The Exchanges

Q Now, can you get us started with telling us a little bit about your beginnings and walk us through the David Wu story?

A Sure. Um, I, um, I'm actually a Bay Area native. I grew up in the valley, and my father was an entrepreneur, and my mother was an artist, and I think that's where I've gotten some of my left-right brain arm wrestling and why I like consumers so much. Um, spent the bulk of my career as an entrepreneur, um, started off very much a tech and a product guy, and then over time became kind of more of a inside guy, keep the lights on guy, jack of all trades, master of nothing kind of guy. Um, Was at a company for a decade called Homestead that became a very successful way to build websites and kind of web one point oh, almost went public, almost died within a few months of filing and hung on my fingernails for another seven years and built it back up to about a hundred million dollar revenue business and sold it in 2007 to Intuit. At Intuit I ran a bunch of their SaaS businesses and frankly just missed entrepreneurs and missed consumer. And so I started doing a lot of angel investing, so for the last seven or so years, I think I've done 30 or 40 angel investments, and then I joined Maveron full-time three years ago and fell in love with the team and the platform. Maveron's sort of a unique venture fund in that we've been around for 16 years and are really, really specialized in what we do. Every investment we make is something that is direct to consumer, so no enterprise, infrastructur…

AI assessment note: “I'm actually a Bay Area native. I grew up in the valley”

Q And then talking about VCs, let's, let's discuss Maveron a little. You're, you're very founder and team focused, so what do you look for in a team? What are your preferences? Do you have any strict guidelines?

A You know, you're exactly right. We are definitely unapologetically team and founder driven, and I think that ties back to our consumer DNA and consumer focused in that there's less and less differentiation on the IP of consumer deals and much more around how well the team understands how to connect with end consumers. We actually take this very seriously. We, we've kind of put together a list of 10 key traits that we believe are kind of the The key success traits for a Maveron consumer successful founder, and we actually score, um, all our potential investments, um, CEOs against this scorecard, and we often look back six months later or 12 months later to see how well they did against that scorecard and what has changed. Um, I think that you can actually find some of these bullet points on our, on our blog or on our, our website, but, you know, I'll signal a couple as examples, you know, three that I think about all the time is one is contagious passion and relentless perseverance, and that's the idea that these people are just Insanely passionate about what they're doing, and, and, you know, failure's not an option. Another one we look closely at is category advantage from their past experiences or things they've done before that give them an advantage over, you know, their nearest competitor. And the third one we talked about a little earlier as well is, you know, I'm really …

AI assessment note: “put together a list of 10 key traits that we believe are kind of”

Q And for startups, maybe raising a seed, uh, seed round, um, why, why should they take, uh, seed VC money over angel money? What's the difference? What should they expect there? Obviously you as an angel, where do you think they should fall?

A So I think that, you know, there's one critical difference between angel money and, And institutional money, and what it really comes down to is angels are generally investing their own money, whereas most institutional funds are primarily investing other people's money, and they're investing other people's money for a living. And, and that, that, that shows itself in the, angels are often investing for, as I said kind of earlier, for a plethora of all different kinds of reasons. They may be doing it For lots of things that are not even return on capital focused. Things like, you know, they like you. They're passionate about what you're trying to do. They want to pay it forward and they made a lot of money in their last company. You know, it really runs the gamut. Um, institutional money for the most part is investing in some kind of thesis about how they're going to make their limited partners money. And so they're very focused on this power law curve where You know, most of the companies are not going to do that well. So it's the one or two giant hits that are going to cover the, all the rest of the portfolio and the upside return. And as a result, I think that institutional money wants to put more money to work. It's more of a zero sum game where they have to elbow everyone else out. And they're going to take a much more active role with a much higher risk profile where, you…

AI assessment note: “there's one critical difference between angel money and, And institutional money”

Q Now, can you get us started with telling us a little bit about your beginnings and walk us through the David Wu story?

