Hiring Momentum: Underrated Component of Startup Success

There’s an old adage about if you want to see what matters, just follow the money. But with startups, capital is a lagging indicator of success. If you want to really figure out the future, you follow the talent. Where do the smartest people want to work? What problems are interesting them? What companies are they joining?

From an investment perspective, the ability to recruit talent is a key sign of promising founders. Since we invest in seed stage companies, there’s often only a small team (or no team beyond the founders). But there are signs to look for, such as (A) do their former coworkers want to work with them again and (B) asking about their hiring plan. And don’t fall back on the crutch that hiring is hard because you didn’t go to Stanford or work at Facebook. Shyp made a key hire before their seed round had even closed and has built an incredible team without founders having the valley pedigree. In fact, I’d say to a company, the top performing founders we’ve backed rarely talking about “hiring” as their greatest challenge. Sure it still takes effort (some people suggest CEO should spend 50% of their time recruiting) but these startups have nailed the trifecta of:

1. Product vision and work that resonates

2. Core team + culture that others want to be a part of

3. Equity that’s perceived to have upside

Combine those three and you have Hiring Momentum, an underrated and IMO underdiscussed component of startup success and scaling. I experienced this at breakouts like YouTube where the early engineering team were largely referral based hires and observed it from further out at a number of other startups.

Harsh reality is, if you have trouble hiring the problem isn’t with the market, it’s with you. Do you lack candidates or not seeing any referrals from your current employees? Are you getting good folks at top of funnel but losing them during process? Are you making offers but failing to convert or pry them loose from their current employer? Each of these conditions suggest different challenges to be unpacked and understood. Satya and I spend time with founders on sourcing, interview process and helping to close but ultimately if you can’t articulate 1, 2, and 3 above, no one amazing is going to join your startup. Sorry, there are too many other opportunities out there to compromise.

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Do SF Engineers “Get” Art? 3 Fish Gallery Owner Weighs In…

As a venture capitalist, I drink a lot of coffee. Cafes host many of my meetings, quick email sessions in-between meetings and, when necessary, a quiet place away from the toddler. My favorite San Francisco shops each have a unique aesthetic style, despite the similarities in how they may approach third wave coffee. Often the art and music is a big component. Ritual on Valencia in the Mission has introduced me to some favorite bands, photographers, illustrators, all by what they choose to play or display. Recently there was an fun collection from 3 Fish Studios that caused me to lovingly stare at giant bears, flaming Godzillas and more, while awaiting my drip.

Folks who read this blog often might remember my attraction to local businesses and their use of technology (having worked in an independent book store as my high school job). I’ve written before about Flour & Co Bakery, Blue Bottle and others, but never spoke with an artist and gallery owner until now. Eric Rewitzer, who co-founded 3 Fish with his wife, was kind enough to share some thoughts. (Their studio is out on the Avenues by Ocean Beach and they mail order worldwide).

Hunter Walk: In recent years has technology had a bigger impact upon the creation of art or the business of art?

Eric Rewitzer, 3Fish: Technology has certainly had an impact on how art is envisioned, made and displayed.  Those that have been in the Bay Area for a while may remember the 1999 Bill Viola show at the SFMOMA.  I went to that show a half dozen times and immersed myself in The Crossing, a video projection of a man engulfed in water on one side of the screen and fire on the other.   It just blew me away – seeing video and projection elevated to high art has informed my world view ever since.  Recently the work of Jim Campbell comes to mind – an artist bringing LED to an art form driven by code – creating a visual that is unique, powerful, and beautiful.

As for how technology impacts my own artwork,  I carve blocks of linoleum with hand tools, and print with a hand-cranked etching press – a process that has been around for hundreds of years. I developed graphic arts software for years prior to my printmaking career, so going back to the fundamentals of printing is something that has motivated me from the start. I love the simplicity of printmaking, and how it does not rely on a computer. That being said, being competent with digital capture, Adobe Creative Suite, color managed workflows, and archival inkjet printers is vitally important for the business side of my trade.  I am able to utilize all these technologies in-house, and the accessibility and affordability of these solutions has been a big factor in the success of my studio.

HW: Art is such a personal purchase – do people order from your website or is it more a way to drive people into your gallery?

ER: My wife and I have strived to create a studio environment that is open, authentic, and accessible for people who are interested in purchasing original artwork.  While we get a fair amount of sales from our website, the vast majority of our sales is done directly here at our studio. Yes, art is a personal purchase, and it can be made more memorable (and pleasant) with a connection to the person who made it.

