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Ever wonder what it takes to raise 10s of millions of dollars from a top-tier venture fund?
One of our own recently did and we’ve talked him into sharing every detail of the process.
On Tues, Dec 10th from 6-8pm we’re turning off the cameras and closing the doors for an extremely candid and open conversation with Mark Newman, CEO of Hirevue.
During this session we’ll get into the nitty gritty details of their recent $25M funding from Sequoia Capital. We’ll walk through the pitch deck, look at the company’s financials and metrics, we’ll even get into the personalities and dynamics which led to multiple term sheets from top tier venture capital firms.
If you’ve ever wanted to be a fly on the wall on Sand Hill Road, here’s your chance. If you’ve ever wondered how much progress you need to show or how to tell your story to get VCs attention, here’s your chance. Also, if you’ve ever wanted to meet one of my favorite founders in SLC, here’s your chance.
I’ve had the good fortune of knowing Mark since the very earliest days of Hirevue. That front row seat has allowed me to watch him grow as a person as he’s grown his business. If you know him well, you’ll know why the recent $25M raise from Sequoia Capital comes as no surprise. He’s a treasure trove of insights and experiences every local founder can learn from. And someone all should have in their personal network.
So, join us December 10th from 6-8pm @ The Leonardo by RSVP’ing HERE.
When we started OATV we were a very new and unproven team. Neither Mark nor I had managed a fund and, tho I’d been at a venture fund prior, I wasn’t even close to being a Partner there.
To combat the weariness that some potential investors felt about backing first time managers, we set a few rules that would give them some assurances that we would use them to vigilantly combat style drift- which is a common problem LPs have with new managers who sell them one strategy then proceeded to drift every which way chasing deals.
Our rules were pretty simple for a seed stage fund:
For us, at the time, these were good guide posts that gave investors comfort as to whether we were delivering the product we’d sold them.
But the world is messy, and in the early days of OATV we probably held too closely to these rules which caused us to miss out on some really great investments.
There were many many conversations about companies we liked that didn’t fit neatly within our rules. Price was too high, or we couldn’t own enough or there wasn’t a top tier firm leading the larger round in a company we liked.
I don’t think those were unhealthy conversations to have. Nor do I think having guide posts around how a firm invests is a bad thing, but I never liked how many of those conversations about our rules ended.
Most of the time they ended with some version of- how could we ever explain this to our investors? This isn’t what we told them we would do? Which was usually where we let our desire to invest derail from our willingness to push forward. Tail tucked firmly between legs, we passed on many great companies that didn’t fit within our rules.
Which was a crummy thing to do.
In several cases we had conviction around companies that we couldn’t justify to our investors, but we didn’t have the confidence to follow those convictions. We let our fear of what our investors would think about us breaking our rules dictate our actions. And that was wrong.
Not wrong that we missed investing in some great companies. Any firm worth their salt has a long list of companies they passed on for one reason or the other. But passing on something out of fear of what your investors will think, what they might say, or how they will act when it comes time to raise your next fund is the kind of wrong that cuts deep and stings longer.
In our second or third year of business we struck a healthier relationship with our rules. We started getting more comfortable with our own instincts. And our fund performance was such that our investors trusted us enough that when we chose to break or bend our rules the results were usually good ones.
We still have rules we follow. I think most should.
But we break them or bend them now in ways we didn’t in our early days. Not all the time. And not just for the sake of it. But we’re not not breaking our rules out of fear anymore and that makes missing the good ones a little less painful.
When I was a teenager, my mom would often drag me into the dinning room, tie me up to a chair at that big table and force me to do my homework. School was not my thing. And if a “thing” did not involve a skateboard, a set of headphones or a group of friends it was not willingly getting done.
During these dining room dashes of homework sprints I would often get a heartfelt lecture, pep talk or plea from my mom. The tone changed frequently but the message was always the same- I wasn’t living up to my potential.
She saw more in me than what I was putting out. I think it drove her crazy and broke her heart in equal measure. She loved me. She wanted the best for, and from, me. And she wasn’t getting it. No one was. And she feared that no one, including she and I, ever would.
"You have so much potential" was the rallying cry of my youth and it fell flat on deaf ears.
Today is my 40th birthday.
And I woke up thinking about that dining room. Those lectures. And that rallying cry.
I don’t think my mom could have seen then how my life would have played out to this point. Pretty sure, if you’d have asked, she’d have imagined me down and out somewhere filled to the brim with all of that untapped potential.
