| | | | | | Snap revealed some worse-than-expected earnings in the third quarter and a $40 million Spectacles flop during its earnings call on Tuesday. CEO Evan Spiegel noted that the company will redesign the app "to make it easier to use." | | Last Friday, I spoke with Jeremy Liew, the man who wrote Snap's first check. Liew, a partner at Lightspeed Venture Partners, invested $485,000 in Snap in April 2012 — an investment that returned more than $1 billion when the company went public. Below is an abbreviated conversation with Liew. Read the full Q&A here. | | | | . |  | | . | | | | TERM SHEET: You've had quite a year — Snap went public. Walmart acquired Bonobos. Stitch Fix filed for an IPO. Tell me about your investment thesis. What do you look for in a company or founder before investing? | | LIEW: We're usually looking for some indication that companies can become part of popular culture in the future. We're looking for some signal that the company is not niche, and it will expand beyond what everyone will be doing in the future. | | One of the ways we do that is we look for services that attract a lot of young female users initially. It's a service that could make sense for a whole lot of people, but for whatever reason, the initial user base is young and female. We think that young women are the early adopters of popular culture. They're kind of hit-makers for the rest of society. | | You wrote Snapchat's first big check in 2012. What did you see in the company then that made you want to invest? | | Snapchat was highly engaging with young women, which is predictive of something being used broadly in the future. It showed incredible growth, incredible engagement, and incredible retention. That really caught our attention because we look for something that has a scalable, repeatable way of growing, and this appeared to be doing so through word of mouth. Snapchat was definitely creating a habit because we could tell from the engagement and retention, people were using the app several times a day. | | Finally, we look for a unique insight from the founders that explains why this is all happening. We needed to know that they didn't just get lucky but that they will continue growing the business in the future. This is obvious now, but this was a unique insight back in 2012 when Evan Spiegel said that Facebook and Instagram are highlight reels for your life. You use them when you're feeling happy, excited, and proud. They give people performance anxiety about what they're willing to put on social media. If you're only seeing the top 10% of somebody's life, you don't really know the whole person. Snapchat allowed its users the freedom to be able to put things up that weren't "Instagram-ready." | | What do you think about Snap's performance since it went public? | | I actually don't think about the company's performance since it went public. I think about the performance since it was founded. That, to me, is the more relevant metric. In the spring of 2012 when we invested, it had tens of thousands of users. Today, it's in the hundreds of millions. It employs tens of thousands of people, it generates hundreds of millions of dollars, and it's touching the lives of a good portion of the Western world every single day. That's pretty remarkable. | | It's been reported that there was a misunderstanding with the terms of the deal. (Spiegel reportedly paid less attention to the exact terms that gave Lightspeed veto power over investment at Snap & regretted it later.) What do you think about the evolution in recent years from founder-friendly investing to more of a climate of governance? | | I think that everything is a pendulum, and market conditions can change from one side to another over time. I do think it's important to understand that some people will try to portray Evan as a naive founder. But he's an incredibly sophisticated entrepreneur, and I think people can see that from the smart decisions he has made through the course of the life of his company. So yes, things can somehow get confused, but he's a very sophisticated business person. No one can confuse Evan into doing something. | | So you're saying those reports about the misunderstanding of the terms were exaggerated? | | I think that everything that has ever been done with Snapchat is something Evan has understood. He was well-advised by really smart people. | | | | . | | |  | | | | | | THE LATEST FROM FORTUNE... | | | | | | • Intersection, a New York-based smart cities technology and media company, raised $150 million in funding. Graham Holdings Company led the round, and was joined by investors including ArrowMark Partners and NewSpring. • Compass, a New York-based real estate technology company, raised $100 million in Series E funding at a $1.8 billion valuation. Investors include Fidelity Investments, IVP, and Wellington Management. • Monzo, a U.K.-based digital challenger bank, raised 71 million pounds ($93 million) in funding, according to Reuters. Read more. • Yotpo, an Israel-based user-generated content marketing platform, raised $51 million in funding. Access Industries (ClalTech) led the round. • Leanplum, a San Francisco-based mobile marketing platform, raised $47 million in Series D in funding. 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Previously, they were at Silicon Valley Bank Analytics. • Roger Liew joined Impact Engine as an operating partner. | | . | | | | | | | | | | | This message has been sent to you because you are currently subscribed to Term Sheet
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