Second Seeds: The New Normal But Know This…

I delete my tweets periodically, so wanted to capture some good discussions regarding seed bridges and founder/investor expectations.

These two previous blog posts provide context

The Three Types of “Second Seed” Rounds: Too Cold, Too Hot and Just Right

For Fundraising, Seed is No Longer a Round, It’s a Phase

So what can mess up a seed extension process? Expectations gap!

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Then folks like Science’s Peter Pham and Breather’s CEO noted this maddening point about data

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As a seed investor, I find myself both as “existing investor” and “potential investor” depending on the situation!

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And as Agrilyst’s CEO points out, early stage pricing is almost always a “who knows?!?”

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Whatever your situation, just hope to play on and stay in the game! 

Investing Outside Of Silicon Valley: Now More Than Ever (Where “Ever” = 2013)

Homebrew is making more investments outside of Silicon Valley than we have in our history! That statement might be more dramatic if our firm was founded in 1983 instead of 2013, but speaks to a handful of changes in seed investing. Some of these are generalizable and our friend Semil Shah does a nice job covering several in his post “Investing Outside the Bay Area.”

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What I want to emphasize though, is we don’t think about this as “value shopping” (trying to get cheaper valuations elsewhere) or “competitive pressure” (we believe our product is preferred by a subset of great entrepreneurs and there’s more than enough opportunities to deploy our funds solely in the Bay Area if we chose to do so). No, instead we are simply looking for minimally the right team to solve a big problem and even more opportunistically, companies that might actually be advantaged by a non-NorCal homebase.

Satya and I tend to approach strategy in a framework and here’s how we’ve managed the question “where will Homebrew invest?”

Phase 1 Bay Area + NYC (2013-14)

Starting out we really wanted to ensure we got our offering correct – could we effectively deploy capital + sweat + reputation to work with great seed stage founders for the first 3-5 years of their company. Could we ensure to support them as people, not just as executives. And could we increase the velocity and probability of their success.

Homebrew is basically built to make these goals our priority and it comes with a set of tradeoffs, for example, our fund size probably has a ceiling. Early on we also self-imposed a geographic constraint because we didn’t want to spread ourselves too thin and risk disappointing the founders we backed. So we said, outside of very special circumstances [hi amazing SaaS company Weave in Salt Lake City], let’s only invest in the Bay Area and NYC (here’s a 2013 post which answers ‘why NYC’).

Did we miss some great companies in places like Seattle, Los Angeles, Denver and so on? Yes we did! But we were optimizing for building a foundation for Homebrew, not chasing every deal everywhere.

Phase 2 California + NYC (2015-2017)

As we started investing out of our second fund in the middle of 2015 we felt like we had our sea legs under us operationally. And at the same time, came upon a handful of amazing opportunities in Southern California (two in LA, one in San Diego). Pull and push simultaneously caused us to expand our “target geos” to SoCal (defined as we hold ourselves accountable to be proactive there from a dealflow perspective). It also gave us reasons to be in Los Angeles more frequently. Which is nice. [sidenote: I had teams in LA for the entirety of my 9+ years at Google and spent a summer internship earlier in my career so I’ve always been #LongLA].

But even with creeping the Homebrew business down LA-way we still routinely said “No” to companies elsewhere, even when they looked interesting, because we wanted to get to “capacity” in terms of our commitments and Board Seats before judging whether we could properly go beyond these two states and still meet our goals for Homebrew.

Phase 3 US and Canada (2017+)

Where are we now? Literally a broader mindset. Two LA, one San Diego, one Salt Lake City, two Boston, seven New York City. And our next two investments look likely to be in two cities new to Homebrew. We’re more confidently investing in the best companies no matter where they’re located in the US or Canada. We feel like we have a non-local playbook in place – not just for opportunity sourcing but more importantly, startup-servicing ongoing. Our success isn’t dependent upon being geographically diverse but we don’t see a reason now to artificially constrain ourselves. How will this play out? Will we ever invest internationally? Is the Bay Area still the absolutely best place to start a company of potential significance? I’ll let you know in a few years 🙂

 

 

“The folks who have the most outsized successes are the least likely people to have been doing it for the money” – Jason Shellen Reflecting On His Time At Google, Startups

Jason Shellen and I overlapped at Google but for some reason, our best conversations always happened outside of the Plex – like on a bus heading to Google’s pre-TED dinner in Monterey, or some random startup event in San Francisco. Jason joined Google when Pyra Labs (the company behind Blogger) was acquired. We’re now both out of Google for enough to time to sit back and reflect on our careers, and the most important question of course, WHO KILLED GOOGLE READER (Jason was its founding PM).

