Danny Rimer on Missed Deals, Investment Discipline and Building Index Ventures

Danny Rimer says Index Ventures tries to remain focused, back exceptional founders and avoid letting market-size estimates become a mental trap. He also believes strong companies can list in difficult markets. These are his investment judgments, not guarantees about financing or returns.

Harry Stebbings interviews Rimer, an Index Ventures partner, about partnership decisions, missed investments, portfolio exits and building across Europe and the United States. Index has interests in companies discussed, including Figma, King, Etsy and Discord, so his assessments reflect an investor's perspective.

Rimer remembers being close to his mother, interested in art and comfortable doing things differently. He did not grow up with a firm sense that success was inevitable. He still cares about being transparent and acting consistently with his values.

From Jim Barksdale he learned to keep the main thing the main thing. Index's decision not to expand into China or India was one example of preserving focus, he says, rather than following every fashionable opportunity.

Barksdale's memorable snake rules were a metaphor for making decisions, committing to them and not continually reopening settled debates. Rimer says the difficult part is evaluating opportunities that initially look threatening or distracting and then giving a clear answer.

Index's investment committee uses votes from one to four and seven to ten, with no five or six and a positive threshold. Rimer says the process tests the sponsoring partner's conviction and allows unusual ideas to win support. His claim that the firm's best investments were unanimous is his retrospective assessment, not proof that unanimity causes success.

He lists Spotify, Snap, Airbnb and LinkedIn among opportunities Index failed to secure in the desired way. In Airbnb's case, Rimer describes a close relationship with Brian Chesky despite the firm not investing. The reasons differ across deals; they are not one uniform type of miss.

Index uses investment theses to create discipline and prepare partners to act when they find an opportunity. Investors develop areas of focus independently, test ideas with colleagues and eventually present mature arguments to the partnership.

One thesis was that fashion could become a shared social language in ways music had previously served. Rimer says that lens helped the team look at companies including Net-a-Porter, ASOS, Farfetch and GOAT. These examples reflect the firm's investment interests and do not establish that the thesis will hold universally.

Stebbings asks whether a thesis can cause investors to reject an exceptional outlier. Rimer agrees this is a danger. He knew Spotify founder Daniel Ek was talented from earlier work, but prior difficult experiences with music companies shaped his judgment and he failed to back him.

His lesson for seed and Series A is that an exceptional founder can justify revisiting preconceptions about an unattractive market. He looks for founders with strong instincts about the people they recruit, while acknowledging that stage affects the decision.

Index does look at market size, but Rimer says conventional total-addressable-market estimates are often noisy and can constrain imagination. For Airbnb, he recalls focusing on hotel rooms it might displace instead of the new accommodation supply it could create. This does not mean every market becomes large.

Rimer says the partnership analyzes mistakes as well as successes and tries to prevent past outcomes from becoming automatic rules. He also encourages founders to celebrate progress during a difficult journey, not just focus on the next milestone.

He sees valuation as another trap when investors compare only with current peers and do not consider how a market or company might evolve. Stebbings worries that a few giant technology companies may pull away from the rest; Rimer responds that the composition of the largest companies can change over time.

On timing, Rimer says there is no credit for being too early, but he believes exceptional companies ready to list can go public in difficult markets. That is his view, not a guarantee that an IPO will be available or appropriately priced in any market.

He separates patience for technology development from betting that a new market will appear. With Figma, he says the team was clear it would take years to build the product, while design demand already existed. He gained confidence as he got to know the founders and team; Index invested in the company.

On reserves, Index has seed, venture and growth funds and many of the same limited partners across them. Rimer says the firm seeks to add capital when it has strong evidence and the founder wants it. Different funds and LP needs shape the ability to do so.

Stebbings raises the risk that a large multi-stage investor declining a follow-on sends a negative signal. Rimer believes the risk has diminished as more capital and funds have appeared, while acknowledging his view may sound self-serving. His experience does not prove signaling never affects a company.

He thinks there is too much venture capital and dislikes narrowly defined sector, impact and geographic funds because, in his view, their mandates can compromise company selection. That is a critique of fund design, not a demonstration that every specialist or impact fund performs poorly.

Index could have raised larger funds, he says, but wanted enough resources without changing its partnership culture. Larger funds may require more people, alter incentives and make management fees more prominent relative to carried interest. He describes the firm's aspiration as operating at scale while retaining an artisan approach.

Rimer argues that many technology brands emerge as a byproduct of strong products, while a few companies build brand deliberately. He wants founders to think about what they stand for and how scarcity and distribution affect perception. Stebbings adds that brand is difficult to retrofit late.

Asked about sourcing, selection and service, Rimer adds a fourth discipline: exiting. He says Index's institutional limited partners rely on the firm to maximize returns, and that being willing to recognize failure and being disciplined about successful exits are both part of the job.

For a struggling company, he wants investors to confront reality, learn and decide whether a founder has genuine conviction for a new direction. He says a founder who has given the business a real effort should not be treated as a disappointment merely because it closes.

For winners, Index can sell incrementally after a company becomes public. Rimer says the partner closest to a company has one vote rather than unilateral control over the exit, a way to reduce attachment to past success. He names Adyen, Datadog and Roblox as examples of the firm's exit work without giving realized return figures.

Stebbings describes regretting not selling a private holding. Rimer distinguishes public-market distributions and a complete sale from selling small pieces of a growing private company, where price discovery and information can be harder. He says Index does not generally try to time such incremental private secondary sales.

