Venture capital founder explains how the pandemic altered consumer habits

Left Lane Capital Founder and Managing Partner Harley Miller sits down with Yahoo Finance Live to talk about the firm's success in investing in consumer technology, venture capital outlook in the late pandemic, how the pandemic has changed consumer and investor habits, and web3's ties with cryptocurrency.

Video Transcript

[MUSIC PLAYING]

RACHELLE AKUFFO: Welcome back to "Yahoo Finance Live," everyone. Our next guest got quite the birthday present. [INAUDIBLE] closed a $1.4 billion fund to invest in consumer tech on his 33rd birthday. Well, let's bring in Harley Miller, Left Lane Capital's founder and managing partner. Belated happy birthday and thank you for making us all feel like underachievers.

So we're going to get to this fund. We've seen that Left Lane has now raised about $2 billion since its founding back in 2019 and covers a broad range of sectors-- FinTech, gaming, and everything in between. What did the road to this point look like?

HARLEY MILLER: Well, Rachelle, thanks so much for having me and appreciate the belated birthday wishes. No-- nothing congratulatory is deserved around raising capital or deploying capital. I think we have a different mission than that, but-- but I appreciate the sentiment. The journey was-- it was a long one. I spent about 10 years at a different firm, honing my craft, learning how to be an investment professional, focusing all of my energy and resources around this burgeoning internet and consumer technology opportunity.

This was right at the advent of smartphones, as this new ubiquitous, downstream mobile commerce opportunity that was transforming consumer spend, whether in the household or in the workplace, in the real economy. And that's what I dedicated my entire career toward. And ultimately, found the confidence to leave two and a half, three years ago to start our own firm.

Left Lane purpose built for this specific opportunity, in a world of more generalist investors or investors that have overly rotated toward enterprise software, which has been a great asset class and business model. But when we look at the $30 trillion of consumer spend in the Western world, it receives a lot less investor attention relative to other segments. And so this is where we dedicated our focus and efforts. And we've made some phenomenal investments across a lot of the categories and sectors that you described. And happy to go into that.

RACHELLE AKUFFO: Yeah, so, then how did your experience when you were at Insight Partners, how did that shape the direction of Left Lane Capital, and some of the changes that you've either seen in the VC space or the changes that you still want to see?

HARLEY MILLER: Appreciated everything that we learned. I mean, they really allowed us to have the latitude to build our track record, to pursue the world, vis-a-vis entrepreneurship and do a lot of investments. So, I think we learned a lot from spending time there. But when we left, we wanted to do something different. We wanted to carve out our own niche, our own lane, proverbially speaking, right. And so work ethic, and grit, and latitude, but ultimately, having that regard in deference for entrepreneurs I think was an important part of our journey.

Really building investment professionals from the ground up. We hire a lot of younger people we really try to breed them to be career VCs. And we take that training incredibly seriously and we're incredibly proud of the 25 Left Laners that we have on the team. It's really the lifeblood of the firm. And I think that's what resonated with institutional allocators that ultimately blessed us and anointed us into the industry.

As you acknowledged, we're relatively modestly aged for the Earth, but we've been doing this for the entirety of our professional careers. And so I think that was a unique positioning that allowed us to enter into the scene. And I think we're part of that next generation of asset managers in the venture capital and growth equity space. And we're-- we don't gloat in that, we don't take it for granted any given day, and we work day in, day out to perfect and hone that craft.

RACHELLE AKUFFO: And you talked about some of these underrepresented sectors, that you weren't seeing a lot of this VC capital flow into, how were you able to identify that? And why do you think that you haven't historically been seeing more investment in this space?

HARLEY MILLER: I think a lot of venture capital, historically, were people that lived in the Coast or grew up in the Coast, and that's what they sort of identified with. So you might have positive or dis-positive bias, based on one's own experiences. And myself, I grew up in middle-class Pittsburgh suburbia. A lot of my partners did as well.

I think we have that regard for the common consumer sort of deep into the bell curve or the histogram of the populist, right. And I think that's the curiosity with which we approach the world. We look at the world through opportunity sets and think about large industries that are still largely offline, very analog, and what is ripe for digital disruption or digital first solution.

As a simple example-- it might seem obvious in hindsight-- we made an investment into a company called Jack Pocket, which is a mobile lottery platform. That's an $80 billion a year market in North America that was 1% or 2% digitally penetrated. And so, despite the phenomenon of COVID, a lot of these categories, from gaming, to financial services, health care, food, education, are still in their single-digit penetration from an offline world to an online world, despite perhaps popular misconception. And that's the genesis of our thesis.

It's not new. This is what we've been doing for the last decade. The difference is, when you talked about with Insight and us, is now this is the entirety of our professional purpose for existence. We've architected our entire organization, our platform, our resources, top to bottom and side to side dedicated to this. And to my knowledge, there's not too many other firms out there that are highly specialized and focused around that internet and consumer technology opportunity.

RACHELLE AKUFFO: So then when you look at how the pandemic has really shaped now tentative emergence from the pandemic, how has that shaped consumer spending, consumer behavior? And then as you throw it forward, things like Web 3.0, wider adoption of crypto, how do you see your company positioning itself?

HARLEY MILLER: Sure, I'll offer the commentary first around just the last couple of years, because it's been tumultuous, to say the least, right? I think when you look at the general populace, or families, or workers, or an individual, right now some of their scarcest resources are time, and admittedly, wallet. I think people are mindful of that, as you enter into more turbulent times. Naturally, that's going to gravitate spend toward digital first solutions that can be more flexible and advantageous around cost and delivery of a service or product, as well as convenience.

So we have a company in Vienna, Austria, as an example, called GoStudent, that built one of the largest online marketplaces for high-quality, affordable, and reliable virtual one-to-one tutoring. It's now live in 30 markets across the Western world, including North America. Whether in an upmarket or a down market, parents and children alike will always have need for quality, affordable, and convenient tutoring. And I think more now than ever that holds true.

And so I think that's something that we look for, companies and categories that will persist whether in good times or bad. And ultimately, we're thinking in five to 10 year hold periods. And so, things that can traverse up markets and down markets.

With respect to Web 3 and crypto, I heard the previous bit. I think you all were having a bit of a laugh about $10,000 digital sneakers. I don't have a horse in that race, per se. I think I want to be a purveyor and student of consumer behavior. I think it's incumbent upon us as asset managers, as venture capitalists, to understand what has longevity to it, versus what will be a bit faddish or ephemeral in nature. And to the extent it's the latter, then we need to understand that, acknowledge that, and not over rotate and pour a bunch of money into investments that might not be around or might look different in several years.

But things that we think are truly permanent patterns in behavioral adjustments in consumer spending is something we pay attention to. So we're looking at a lot of companies in the space. We've invested in companies that are crypto native or Web 3. We invested in a large company called iTrustCapital, out of Long Beach, California, that's a the largest self-directed IRA crypto trading platform that lets people invest with their IRA or 401(k) in a tax-advantaged way into cryptocurrencies. So sort of doing it the Left Lane way, so to speak.

And I think-- not to go on a tangent, but I think that the line in the sand, the demarcation point between Web 3, crypto native, and a Web 2.0 company will start to get a little bit more fungible, so to speak, or inherently blurry, if that's fair.

RACHELLE AKUFFO: Well, we'll certainly be on the lookout for it. Obviously, a lot of people-- a lot of interest generated there. We do thank you for your insights. Harley Miller there, Left Lane Capital's founder and managing partner.