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Hunter Walk: So Jason, now that we’re old and can reflect a bit, what have you found – for better or worse – as a common thread in the career decisions you make?

Jason Shellen: I’ve always tried to work on problems I can’t stop talking about. Early in my career, I was compelled by clichéd notions of “changing the world thru technology,” but it was true! My last year of college, I took a class called “Web Publishing”, and I was transfixed. I thought everyone should have the ability to publish to the web. When the opportunity to work on Blogger came along, my values lined up so well that I essentially volunteered for a while because it was so satisfying to see it come to life. Getting to work on a product you love is motivating.

I’m incredibly fortunate to be able to choose what I work on now. Sometimes that means building an exciting idea into a product and sometimes a company. Often, it means selling that product or company to join a larger company. In those cases, I usually ask myself “Am I going to be able to make a positive impact on the company?” and “Can I get into trouble?”. Good trouble: new products, prototyping the future and defining a new way to build products. I like having room to grow and develop in whatever I do.

I’ve had opportunities come up in gaming, banking or the gig economy but when I don’t connect with the core problem, I usually move along even if it’s not in my financial best interest. Recognizing that I have a “Not To Do” list makes it easier to pass those along to friends who are a much better fit.

HW: We were fortunate enough to “grow up” in tech around a bunch of people who are now Bold Face Names – you know, magazine covers, lots of wealth, etc. Is it weird seeing people you know get famous in that way?

JS: I grew up in Silicon Valley and had always found technology fascinating, but I never thought we would be at this point of stardom for founders and tech execs. Now I get to play “Who does Dad know?” at the magazine rack with my kids. A lot of it is refreshing to see since it’s a more inclusive and diverse crowd than just “People that look like Dad.”

The wealth is fascinating because many times the folks who have the most outsized successes are the least likely people to have been doing it for the money. The most impressive of these are the ones who recognize that they should put tech (and their wealth or notoriety) to work for traditionally under-represented voices and lay the groundwork for the next generation of philanthropy.

HW: It’s 11 years since you left Google. Should you just have stayed?

JS: During the harder parts of startup life, I asked myself that question more than a few times. I still have a soft spot in my heart for Google (especially the days of under 1000 employees). It was a launch pad for many pivotal points in my career and an intellectually stimulating place to spend my time.

Before I left, I had a moment of realization that Larry & Sergey had their time in the garage and I wanted the same thing. I wanted to go back to building with a handful of people committed to solving problems in new ways. I have been able to do that a few times over, and it’s rewarding. I wouldn’t swap that for the last eleven years.

When I was forming a new company, I wondered “who do I want to work with?” and a considerable amount of former Google collaborators and colleagues had all moved on to start their own companies. It’s a weird problem to have. It felt like we had all traded to different teams.

HW: You’ve raised VC funding a few times, and I know always had multiple investors interested in backing you. How’d you choose who to work with?

JS: The honest answer is the first time I raised money after I left Google I didn’t know how to choose a VC. I didn’t talk to a lot of the usual suspects because I thought that my ideas were too small or not ambitious enough. I had a lot of inbound interest, and luckily some of those people turned out to be great business partners.

I’ve found that a smart investor is someone you’ll spend a lot of time talking with about your core principles and how you see the world. Your idea may change, the product may change, the company may change so you’ll need to be able to pick up the phone and talk with someone you trust about what comes next. It’s not just about the money. It’s whether they provide sound advice, ask great questions and make helpful connections.

HW: Seriously though, who killed Google Reader?

JS: I wasn’t consulted! I left Google and then five years later they retired it. I heard it might have been a Google Plus executive but he’s not there anymore. From what I understand, by the time Reader was killed, the usage numbers were not on an upward trajectory. Pair that with blogging on the decline in the face of Facebook and Twitter and you have a murky situation. It was also at a time when Google Plus had been given a lot of resources and then hadn’t lived up to internal expectations, so maybe it just drew the shortest straw.

Reader never had an easy time. It was nearly killed before launch in the annual product priorities process. I think it was on a list of “Top 100 projects that should probably not launch” in the summer of 2005. In October 2005, after the beta launch, my manager told me that I should probably disband the team and stop hurting the careers of the engineers involved and find a new project to join. I did not disband the team, and things improved quickly with rapid product iterations (and lots of users).

