Hey Buddy, Can You Spare a Vote? My SXSW Panels.

As many know, SXSW uses a group voting process to help influence what panels are selected for their event. There are four panels that I’m part of for 2015’s event and if you had a moment to click on over and vote for our submissions, it would be great. And also groovy to see everyone in Austin!

1. Building Gender Balanced Startups

Everyone in tech wants more gender balance in the startup ecosystem, but the practical challenges to implementing that goal are complex, and involve many players—from the incubation/hackathon culture, to the VC community, to the startup founders and execs who must hire and manage a (hopefully) gender-balanced team. Join a leading venture capitalist, female tech leader, and reporter as they discuss the problems they’ve encountered—and offer solid advice for building a more inclusive (and therefore successful) startup industry. – See more at: http://panelpicker.sxsw.com/vote/40327#sthash.dktxr411.dpuf

2. How Your Startup Can Win The New VC And M&A Game

The tech startup world has changed dramatically in recent years with the rise of crowdfunding, a changing venture capital industry, and changes in the M&A market. Venture capital has seen the growth of many angels and smaller funds, new corporate venture firms, as well as the concentration of a small number of large funds. We’ll talk about how entrepreneurs can best build their companies, raise funding and prepare (optimize) for a massive exit in this new environment. To build successful companies, entrepreneurs need to think about these larger strategic issues and how they affect each other. We’ll also talk about the mechanics of how to develop relationships with potential acquirers and how to negotiate with acquirers. The panel includes experts in startups, venture capital, corporate development and M&A. They are at the forefront of new ways of investing in startups and conducting M&A transactions. – See more at: http://panelpicker.sxsw.com/vote/40604#sthash.cZ5Egx23.dpuf

3. Product Leads:Dictators, Democracy & the Good King

Who makes the final decision for product? Weak product leaders let consensus rule. There’s a town in Chiapas, Mexico where no law can change without unanimous agreement -anthropologists study it because nothing ever changes. Like the Mahabarata and Plato point out, the best form of government during an intense growth period is under a Good King. This is the only way product can move fast. It requires you to make fast decisions, be inclusive on ideas and brainstorm, but be very decisive to deliver speed of change.

Hear from industry leaders Paul Berry, Hunter Walk, Justin Santamaria & Shiva Rajaraman on what this means for launching and growing a successful product, today.

Amazon pushes new code every 11 seconds. How often do you push live? The speed of change may matter more than anything else. People move from liking to loving products not just because of how the product is right now but because of a because of the belief in where the product is going.

- See more at: http://panelpicker.sxsw.com/vote/41935#sthash.OwlWwKu4.dpuf

4. Unlocking the Promise of Local

For the last decade, local has been considered the next frontier for startups. But for all the promise, the landscape is littered with startups that have tried to crack local and spectacularly failed (Kozmo, Webvan, etc). Hundreds of millions of dollars of venture capital has evaporated in this space.

But finally, after years of struggle, startups across local are starting to get significant traction. And the remarkable success of Uber shows how incredible the opportunity is.

Hear from startups that are breaking out across local: in apartments (CEO, ApartmentList), local services (President, Thumbtack), food (CEO, Sprig), and shipping (Investor, Shyp).

Panelists will discuss:
-Why is local so hard?
-Why are companies starting to break out now?
-What are the keys to unlocking local?
-Will all of local be “Uberized”?
-How are the tech giants — Google, Amazon, eBay, Apple — going to play in local?

- See more at: http://panelpicker.sxsw.com/vote/34835#sthash.ehHBoWdy.dpuf

got your money

Getting Founders Some Early Liquidity Can Benefit VCs

When Google went public in August of 2004 one of the first things I did with my employee grants was sell enough to pay off my student loans. In retrospect I lost a lot of future gains by cashing out too early but what I gained was more important: peace of mind in removing the only debt I’d ever carried. Did I work any less hard the next day because of my liquidity event? Nope. The vast majority of my future savings was (a) not vested yet and (b) tied to hope for future stock grants I’d earn. Being out of debt, having a little cushion, actually allowed me to just put my head down and work, not worrying about my month-to-month bank account balance.