HW: You’re not just an artist, you’re a small business owner. What software/services do you use to manage sales, accounting, etc? 

ER: We wanted to drive people directly to our website from the beginning, avoiding sites like Etsy to sell our work, and that has proven to be a successful business model for us. After struggling with some home-grown solutions for e-commerce when we opened, we switched over to Shopify a few years back and have been benefitting from that decision ever since. Shopify handles all of our online sales – domestic and international – as well as our growing wholesale business.

We also benefitted by being an early adopter of Square for our in-store credit card processing. Early on their low cost of service really was a game changer for small businesses like ours, and as their products and services have grown, we have adopted most of those offerings, too.

As for accounting and bookkeeping, I leave all of that in the capable hands of my CPA.   If I had to crunch the numbers every day, I’d never get any artwork done.

HW: Have any apps, social media tools or other products been especially helpful in sharing your work? I’m thinking Facebook, Instagram, Twitter, etc?

ER: We’ve had a Facebook page for 3 Fish Studios for about seven years, but when they switched over to the sponsored ad framework a few years back we had to find a more affordable way to communicate with our growing list of followers.  Twitter did not seem to be a good fit because I simply didn’t have the time to devote to multiple interactions each day. Instagram has proven to be our go-to social-media tool as of late, and that makes sense as our work is so visual, and all of our “fans” see everything we post. Surprisingly, it seems the most effective way to reach people interested in our work is through good old fashioned email newsletters – we have thousands of subscribers and our click rates are pretty great.

HW: I encountered your art in Ritual Coffee here in SF, one of the coffee shops beloved by engineers and designers. Have you seen an increased interest in art from people who work in the tech industry?

ER: Yes, I have seen the tech community support many of my fellow artists over the last few years. In general I think the tech industry has a deep appreciation for things done well, and that translates into a natural curiosity for how things are made.  I think authentic connections with the local arts community is an extension of this.

Having been in the tech industry myself for 15 years before starting 3 Fish Studios, I have a pretty good understanding of what it is to be in front of a computer all day. The manual nature of the work I do is what drove me to it, and it has proven to be very interesting for others whose handiwork is mostly done at a keyboard.  As a result, I have an easy rapport with the tech community, and really enjoy explaining my process to them.  Their curiosity and my enthusiasm for what I do are a good match.

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Announcing Homebrew Fund II

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Single origin coffee beans from the top of the Himalayas, gathered by monkeys under full moons, in even-numbered months. Hand-ground in our office by a team of baristas who in addition to undergoing 100 hours of training over a four day period (don’t tell me that’s impossible! Just get it done!), were each the lead singer in a one hit wonder 90s band. Then a single cup of drip made with 203 degree purified water strained through a filter made of angel wings. Organic angel wings.

This was the office perk I wanted when we closed Homebrew Fund II but instead we just got back to work.

More details on Homebrew blog

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I Hope Product Hunt is Building “IMDB for Products”

Product Hunt has the best shot of building something I’ve wanted for a long time: an IMDB for Products. In the arts and other traditionally creative professions “credits” are a well understood part of professional recognition. Those efforts were always collaborative and project-based. But for some reason technology projects, despite possessing those same characteristics, never ended up with the same way to identify and recognize individual contributions. Instead you were left with boring resumes and job titles.

When we published Homebrew’s WhatIfs, our venture fund’s collection of areas we’re excited to investigate, one of the items listed was IMDB for Businesses/Products. From prior conversations with the Product Hunt team I’ve known this is an area of interest for them as well. So of course I was excited when last week Ryan announced Giving Credit, a PH feature which allows CEOs to note the folks who worked on a product. Because PH has a community (and ability to drive traffic to a product), there’s motivation for a CEO to keep their company profile complete and lively, to foster conversation around it. Why does this matter? In response to my request, lots of people sent me links or mocks to their ideas for a solution. The challenge those people failed to realize is that the issue isn’t with building the webpage or database structure to house this info but rather the community and incentive which causes data to be entered, verified, maintained. IMDB kickstarted their site with canonical data already available about movie credits. The tech industry has no such kickstart opportunity. It will need to be full self-assembled.

Having gotten the chance to know Ryan and Product Hunt before it was RYAN and PRODUCT HUNT, I enjoy seeing them gain supporters and momentum. If they can also deliver on one of the resources I’ve thought could actually compete with LinkedIn, well, even better for them and their investors!

