It is said the best ideas either terrify you or make you laugh. In Joel Cutler’s case, it’s ideas he doesn’t understand. Known as the man with the Midas touch with his investments in companies such as ITA Software, KAYAK and Airbnb, the co-founder and managing director of General Catalyst Partners said, “If someone pitches an idea to me that I don’t understand, that’s when I am interested.”
Cutler: ““My job is to spot bright people in a moment of time, give them money, for them to do a lot of work and for them to give me back a lot of money and I get all the credit.”
Speaking during an on-stage interview at Phocuswright Coference in Fort Lauderdale earlier this month, Cutler comes across as self-deprecating and humble, but clearly sharp in his thinking.
Admitting “I am not a first principles thinker”, he said, “My job is to find people who see it. If you can see tectonic shifts in tech and a new business idea at the same time, and people who can make it happen, you give them as much money as you can.
“Anything I can’t understand, I am more interested. If you say ‘I am the KAYAK of this or the Airbnb of this’, I turn off. Tell me something I can’t understand.”
He said entrepreneurs need to push their thinking harder and do things that are not obvious.
Invest in people who see the future as it should be
It was happenstance that brought him into entrepreneurship in travel. His father was a tour operator and ran a convention business in Las Vegas. He ventured into startups with a friend from summer camp, David Fialkow, and they invested in 3-4 startups, one of which was a cruise line startup.
“The world was getting wired up for the Internet, I was working in a cruise line in Miami and David (Fialkow) invested well.” Together, the two partners have done 250 deals.
One of the most successful deals was ITA Software, acquired by Google. “Jeremy (Wertheimer, founder), sees the future in a way that’s different. Engineering really, really matters. People who see the future as it should be are the ones we need to invest in. They have first principles thinking, they do things that are different, not incremental.”
Calling himself a terrible VC, he said he lost about $10m in his first two investments in ad tech and security.
How the KAYAK match-made-in-heaven was made
As for the idea behind KAYAK, he disclosed that it was him and a partner, Paul Rieder, who came up with the idea of a search for flights, and they approached Steve Hafner and Paul English to run it.
Indeed, the first time these two co-founders of KAYAK met was in Cutler’s office. “I knew Steve from Orbitz and had met Paul 10 years ago at a party. They never met before and we said, why don’t you guys do this?”
As for the competition in meta-search coming from as powerful a company as Google, Cutler said, “In a world this big, someone will always do something better. Google is doing a great job but somebody else will do it better.
“It’s not over, it’s never over.”
“If you don’t fail, you are a sucky investor”
As for Airbnb, he said of the founders. “Amazing and all foodies. We got to know each other through food. I had no idea it was doing to be this big. It was easy to invest in them – remarkable, unique, the math made sense, the community loved it. I think no one predicted how big they would become.”
Saying he’s missed a lot as well, he said that making mistakes was part of the game. “You got to be in the best fights and be prepared to lose. If you don’t want that, then don’t be a VC. If you don’t fail, you are a sucky investor.”
What’s needed right now is demand aggregation but it’s getting harder and harder, he said. Attractions and vacation rentals are interesting businesses but don’t have the same size as demand aggregation.
“I will always be interested in demand aggregation and you get outsized returns usually in the B2C space, I like the consumer space better.”
Of AI, he said there were currently inflated expectations and expects that in five years’ time, it will become ubiquituous. “AI will become part of everything, it will be a horizontal, not a vertical.”
As a parting shot, he said, “My job is to spot bright people in a moment of time, give them money, for them to do a lot of work and for them to give me back a lot of money and I get all the credit.”