It’s for reasons like these that I support getting startup founders some liquidity during their company’s first few years, perhaps as early as Series A financing when appropriate. At Homebrew we’ve backed many first time founders, many of whom have struck out on their own and are putting lots at risk. They’re hungry – not just for financial success but to build a company they can be proud of for years to come. Pre-seed round they’ve done things like share the same room in a two-bedroom apartment in order to airbnb the other room. Or put startup expenses on their credit cards, far beyond their savings, hoping they can close financing for the company by end of the month.

So what should happen when these founders get past a few important milestones in their company and are able to raise healthy financing rounds at meaningful multiples? They should get a chance to sell small amounts of stock and put some money in the bank ($50k, $100k, $200k). Feel ok about going out to dinner every once in a while – maybe even take their significant other for a weekend to Napa as thanks for putting up with the long hours and uncertainty. Clear our some student debt. Get an apartment of their own in an expensive city like San Francisco.

Is there a formula for this? ie Raise $X million at Y valuation and sell up to Z%? Of course not, it’s situational and a discussion between founders and their investors. It’s a personal decision – to sell stock that you hope will be worth much more later on – but one which should be given to founders. Done properly I don’t believe it will disincentivize or send wrong signals to employees or future investors. As seed venture capitalists, we want founders to ‘go the distance’ and continue building value. It’s not clear to me that “all or nothing” is the right path forward or even that waiting until growth capital rounds makes sense. Yes, at early stages you want to maximize investment going into company operations and not private pockets but that’s why these conversations should happen openly and with structure (for example, series FF which requires Board approval to liquidate in a financing).

I conjecture there’s a secondary benefit to managed liquidity for founders: it may help diversify founder populations. The opportunity cost of a startup in forfeited salary and in-the-money equity at larger tech companies can be considerable. If you don’t have family money or a nest egg from previous wins, let’s balance that risk with some short-term opportunities. It’s not about giving founders a wild lifestyle or encouraging them to increase their personal burn (Sam Altman has a great tweet about this and I’ve written the same).

If you’ve entrusted a young founder with millions of your LP’s money, you can probably trust them to make the right choices if you offer the ability to pull $100k out of a company that was just valued $50 million.

Why Most VCs Won’t Intro You To Other VCs (Unless You Follow These Steps)

The question I get asked most often is “would Homebrew like to invest in my startup” (and we do our fair share of chasing too -> “please let us invest in your startup!”). The question I get asked second most often is “if not Homebrew, will you introduce me to some VCs who would like to invest in my startup.” There’s a reason why I won’t – because it means putting my reputation on the line for a founder I don’t really know. And in this business, reputation is very important. That said, Satya and I have made introductions on deals we looked deeply at but passed — in at least two cases these intros resulted in funding. And in many other cases we’ve pinged investors who I thought might be interested even though I didn’t look closely at the deal (usually because it was outside of our themes). What set these entrepreneurs apart from the ones where I just hit ‘archive?’ A lot. So here’s my guide to getting a VC to introduce you to other VCs:

1. DO some work upfront. DON’T just ask me to identify investors for you

Which of these is more likely to gain a response?

(a) “Hi Hunter. We exchanged some Twitter messages. I know you don’t invest in social gaming startups but do you know any investors who do?”

(b) “Hi Hunter. We exchanged some Twitter messages. I know you don’t invest in social gaming startups but I’m not from the Valley and was hoping you could give me some guidance. I checked AngelList and Crunchbase. Funds 123, 456, and 789 all seem to invest in seed stage social gaming startups. Do you think any of these three would be particularly good for me to approach?”