There’s been a lot of build up to this birthday. At least once a week for the last year my wife or kids or friends have timidly asked how I feel about turning 40. My answer has been pretty consistent- I’ve got a pretty great life by most measures. I’m healthy. I have a family I’m crazy proud of. I’m my own boss. And I’ve played by my own rules all along.
But this morning I woke up with a different answer than the one I’ve been giving for the past year.
How do I feel about turning 40?
I feel like I’ve still only tapped a small part of the potential that my mom saw in me. That she pleaded with me to unlock.
40 is a big number. And I didn’t really feel the weight of it until this morning. But it’s a comfortable load that I know what to do with- live up to my potential.
This was the first thing I saw when I logged onto Twitter this morning.
A promoted tweet.
This is not the first promoted tweet I’ve ever seen. Like most people, I’ve seen them popping up at the top of my feed for some time now.
At their launch they we heralded as new. Even revolutionary.
But with Twitter’s addition of expanded media in our feeds yesterday, these once subtle, maybe even forgettable, ad units have taken on a new life.
Now, to be clear, I’ve hated every Twitter redesign ever. #newtwitter, #newnewtwitter and now #twitter3 (or Twitter cubed). So me not loving a change is not without precedent.
My my initial, flippant reaction was something to the effect of “if I wanted expanded content in my feed I’d use Facebook”.
I get it, Twitter is growing up. They need to compete with Facebook on the streets for users and, soon, on Wall Street, for investors. Most of those people get Facebook. Most of those people still don’t get Twitter.
As early users we held out hope we that somehow, someway Twitter could write it’s own playbook. Change the rules. Take on Facebook without becoming Facebook. Maybe they’d find a way to monetize our data that didn’t require ads. Or, maybe they’d develop an ad unit that looked, felt or acted differently than those awful banner ads plastered all over the edges and inside the feeds of Facebook.
Instead, we got this.
Wall Street understands this.
Madison Avenue understands this.
And despite not loving this, I get that.
But with all the hype and lead up to promoted tweets as a new, revolutionary ad unit, let’s get clear on what THIS really is.
As Juliet once said to Dick Costolo, a banner ad by any other name…
Recently, a group of fancy kids from a fancy school back east dropped by OATV HQ to talk shop as part of their tour through Silicon Valley. The kids were super smart and the conversation was engaging.
At one point, I was asked about how we put together our investment themes and which trends we track. Implying that our portfolio looked, um, different than the other VCs they’d been meeting. As I wrapped up my rant on how we watch the alpha geeks and what people do in their spare time, one the students said something to the effect of “oh, so you’re hipster VCs”.
At first I was taken aback and bothered as there’s a certain smugness implied in a comment like that which harkens me back to a once popular tshirt on a once popular site. But, it also captures a tendency that I think is real and one that we’ve found ourselves susceptible to.
As VCs, we like the new. And we like to find the new before anyone else catches wind of it. And we like to be right about what has the potential to blow up in the future.
But, in doing so, we’re also susceptible to moving on to the new new before the old new has proven itself out or reveals all of it’s innate potential. And, we can mistakenly shut the window on opportunities just as (or because) other VCs and better equipped founders enter the market.
I was reminded of this all in a board meeting yesterday. The company in question is quintessentially alpha geek at the core and in a market we were able to spot before it started hitting the mainstream media. But they’re all showing up now and the market is getting even more exciting. As the founder relayed an application a customer of theirs was looking to build with their products, it occurred to me that the application in question wasn’t even possible until this very moment. And that it is only one of hundreds, thousands, or even more applications that this new technology and this new market can enable.
It’s one thing to spot a market early. It’s another to understand all of it’s nuances, quirks, opportunities and blind spots. To encourage and advocate for these markets, only to move on before they grow is a mistake we’ve been guilty of in the past and one we’re hoping to avoid in the future.
We may fund some companies that don’t exist yet, but we need to do a better job being a part of the new markets they create instead of busily off chasing the next new thing.
From an interview with designer/artist/soul searcher Elle Luna:
So I was using Uber all the time in San Francisco, even though I hated the design. And then I went to the Crunchies awards ceremony and at a post-ceremony event, where I was in a ball gown, I saw the CEO of Uber, Travis Kalanick, sitting at the bar. I was three whiskeys deep at this point and I walked up to him and said, “I use Uber all the time and I absolutely hate the app. I think you should bring me in to fix it.” He replied, “Oh, yeah? What are the three things you’d fix about it?” I said, “I’d redo the logo, redo the entire app, and change the rating system.” I think there was something about being in a dress that empowered me to say such things (laughing). And do you know what he said? He said, “Be at the Uber office at 9am on Monday.” I told him I couldn’t do it alone and he said he’d have a team for me.
