Four Years of Homebrew: Notes From Our 2017 Annual Investor Meeting

“The days are long but the years are short” applies to parenting and venture firms. Satya and I raised Homebrew’s first fund Q1 2013 and now, four years later, we held our 4th annual meeting last week, just days before our official birthday (anniversary of fund close).


For VCs, annual LP meetings are combination Board Meeting + Community Event. We spent an afternoon with our investors, providing updates on fund performance, market dynamics and future plans. Several founders gave 10-12 minute updates on their companies, and then, a dinner with our LPs, Homebrew founders and fund advisors. It’s of course not the only time our investors hear from us – we send our quarterly letters with financial statement, and given that our investor base is largely institutional, see them individually once or twice a year in-person (in addition to ‘as-needed’ conversations when they’re referencing other fund managers, discussing direct investment opportunities in our portfolio companies and so on).

If you’re interested in what gets covered and how these meetings evolve, here are summaries from our first three:

Year One – 2014

Year Two – 2015

Year Three – 2016

Satya wrote up Year Four – 2017 so rather than repeat what he covered, let me add just two personal observations.

  1. Founder < > Market Fit Is Beautiful – Watching five founders present their companies we were struck by how strongly each startup was an extension of their founders, even as some scaled to teams an order of magnitude larger than they were when seed funded. Homebrew founders care deeply about the problems they are solving and treat their company as their first product, in the care they apply to building diverse teams, mission-driven cultures and responsible growth strategies.
  2. I Don’t Generically Like VC. I Like Satya, Our Founders, Our Investors and Homebrew’s Model – If I wasn’t doing Homebrew, I likely wouldn’t be the 3rd, 7th or 11th partner at someone else’s fund. I wouldn’t be the consumer guy at a $1b fund. And I wouldn’t be making 100 small investments a year. Maybe I’ll feel differently in three, seven or 10 years, but just as we care about Founder < > Market fit in our investments, Homebrew was designed with the same care. That’s one reason why, when people ask me about interest in “getting into venture,” I try to help them understand that different roles, different models, different firms can lead to very different experiences and they shouldn’t generically seek to “become a VC.”

On to Year Five!


We Value Conversion More Than We Value Trust: Wading Into The Unroll.Me Discussion

So the moment I read Mike Isaac’s TK profile it jumped out that was going to have a problem on their hands. Their consumers were surprised at what was being done with their data and no one likes surprises. Regardless of legality (it appears 100% legal) and regardless of uniqueness (what is doing isn’t unique), their PR team’s initial response was “read the ToS.” Uh, no, wrong answer. Their CEO then published a blog post which was either sincere or insincere depending on your parsing of “sorry” and general cynicism. Others chimed in with “what did you think, it was free” vs the “my data is my data” purity test. Then today, a friend of the CEO wrote a passionate essay basically saying the CEO is a good guy and tech industry sucks overall.

But let me parse a bit why faced a backlash despite having the right to aggregate and sell anonymized data in exchange for giving you a free product:

Surprised Users! It seems that somewhere along the way evolved how they were monetizing their understanding of your inbox. At first it was to serve you targeted ads in their notification emails to you, but then it became about aggregating and anonymizing data to sell to third parties (this is what Uber purchased). They may have updated the ToS to give them this right, but they seemingly never communicated proactively in plain language what this meant. Why? Because it’s another friction in conversion and, as an industry, we measure funnel dropoff to a second decimal but don’t measure trust often or well. And they put trust at risk.  If they’d proactively notified users and provided an explainer, perhaps they could have mitigated the surprise proactively:

“Hi. In order to keep this service free for you we’re doing something new to help us pay the bills. In helping you manage your inbox we do analysis on which businesses are sending you email and what they’re notifying you about. This information – in aggregate and anonymized – is useful as a market data product we make available to third parties. For example, we may create research reports which help airlines understand trends in travel based on email receipts. Your individual info is never shared, your personal email data NEVER leaves our secure servers and you can [opt out of this panel and upgrade to our premium product; delete your account and all info we have stored; etc] at any time.”

Net-net, the expansion of their business model was perfectly legit but sensitive enough to the average consumer who thought the service was just helping them identify and unsubscribe from mailing lists. Which brings us to….