A Sure. Um, I, um, I'm actually a Bay Area native. I grew up in the valley, and my father was an entrepreneur, and my mother was an artist, and I think that's where I've gotten some of my left-right brain arm wrestling and why I like consumers so much. Um, spent the bulk of my career as an entrepreneur, um, started off very much a tech and a product guy, and then over time became kind of more of a inside guy, keep the lights on guy, jack of all trades, master of nothing kind of guy. Um, Was at a company for a decade called Homestead that became a very successful way to build websites and kind of web one point oh, almost went public, almost died within a few months of filing and hung on my fingernails for another seven years and built it back up to about a hundred million dollar revenue business and sold it in 2007 to Intuit. At Intuit I ran a bunch of their SaaS businesses and frankly just missed entrepreneurs and missed consumer. And so I started doing a lot of angel investing, so for the last seven or so years, I think I've done 30 or 40 angel investments, and then I joined Maveron full-time three years ago and fell in love with the team and the platform. Maveron's sort of a unique venture fund in that we've been around for 16 years and are really, really specialized in what we do. Every investment we make is something that is direct to consumer, so no enterprise, infrastructur…

AI assessment note: “I'm actually a Bay Area native. I grew up in the valley”

Q And then talking about VCs, let's, let's discuss Maveron a little. You're, you're very founder and team focused, so what do you look for in a team? What are your preferences? Do you have any strict guidelines?

A You know, you're exactly right. We are definitely unapologetically team and founder driven, and I think that ties back to our consumer DNA and consumer focused in that there's less and less differentiation on the IP of consumer deals and much more around how well the team understands how to connect with end consumers. We actually take this very seriously. We, we've kind of put together a list of 10 key traits that we believe are kind of the The key success traits for a Maveron consumer successful founder, and we actually score, um, all our potential investments, um, CEOs against this scorecard, and we often look back six months later or 12 months later to see how well they did against that scorecard and what has changed. Um, I think that you can actually find some of these bullet points on our, on our blog or on our, our website, but, you know, I'll signal a couple as examples, you know, three that I think about all the time is one is contagious passion and relentless perseverance, and that's the idea that these people are just Insanely passionate about what they're doing, and, and, you know, failure's not an option. Another one we look closely at is category advantage from their past experiences or things they've done before that give them an advantage over, you know, their nearest competitor. And the third one we talked about a little earlier as well is, you know, I'm really …

AI assessment note: “three that I think about all the time is one is contagious passion”

Q And you said there about ecosystems and startup ecosystems. You started out at Stanford. I mean, what are they putting in the food, David? There's just tech titan after tech titan. What do you think makes it so special?

A You know, I, I, I, you know, I'm a big fan of Stanford. You know, I, I, I still am a strong supporter of Stanford, but I think it goes beyond just Stanford to the Bay Area, and I think that the Bay Area, you know, we invest primarily all across the United States, um, and the Bay Area is a very special place, and when I think about the right environment to create a startup ecosystem, there's kind of three prerequisite criteria. I think you need great access to capital, I think you need great access to talent, and third, often overlooked, I think that you need a culture that really encourages swinging for the fences, and kind of a culture that says that doing the impossible is actually something that happens every day.

AI assessment note: “three prerequisite criteria. I think you need great access to capital”

Q And for startups, maybe raising a seed, uh, seed round, um, why, why should they take, uh, seed VC money over angel money? What's the difference? What should they expect there? Obviously you as an angel, where do you think they should fall?