I thought the offer was bogus, but I went to Uber’s office on Monday at 9am, laughing to myself, and Travis led me back to a project room with two other designers—they were from outside of Uber and he had flown them in from New York! We took on the Uber app and redesigned it in three weeks. In fact, one of the guys he flew in from New York, Shalin Amin, ended up staying on full-time. The app is gorgeous and last night it won the Fast Company 2013 Innovation By Design Awards for the transportation category, beating out Mars Rover and Tesla.
Most people want to be fit, most people aren’t.
Most people want to build a successful business, most people won’t.
Most people want to be the best version of themselves, most people aren’t.
Most people have dreams they want to fulfill, most people won’t.
Everyone wants to quit something, build something, be something, do something. Most people won’t.
How many things have we wanted? How many opportunities have we craved? How many broken things have we wanted to fix?
And how many of those have we shrunk from. Hid from. Or, excused away.
We’re not alone.
Most people won’t.
But every once in a while someone puts themselves out there. Makes the leap. Faces rejection or failure or worse. And comes out the other side. Better. Changed. Bolder.
Most people won’t. Which means those that do change everything.
Macklemore recounting the last 365 days since the release of The Heist. Easily one the best posts I’ve read all year.
Click through to read how they went from a 500 sq ft studio to playing in front of 200,000+ crowds. How they crafted creative deals that kept them independent from the labels while finding ways to leverage their reach. And how they’ve processed the mixed emotions that separate those who sell out and those who blow up.
66% of angels lost money on first-round investments in tech startups (and a majority generated no return whatsoever). More important, he ran a mathematical simulation that showed that median returns varied greatly with portfolio size. Namely, the more investments, the better. Simeonov learned that with five portfolio companies, the median return was break-even. To double that, your best chances are to have 50 portfolio companies. To triple your money, the number of investments jumps to 150.
The proposed equity crowd-funding rules for unaccredited investors (i.e., the rest of us) would restrict the annual amount of investment to between $2,000 and $19,000, depending on income. To build a 150-company portfolio over three years at the high end would mean an average investment of just $380 per company.
After the flurry of press yesterday around Cover’s launch I received a telling note from one of the investors in our fund. I don’t have permission to share their exact words, so I’ll offer a dramatic rendering here:
WTF were you guys thinking?!? Srsly? A restaurant app? What happened to Alpha Geeks and working on “things that matter”? Is waiting for your bill at a restaurant that big of a problem? This is not the kind of stuff I expect to see funded by OATV
I wasn’t all that surprised by their reaction as it was fairly similar to the one we got from folks when we funded TripIt.
What in the world were we doing funding a travel company? Something so practical, bordering on mundane. Whither the Alpha Geeks?!?
To be fair, I can understand the root of these types of reactions, but I reminded this investor and myself that our fund doesn’t have to do all drones and satellites all the time. Or even, all wacky ideas all the time.
Tho we do fund things that are often misunderstood each investment is rooted in a thesis we’ve operated under since founding OATV. It’s a thesis that has shaped our voice as a fund and our underlying portfolio of companies- Watch the Alpha Geeks, see what they’re working on in their free time, and develop investable themes around them.
In the case of Cover, the alpha geek driven theme our investor had missed was that of Context Aware Programming. As Tim recently wrote:
Just as the switch from the command line to the GUI required new UI skills and sensibilities, mobile and sensor-based programming creates new opportunities to innovate, to surprise and delight the user, or, in failing to use the new capabilities, the opportunity to create frustration and anger. The bar has been raised. Developers who fail to embrace context-aware programming will eventually be left behind.
This is a theme we’re deeply interested in and one manifest in a number of the companies we fund. Cover happens to be directly relevant to this theme and being lead by founders who’ve embraced this notion to their core.
So, let’s go ahead and just chalk up this latest email exchange with our investor as another case of being misunderstood. The misunderstanding around TripIt worked out pretty well, I offered to buy our investor dinner when Cover does even better.
Paying with Cover of course.
Cover has opened up today after having been in private beta for the last few months.
I’ve had the chance to use them on all of my recent trips to NYC. They have ruined me for dining any other way. Not only have they hand picked a who’s who of top restaurants in the city, but they’ve improved upon an already fantastic dining experience by removing all friction around settling up at the end of the meal. It’s magical.
The guys do a great job in the video discussing their motivations and ambitions for the service.
If you’re in, or travel frequently to, NYC I’d highly recommend you give it a try. You’ll never want to pay for a meal the old way again.
You can download the Cover app here.
They’re adding restaurants at a torrid pace, so they have a Foursquare list to keep track of them all. You can follow along here.