I receive 20 versions of (a) for every one of (b). It’s never been easier to get a sense of what industries and stages are preferred by various investor segments. Do some work upfront and then ask for confirmation, rather than just open-ended asking a VC who they recommend for your company. (b) also leaves the door open to me actually making those introductions because you’re starting to engage me in specific directed conversation.

2. DON’T tell other investors that “Hunter suggested” you reach out if I didn’t actually say you could use my name

If we’ve ever corresponded public or privately and I’ve said something like “so-and-so angel investor is really good” you can’t use that to approach said person with a “Hunter Walk suggested we get in touch” subject line. When an entrepreneur says they were referred to me by a mutual friend, I always immediately forward that note to said friend and 95% of time get back a response that suggests the founder is exaggerating the relationship. This isn’t hustling, it’s borderline duplicitous. I don’t like to be on either end of these ‘endorsements.’

3. DON’T expect me to write your pitch email for you

When I agree to make the intro, send me a new fresh email for each one you want me to forward. Roy Bahat at Bloomberg Beta gives a nice outline of what an intro email should look like. You can even forward me a sample intro email and ask for any feedback. I’m glad to look that over (but won’t always be able to spend time on your deck or product).

4. DO follow-up with me post-introduction

Close the loop. After I make an introduction you don’t have to give me a play-by-play but I’d like to know if it ended up going anywhere. I’ve had founders who didn’t tell me that one of my introductions resulted in an investment from another angel/fund. It’s not just rude but it’s a chance to continue building our relationship. I want to cheer you on!

5. DO update me periodically with news about your progress

Even if all you eventually want from me are funding introductions, you shouldn’t go quiet in-between these requests. Putting me on your “friends of” email update is a great way to keep me passively in the loop. Just ask first but personally I’ve never said ‘no’ to anyone. If we’ve gotten this far, I’m definitely curious about how you progress.

Hopefully that helps you get more investor <> investor introductions. Throw any questions into the comments and I’ll respond.

*Note, I’m talking specifically about introductions when Homebrew wouldn’t be investing, not syndicating a deal where we are participating. 

Started From the Bottom Now They’re Here: Why Startups Are Racing to Build Operations Teams

“I WANT IT NOW!” First Veruca Salt, but most recently the title of this week’s Instant Gratification series by reporter Liz Gannes. For me one common thread ran through the stories: importance of operations teams in these new on-demand businesses. Strong operations leads are as valuable – and scarce – as great designers, experienced mobile devs and the other fabled unicorn hires. The customer experience for these companies may start with bits but it ends with atoms, and that’s why an Operations team can make – or break – your startup.

When Homebrew decided to focus on the Bottom Up Economy we knew operations would be a key area for many of the teams we backed. Satya and I were fortunate enough to spend many years at Google, beginning on AdSense where Kim Scott ran the Online Sales & Operations team for Sheryl. Kim, a whipsmart founder and leader, built a multibillion dollar business and great amazing teams, so we were thrilled when she agreed to serve as an advisor to our fund. Boom.

I’d also had the chance to spend time with Uber’s Head of Operations Ryan Graves, in my mind the singular prototype for this next generations of operations generals. Undoubtedly multiple HBS case studies will be written on Uber and I’m sure one of them will focus on Ryan. We couldn’t be happier that he’s an advisor to our fund as well. Double Boom.

Now 18 months in, we’ve seen several Homebrew companies invest meaningfully in operations team but Shyp really stands out.

  • Shyp identified and hired a Head of Operations before seed funding had even closed.
  • Head of Operations sits at the Big Table, not downstream of strategy decisions.
  • Accordingly the Operations team is filled with smart, experienced best athletes having pulled hires who cut their teeth at Groupon, Rent the Runway, Birchbox.
  • Latest addition – and first expansion city exec – is James Queen who will be the NYC GM.

Shyp’s Ops team is one reason early results are so promising, customers are loving the service and Sherpa committed to lead the A Round. Pixels on screens and packages in hands. That’s the magic combo for Shyp.

Oh and by the way, they’re still hiring in NYC and SF.

