General Catalyst’s Hemant Taneja says Fellow Venture Capitalists Show Little Integrity
Hemant Taneja, photo General Catalyst
December 12, 2022
Sam Bankman-Fried, the founder of the crypto trading platform FTX, appeared before a New York court today. He was released on a bail of $250 million, while awaiting a criminal trial; his movements will be tracked via an ankle monitor.
The United States Justice Department has charged Bankman-Fried, 30-years-old, “with conspiracy to commit wire fraud… commodities fraud…securities fraud…money laundering,” and alleged misappropriation of “billions of dollars of customer funds deposited with FTX.”
“You need to look no further than the FTX meltdown to understand the consequences of new technology frontiers exploited with little governance, oversight or integrity” by venture capitalists (VCs), Hemant Taneja wrote this week in a post on the site of General Catalyst, a venture capital firm where he is the Chief Executive. Sequoia Capital, Mayfield, Lux and Softbank were among more than 80 major venture firms which invested a total of $1.8 billion into FTX. It was valued at $32 billion in January this year and Bankman-Fried’s net worth was then estimated to be $22 billion.
The rapid technological changes of the recent decades is “one of the greatest periods of innovation and investment in human history,” Taneja, 47-years-old, added. The legacy of the changes though “is that we lack inclusive prosperity, we have eroded respectful society, and we are threatening the sustainability of our planet.”
“It took 150 years for us to see the unintended consequences of the combustion engine (used by automobiles) in the form of climate change,” Taneja added. “It’s taken only 15 short years to see the unintended consequences of social media platforms in creating a highly fractured and divisive society and testing the limits of our democratic system.”
Companies funded by General Catalyst include Airbnb, the room and home rental platform with a market value of $54 billion; Snap, the social media platform worth $14 billion; and Warby Parker, the eyeglass vendor worth $1.6 billion. With its head office in Cambridge, Massachusetts, the venture firm manages $33 billion. Taneja is based in its Palo Alto, California office, one of four General Catalyst locations, including San Francisco, New York, and London, where it funds and works with companies through their entire lifecycle, from early-stage startups to growing large companies.
General Catalyst is focused on “the biggest epicenters of transformation”: healthcare; convergence of financial technology and crypto; artificial intelligence (AI); climate; the digital transformation in India; education and workforce transformation; and security, defense and intelligence.
Taneja has cofounded several healthcare companies. In 2014, he cofounded Livongo Health, which uses technology to remotely help patients manage diabetes, blood pressure, stress, and other ailments. In 2020, during the sharp spike in demand for online medical services amidst the COVID-19 pandemic, Livongo was bought by TelaDoc for $19 billion. TelaDoc, which reached a peak valuation of about $48 billion in early 2021, now has a market value of $4 billion.
In 2017, Taneja cofounded Commure a platform for healthcare software innovation. Last year it raised $542 million in a funding round at a valuation of $3.5 billion.
In 2002, Taneja joined General Catalyst as a managing director; he was named CEO in 2021. in 1999, he earned an M.Eng. in Electrical Engineering and Computer Science (EECS) and an S.M. in Operations Research from the Massachusetts Institute of Technology. In 1997, he earned a S.B. in EECS, an S.B. in Mathematics and an S.B. in Biology, all from MIT.
“I wound up with five degrees from MIT because I was hoping to pursue an academic career,” he writes about himself on General Catalyst’s site. “Being naturally curious about many different disciplines and getting degrees in those disciplines was great training because it gave me a unique lens on different types of innovations that are becoming commercial,” he told Spectrum, an MIT publication.
Taneja grew up in India and speaks Hindi. While he was in high school, his parents moved the family to Boston. “We were the classic immigrant family and had the proverbial American dream,” Taneja told Spectrum. “Work hard, study hard, do your best, and rise up in the world. That was a very consistent and nonnegotiable theme in our family.”