Beyond SKUs: Dipping Our Toe Into Hardware Investments

Often the best way to learn is just to do it and same holds true in venture. When Homebrew launched two years ago, Satya and I knew that smart hardware was going to be important to our Bottom Up Economy thesis but also that neither of us yet had meaningful experience working alongside the best hardware entrepreneurs at the seed stage where we invest. And since our model is to typically play a leadership role in financings, providing value beyond capital is an important promise we make to founders. So we figured that we had three choices to close the gap:

  1. Go Big Immediately: Fund 1-2 Hardware Startups With Our $500k-$1m Checks & Hope We Picked Good Ones
  2. Stay On Sidelines: Spend Time Researching, End Up With Market Map. Then Make Investments.
  3. Learn Alongside the Best Founders: Make Several Smaller Supporting Investments in 2014. Write Lead Checks 2014-15.

We selected #3 believing that you can’t practice from the sidelines. Over the past 12 months we’ve made three investments in smart hardware companies which we believe have the potential to be amazing innovators and huge businesses. One was launched today – home wifi via eero – the other two are operating companies which haven’t yet announced Homebrew as an investor. In all three cases we were lucky enough to be welcomed in by founders who knew we were to help but also to learn from them.

During the twelve months we looked at many interesting devices. Some we dismissed out of concern for the challenges of production, pricepoint or lack of market demand. There were many that I’d describe as compelling SKUs but the path to platform was fuzzier. What I mean is, it’s really hard to build a venture-scale business selling individual hardware products at retail pricepoints. And at seed stage you’re working off a prototype and *maybe* some crowdfunding data. The question in our mind was always, assuming you put this hardware in a sufficient number of business/consumer hands, how do you keep making revenue and even increase LTV without ever having to sell them another SKU?

We couldn’t be happier with the three companies we’ve backed and it gave us confidence last fall to write a co-lead check into a very early carbon fiber manufacturing technology startup with our friends at a local incubator. Having gotten our bearings and now able to articulate how Homebrew is a great investor partner to these types of companies, Satya and I are excited to more aggressively back more early hardware teams. You might even see some gracing our WhatIfs list.

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Homebrew Investment: eero Home WiFi

It’s fun investing in things that people want. And with today’s launch of eero, the best solution for home WiFi, it seems the founders aren’t alone in wanting better home connectivity. As we write on the Homebrew blog:

Increasingly the modern household has numerous devices which rely on strong, consistent internet connectivity. First it was work productivity and entertainment – laptops, streaming music and video – but increasingly it’s our thermostats, kitchen appliances and security cameras. “Smart” devices can’t be smart if they’re offline.

eero is building a hardware and software solution to create a smart mesh network within your home. We’re proud to play a supporting role in their financing. Learn more and preorder at geteero.

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Silicon Valley Is Still Best Place to Build a Startup But…

I’m an unabashedly pro-Silicon Valley homer. 12 of Homebrew’s first 17 investments are based here (four in NYC and one in Salt Lake City), attended grad school at Stanford and coming up on Year 18 living in the Bay. Midway through my career, this is where I want to be and if I was just starting out, it would probably be the same story. However, what Silicon Valley thinks about your startup has never been less important. And it’s interesting to consider why.

When I got out to Stanford in 1998 it was still the dawn of the consumer commercial internet. Bay Area early adopters were generally representative of the people who would be getting online in the next few years. Largely American/Western. Largely white. Largely middle class. Largely using AOL (or another dial-up service) at home and some network connection at their white collar desk job. This homogeneity was useful in the sense that if you liked something, it was likely that there were other people similar to you that would also like it. Not because VCs or SF hipsters or Stanford undergrads were especially insightful but because the Internet population wasn’t as diverse as it is today.

Fast-forward to 2015. Billions of connected people across the world from all geographies, cultures, socioeconomic situations. Realities very very different than the Bay Area status quo. It’s never been more dangerous (or foolish) to sit here in SF and pronounce something as a failure just because you “don’t get it” or “haven’t heard of it.” Conversely, teams across the world can develop products for themselves (or their parents, their kids, their friends, etc) and find that they can reach hundreds of millions of people, without needing adoption in the US.

It’s not just the world coming online that’s changed the game but also monetization options spreading. Traffic outside of US, Japan and handful of European countries used to not matter because the internet was primarily ad supported and the majority of the world hadn’t yet brought their businesses online. How different today! Micropayments, direct transactions, ecommerce and so on.

Global entrepreneurs have access to audience, to monetization and, increasingly, to local capital. It’s why I believe early stage startups aren’t “over-funded” but under-funded by at least an order of magnitude. You just need to zoom out of 415, 650, 408 sometimes.