two years that I was waiting for 5pm to come around so I could get out. Meanwhile, I had been hearing from a lot of classmates from undergrad and grad school who were also in year two or three at work, and they all realized that they were not happy at their jobs. So, thinking about that three-year mark, I felt very excited knowing that I had found something that might work for me.
The thought immediately afterward was of fear. I realized I had to make this work. If I could not make it work, I did not know what else to do—there was no Plan B. That was a very interesting contrast of emotions. The realization that this is something that I've really enjoyed doing really motivated me to not lose it. I had to do a good job.
What is it about VC and your background or your personality that clearly works—13 years later?
In venture capital you essentially meet a lot of talented, enthusiastic, passionate individuals every day. You get to see what their future version of the world is all about. My day-to-day consists of about 12 meetings every single day; half of them with founders or prospective founders, the other half with existing portfolio founders or internal team meetings. When I meet with prospective founders, I'm really looking forward to the moment when they reveal a version of the future that is so “dreamy” that I cannot say no. I ask myself the question, “What if she or he is right? How big could it be?”
That intellectual curiosity—my having to figure out the answer to this question for every meeting I have with a prospective founder—really gets me out of bed. Every day I think about “What am I going to hear today? What am I going to learn today?” And every day, it is different. I've asked my wife to ask me every evening what I have learned today. This is so that I can summarize a couple of key things I learned from the different meetings—and they're so great! There are very rarely days that I don’t learn anything. I worry that one day a day like that will come….
Please tell me what you mean about “the business of saying no.”
The reality is, we're in the business of very politely saying no, and breaking the hearts of those awesome founders that walk in the door or pitch to us in zoom meetings. We decline them very politely because we want them to come to us with their next big idea, which might be the right fit.
The truth is, we get to say yes in very few instances every year. And when that happens, oftentimes other VCs have also said yes, so it's a bit of a dogfight. We try to position ourselves as the right “spouse” so we can win the opportunity to work with a very small group of founders on their companies. Each commitment is like being married to someone for a long period of time. We want to make sure we fit, and a lot of that is based on how we communicate with each other.
I learn something every day and I live for the thrill of the moment when I'm like, “I get it. This is one we have to get behind.” And now it's on me to convince my awesome partners at General Catalyst to hopefully be as enthused as I am to fund this company. Every single time we said yes, I remember how I felt during the first meeting I had with the founder. You get the thrill of uncovering something new; truly feeding my intellectual curiosity with somebody else's version of the future. And then being part of the journey, as somebody in the background, while the founders are the protagonists for five to eight years, is very exciting. In some instances, the company becomes a household name. And that‘s an indescribable feeling.
I have to ask the question, what about the ones that got away?
Oh, yeah, it happens all the time. We have the portfolio; we also have the anti-portfolio. Let me think of a few of the more well-known ones. We saw Tinder in the early days … but sometimes we pass because it was just not the right fit for a variety of reasons like technical risk or legal issues.
I'm fortunate enough to have been part of General Catalyst, where we've gotten a lot of the really good ones. Unfortunately, we don't get paid for the “noes.” We say we get paid for the very few “yeses” that turned out to be right. The vast majority of what we invest in at the early stage doesn't have the outcomes that we and the founders are dreaming about when we decide to work together.
And so that takes us back to General Catalyst. Are you only focused on early stage and disruptors? How different are Gen-Z founders?
General Catalyst is a multistage venture capital firm. Our mission is to invest in positive and powerful change that endures. We do so by investing in ridiculously ambitious founders who will hopefully, over time, build the category-defining company in their space.
We have offices in San Francisco, New York, and Boston—where everything got started—and in London as of 2021. The firm is 23 years old and we have the ability to write checks that range from $250,000 all the way to $250 million so that we can be the capital partner from inception to IPO and beyond.
I spend the bulk of my time with all things early stage, in the words of VC jargon, mostly investing in pre-seed Series A and Series B. That is when companies are raising from a few hundred thousand dollars to $30 to 40 million. And over the last couple of years in particular, I have been mostly obsessed with investing in technical teams that are the customers of their own products. A lot of them are Gen Z, or they're like the next generation who—like aliens capturing the planet—one person at a time is changing the face of the internet right in front of our noses. We may not be fully aware of it now, but in a few years, it will be a Gen Z-first world when it comes to the technologies we're going to be using every day.
How has General Catalyst changed over the years?
