Overheard

• "No way this capital gains tax is going to pass. literally everyone i know (VCs and hedge fund managers) hates it." —Redpoint's Logan Bartlett.
• "After five years as an investor I can now confirm this job is at least 10x easier than being a startup founder." —Zach Coelius.
• "Um, I found Greylock's office bathroom soap on Craigslist for $45." —The story only got weirder from there as negotiations continued.
• "Advice to founders - common wisdom is to pick the person rather than the VC firm. But seeing turnover increase in the industry. Just heard a nightmare story (and have come across 4+ abandoned co's). What happens when your favorite board member leaves the VC firm?" —Altos's Ho Nam.

The Big Story

VCs Scour the Globe

With competition fierce for startup deals in Silicon Valley, some VCs may instead look abroad. The IPO of UiPath this week was the latest example of a company that VCs have found overseas that has turned into an investment hit.

The deal was especially lucrative for Accel, an early proponent of this strategy, and turned an investment of $172 million of what was originally a Bucharest-based startup into $5.9 billion.

The traditional Silicon Valley VC mantra is to only invest in startups that you can drive to. But Accel sought out startups overseas that had been overlooked by their competitors.

• Partners flew to Australia to meet and later invest in Atlassian, and also bet on Flipkart, Rovio, Spotify, Slack and others.

Other firms have also gone globetrotting for deals. Some of those efforts have been more successful than others. One key decision is whether to set up offices in other countries that are run under the U.S. team, or to spin them off to run mostly autonomously. Accel for its part has separate offices that often team up on deals.

• Sequoia's China team has scored wins like ByteDance, Meituan and Pinduoduo. Firms such as Index Ventures and Insight Partners also have a definite international focus.
• Firms such as GGV Capital, DCM and E.ventures have globally distributed teams to watch and compare trends that emerge across different markets. Tiger Global has also long had an active international focus, especially in Asia. Coatue has also been active.

In recent years, a range of different firms, including Y Combinator, have ramped up international investments, as growth in other markets becomes clear.

• Latin America is a big interest recently, with Uber's acquisition of Mexico's Cornershop opening eyes, on top of SoftBank's recent announcement of $1 billion it plans to invest this year.

Still, as the UiPath deal showed, Europe is now a mature market that others are still catching up to, one VC tells me. Accel itself has made early bets on hot companies like Snyk (now valued at $4.7 billion), Hopin ($5.65 billion) and Miro in Europe.

Of course, the pandemic has upended many assumptions, and opens up international deals even more. With everyone at home, it has become easier for VCs to connect to international startups over Zoom and therefore invest in a company anywhere.

While the data isn't all in yet, this could accelerate VC investment in international deals. But firms still need to devote resources to other markets to develop expertise. A number of these markets have local firms also competing for deals. Many VCs have long talked about innovation happening abroad and in some cases outpacing the U.S. These days, there's less excuse than ever for a VC firm to miss a hot international company.

A MESSAGE FROM INTEL AND MICROSOFT AZURE

Open-source computing is going gangbusters — and that's good news for those seeking better and stronger security in the enterprise. With the growth of hardware platforms, ISVs and CSPs using trusted execution environments to protect data in use, open source-licensed projects are a natural way to encourage experimentation, learning and adoption.

Learn more

Inside Track

• There's ahead of your time and then there's Dogecoin ahead of your time. Saar Gur's 2014 take on why an altcoin, maybe even Dogecoin, could overtake Bitcoin. "Yes, Dog as in the animal," he wrote.
• Eric Bahn and his wife, Beatrice Kim, talk about how they try to avoid burnout during the pandemic.
• If you ever wanted to get inside the mind of Sequoia's Mike Moritz, Kevin Gao compiled 642 pages of the journalist-turned-VC's writing.
• Experienced founders not only exit companies faster, they also require 34% less capital, boosting investor returns, according to M13.

Need to Know

• Discord dumped Microsoft. Deal talks for an over $10 billion acquisition fell apart, according to The Wall Street Journal.
• The clone wars: Facebook copied Clubhouse. Apple launched a Tile competitor. It then challenged Spotify with a podcast subscription, so now Spotify is rumored to be launching its own version of it to undercut Apple.
• Cellebrite checkmate: A Cellebrite kit just happened to fall off a truck in front of Signal's CEO who then happened to find security vulnerabilities, which led to one of the best corporate blog posts of all time (and lots of trouble potentially for Cellebrite).
• Zoom wants more Zooms. It launched a $100 million fund to invest in startups building on Zoom.
• What a capital gains hike means for startups. Angel investors, secondaries as well as venture, could see effects.
• From Protocol: App makers went to Washington and spilled all their tea on Apple.
• This week in VC history: Twitter got the infamous tax break to stay in San Francisco.
• Your weekend reading: They hacked McDonald's ice cream machines and started a cold war.

Five Questions With...

Spark's Natalie Sandman

Natalie Sandman is a partner at Spark Capital, which raised $1.35 billion last year. She was previously an investor at Shasta Ventures. Before that she led the product team at Ravelin and was previously one of the first product managers at Zenefits, building insurance, payroll and HR products.

What are your partners talking about at the Monday meeting?

Every week we always talk about market conditions: How to help our founders think about everything from SPACs to what's the market like for IPOs and additional financing or fundraising. Also in the pandemic: How we can best build relationships with founders quickly.

Do you think firms like Tiger are changing VC?

With Tiger, the product they've been offering for the past several years but also in the pandemic has made the product more attractive. It's a differentiated product. How they as a firm aggressively preempt deals, issue term sheets quickly and pay relatively high prices and drive up the cost basis in the industry and have lightweight board governance. In today's market that's an attractive product for entrepreneurs. Part of the question I have is how that will change the relationship between VCs and entrepreneurs over time.

Does that affect the early stage?

Even with earlier stage, it has forced us to have a prepared mind in specific categories. We still want to be opportunistic with compelling founders. It has forced me to narrow my focus on opportunities I find interesting. And at times to seek out companies in a space, and narrow our aperture to build deeper relationships with a founder. In the past year and a half, partly because we're not in person, relationship building is different. That has opened up opportunities for Tiger that resonates in the market even more. I'm curious to see how that changes when things open up more and do shift more back to normal.

What's a secret interest or obsession of yours that most people don't know about?

Something I've been doing over 15 years is oil painting. For me it goes back to my family, we've always built things, working or painting and my dad was a software engineer. It takes me out of the everyday world and puts me in a different mode and headspace.

What company, outside of your portfolio, have you been most impressed to watch this year?

Figma. I've always been really obsessed with Adobe — they've been phenomenal. They've passed a $250 billion market cap, they're a dominant player and started in the '70s. And their evolution as a business. One [reason] I'm excited about Figma is they've done an incredible job with people — they love developers, designers and product managers. They also have a massive opportunity to eat Adobe from the [bottom] up. They're doing an incredible job executing in terms of product building.

What company or sector is most underrated now?

Digital health I think is still underrated for potential. There's many products and services that can reinvent health care and target specific demographics or at specific points of care. One of the things COVID accelerated was forces changing how care is delivered. That's one space I'm super excited about that's similar to what Spark has invested in with fintech, at the infrastructure level. We're looking a lot at what the building blocks are that help digital health companies.