Almost a year ago, Alphabet’s growth-stage venture arm, CapitalG, appointed Laela Sturdy as its new head, following the departure of founder David Lawee. Sturdy’s promotion was widely anticipated. She joined Google in 2007 in a marketing role and transitioned through various departments. When CapitalG launched in 2013, Lawee recruited her, stating in a 2021 CNBC interview, “I made it a point to identify the stars within Google, and Laela's name was mentioned frequently.”
For many investors, the past year has been one of the most challenging periods in their careers. We inquired whether this has been the case for Sturdy, a former college basketball standout who emphasizes that 60% of her team comes from diverse or underrepresented backgrounds. To learn more, we interviewed her earlier this week at CapitalG's bright and airy office in San Francisco’s Ferry Building. Here are edited excerpts from our conversation for brevity and clarity.
Congratulations on your new role! How does your management style differ from David's?
I’m still actively leading investments and serving on several boards, but I’ve also focused more on the team and how we can expand our firm. We now have many more exceptional investors at CapitalG.
You mentioned a team of around 50 people. How many of them are investors?
Our model is centered on leveraging Google and Alphabet's resources to support our portfolio companies. Beyond our team, we've engaged over 3,500 senior advisers from Alphabet in the past few years, assisting with pricing analysis, scaling infrastructure, marketing strategies, and setting up sales incentives. Growth-stage companies often face numerous technical and business challenges in our field.
Access to 3,500 advisers is impressive! How does that process work?
For instance, we collaborated with Google's training team that offers AI and ML training to Google engineers. Recognizing the effectiveness of their program, many of our portfolio companies asked us how to elevate their engineering talent. We facilitated access to this training, allowing hundreds of engineers from our portfolio to participate. My long tenure at Google has instilled in me the value of its knowledge-sharing culture.
With the competitive market for AI talent, how do you reassure portfolio companies about data security within Alphabet?
Everything is opt-in for our portfolio companies. We maintain strict confidentiality; no data is shared between our portfolio companies and Alphabet. We act as an intermediary to create mutually beneficial opportunities.
How are investment decisions made at CapitalG? Do you have the final say on funding?
Our investment committee comprises myself and three other general partners, each seasoned investors. For example, my partner Gene Frantz has been with me for nearly a decade at CapitalG. Deals are presented to our committee, and we collectively make decisions.
What is your annual investment rate and typical check size?
We usually invest between $50 million and $200 million per company. We're very thesis-driven, conducting deep analyses of sectors. Each year, we invest in about seven or eight new companies, alongside numerous follow-on rounds for existing investments.
What ownership percentage do you aim for in companies?
We are flexible regarding ownership stakes. Our focus is on achieving attractive returns on our investments. For instance, I led the Series D round in Stripe in 2017 at a $9 billion valuation, and we recently closed an early investment in an AI company with a valuation under $500 million. Market conditions, business differentiation, and our capability to provide substantial capital are central to our investment strategy.
Do you disclose your cash-on-cash returns?
We do not publicly share our returns.
With your $9 billion investment in Stripe, which saw its valuation soar to $95 billion and then adjust to $50 billion, do you attribute that to market trends or performance?
Stripe is an outstanding company addressing major market opportunities, and I remain optimistic about its current and future performance. Evaluating valuations over the past 18 to 24 months reveals that most underwent some reset post-COVID—so I wouldn’t draw conclusions about its underlying business performance based on valuation changes.
Does Alphabet allocate specific funds to you annually?
Yes, we manage distinct yearly funds for investments.
What is the total size of these funds?
We currently manage $7 billion in assets, dating back to our inception in 2013.
Given your substantial resources amid a challenging market, are you purchasing secondary shares?
Our focus is on building strong partnerships with CEOs and management teams. We will only invest if we engage directly with the CEO and access the company’s internal data. Our goal is to be the best partners so that they will recommend us to future promising companies.
What secondary shares have you acquired?
I can’t disclose specific companies as they haven’t been made public. Many secondary deals are structured as primary investments. The broader trend reflects early-stage investors seeking liquidity—this aligns with our focus on identifying the best growth-stage companies early in their long-term growth trajectories.
Do you eventually return shares to Alphabet?
We certainly distribute shares, but our approach emphasizes a long-term perspective.
Is Alphabet primarily concerned with your returns, or are these investments mainly strategic?
We prioritize delivering returns while leveraging Google and Alphabet's expertise to become top-tier partners for generational tech companies.
How does AI fit into your strategy?
We are enthusiastic about AI, and our team at CapitalG is dedicated to exploring this area. We have outstanding advisers within Google who help us make informed technical investments. A notable example is our early investment in CrowdStrike when they had just $15 million in revenue. Our approach involves analyzing enterprise use cases, where incumbents with established distribution channels can excel, while we also seek out companies with strong technical differentiators. One such company we support is Magic, focused on creating AI software engineers.
As a board member of Duolingo, it's noteworthy that they recently reduced contractor numbers, citing AI as a factor. Are similar trends evident across your portfolio?
I can’t comment on Duolingo specifically, but generally, our portfolio companies are actively exploring how AI can enhance customer experiences and optimize their processes. There’s significant enthusiasm for utilizing AI in workflows, leading startups to rethink their organizational structures and streamline their teams toward high-value opportunities. Exciting developments are unfolding in this space.
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