Laela Sturdy on Growth Investing, Second Acts and Building Durable Companies

Laela Sturdy says one of her early investing mistakes was putting too much faith in companies successfully launching second and third acts. The CapitalG managing partner now generally wants an investment case to work on the strength of the existing business, with future products treated as upside unless there is evidence they can succeed.

Harry Stebbings asks whether venture investing is primarily pattern recognition. Sturdy says her years as an operator helped her develop insights into how companies build teams and scale, but those insights are most useful when paired with openness to what is genuinely new.

She led Gusto's Series B after years building small-business operations. That experience taught her to look past a large theoretical market and examine channel economics, marginal costs and the operating details required to scale. CapitalG is an investor, so her examples reflect positions in which the firm has an interest.

Sturdy says relying entirely on the past would prevent an investor from adapting. When she invested in Stripe in 2017, her small-business experience was relevant, but she also had to learn how a developer-led business could move from startups to enterprise customers.

She applies the same combination to enterprise AI: familiar questions about software purchasing remain, but adoption speed and the risks to customers' existing businesses may differ. Good decisions, she argues, draw on earlier experience without assuming every new market will follow the same path.

Stripe and Credit Karma had strong core businesses as well as attractive stories about additional products. In other cases, an investment thesis depended on a second or third act in a smaller initial market. Sturdy learned that such expansions typically take longer and are less likely to succeed than their plans suggest.

Her usual base case now underwrites the business that exists today. New products can enter an upside case, but without a launch or meaningful evidence of demand she does not assume they will work in the base case. She acknowledges that this discipline can also cause her to miss exceptional teams or lose deals on price.

Whatnot is an exception she cites: CapitalG invested and she serves on its board. The live-commerce company was operating in five categories within four or five months of its Series A, providing evidence of a multicategory strategy even though those categories had not all reached full liquidity.

The evidence need not show that an expansion has already won, she says, but it should suggest that a team can execute unusually quickly or manage multiple efforts. Many startups repeatedly postpone promised international launches or new products because the core business demands so much attention.

Asked whether companies expand too late or too early, Sturdy says the answer depends on stage. At growth stage, companies often wait too long, especially in the years before an IPO, when public investors want evidence of durable growth and diversification.

Stebbings argues that early-stage boards should emphasize focus and customer love. Sturdy agrees: a young company should establish its core first. Her growth-stage advice addresses a later point, when a company might have $100 million to $200 million in revenue and a large enough organization to manage several priorities.

At that stage, she sees companies make bets on adjacent products that are too small or scattered to matter. They still need focus, but also sufficient resources and prioritization for selected second acts. Even a company with a very large core market may eventually have opportunities to deepen customer relationships or expand.

A successful startup can repeat the mistakes of the incumbents it displaced, underestimating how difficult it is to win an adjacent market. Sturdy says distribution can confer an advantage, but teams may overestimate their right to win without a competitive product, clear differentiation and adequate resources.

Stebbings asks whether $100 million of revenue is enough to go public. Sturdy says readiness is less a fixed revenue threshold than the ability to tell a credible story and execute predictably. Public investors expect companies to explain growth, investment, profitability and returns, then deliver against those commitments.

She disputes the idea that going public necessarily prevents investment. Companies can invest if they communicate their plans and deliver results; missed commitments can put them in a more restrictive market position. She has seen disciplined companies at $100 million of revenue that could be ready and less disciplined ones above $500 million that would struggle.

On liquidity, Sturdy expects IPO markets to reopen but cannot say when. CapitalG evaluates whether a company could stand alone as a public business and says it does not underwrite an investment dependent on a merger or acquisition, even though M&A can be a valuable exit.

Stebbings challenges the idea that the best businesses must be founder-led. Sturdy says she would invest in a company run by a non-founder and cites capable CEOs who bring different strengths at different stages. Founders may prefer early invention while a partner excels at scaling.

Some founders do not want the people-management and complexity of running a large organization; others need operational skills they can add through an executive team. Sturdy says she supports founders who want to grow into the CEO role, and views company building as a team sport.

Stebbings cites the argument that a founding team's strongest exceptional skill matters more than balance. Sturdy sees more truth in that at the zero-to-one stage, where an unusual ability can help reach product-market fit. At scale, founder strengths remain valuable but are not enough without a strong team.

For companies with $30 million to $100 million in revenue and growth around 15% to 40%, she says the answer depends on market size and the business. A vertical software or marketplace company might compound through added products, but she expects growth at the lower end often to decay further.

Such companies may need to reach profitability, combine with another business or find a way to reaccelerate. She notes that a company at $100 million in revenue with 20% to 30% EBITDA margins would have a different financial profile. These are illustrative possibilities, not forecasts for every company in that group.

CapitalG is open to partnering with private-equity firms on larger buyouts or rollups and typically writes a $150 million check in that context, Sturdy says. It had not conducted its own rollup at the time of the interview, though she does not rule it out forever.

Asked whether Series B and C prices make growth investing unattractive, she rejects broad industry generalizations. In her experience there are good companies at fair prices throughout cycles, though identifying them is harder in some periods than others.