Ad Targeting vs Data Selling. But was always targeting you based on your data! Yes, they were serving you targeted ads in email notifications based on their understanding of your interests. However, this still feels like they’re keeping your data within their walls. Of the thousands of ads you might see, they’re selecting one that’s relevant to you. This isn’t at scary as the idea that your data (even anonymized and aggregated) is being bundled and sold outside of their corporate systems. Again let me emphasize this post is about why people felt angry, it’s emotion not logic. There was a toxic shock reaction to the idea of one’s data being decoupled from their use of the service and sold. It’s why a company using your data to improve your experience (and their monetization) inside of their product is perceived differently than your data being used by that same company to inform a 3rd party.

But Her Emails. The value prop is simply stated – here’s a picture from five minutes ago

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From this simple screen you are prompted to give full access to your email account. Obviously many people gave that access (I did a while back but a few years ago decided no startup should have access to my inbox – too risky). The average person doesn’t think it’s scanning the contents of all your email, just recognizing sender and subject lines. Even a technically aware person might think they’re working off some collaboratively filtered white list and black list of sender addresses, not scanning your Lyft receipts and recording metadata. was building a much more sophisticated view of you as a user than they may have needed to deliver much of their core value proposition. Again, not illegal, but ultimately invasive.

I’m writing this up because nearly a decade of work at Google gave me some insider perspectives on how consumer react to different assumptions around privacy (I was there when Gmail launched and was ‘reading’ your emails). And I’d urge startups to not be too cute but evading the discussion with their users but instead follow a set of best practices around ensuring users have control of their data and understand the tradeoffs they’re making in how you are using it to their benefit as well as the company’s needs.

From an outsider perspective did nothing illegal, or even that uncommon, and every consumer should be proactive in learning how the services they trust maintain or abuse that trust. But did fall short of best practices and potentially even crossed into a gray area ethically depending on the nature of any internal conversations around the level of consumer disclosure they should make once their business model changed.

Seed Investing & Dark Dealflow: You Lose 100% Of The Deals You Don’t See


Folks outside of seed stage venture often think “winning” deals is the most important part of being a great investor, but I’d argue it’s “seeing” the best opportunities that’s actually the strongest indicator of future fund success. Or to put another way,

I rather see 100% of the top seed opportunities and win 50% than see 50% and win 100%

What outsiders don’t realize is that much of the most intriguing seed startups go through a financing process that’s “dark” – not seen by most investors because it’s either competitively privileged to a few firms or so against traditional patterns that the walk is more random.

Satya and I track “misses” (NYC and SF/BayArea startups in our areas of interest) as rigorously as the other phases of a traditional “See -> Pick -> Win” funnel. Four years into Homebrew, we’re fortunate to feel really good about our relationships and reputations — you live and die by those in our business.

When we do “miss” an opportunity there are two main causes:

1. Founders With Strong Pre-Existing Venture Relationships – for example, repeat founders going back to their same investors and not expanding the pool. What can we do in these situations? Make ourselves tangible in our practices and areas of expertise and build case for founders that these are worth adding to their cap table and will best serve them in their current company. Also seek to build familiarity pre-funding process so that we too can have a “pre-existing” relationship.

2. New Areas of Interest That Our Portfolio Doesn’t Yet Represent – SaaS, Marketplaces, Commerce, Autonomous Robotics, Financial Services/FinTech. These are some of the verticals that our portfolio suggests we have interest and a POV. But at any given time there are areas that we’re exploring actively without a current investment, or we’ve made investments but they’re not yet public. When we “miss” an opportunity the feedback we sometimes hear is “oh, we didn’t know you cared about XYZ.” So we plan to be a little more open and ‘learn in public’ about areas of interest. Given our culture – and scale – this is less like to be via large scale “content marketing” and more hands-on learning and sharing of information publicly. Maybe it helps us, maybe it helps founders, maybe it helps other investors too.

Coming out of our 4th Annual LP Meeting last week, we’re thinking in particular about #2 and how to implement some new ideas there.

Brain Food: Two Weeks Into Nootropics

Hi, you might remember me from such infomercials as…..

So I’m about two weeks into a nootropic called TruBrain and wanted to write a bit about my experience. Nootropics are essentially “vitamins for your brain,” and, while the term was apparently coined in 1972, it wasn’t until the last few years that it went ‘mainstream’ among my friends. I’ve tinkered with different types of Chinese herbs, traditional vitamins and supplements as well as other personalized forms of health optimization. Rather than go deep into my own research, most of what I try comes from trusted recommendations. You know, the people who are a little bit out there but not so experimental that I worry about downside side effects. Mostly I just assume that the worst thing possible is I piss away some money. Literally.

