Homebrew

“I think it boils down to probably one of three primary problems. One is that, and this is more common than people might suspect is that the founders disagree. And they decide they don't want to be co-founders anymore. So that happens quite often. Number two is…”

“Follow on decisions are only problematic if you have misalignment of expectation.”

“At that time there were many, many sources of capital, even more sources of capital now But there were very few investors at the seed stage in particular who were willing to raise their hand and say that I'm the investor of record.”

“So we like to see as I referenced earlier, kind of a very narrow near-term focus, but in the founder's mind, a path to a broad long-term vision. So start with something small, start with something meaningful, start with something that people will love. And the…”

“We spend a lot of our initial interactions with companies, obviously talking about the product and the market, but we spent a lot of time understanding the founders and what drives them, what motivates them, why they're doing what they're doing.”

“And I think the key to successful fundraising at the seed stage is really establishing that emotional resonance with an investor. And there's really only two means by which to do that. One is the personal story of the founders, right? Why it is they're focused…”

“Probably the number one change that we've made in terms of our investment criteria, we originally started with the idea that we needed to have a specific ownership percentage. In order to drive meaningful returns, and that's become more flexible where we think…”

“Our first investment for homebrew was a company called Clementine, and it was kind of a joint effort between us and the founders in terms of spending time in a particular problem area and then coming up with a product idea. So it was almost an incubation of so…”

“We will probably make more investments this year than we did last year.”

“We don't invest in pure consumer social businesses.”

“We had 18 companies in our first fund. We will have a similar number and maybe slightly more in our second fund because it's a slightly larger fund, and we only make about eight new investments a year.”

“We have formal time with every company just about every week or every other week, and then we're usually on Slack and text and email with them every single day.”

“So long as we're making a set of six, seven, eight, nine investments each year that will ultimately turn into some number of meaningful, viable, transformative businesses.”

“That's how we got involved in a company like Managed by Q, which is doing wonderfully. They were already at a revenue run rate and a growth rate that probably could have gotten them in a round, but they hadn't yet thought about what expansion at the time out o…”

“We Are going to be in that period coming into fund three in 2018, where we want to start being able to raise our funds off of how homebrew is doing and not just our reputation or what we were able to do before homebrew.”

“I think if Satya and I had to make a decision about any one quality that was present or not present in terms of impacting a investment decision, it would probably be something around founder market Or the why, why are they building this company?”

“And what I'll say, at least through first fund and, you know, starting to get halfway through our second fund, is when we and our founders agree on those milestones and they hit those milestones, none of them have had problems raising an A round.”

“We want to stay focused on early stage companies that we can put not just capital, but time behind. So it means a relatively concentrated investment philosophy. And, you know, we want our legacy to be the companies that we worked with over five or six funds, n…”

“I think Homebrew did an incredible job. I mean, they raised their first fund in 2013 in less than a hundred days, and they raised it from some very, very high profile and very reputable LPs.”

“As an example, I think we've done a handful of SBVs now, but we did two last year, which led the Series E and Series D rounds for two of our later stage companies by virtue of having built that relationship and taking advantage of the market dislocation, where…”

“I think, like, not that this is, you know, sort of unspoken, because I think we've both talked about this, but, like, we also started this later in our careers, right? Like, we were both in our, you know, mid-late thirties, and I think it's, like, we both We w…”

“Raising 203 hundred million dollars, you know, like some of our peers and going to market in a model where we brought on another GP, we expanded our team, we brought on another platform person. Like, I actually think we could, you know, Hit exceed our benchmar…”

“In 10 of the 11 investments that we made last year, we were offered more allocation than we took, because what we care about is really sort of working with great founders and great co-investors.”

“We do a quarterly offsite with just the two of us every quarter, and a part of that conversation is, how happy are you? Right, like along a bunch of different dimensions.”

“We also started with the idea of no succession plan, no growth.”

“We look back And we've struggled over 10 years to find an occasion where lack of, you know, if there was lack of consensus, it meant we didn't do the deal. And I don't think we have any, you know, quote unquote outliers that were, you know, false negatives bec…”

“We used to not care who the other investors were. We're like, we're going to help you and we'll get other people great around us. Now we actually care about quality, you know, of the lead investor.”

“In today's market at the seed stage in particular a hundred million dollar fund is a bit of a tweener. You've either got to be larger to be able to write large checks and get the ownership that you need in order to win the best opportunities and deliver the ty…”

“We've always tried to evaluate, like, as an example with a fund and a follow-on investment, do we believe we can earn at least five to 10 X from here? And if we believe that, then we're more likely to be a buyer. And if we don't, then, you know, we're more lik…”

“And, you know, we, we've never had any of those kinds of issues because we don't do deal attribution. Every decision is made by consensus and we both work with every company in, in some, you know, type of way.”

“And so in some ways, I think part of our portfolio that's really going to benefit from the slowdown Are the early product market fit, you know, companies that now have some capital in the bank, but don't have to, aren't getting the crossover investors, pitchin…”

“If there were three or more of us, consensus would be You know, a foolish goal wouldn't serve us or the founders well.”

“The flexibility that we have in not having a fund now is that we don't have to think of every investment as having the potential to return the fund, right? Every investment just has to be a good return.”

“One of the experiments we're running here is kind of the testing the thinking around can capital and counsel be separated over the course of time, right? And so one of the things we're trying to evaluate is in some cases when we do a smaller check, can we stil…”

“We do three, six used to do every other year, like an externally led, 360 degree feedback real process with our founders and some of our co-investors. Not, you know, like a survey, you know, or an NPS score, but like, Talking 30 minutes to each of our founders…”

“You know, we have a few that I think could have been public, you know, already, but have decided, you know, for various reasons to hold off, and I think when they become public, they'll be even stronger companies.”

“The LPs we ended up with were all LPs who were excited about equal partnerships. The ones who passed on us were ones that wanted a single key mat, like this notion of, well, it's great to have multiple GPs, but at funds under a hundred million dollars, we real…”

“Even in the market over the last decade where everyone was putting their funds to work in 18 to 24 months, Our funds were being put to work it in three to three and a half years.”