Venture capitalist Keval Desai, a product management director at Google turned VC, has a differentiated take on investing. His two theses are based around want versus need and real-time investing, the former being a focus on companies that help fulfill consumers’ desire, the latter being companies that solve problems for consumers in real time. (Suffice it to say that far from seeing a bubble, Desai is bullish on the consumer Internet. Among his investments is the luxury consignment site RealReal, which just raised a fresh $20 million.)
We met at Rose’s Café in San Francisco on Friday to talk about it over eggs. Our conversation has been edited for length.
You worked on Google’s video ads efforts and a TV initiative that was eventually folded into YouTube. Do you think the company is still interested in TV?
I’d say yes. There are 5 billion homes in the world with a TV, compared with 2 billion with a PC and 1.3 billion with a smartphone, so if you want to reach a global audience, TV makes sense.
Silicon Valley has tried to reinvent TV over the last 20 years and we’ve failed, for the most part. I think Larry [Page]’s takeaway is that [past efforts] were too slow. He has an obsession — rightly so, I think — with speed. If you make something superfast, you have more success. Google was the fastest search engine; Chrome is fastest browser. So I think Google does have an interest, but it probably wants to reinvent TV in a way that’s fast and open makes it easy to discover content quickly.
How did your work at Google inform what interests you today as an investor?
I think the web is becoming more like TV, a discovery-driven entertainment medium. If you think about it, over the first 20 years, the Internet was more about fulfilling basic needs; it was more like a utility. You got your modem and broadband and browser and then identity, via Facebook. Once those basic needs were satisfied, we began focusing on things we want but don’t need: YouTube, Pinterest, Airbnb. Do I need to watch videos online? No. Do I need to go on vacation? No. The need economy was winner-take-all; how many broadband and email and browser providers do you need? But how many places do you go see a movie, eat a nice meal, stay in a hotel, travel for vacation, buy shoes? The want economy is not winner-take-all and it’s 100 times bigger.
What does that say about the valuations of Uber and Pinterest, big companies with growing numbers of competitors?
Generally, I think people and markets are smart. These people who are paying “lofty” valuations are sophisticated investors who’ve been investing for decades in many cases.
Also, the number of hours of the day that people have access to services is exponentially bigger than anything in the desktop era, so the mobile economy is huge. When Netscape and eBay and Amazon came out, it was very hard to reach $1 billion in revenue; now, there are 1.3 billion smartphone users in the world and Uber, which is in something like 50-plus cities, is probably already reaching half that addressable business. That translates into $2 per person per year. Then you put a 10x multiple on that? Sure. That’s not even a high multiple. Real time markets are changing everything.
Because people can order things whenever and wherever.
Think of the impact of that on service providers in our economy: Restaurants, taxi drivers, other businesses. Because end users can make decisions 24/7, every service now needs to be operating 24/7. I’m not an investor in HotelTonight, but I like them. They aren’t booking six months in advance. Instead, I show up to an airport and book a bed [at the last minute]. If I’m guaranteed a spot at a hotel that I like without paying an arm and a leg, I’m going to do it. It’s like [Google] AdWords. When I load a page, a relevant ad shows up. I think the whole world is moving in that direction.
Service providers have always hoarded inventory because consumers couldn’t make decisions in real time and there wasn’t enough data about matching the right buyers with the right sellers in real time. Both of those issues are being fixed.
Before we part, what’s one thing people might not know about you?
I’m on eight boards, and six of them are led by women.
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