I spend New Year’s at an event that’s like a “Family Camp Meets Foo Camp” and this year noticed my friend James taking interesting packets of pills in the morning and afternoon. It was TruBrain and he swore by the effects. Online searches showed me a mix of neutral to positive reviews alongside some people who complained about price (apparently it’s 50%+ cheaper to buy the ingredients in bulk and make your own pills but COME ON).

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“Increased focus and recall, stability of mood” sounded pretty good to me so I ordered a few boxes. They sat on my desk until earlier this month when I began the “loading period” – 10 days where you let the supplement build up in your system and you start seeing benefits.  Thus far I’m impressed. Do I know 100% that it’s TruBrain and not a placebo effect or diet, seasonal, external factor? Of course not. But biggest impact has been elimination of a periodic afternoon lull in concentration. And I haven’t experienced any negative downsides.

If you want to try it out, here’s a referral link to save 20%. Note: some folks have told me they’re frustrated by the trial/billing process. I think you get put into an opt-out subscription or something like that. It wasn’t confusing for me but please be comfortable with it before you enter any credit card info.

I’m also generally interested in startups building businesses around personal health science (nootropics, microbiomes, etc) so if you’re an early stage founder in that area, I’d love to hear from you [].

Lastly, I reached out to the TruBrain team to ask some questions and they were gracious enough to respond.

Hunter: I found it interesting that TruBrain is a “five day a week” recommended use (workdays) versus daily. Is that a decision around the science of the product, or marketing? Or something else?

TruBrain: The configuration is a balance of science, marketing (or specifically pricing), and customer behavior. In other words; it’s enough of the raw materials to deliver the key benefits while hitting a price point and regimen that works for the majority of target market. That said, we do have quite a few subscribers on custom orders that use TruBrain 7 days a week. Here is a photo of the whiteboard from TruBrain’s early days when this decision was made:


Hunter: My introduction to TruBrain came via a friend in the tech industry. Does word of mouth play an usually important role in supplements like this? How does the company track and measure this channel?

TB: It does. There’s justifiable skepticism for people looking at our category of products, so word of mouth referrals is by far the best way for someone to discover our products. We have a referral program that we’re always tinkering with to measure and accelerate this channel.

Hunter: Do you foresee a future where TruBrain is formulated to each individual? Like, should my version of TruBrain be different than someone else’s? Is there a future in personalized nootropics? 

TB: Personalized nootropic formulas would be ideal for some people, however, we don’t believe there’s enough variance in results/performance to justify the amount of time and education that would require from consumers, or the added operational complexity. For example, a custom-made bike frame will probably give you the best performance, but most people are happy with buying something off the rack without the added cost ​, research, and  time  ​required to get​  it made​. Our goal is really to make nootropics as easy and accessible to mainstream consumers as possible, and our formulas are designed to deliver the best results for the vast majority of people in the middle of the bell curve. That said, we’re constantly tinkering with our formulas and model to best meet the demands of the market, and are certainly open to exploring mass customization as we scale.

Why I Care About Problem Size More Than Market Size

For seed investors, overfocusing on TAM (total addressable market) can be a trap. It causes founders to think that displaying a generic sizable dollar stat (“$150 billion is spent on Education annually”) is sufficient versus really spending time understanding important characteristics about the problem they’re solving. Namely,

  • Is the problem large?
  • Is the problem urgent?
  • Is the problem valuable?

One of three and you don’t have a business. Two of three and you have a business, perhaps just not venture-scale (nothing wrong with that!). Three of three and I’m interested.

Here’s my presentation on this topic from LAUNCH Festival earlier this month. It doesn’t hold up as well if I’m not ranting and gesticulating.

Why UpCounsel Launched “15 Minutes With a Lawyer”

I try not to shill for Homebrew portfolio companies too relentless on this blog (for that you have my Twitter account), but I just really love UpCounsel’s new “15 Minute Legal Consultation” product, so wanted to talk a but about it.

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Background: UpCounsel is a B2B marketplace which connects businesses with high quality independent lawyers for project-based work. Their customer base is a mixture of SMBs (10-250 employees) and larger enterprise clients such as Twilio and Airbnb. Platforms like Stripe also recommend UpCounsel to Stripe Atlas developers. The marketplace is growing quite nicely – we invested in 2013’s seed and Menlo Ventures lead 2015’s A Round.