I’m still proud of the team behind Reader and have fond memories of that time in building a new product at Google. It would be amazing to see what Reader would have become if it made it through the chasm like Google Photos was allowed to do.

Thanks Jason – follow him on the Twitter

 

A Handmade & Instagrammable Happy Birthday To You! (aka Punkpost App Makes Beautiful Greeting Cards *First One Free*)

My instagram feed is a combination of coffee roasters, 80s pro wrestling, @IronMaiden and #BulletJournals/Doodlers/StudyNotes. That last one might need explaining if you’re unfamiliar with the culture. Buzzfeed’s helpful WTF is a Bullet Journal provides a bit of an overview, but really you can simply look at this image and get a pretty good sense.

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I just love the personality dripping from structured handwriting, sketches, doodles and the like (note, there are also a bunch of fun Instagram doodle accounts – you can see who I follow if interested). So, not surprisingly, when a friend introduced me to Punkpost, it kinda blew my mind.

Punkpost lets you send handwritten cards – birthday, get well, congrats, anything! – drawn by artists and mailed directly to whomever you want. These unique creations are a flat $6 (plus any add-ons like glitter confetti or prints of photos you’ve uploaded) which isn’t much more than the drab stock cards lining your pharmacy aisles. Punkpost’s founders are a wife and husband team here in San Francisco and they’ve truly thrown their whole selves into this business.

I urge you to try them out and see what you think. They’re available via the web and an iPhone app (using app your first card is FREE).  

Very few products surprise and delight me like Punkpost has – thank you Lex and Santiago for your hard work! And best of luck with your startup.

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The 20% Rule: Some Success Porn From Theo Epstein That’s Actually Pretty Good

I didn’t click on that fake Warren Buffett tweet and I don’t stan for success porn like “Five Things Successful People Do In Their 20s.”

Buuuuuuuuuut, this advice from Chicago Cubs President Theo Epstein is pretty good.

“Whoever your boss is, or your bosses are, they have 20 percent of their job that they just don’t like. So if you can ask them or figure out what that 20 percent is, and figure out a way to do it for them, you’ll make them really happy, improve their quality of life and their work experience.”

He’s not saying “work 120% to get ahead” or kiss your bosses’ ass by doing their grunt work. It’s a bit more subtle than that. And a tactic that matches getting exposure to new opportunities with understanding the nuts & bolts of what your boss’ job *is,* so that you can ascend to a similar role sooner.

Oh, and GO YANKEES!

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“You need to be extremely good at picking up on subtleties and subtext in communication and this is not something men are famous for” – Taylor Lorenz on covering Internet Culture

I love anthropology even more than I love algorithms. Watching people use my products like Second Life and YouTube was always fascinating because unexpected things happened every day – emergent behavior. Taylor Lorenz is one of the best reporters right now in finding and sharing these stories. It’s gotten to the point where I can sometimes read an article title and just know it’s her byline. She was kind enough to let me fire five questions at her. Here you go!

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Hunter Walk: Can you share a bit of your background, what led you to journalism and how you ended up covering tech for The Atlantic?

Taylor Lorenz: My career path is hard to describe. I actually made a list this year of all the jobs I had before my current one and it was 38. Basically, I worked in a bunch of other fields and around 2010, while I was working a series of shitty temp jobs, I discovered Tumblr and it changed my life.

I ended up creating a bunch of semi-popular tumblrs which lead to a job running social media for a bunch of fortune 500 brands at what was then one of the best creative agencies in NYC. I did that for a couple years then worked in strategy and social media roles at various media companies.

I always wanted to report on the stuff I do now, but it was impossible to find anywhere that would let me do that full time. I kept working in strategy, biz dev, audience development roles and writing on the side. Eventually, I started writing freelance for Cooper Fleishman who is one of the greatest editors of all time.

Cooper encouraged me to report on what I cared about, not just follow whatever beats were out there. He also helped me come up with ideas for what I consider some of my best work. The stuff I wrote for Cooper at Mic caught the attention of a bunch of editors who offered me full time jobs. Once I had a full time job covering the stuff I do now with Ben Collins, (another one of the greatest editors of all time) as my editor I feel like people finally started paying attention to it. In April The Atlantic recruited me and here I am.

There’s like 900 forks in the road between that, but that’s the gist.