In 2018, Taneja and his wife Jessica made a donation to MIT.nano, the new center for nanoscience and nanotechnology on the MIT campus. They funded the Shiv and Santosh Taneja Innovation Alcove, named after Taneja’s parents, which serves as a breakout space for cross-disciplinary collaborative work. “The opportunity for me to attend MIT is really what transformed our lives, and eventually our kids’ lives, and so I wanted to recognize that and make the gift in my parents’ honor,” Taneja told Spectrum. He and Jessica live in the San Francisco Bay Area with their three children.
Taneja also helped fund and serves on the board of the Khan Lab School in California. The school was founded by Salman Khan,, another MIT alum, who also runs the free online math and science learning platform Khan Academy.
An author of several books and articles, this year Taneja published Intended Consequences: How to Build Market-Leading Companies with Responsible Innovation. In the book he argues that Milton Friedman’s philosophy that companies exist only to increase shareholder value is dead and buried. The old Silicon Valley tenets of “move fast and break things,” minimum viable products, hyper engagement and growth at any cost and focus on profits for investors and maximizing fees for venture funds must be replaced with new principles for an era of responsible innovation.
Venture capitalists, he writes, must “generate returns beyond profits and…recenter technology as a force for good in the world.” A company’s intent to do good is not enough. “That mindset must be supported by a business model, a mechanism that leaders must intentionally and proactively build along with the company from the ground up, one that incentivizes and rewards the organization for fulfilling its intentions.”
“The feeding frenzy of the last few years,” among Silicon Valley venture capitalists, Taneja writes in his General Catalyst blog, has “spawned a whole lot of undisciplined business behaviors in the venture space…investing at the peak of the market…buying public stocks; the crypto craze; poor governance; a ‘growth at any cost’ mindset…all fueled by a hubris that we somehow know better and are smarter than everyone else.”
Taneja predicts “that tomorrow’s most financially successful, compounding businesses will be those that operate in the best interest of society.”
He lays out nine “reframes” that companies can adopt to meet this goal. They include: instead of celebrating disrupting existing businesses, “committing to working with innovation-minded leaders within the industries we’re actively trying to transform”; from exiting an investmen at a profit for investors and the VCs, to “building enduring, compounding businesses that stand the test of time; “and a focus on “financial AND societal benefit (abandoning the false choice of doing good or doing well).“
Many VCs and founders in Silicon Valley may view Taneja’s statements, at best, as a marketing stance to appeal to the boards of pension funds who have a mandate to “do good” and which are the major source of funds for General Catalyst, as well as other VC firms. Competition among startups and VCs in Silicon Valley is extremely intense. None other than Steve Jobs, the late founder of Apple, sought to motivate his developers by saying, “It is better to be a pirate than join the navy,” according to Quartz. Being a pirate in Silicon Valley meant moving fast, unencumbered by bureaucracy and politics, and willing to take considerable risks for greater rewards. In 2016, on Apple’s 40th anniversary, the company’s head office in Cupertino, California, flew a pirate’s flag. Today Apple has a market value of $2.1 trillion.
Taneja expects artificial intelligence to have a big impact on businesses, he told CNBC. For instance, in a few years he predicts consumers will input information onto an intelligence bar and be able to buy an airline ticket or a book, instead of using a search bar to first locate the information and then make a purchase.
In 2019, speaking at a conference organized by the MIT Club of Northern California, Taneja said entrepreneurs should build a company culture where “you are accountable, transparent and explainable” for using AI and data. Instead of viewing human beings on their phones, as consumers you can manipulate to grow the business, entrepreneurs should focus on how to serve them well. He added that the world of venture investing offers huge opportunities. “I feel like a kid in a candy store…every sector (defense, autonomy, health, education) has got issues,” problems that need to be solved. The key thing for an entrepreneur is to pick a sector “that resonates most authentically with you, workwise.”
FOR MORE UNIQUE STORIES ON INDIANS AND INDIA:
For access to stories each week email: gitimescontact@gmail.com