A So I think that, you know, there's one critical difference between angel money and, And institutional money, and what it really comes down to is angels are generally investing their own money, whereas most institutional funds are primarily investing other people's money, and they're investing other people's money for a living. And, and that, that, that shows itself in the, angels are often investing for, as I said kind of earlier, for a plethora of all different kinds of reasons. They may be doing it For lots of things that are not even return on capital focused. Things like, you know, they like you. They're passionate about what you're trying to do. They want to pay it forward and they made a lot of money in their last company. You know, it really runs the gamut. Um, institutional money for the most part is investing in some kind of thesis about how they're going to make their limited partners money. And so they're very focused on this power law curve where You know, most of the companies are not going to do that well. So it's the one or two giant hits that are going to cover the, all the rest of the portfolio and the upside return. And as a result, I think that institutional money wants to put more money to work. It's more of a zero sum game where they have to elbow everyone else out. And they're going to take a much more active role with a much higher risk profile where, you…

AI assessment note: “angels are generally investing their own money, whereas most institutional funds are primarily investing other people's money”

Q And how do you know, then, which is the right funding source with all the different funding sources that you mentioned emerging? How do you know which VCs the right one for your startup.

A You know, I, I, it's interesting because in the old days, you know, there's this great unpackaging going on, which is in the old days you took funding, you know, from maybe one of 10 VCs that you had heard of, and you get control, advice, and money from the same source. Now you can kind of mix and match like a component stereo and get smart advice from, you know, old founders paying it forward and advisors, and you can get, you know, money from dumb money, or angels, or seed funds, or series A funds, and And you, and control, you may even be able to kick down the road to your series A or series B. So there's just so much choice out there. You know, in a lot of ways, I encourage entrepreneurs to figure out what do they really need in terms of skill sets around the table that they're missing. And in the same way that you would hire an, an individual or a company to be on your executive team, do that same amount of diligence. Uh, and, you know, go talk to, Portfolio companies, probably the most successful and the least successful portfolio companies in some of the investors that you're thinking of taking money from, and really understand, you know, how do the act when things are going well, how do the act when things are not going well, and, you know, really what's the character, um, values, and, you know, cadence of these individuals.

AI assessment note: “figure out what do they really need in terms of skill sets around the table”

Q And how do you find the seed funding environment in San Francisco? In London, the seed funding environment's exploded. Is that similar in San Francisco?

A You know, I think that the seed funding environment in San Francisco is Exploded, you know, almost beyond imagination, and I think there's actually no looking back. There is so much capital and opportunity out there, whether it's angel syndicates or the job acts adding crowdfunding or the plethora of micro VCs. I've heard, you know, stats in the staggering number of billions of dollars that are new funds specifically created at seed programs. I often hear, you know, large scale VCs starting up seed programs, and some of them have Also staggering numbers where they'll allocate a few hundred million dollars towards seed. So I think it's a phenomenal environment in the Bay Area. It's, it's, um, probably never been a better time to start a company in the Bay Area if you're a founder.

AI assessment note: “the seed funding environment in San Francisco is Exploded, you know, almost beyond imagination”

Q And you said there about ecosystems and startup ecosystems. You started out at Stanford. I mean, what are they putting in the food, David? There's just tech titan after tech titan. What do you think makes it so special?

A You know, I, I, I, you know, I'm a big fan of Stanford. You know, I, I, I still am a strong supporter of Stanford, but I think it goes beyond just Stanford to the Bay Area, and I think that the Bay Area, you know, we invest primarily all across the United States, um, and the Bay Area is a very special place, and when I think about the right environment to create a startup ecosystem, there's kind of three prerequisite criteria. I think you need great access to capital, I think you need great access to talent, and third, often overlooked, I think that you need a culture that really encourages swinging for the fences, and kind of a culture that says that doing the impossible is actually something that happens every day.

AI assessment note: “there's kind of three prerequisite criteria. I think you need great access to capital”

Q And how do you find the seed funding environment in San Francisco? In London, the seed funding environment's exploded. Is that similar in San Francisco?

A You know, I think that the seed funding environment in San Francisco is Exploded, you know, almost beyond imagination, and I think there's actually no looking back. There is so much capital and opportunity out there, whether it's angel syndicates or the job acts adding crowdfunding or the plethora of micro VCs. I've heard, you know, stats in the staggering number of billions of dollars that are new funds specifically created at seed programs. I often hear, you know, large scale VCs starting up seed programs, and some of them have Also staggering numbers where they'll allocate a few hundred million dollars towards seed. So I think it's a phenomenal environment in the Bay Area. It's, it's, um, probably never been a better time to start a company in the Bay Area if you're a founder.