We have been in the business for 23 years. At first, we were only doing early stages. Like incubations, pre-seed, Series A. And then, seven to nine years ago, we started writing some larger checks. We wanted to have a bigger piece of some of the winners we were investing in—the outcomes of tech companies also got bigger. So, in game two, we decided to be protagonists.
VC is an industry that sits on top of the most dynamic and exciting industry, which is tech startups. But VC as an industry tends to be pretty stale, not innovative. We have a point-of-view at GC: we need to adapt to the times. We can sell this vision to founders and, of course, our investors and limited partners because we don't want to be doing the same thing today, that we were doing 20 years ago when the firm was three years old.
You clearly adapt with the times. Is that the culture at GC?
Yes. So, for example, we got started with doing seed investing and now we're pretty active in it. When we got started, we were not doing any late-stage investing. Now we are active in it. When we got started, we were all in Boston. Now the bulk of what we do is in Silicon Valley. Now we’re increasingly getting active in both Europe and in India, by the ambition of the founders. Both of these geographies are in an order of magnitude of what is higher than what it used to be 10-20 years ago.
Also, the technologies we're investing in are changing. A few years ago, we were not investing in Gen-Z founders. Now, the bulk of the meetings that I have, especially for consumer-facing products like dev tools or “nerdy-people products,” are with very young founders. They've come to us and they're different than those before them. And because they're different than those before them, they live with their heads in the future. The technical ones have a shot at bringing it to life. And that is the future in which we're going to be investing.
Tell us about Hive, one of your portfolio companies.
Hive is a company we've been invested in for ca. 10 years. Now it's one of the leading AI enterprise companies in the Valley. In particular, they've emerged to be the content moderation market leader for any company and young startup that uses user-generated content (UGC) as part of their product. They make it possible for any of their customers to very quickly eliminate objectively bad content. Like not-safe-for-work content, violence, bullying, anything that most people know—when they see it—that this is objectively bad content. Hive does this real time—without any human intervention. The content can be written, audio, photo, or video. That's one of the things they are leaders in: content moderation.
Over the last year they got into the generative AI universe as well. They have awesome new products now in the market that can help consumers and businesses with everything from content creation to image creation. Hive figures out if a specific text or photo or video was created with generative AI—it's very exciting and at the forefront of innovation. It all started because the founders themselves were the builders of random chat, a consumer social product, and they had a bunch of issues with that—content they needed to get rid of.
Unlike anyone else at the time, who were encouraging the community to figure it out or hire people in the developing world to figure it out, Hive themselves were trying to do with their team of capable technical people that said, “We're going to clear all the bad stuff out with technology.” And they did.
One of their products can tell you if a photo or video was generated, and with which specific AI algorithm. The same for homework. It's pretty cool. It can do all sorts of stuff. For photos, for example, you can upload a photo on Hive and you can ask if it was AI or not AI, and Hive can tell you with a pretty high degree of confidence which algorithm was used to create it.
With all of the news on deep fakes, it’s quite a relief to hear that there’s technology out there that can distinguish between AI and real. How does Hive fit in with GC’s ethos?
GC believes in responsible innovation. That's a core part of our investment ethos. For example, for every single company that interests us, we debate what will happen to the community if we invest in this one. We do not only think about if the company will benefit, we want the benefits to go beyond that.
We debate a lot about the founders, their integrity, the unintended consequences of products or companies that have massive success. A partner of mine wrote a book called Unintended Consequences that essentially summarizes our role in responsible innovation. That's something that we pay a lot of attention to, more than inputs and outputs.
We pay attention and evaluate with our internal process about the “Responsible Innovation” aspect of every pitch that we hear that we're really interested in. The founders we invest in are in the early stages of their company. They all have a lot of dreams and passion. Things can get out of control and we see our job, especially if we invest in someone, as helping them avoid making some of the mistakes that otherwise they would make.
For me, since I invest a lot in consumer products, this is always top of mind, especially now that I'm older. During my 20s I had a different point-of-view. Now I am very aligned with GC and our values about certain things that we'd like to see in the world. So, for example, any consumer social products that makes people get depressed, makes people get addicted, makes people feel bad about themselves, they’re off the table. Working with companies like Hive will help eliminate a lot of the bad content out there, and that is a big deal. 10 years ago, no one was asking what you would do if you find out your products were addictive. Now we do.
It was a relief to hear about the developments in technologies protecting us against AI. Learning about Niko Bonatso’s career path and how General Catalyst is preparing for the future, gave a more human aspect to an otherwise capital-focused industry. Stay tuned for other great stories and maybe even another one with Niko from General Catalyst.