HW: You’re on a really amazing run of insightful, funny and unique articles about social media, tech and teens. What’s your process for finding these trends and nuggets?

TL: I love writing about emergent behaviors and evolving social norms on different apps/social platforms. I end up writing mostly about teens because they tend to use technology in really weird and creative ways, but I have covered lots of other groups and communities. For instance. I recently wrote a piece on how Twitter became the top social platform for the nudist community.

I find this stuff always by going down random rabbit holes online. I have eight Instagram accounts and spend a lot of time on the Explore page.

HW: When you get a tip or happen upon a trend, how do you validate it’s actually something meaningful and not either just a few people doing something weird or you’re being pranked for the lulz?

TL: Most people don’t try to prank me? I spend enough time on the internet to know that if someone DMs me asking me to cover bofa I’m like, lol. I think if people in whatever communities you’re covering see that you’re earnest and not some disingenuous person who’s going to use them for clicks, they’re pretty helpful. Granted, I don’t cover political trolls on 4Chan or people who will almost always lie for fun.

The useful tips I do get are from people I trust who spend way more time on the internet than I do. Before writing about anything I talk to a lot of people and lurk for a couple weeks. I would also just say that sometimes “a few people doing something weird online” can still be a great story! I think people have respect for you as long as you’re not trying to oversell something or dramatize it (like teens are snorting Tide Pods for Bitcoin or whatever).

HW: Anecdotally I feel like much of the best “tech + culture + society” writing right now is being done by women – you, Alyssa Bereznak of The Ringer, Nellie Bowles and Erin Griffith at the NYTimes, Jessi Hempel at Wired (just to name a few). I wonder if this gender split strikes you as accurate and if so, does it surprise you at all?

TL: First of all, Nellie, Alyssa, and Erin are three idols of mine. I’m grateful to even be listed in comparison to them. I’d also add Jamie Lauren Keiles, Amanda Hess, Katie Notopoulos, Julia Alexander, and Paris Martineau to that list.

The fact that we’re all women is something I’ve thought about. Amanda Hess had a great video recently where she talked about internet mysticism and the rise of astrology in female communities online. At the end of the video she talks about male mysticism and how that takes the form of conspiracy theories and Alex Jones-type stuff. I’m underselling the video, but it made me consider the way men and women approach beats, particularly when it comes to online culture.

I think different people are drawn to different aspects of life online and it does sometimes feel like men are more drawn to covering some of the most toxic parts. That’s not to say that there aren’t many great women covering these spaces (Kelly Weill, my former colleague at The Daily Beast, for instance, and many others).

When it comes to online culture coverage though, I think you need to be extremely good at picking up on subtleties and subtext in communication and this is not something men are famous for. Still, writers like my colleague Alexis Madrigal, Miles Klee at Mel, or Max Read and Brian Feldman at New York Mag all write about Life Online with great nuance.

HW: What/who are your internet guilty pleasures, or since you cover this world for a living, do you actually just like to back away from the screen when you’re not researching/writing?

TL: I watch four to six horror movies a week. I’ve seen so many that my bar is really low and I’ll watch almost anything in that genre.

I also read and watch a lot of trashy sci-fi. I’ve seen everything in the sci-fi and horror categories in Netflix, Hulu, HBO. I read a lot of fan fic for shows I like that ended. I also enjoy hiking upstate!

Thanks to Taylor for giving me the chance to ask her a few questions. Follow her on Twitter @TaylorLorenz

Why This Latest Facebook Feature Is Likely About Civility, Not Virality

It’s hostage-movie gospel that you must get kidnappers to use your name, look at pictures of your family, learn about your life, anything that humanizes you and makes it more difficult for them to cause you harm. Maybe it’s just because I’ve seen too many of these flicks, (Taken 4 anyone?), but similar motivation came to mind when reading about Facebook’s new “Things in Common.”

CNET’s Richard Nieva reported on a Facebook feature which displays what you have in common with another commenter in the discussion threads on a brand or publisher page. For example, see the “From Phoenix, Arizona” on the screenshot below.

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If this was Facebook 2012 you might think they were trying to show you other people to connect with and befriend. That is, this feature was another exploration of how to expand the social graph. But I see it differently – I think this is about civility, not virality. Specifically, does it decrease flame wars and increase likelihood of responses.

danah boyd coined the term “context collapse” to define one of the challenges in social media. That we often see other people’s statements totally devoid of any context – of who they are, what else they believe, and so on. In this case Facebook is using tribal intersectionality to show you how you’re similar to the commenter, probably in a way that suggests positive feelings – oh, we’re from the same town, like the same sports team, attended the same college, both have kids.