AI assessment note: “the seed funding environment in San Francisco is Exploded, you know, almost beyond imagination”

Q And does that competitive threat worry you with the emergence of so many seed funds?

A You know, I think that, um, seed funds are out there for a variety of different reasons. You know, at the end of the day, I think if it's good for the entrepreneur, it's probably good for the ecosystem, and in turn, it's good for the venture funds. Um, I think that, um, The seeds tend to be less competitive in the Series A. There's so many seeds getting funded out there, but at the end of the day, the A's are still happening, and they're happening later in larger figures, but there's not that many more Series A deals getting funded. So it creates a larger top of the funnel, so it takes more time and effort to see everything that's happening, but at the end of the day, I think knowing what you're good at and what a venture fund specializes in and really Concentrating there is the important thing, and so I think it raises all boats.

AI assessment note: “I think it raises all boats.”

Q And how do you know, then, which is the right funding source with all the different funding sources that you mentioned emerging? How do you know which VCs the right one for your startup.

A You know, I, I, it's interesting because in the old days, you know, there's this great unpackaging going on, which is in the old days you took funding, you know, from maybe one of 10 VCs that you had heard of, and you get control, advice, and money from the same source. Now you can kind of mix and match like a component stereo and get smart advice from, you know, old founders paying it forward and advisors, and you can get, you know, money from dumb money, or angels, or seed funds, or series A funds, and And you, and control, you may even be able to kick down the road to your series A or series B. So there's just so much choice out there. You know, in a lot of ways, I encourage entrepreneurs to figure out what do they really need in terms of skill sets around the table that they're missing. And in the same way that you would hire an, an individual or a company to be on your executive team, do that same amount of diligence. Uh, and, you know, go talk to, Portfolio companies, probably the most successful and the least successful portfolio companies in some of the investors that you're thinking of taking money from, and really understand, you know, how do the act when things are going well, how do the act when things are not going well, and, you know, really what's the character, um, values, and, you know, cadence of these individuals.

AI assessment note: “go talk to, Portfolio companies, probably the most successful and the least successful”

Q And does that competitive threat worry you with the emergence of so many seed funds?

A You know, I think that, um, seed funds are out there for a variety of different reasons. You know, at the end of the day, I think if it's good for the entrepreneur, it's probably good for the ecosystem, and in turn, it's good for the venture funds. Um, I think that, um, The seeds tend to be less competitive in the Series A. There's so many seeds getting funded out there, but at the end of the day, the A's are still happening, and they're happening later in larger figures, but there's not that many more Series A deals getting funded. So it creates a larger top of the funnel, so it takes more time and effort to see everything that's happening, but at the end of the day, I think knowing what you're good at and what a venture fund specializes in and really Concentrating there is the important thing, and so I think it raises all boats.

AI assessment note: “The seeds tend to be less competitive in the Series A”

Q And you talked about access to talent and access to funds. I think, you know, Y-Combination and the accelerators have to be the amalgamation of the two, and you actually coach at a lot of these demo days. What's the most frequent problem that you see startups encountering, and how do they overcome it?