She compares an entry valuation with public and private peers, but says the decisive judgment is future growth. A price that looks expensive against current multiples may be reasonable if a company compounds faster and longer than peers; assuming every company can do this is a common venture investing risk.

Sturdy cites CapitalG's 2017 Stripe investment as an example where some investors doubted sustained growth in a large market. She believes its prospects justified the price, but that is her retrospective assessment of a portfolio company, not a realized return figure.

She describes 2023 as a productive investment year for CapitalG while much of the market pulled back. The firm also moved earlier in areas including AI. Her account concerns opportunities the firm chose, not a claim that every investment made in that period succeeded.

Growth investing is not dead, she says, even though activity fell from the 2020–21 peak. AI transactions can affect the aggregate figures. She sees opportunities in earlier growth rounds and in later private companies raising primary capital while early investors sell secondary shares at prices aligned with public comparables.

Stebbings describes a company that raised at a very high multiple of annual recurring revenue. Sturdy says companies funded at peak valuations face a test: can they retain a team that believes in the business, execute and grow into the valuation? Some may have to combine, reset or raise a down round to rebuild incentives.

Building a startup takes more time and energy than many expect, she says, making long-term commitment from founders, employees and investors important. Belief must be accompanied by continued execution and financial performance.

Her best investments did not feel obvious at the time. When she backed Stripe, other investors raised concerns about a commodity market, valuation and differentiation. She reached a different conclusion after speaking with customers and studying cohorts and its go-to-market approach.

UiPath's Series B had strong numbers, she recalls, but skeptics questioned why a company founded in Romania had accelerated after roughly a decade and whether robotic process automation could become a large market. CapitalG invested; her account describes her decision process, not a guarantee about the company.

Sturdy says a growth investor needs conviction in both the company and the price. CapitalG typically underwrites a target of three to five times money invested in its core growth deals; earlier investments may target ten times. These are underwriting targets, not reported realized returns.

CapitalG has one limited partner, which Sturdy says gives it more flexibility to hold positions for the long term. She still cares about time and returns, but believes reduced pressure to sell can support ownership of companies that compound. The structure is specific to her fund.

Stebbings asks whether private investors should retain public stock because they know the company well. Sturdy says public-market specialists bring different information and portfolio-management skills, so an early investor's private-company insight alone does not settle the decision. Stebbings agrees that public valuations, short sellers and other factors change the context.

Selling requires renewed conviction in the financial performance an investor is willing to underwrite. Sturdy says CapitalG's growth checks are typically $50 million to $200 million, making customer research, financial modeling and position management significant parts of the decision.

She notes that exits in 2021 benefited in many cases from unusually high valuation multiples as well as business performance. Investors must consider market conditions, portfolio risk and distributions as well as company fundamentals. Holding a position means continuing to buy into the thesis, in her view.

CapitalG manages $7 billion, she says, but declines to disclose its largest position. On entry mistakes, she points to investments in markets where the firm lacked sufficient local history or people on the ground, especially when businesses served local customers.

Understanding local consumer behavior, income levels, operational complexity and market timing can require different expertise. During peak periods, she believes some valuations did not adequately reflect these risks. She describes lessons from individual deals rather than dismissing every emerging market.

Asked whether the best founders need venture investors, Sturdy says even exceptional people benefit from strong boards, advisers and colleagues who provide resources, ask questions and serve as sounding boards. She sees the investor's role as supporting the founder.

She praises Accel's Rich Wong for supporting founders, building executive relationships, asking hard questions and doing the work. In the quick-fire round, she also emphasizes humility and hard work, and says she respects Elad Gil's work in AI investing.

On growth-stage AI, Sturdy says CapitalG found earlier-stage opportunities more attractive over the preceding 18 months, while its pipeline now includes rapidly growing companies with differentiated teams and technology. She acknowledges the difficulty of underwriting financial returns in a market with active strategic investors and says the firm waits for appropriate valuations.

CapitalG primarily invests at growth stage, while Google Ventures usually focuses on different stages. When their interests overlap, she says, the teams collaborate and have invested together.

Sturdy recalls meeting UiPath founder Daniel Dines soon after returning from maternity leave. They spent much of their first meeting discussing their upbringings and families rather than automation. For her, mutual trust and a relationship that can last through difficult periods are important parts of investing.

She tries not to invest in people she dislikes because she expects to work with founders for a long time. Asked what worries her most, she names misinformation, autocratic regimes and threats to democracy.

Looking back, she wishes she had understood sooner how strongly venture returns follow a power law: a few large decisions can dominate outcomes. She tries to organize many smaller activities around the major bets, estimating that she makes six to eight truly important decisions a year.

Sturdy says venture is more of a people business than it is often given credit for. Exceptional leaders do not all share the same personality traits, but each has something that attracts followers; what produces that commitment can vary widely.

Stebbings asks whether followers are drawn to a leader or to the excitement of success. Sturdy says enduring growth needs both results and the ability to recruit strong people. The harder test is who retains committed followers during difficult periods: some leaders build cultures and a shared vision that endure, while others lose support when success falters.