Miles Grimshaw - The DNA of Software Companies

Key Takeaways:

• Miles, sees himself as a "biologist" rather than a "physicist" when it comes to investing. He explains that a physicist in investing would be someone who tries to define a set of rules and axioms that are unbreakable, and looks for repetition and consistency.
• In contrast, Miles sees himself as more of a "biologist" who is constantly adapting and evolving, and starting with a lens of curiosity and imagination. He references Darwin and how he explored new lands and was amazed at new species and how they fit into the world and how they adapted to their environment.
• Miles sees himself as change-seeking, and believes that the best companies don't want to be versions of what has been, but want to be the best versions of themselves.
• When Miles engages with a new company, he comes at it with a sense of wonder and curiosity, and tries to understand what is special about the company, rather than trying to fit it into a mold.
• Miles believes that it's important to think about the half-life of information that could flow through a given system of record, even when the company is very young.
• Miles believes that thinking about the half-life of information can help understand how much inertia there is in the application, and how much of an organization the application can touch, which can lead to healthier versions of expansion.
• Miles also mentions three broad strokes that he looks for when investing:
• 1) The ability to compound inside a customer
• 2) The ability to compound externally in the market
• 3) The ability to compound layers of product potential.
• He believes that these attributes are present in the very biggest companies and that it sets them up for long-term success.
• Miles believes that the second bucket of good genetics for a company is the capacity for a platform or ecosystem to be built on it or around it.
• Thinking about the "agglomeration effect" can be useful in understanding how certain companies or industries congregate in specific geographic locations and how it can benefit them.
• The importance of not copying "heroes" or successful companies in the industry as it can create a mindset that leads to overlooking important factors for success in the business.
• The concept of "graduation risk", which refers to the possibility of losing customers as they grow and decide to build their own solutions instead of relying on the API.
• Twilio, the stickiness of the customer relationship suggests that these businesses may be more successful than initially thought. He cites the example of Twilio, which has $4 billion of revenue and a net dollar retention (NDR) of 120%, which he suggests implies a "really sticky" customer relationship.
• New monetization models around software, such as using interchange revenues instead of traditional software revenues. Toast as an example of a broad suite that can be used to monetize other areas.

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