A You know, um, a lot of these early startups have lots of different things they're working on, but, you know, generally I bucket into three areas, which is getting the right team, finding product market fit, and raising money, aka not running, you know, not running at a runway. Um, on the right team side, I think the recruiting environment's getting as competitive as it's ever been, and that's sort of the downside to how easy it is to get seed funding, and not only in terms of the talent That you need on the team, but the combination of the mindset that, you know, frankly, the day you put on a CEO hat is the day that your full-time job is as a recruiter, and secondarily, there, you need a variety of different skills, so I often tell a lot of the entrepreneurs to kind of figure out, you know, to, to, to be on the right track with, you know, smashing success, what do you need to achieve in the next six months, and do you really have the right variety of skills between now and six months from now to get you there, and then, frankly, it's, Rapidly iterating, especially on the consumer side, understanding what that end consumer really wants, and starting to get, kind of, MVPs in their hands, and iterating like crazy until you find something that captures, kind of, the hearts and minds of these consumers. And then, you know, frankly, every, every entrepreneur I know, whether early or …

AI assessment note: “generally I bucket into three areas, which is getting the right team, finding product market fit”

Q And you talked about access to talent and access to funds. I think, you know, Y-Combination and the accelerators have to be the amalgamation of the two, and you actually coach at a lot of these demo days. What's the most frequent problem that you see startups encountering, and how do they overcome it?

A You know, um, a lot of these early startups have lots of different things they're working on, but, you know, generally I bucket into three areas, which is getting the right team, finding product market fit, and raising money, aka not running, you know, not running at a runway. Um, on the right team side, I think the recruiting environment's getting as competitive as it's ever been, and that's sort of the downside to how easy it is to get seed funding, and not only in terms of the talent That you need on the team, but the combination of the mindset that, you know, frankly, the day you put on a CEO hat is the day that your full-time job is as a recruiter, and secondarily, there, you need a variety of different skills, so I often tell a lot of the entrepreneurs to kind of figure out, you know, to, to, to be on the right track with, you know, smashing success, what do you need to achieve in the next six months, and do you really have the right variety of skills between now and six months from now to get you there, and then, frankly, it's, Rapidly iterating, especially on the consumer side, understanding what that end consumer really wants, and starting to get, kind of, MVPs in their hands, and iterating like crazy until you find something that captures, kind of, the hearts and minds of these consumers. And then, you know, frankly, every, every entrepreneur I know, whether early or …

AI assessment note: “generally I bucket into three areas, which is getting the right team, finding product market fit”

Q And how do you create that culture in, in a place where it's not already prevalent?

A You know, when I look at the barrier versus some of the new up and coming areas like LA or even New York, you know, the culture is a little different. And I think it starts off with who are the heroes and the role models in the area. So as, as companies see breakout success doing amazing things, I think all of a sudden they become the new normal. And so there's not a secret recipe for it, but I think that, you know, one of the big differences between the financial mindset of New York is And in the Bay Area, New York starts off with, well, you know, this is as big as you possibly can get, and this is what's rational for, you know, what, what could happen in the Bay Area is still a very dreaming town, and I think the fact that you see the Facebooks and the Googles and the history of these little product companies that start taking over the world, it lends credibility to that's what can happen.

AI assessment note: “I think it starts off with who are the heroes and the role models”

Q And then do you, do you back first time founders? Do you like technical founders over non-technical? What's your preference on that?

A You know, We often back first-time founders, and, and, you know, I'm one of those believers that, um, past success is often indicative of future success, and so even a first-time founder, you know, maybe a nineteen-year-old coming out of the UK has had some body of work of things they've accomplished in their life, whether it's winning awards in sports or scholastics or, you know, one, one, um, very successful entrepreneur I know that's run really, really large companies says, I can learn everything I need to know about you based on what you did in high school. And so we will, you know, we generally like to understand what people have done across the body of work of their life, but we don't think that you necessarily have to have started a company to be fundable for your next company.

AI assessment note: “We often back first-time founders, and, and, you know, I'm one of those believers”

Q And you specialize in consumer brands at Maveron, and a big, you know, with Eargo and August, and a big problem that these brilliant solutions often encounter is transitioning from an early adopters market to a mass market. How do you bridge that gap and really transition it to a mass market product?