Don’t Send a Banker to Do a Founder’s Job: Seed Fundraising Can’t Be Outsourced

I fund young companies. I’ve funded companies that everyone has wanted to fund, and companies that not many people had heard of yet. I’ve funded men and women, first time founders and repeat founders. Enterprise ventures and consumer businesses. Entrepreneurs I’ve met via mutual friends and ones who were a cold email into my inbox. Outside of founder integrity, I have very few absolutes about the attributes of the people and company that will be our next investment. But I’m skeptical I will EVER write a seed check to a company that reaches out to me via a banker or placement agent.

At the seed stage there are just some things you can’t outsource and fundraising is one of them. Having a banker or advisor behind the scenes helping you understand the venture process? Maybe (although there’s so much more info out there these days than 10 years ago). But having this person approach me with an “I’m representing Company XYZ which is looking for funding” email? Not the way to start off our relationship.

You don’t need an intermediary. You need to be out there building relationships with potential investors. You need to understand how to tell your story, to get someone to believe in you. Failure to do this well doesn’t just impact fundraising – it’s the same for hiring, for press, for partners. So founders, please send the email directly to me – preferably with a link to a product demo instead of a 60 page business plan.

* Remember, I’m talking about seed stage financing. As rounds get bigger, more complex, I understand the participation and leadership of bankers and advisors.

** A lawyer making an intro during fundraising is different. You’re hiring that lawyer anyway to manage your legal needs around incorporation, financing, and so on. Good startup lawyers also have relationships with investors that can help with an introduction. But don’t hire a lawyer because you think he or she can get you financed. YOU are the only one who can get yourself financed. 

*** I wouldn’t even have a business consultant portray themselves as an employee of your company that’s managing the fundraising. Again, founders founders founders. The more layers put between me and the founders, the less happy I am. And this isn’t asymmetrical – we currently don’t have any investment professionals at Homebrew who can’t bring a deal to the table for funding (it’s me and Satya).

My Daughter’s iPad: When Your Kids Show You How Something Should Work

8354050467_234e096f51_c

My toddler is the beneficiary of growing up in an upper middle class household with associated gadget trickle-down. For example, she inherited an old iPad back in 2012 during her first year of life (although she now prefers my wife’s mini).

Fairly quickly she was able to master turning it on and unlocking the screen (not to mention also firing up Pandora). Fanboys insist that the fact children can use Apple products so easily is proof of a magical, intuitive UI. Sure, that and the kid has likely watched their parents use the same interface hundreds of times before (seriously, they’re really good mimics).

Anyway, we’d sit together, iPad in her lap or on the floor, as she tried to “Slide to Unlock” using her tiny finger. Fairly often it worked as expected but occasionally she failed to drag the entire way and the iPad remained locked. This frustrated her, leading to a series of reswipes that were equally sloppy. The iPad remained locked. My expectation was that she’d now thrust the device in my direction looking for me to open it for her, but instead something else happened. She grabbed my finger.

She grabbed my index finger and pulled it to the screen, using my digit like a stylus, running it across the screen. Of course! After seeing me open the tablet multiple times with a motion similar to what failed her, my daughter’s assumption was that the magic was tied to the finger, not to the gesture. The iPhone 5s with Touch ID hadn’t yet been released but it was heading in the same direction that my toddler intuited. The unspoiled eyes of a one year old just couldn’t imagine it working any other way.

The fact that the generations behind me — those who grew up with digital technology from Day One- would have very different ideas about what the world needs was one of the factors which motivated me to start our VC fund Homebrew. After a dozen years helping to build products, the chance to back founders and see the world through their eyes was too compelling. It wasn’t that I was exhausted of ideas but rather I wanted to bet on the field. And resist the urge to explain how things DO work but instead listen and watch as to how they SHOULD work. But I’m waiting until my daughter is at least in kindergarten to offer a term sheet.

photo credit: https://flic.kr/p/dJdG9T