Why? Because maybe that lets you bring a little more context (or even kindness) to the interaction before you go into rage post mode. You might hesitate before dunking on someone for their, in your mind, ridiculous beliefs and respond in a more civil manner. Sort of a proactive deescalation. makes you more likely to respond and help someone if they’re asking for advice.

It’s smart and while just a test, points to how Facebook can use the information they have about us in ways that aren’t just ad targeting or friend finding. I have to imagine these experiments are exciting for the team working on them. I mean, if you’re a Facebook engineer would you rather just be tasked with getting another few seconds of daily engagement and a slight increase in ad clicks -OR- have the chance to invent the metrics and dashboards that will monitor the health of the web going forward?

Me! On the Digiday Podcast (Transcript & Link)

Brian Morrissey is EIC of Digiday and we met online. That’s less of a confession and more an admission that I was surprised to be invited on to his podcast, given that they usually focus on the people actually doing the work in media, advertising and commerce. Maybe he was just being nice because I interviewed him on my blog earlier this year.

Anyhoo, the podcast was fun. You can listen here. Or if you’re more the reading type, I got a transcript made:

The Best VC on Instagram

The world doesn’t need your content, but if you enjoy creating, you should do it, without hesitation. That would be my advice to you as a human. But whenever a fellow investor tells me they need to tweet more, write more, start a podcast, etc, for purposes of content marketing, I tell them “sure, if you enjoy it. And pick a medium that you actually enjoy using, otherwise it’ll never work longterm.”

Insta VC

So it made me smile when I found a VC using Instagram in a way that I find brilliant. thingtesting is a classic product review account but with a lot of Instagram-native style (and new CPG brand, D2C emphasis). Its author is a woman named Jenny Gyllander, an investor based out of the UK. I don’t know Jenny but she’s found a lane that’s fun, visual, whimsical and unowned among the yet-another-Medium-post landscape.

 

Go Jenny!

 

Old Man Yells At Clouds (and Aspiring VCs As To What This Industry Really Is About)

I get a lot of inbound from friends, acquaintances and Twitter followers about making the transition from Operator to VC. Here are the top three reasons – lightly paraphrased – for why venture interests them:

  1. “I love working on products and it seems awesome to be able to work on 10 at one time instead of just one”
  2. “It seems intellectually stimulating, spending your days talking with the smartest people and investigating new technologies”
  3. “I enjoy helping entrepreneurs and could see myself doing that as a career”

I have never heard someone say “I want to be an investment manager and a salesperson” despite this being THE fundamental job responsibility of a venture capitalist. And I think that’s one reason why we’re seeing more boomerangs from Operating to Venture and then back to Operating (or changing VC firms). People didn’t actually realize what the job was going to be and didn’t like it or underperformed or realized they chose the wrong firm (in terms of culture, strategy, quality) from which to base their career.

Now, the way I personally approach this “investment manager and salesperson” responsibility is similar to the “I breathe to live, but I don’t live to breathe” mantra. Satya and I started Homebrew not because we wanted to optimize for investment management roles in our careers but because we believed practicing early stage venture in a deliberate manner would be the most satisfying and impactful way to spend the second half of our careers. These objectives do include variations on the intellectual stimulation, assisting entrepreneurs to succeed and so on that I hear espoused by aspiring fund managers. BUT we also had full understanding of, and embraced, the responsibilities that came with the role.

Thus far we’ve only proved to be good fund raisers and need to prove that we’re also good fund returners — what I’m trying to emphasize here is that you cannot shy away from the core value proposition of our business: you are taking money from others and returning it at a risk-adjusted multiple. This doesn’t mean LPs are your customers (I strong believe LPs are your partners and founders are your customers), but I want to emphasize that realities of venture capital don’t match the content marketing we do as an industry. Let me also emphasize that I believe the question of “founder friendly or not” is orthogonal from embracing the responsibilities of an investment manager. Venture is a long-term, repeatable game and, at least the way we practice it, I believe our interests, and values, are greatly aligned with early stage founders.

So if we’re friends and you still want to talk with me about “getting into venture,” I’m thrilled to have that discussion, but be prepared to tell me why you’re going to be an excellent investment manager and salesperson 🙂