A Right. So we, we spent a lot of time internally talking about this phrase that we've coined called the cauldron of consumer passion. And, you know, every company we look at, we're really trying to identify, have they found this cauldron of consumer passion? You know, we're very rarely going to look at a company that has a neat technology in search of a target market or in search of a problem. Um, I think it goes all the way back to our founding roots. You know, we were started at Maveron by Two coffee guys out of Seattle, Howard Schultz, that has hence, hence gone back to run Starbucks, but is still working alongside of us, and Dan Levitan, who partnered with Howard in the old days to take Starbucks public, and he tells the story of how you, when they were thinking about taking Starbucks public, I think there were 40 stores in the early nineties up in the Pacific Northwest, and he went back to talk to a lot of the bankers in New York about the opportunity, and everyone poo-pooed the idea, saying, That doesn't make sense. You know, no one's gonna wait in line for coffee, and, and, and coffee's something you can get anywhere. How could that possibly be an interesting company? And yet, Dan went back, and alongside of Howard, went and visited the people in line at the Starbucks in the Pacific Northwest, and noticed, one, how passionate they were about that experience, how frequentl…

AI assessment note: “we spent a lot of time internally talking about this phrase that we've coined”

Q And then do you, do you back first time founders? Do you like technical founders over non-technical? What's your preference on that?

A You know, We often back first-time founders, and, and, you know, I'm one of those believers that, um, past success is often indicative of future success, and so even a first-time founder, you know, maybe a nineteen-year-old coming out of the UK has had some body of work of things they've accomplished in their life, whether it's winning awards in sports or scholastics or, you know, one, one, um, very successful entrepreneur I know that's run really, really large companies says, I can learn everything I need to know about you based on what you did in high school. And so we will, you know, we generally like to understand what people have done across the body of work of their life, but we don't think that you necessarily have to have started a company to be fundable for your next company.

AI assessment note: “We often back first-time founders”

Q And you specialize in consumer brands at Maveron, and a big, you know, with Eargo and August, and a big problem that these brilliant solutions often encounter is transitioning from an early adopters market to a mass market. How do you bridge that gap and really transition it to a mass market product?

A Right. So we, we spent a lot of time internally talking about this phrase that we've coined called the cauldron of consumer passion. And, you know, every company we look at, we're really trying to identify, have they found this cauldron of consumer passion? You know, we're very rarely going to look at a company that has a neat technology in search of a target market or in search of a problem. Um, I think it goes all the way back to our founding roots. You know, we were started at Maveron by Two coffee guys out of Seattle, Howard Schultz, that has hence, hence gone back to run Starbucks, but is still working alongside of us, and Dan Levitan, who partnered with Howard in the old days to take Starbucks public, and he tells the story of how you, when they were thinking about taking Starbucks public, I think there were 40 stores in the early nineties up in the Pacific Northwest, and he went back to talk to a lot of the bankers in New York about the opportunity, and everyone poo-pooed the idea, saying, That doesn't make sense. You know, no one's gonna wait in line for coffee, and, and, and coffee's something you can get anywhere. How could that possibly be an interesting company? And yet, Dan went back, and alongside of Howard, went and visited the people in line at the Starbucks in the Pacific Northwest, and noticed, one, how passionate they were about that experience, how frequentl…

AI assessment note: “what we're looking for is how deeply is something”

Q And how do you create that culture in, in a place where it's not already prevalent?

A You know, when I look at the barrier versus some of the new up and coming areas like LA or even New York, you know, the culture is a little different. And I think it starts off with who are the heroes and the role models in the area. So as, as companies see breakout success doing amazing things, I think all of a sudden they become the new normal. And so there's not a secret recipe for it, but I think that, you know, one of the big differences between the financial mindset of New York is And in the Bay Area, New York starts off with, well, you know, this is as big as you possibly can get, and this is what's rational for, you know, what, what could happen in the Bay Area is still a very dreaming town, and I think the fact that you see the Facebooks and the Googles and the history of these little product companies that start taking over the world, it lends credibility to that's what can happen.

AI assessment note: “there's not a secret recipe for it, but I think that”