Learning from 20VC interviews, round 3
Highlights:
- the only way to learn investing is to invest
- investor role must include setting/reaching milestones
- this is a business of outliers
- build a succession plan (even for a fund)
- best definition of leader: leading teams by defining what game is being played and how the team will be measuring success
Lyon Wong from Spectrum 28
Founding GP
You don’t need to be a great operator to be a great investor
- it’s fair unique skill
- get good at investing by investing. Period.
- having an operational network is what’s really important
Venture is getting more competitive
- delivering relevant experience in near real-time
- that’s why you need a network of operators
LPs are much more conservative in 2016 vs 2015
- are you really able to return capital
- skeptical of exits
He increased the fund size because they wanted to build relationships with LPs who would be important later on
Experience with [Seed → Early-stage → Late-stage]
- seed is crowded because successful operators are now investing
- gap is capital-intensive seed and team-building post-Series A
They are neither a “horizontal” fund nor a “vertical” fund
- opportunistic on maturity and vertical per quarter
- not trying to build and maintain deep expertise per quarter
- building a rep for delivering value
- facing both the LPs and the entrepreneurs
VCs need to help companies identify and reach milestones
- measurable value
- didn’t announce their fund until one year in
- others can look up portfolio companies and ask them about the fund
Individual vs team dynamic within the fund
- incentivizing teamwork (everyone converges on one industry)
- creating an institution
- passing on to successors
Jesse Middleton from Flybridge Capital Partners
Joined WeWork very early on
Recently transitioned to VC after several years of angel investing
VC is a business of outliers
Operators that tend to be more successful focus on one thing at a time
- but are capable of doing everything if necessary
- being adaptive to a variety of problems
Start with a hypothesis
- pay attention to the signals around you
- embrace the tension between visionary and stubborn
Investors are there to help the company being as successful as possible
- critical feedback in a friendly way serves that goal
Shift from angel to VC
- thinking about both the portfolio companies and the fund
- developing pattern recognition by listening a lot
- working with GPs who have decades of experience
- reviewing Flybridge data
- seen 18,000 companies and made 80 investments
- what won? what didn’t?
VC is a slow-moving business with long feedback cycles
What makes you good at problem-solving?
- being able to learn rapidly
- decompose the problem into actionable chunks
- this skill set can be put to use with portfolio companies
Look at a problem at face value when it hits you
- this could always be worse
- what opportunity could be embedded in this problem?
Optimizing time
- :25 or :50 minutes to allow for follow-up
- takes notes via tweets and emails himself
David Pakman from Venrock
Invested in Dollar Shave Club
Ran several subscription businesses as an entrepreneur
- requires low churn and large mass market (not niche)
- those are the key metrics
Seed investors didn’t follow up in the Series A
- hard to see huge exit from e-commerce
Good to spread risk with multi-party seed investments
Without a strong lead investor, need to articulate long-term funding strategy
- who will be the follow-on investors?
Look for non-consensus to start, then eventually consensus
- Seed/A/B → C/D+
Big Q for e-commerce startup: Will Amazon “Amazon” you?
Unilever’s pitch to Dollar Shave Club: you can “acquire us” and our resources
- didn’t need to fund distribution channels
- could just exploit Unilever’s existing channels
Look for areas that haven’t been innovated in the last few decades
- built something great and establish a premium brand
- collect data and use it to iterate on premium then develop other product categories
Adam Nash from Wealthfront
CEO now, but started as a customer
Came from LinkedIn, where he watched Reid Hoffman bring in Jeff Weiner
- great way to transition leadership
What makes a great product manager?
- everything has to come together
- not obvious what the lines are for software products
- thinking about “Why?” a lot and how tradeoffs were made
What makes a great leader?
- leading teams by
- defining what game is being played
- how the team will be measuring success
- organizing a team of experts not paying too much attention to detail
- thinking about the 2–3 year timeline
Scaling Wealthfront
- investing in cross-functional teams
- finding the leader that can take the helm
- empower others to be the best they can be
- also building a succession plan
- put the company first
- what happens if I’m not here?
AI/automation can take away tasks that people don’t want to do
- also do a much better job
No mission statement @ Wealthfront — just a core belief
Everyone deserves sophisticated financial advice.
We are emotionally unsuited to make financial decisions every day
Good investing is very boring
- doing the little things right for decades
CEOs need to be brutally prioritized
- the most important things get done every day
- keep a view on the important 2–3 year out opportunities
Differentiate timeliness of answer
- 50% answer now or 80% tonight
- or delegate?
Mamoon Hamid from Social Capital
VC = a partner in helping someone who is trying to change the world
How can tech make an impact
- where hasn’t it made a big dent?
Started with 30 year time horizon
- the GPs were all in their early 30s
Fund cycles are too short
Invest 50/50 in longer cycle businesses
- healthcare, biotech, etc
Good VC practices
- have an near-impossible mission statement
- recruit people who have been successful but still have something to prove
- use Slack bots to solicit weekly feedback
A dozen partners, each with their own team
- growth, data science, marketing, talent, discovery…
Facilitate inflection points
Have to earn the right to do more
- wins help build confidence
Tech correlates to growth and profit
- hence largest market cap
Founders take up the mantle and never want to give up the lead
- the job is never done
- think five steps ahead
- execute the next 1–2 steps
Clinton Foy from Crosscut Ventures
Screwed out of an Oculus Rift deal by VCs
- wanted to know who VCs were
Empathy/compassion needed for VCs
Deal flow = firehose
10–12 investments from 400 meetings based on 5,000 prospects
Not a lot of assistants to distance investor
VCs must be excellent long-term actor
- relationships can’t erode over time
Highest bidder doesn’t always win
YC is flipping power dynamic toward the founders away from the investors
Importance of supporting VC community
- re-investing through content/relationships
