Rob Hayes on Corporate Funds, His Uber Investment, and the VC Business

Rob Hayes

Harry Stebbings sat down with Rob Hayes of First Round Capital. Hayes joined First Round in 2006 and has led investments in companies such as Mint.com, Gnip (acquired by Twitter), Square, Planet Labs, and Uber. He began his career as an operator at Palm and later started the company’s corporate venture fund. After Palm, he joined Omidyar Network, where he led most of the venture deals while there. Below are some of the highlights of the interview. Listen here to the full podcast.

On corporate venture funds

I think they way corporate funds tend to get started is that bigger companies see smaller companies achieve a lot of success, often by leveraging partnerships with these larger companies as a channel. The large companies then think that if these companies are achieving success on their backs, they should have a piece of this success. They then go out and try to get an equity share out of these companies so that if a company blows up they will see some of the benefit of that. The challenge is that these are strategic funds, and strategy changes, CEOs change, the company could start doing more poorly than they did when they started the venture fund, etc. I see a strong correlation between when these corporate funds get started and the top of the VC market. For example, I started the corporate VC of Palm in 2008 at the top of the mobile market.

He discusses his investment in Uber in great depth:

5:00 — How did the seed investment in Uber come about?

6:30 — Did you have any idea at how big the company would grow?

10:00 — When did you first realize that Uber would become incredibly huge? And what do you make of their aggressive expansion?

11:45 — Was the Uber seed round very competitive? And how did that change your perspective on seed investing?

On investing and venture capital

There are a lot of people who get into venture because they think they can make a lot of money doing it. That’s the wrong reason. And that’s certainly not the reason I got into venture. There are way easier ways to make a lot of money than going and being a venture capitalist. I do it because I get to wake up every day and meet a lot of new people who have new ideas and are building companies that I would have never considered before. And for the companies that are kind enough to take our investment, I get to work with these companies and help them along the way. The biggest joy I get is walking out of a meeting with a founder I work with and feeling like I’ve added value and helped to make it a more successful company. That never stops. I still get those moments. It’s not about the win-loss sheet. It’s about the day to day work and really enjoying it.

This is a long term business and reputations are made over careers and they are lost over deals.

Anyone I meet today, even if they have a company I’m not going to invest in, I want them to remember the experience of talking to me, the feedback I gave, the introductions I was able to make. So that even if I’m not an investor in their first company, they still remember I hope they would reach out to me because I was a relatively good guy in the whole process.

A product manager’s approach to venture capital

There is constant change at First Round. We all come from a product orientation. First, you figure out your customer. Your customers here are the founders you work with. Many VCs post-internet bubble became so focused on raising funds that they shifted their orientation to view their LPs as their customers. Our investors are very important to us, obviously, but I think of them as our shareholders. If I make our customers very happy, then our shareholders will also benefit. For 35 or 40 years, the venture capital product was relatively stagnant. It was money and partner — that’s what you got. What we said was that, “Our money is just as green as everyone else’s, but we can build a better VC product.” If you’ve ever worked in product, the first thing you know is that products are never finished. There are all these things you can do to make them better.

Favorite book — Travel’s With Charley by John Steinbeck

Biggest influence in VC business —Bob Kagle of Benchmark

The investment that got away — Dropbox

Favorite blog — Dan Primack’s Term Sheet & Talking Points Memo

Most recent investment — wifi system called eero

Writeup by Charles LaCalle at Dreamit Ventures @charleslacalle @dreamit

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