He says the firm's biggest exit errors have more often involved holding too long, but names Etsy as a case where it sold too early and did not anticipate the transformation under Josh Silverman. The interview does not quantify the forgone gain.

Asked to name his largest winner, Rimer declines and points to companies he hopes may become major successes. These are prospective portfolio judgments, not reported exits or realized returns.

He describes King as a lesson in persistence: the team iterated through several game formats and channels before finding stronger traction. Index initially wanted to lead a $15 million round, but another investor offered $25 million at a higher valuation; Index accepted an additional $5 million investment instead.

Rimer says Index can stretch on price for a compelling early-stage opportunity but applies greater valuation discipline in later growth rounds where the possible multiple is smaller. Partners with different views challenge one another on price, ownership and conviction.

King's team repeatedly changed its organization and market approach, in his account, rebuilding conviction roughly every twelve to fourteen months. For him, continued learning and adaptation justified giving that team time, not an unconditional rule to keep every struggling company alive.

His advice to new partners is to take time and make relatively few investments. Stebbings argues that they must still meet many founders to build a benchmark; Rimer agrees but says attention should be concentrated on the most exceptional people.

On Snap, Rimer recalls that Index had an opportunity but did not offer the full amount needed to secure the round. It was willing to invest $40 million rather than the approximately $61 million required, because that would have represented more than 10% of an early growth fund. He considers the failure to find a way to commit the additional $21 million a mistake.

He says the team believed in Evan Spiegel but underestimated how large a social platform could become, using earlier acquisitions as reference points. Stebbings notes that concentrating more than 10% of a fund in one consumer company was still a substantial risk. The account is retrospective, not proof that concentration always improves outcomes.

For Facebook, Index first offered $50 million at a $5 billion valuation and declined to invest at $10 billion. However, Rimer says Owen Van Natta later sold Index a significant secondary stake, which became a good investment. The episode title's list of misses therefore does not mean Index never invested in Facebook.

He recalls meeting a DST investor who had spent a year buying Facebook secondary shares. Rimer saw it as a lesson about concentrating time and capital on a high-conviction opportunity. His later reflections do not quantify the returns forgone by choosing a different strategy.

Asked whether great founders always look complete from the start, he says they may have a very strong spike in one area and clear weaknesses elsewhere. He believes American and European founders can present differently, so investors need to distinguish confidence and polish from underlying ability; these are broad observations, not rules about individuals.

Rimer names Nasty Gal as an important failure. He says he kept trying to save the business after partners urged him to move on. His lesson was that the emotional and opportunity cost of a struggling investment can be much greater than the number of board meetings suggests.

He had championed both an initial growth check and further funding, and felt responsible for having persuaded partners. He acknowledges putting more money into a failing situation and allowing emotion to affect the decision. He now relies on colleagues and recollection of past mistakes to keep him honest.

The best founders may not need a venture investor to succeed, he says, but useful help could improve an already strong outcome. His hypothetical example of moving from 10x to 12x or 14x is an illustration, not a measured contribution.

Rimer describes effective feedback as compassionate but direct. He credits Jeff Weiner with distinguishing understanding another person's difficulty from becoming so absorbed in it that one cannot help. He asks founders for feedback on his own support and communicates patterns he thinks they should address.

Stebbings prefers partners in one office. Rimer agrees that coordination is easier in one place, but says Index moved existing partners to establish San Francisco and New York rather than hiring an entirely new team. The aim was to carry the partnership's culture across locations.

Building the US office required time and support from colleagues elsewhere. Rimer says one challenge was retaining an outsider's perspective rather than following local consensus. He cites Index's decision not to invest in crypto during a period when avoiding the sector was unpopular.

He rejects the suggestion that Europe lacks promising companies. Index had expected Brexit to weaken company formation in London and shifted attention toward other European cities; he says that prediction proved wrong in his experience. His optimism is an investor's assessment at the time, not a complete measurement of the ecosystem.

Rimer says he adjusts for differences in how US and European founders present, while emphasizing an outsider's perspective in both markets. He prefers to invest where Index understands the culture and can judge the substance behind a pitch, rather than expand into every geography.

Insider versus outsider status is less important to him than a founder's authentic connection to the problem. He cites Index portfolio company Empathy and its founder's personal experience of grief as an example. His praise is connected to the firm's investment.

He lists family, work and personal interests as priorities, in that order, but regrets occasions when he placed unnecessary business trips ahead of family. Clear priorities still require effort and choices, he says.

In the quick-fire round, Rimer says he has become more interested in reflection and trusting his instincts. He still recognizes the role of analysis, but wants to pay attention to his first reaction to a founder and avoid using data only to rationalize a predetermined conclusion.

His memorable first meeting with Discord founder Jason Citron began with the founder questioning how Index had handled Nasty Gal. A later dinner focused on Discord's retention, and Index offered a term sheet. Rimer presents the story as an example of a founder evaluating the investor as well as the reverse.

He identifies Sequoia, Accel and others as formidable competitors, varying by sector and stage. He credits Benchmark's Kevin Harvey with generous lessons from a MySQL board relationship and says Benchmark's advice to move partners when opening a new office shaped Index's expansion.

His advice for Stebbings is to focus on the partnership and hire peers. Venture remains humbling, he says: investors keep making mistakes and should learn from partners and history rather than assume they have solved the craft.

In ten years, Rimer hopes Index has a similarly sized partnership and funds, stronger people and better returns. He expects the next generation to lead and perhaps open another office. These are aspirations rather than a forecast of future performance.