Until recently UpCounsel basically had one “SKU” — a predefined project that a potential client would list for bids from qualified and rated attorneys. When these projects were relatively standard (for example, a provisional patent filing), UpCounsel sets a fixed price in the marketplace and for more complex work, the responding lawyers quote their fees. But this one SKU left a gap, namely the “I don’t know what I don’t know” — the more undefined situations where a customers needs consultation but can’t yet define the project, or even if there’s truly a need for a lawyer. Hence, The Consult.

What makes The Consult now possible on UpCounsel?

  • Critical Mass of High Quality Lawyers on Platform: UpCounsel reached a supply-side inflection point where they felt comfortable being able to fill consult requests with the same quality and speed of more complex projects.
  • Trusted Relationship With Lawyers: UpCounsel earned the right with their supply side to intro another SKU, one that’s non-traditional with regards to offline practices (when was the last time your initial consult with a business lawyer could be just 15 minutes)? Also, the lawyers on UpCounsel know that there’s enough high quality demand for their services on the platform that not every consult needs to turn into a legal project – ie lawyers are doing right by potential clients and able to honestly respond when appropriate that this issue may not require the ongoing attention of a lawyer (versus trying to turn every consult into an upsell). The fact UpCounsel CEO Matt Faustman was a lawyer is essential to understanding his marketplace constituencies.
  •  Blended Use of Consults by New and Existing Clients: Of course Consults aren’t just an interesting product on their own but also an on-ramp to customers engaging with UpCounsel on larger legal projects. UpCounsel has enough new customers each month, enough repeating customers and enough in the “reactivation” cohorts, to use Consult differently with each segment. That is, it’s a SKU which doesn’t just potentially increase new customers but also increases repeat usage and overall LTV.

It was a blast to get into the weeds a bit with Matt about how Consults are being used by UpCounsel customers in the early days of this product. At Homebrew we’re generally interested in labor marketplaces that have dynamics beyond a competitive “race to the bottom” and UpCounsel is an example of one built with care and attention to quality and sustainable economics.

Stuck In My Teeth: Mike Monteiro’s Post on Ethics in Your Work

Occasionally a blog post sticks with me for weeks after I’ve read it. Sometimes pleasurably, like caramel in your molars after chewing a candy. Sometimes less so, like a poppy seed caught between two teeth.

The most recent one to ‘get stuck’ was by designer Mike Monteiro entitled “Ethics Can’t Be a Side Hustle.” Mike’s central argument is that one MUST consider the ethical implications of the work you do and the values of the company you work at. And you can’t say “well, I make crappy software that exploits bad habits but hey, I also do some volunteering to make up for it.” Or Mike puts it, “You can’t buy Ethics Offsets for the terrible things you do at your day job.” He continues,

“We can debate whether tech or design are neutral in nature for weeks. And it’s a conversation I look forward to. But whether they are or not, I know that people are not. You cannot afford to be neutral. Right now, more than ever you need to reach down deep into your core, find your ethical strength, and bring it to your day job with you every day.”

So caramel or poppy seed? Both on this one. I really do believe we vote with our dollars and our time. Everything else is just talk. At Homebrew we absolutely commit to investing only in companies where we know we want to put sweat and reputation behind the founders, not just dollars. And we support ethical decisions, even if they create short-term problems for our companies. But we also don’t control the companies. We only control the decision to invest or not.

There’s a second post where Mike addresses some of the objections to his first, such as “must be nice to have the privilege to turn down work but not all of us can afford so” and such. The variation I’ve heard of this is something like “Oh sure Fred Wilson can say USV won’t invest in assholes. He’s successful! But I’m just starting out and I need this win so….” But the truth is the people like Fred are successful precisely because they’ve made those decisions consistently throughout their career. The success is a byproduct, not a pre-qualification.

So yeah, I think you have a better shot at succeeding in the tech industry longterm if you stick to working on projects you believe are ethical with people you believe are ethical. How do you define ethical? First pass is your own sensibilities – trust your judgment. Second pass is your coworkers – do they behave in ethical ways and are they comfortable with the work you’re collectively doing? Final pass is your CEO – are the behaviors and values they model consistent with yours. If all three of these check out, you’re probably ok.