Guy Turner of Hyde Park Venture Partners joins Nick to cover founder profiles and the characteristics that lead to the strongest startups. We address questions including:
- You’ve observed over 50 startups, across your portfolio, and have written extensively about founder profiles. What are the two high-level categories of characteristics that you’ve observed?
- Within the inspection characteristics category… what are the three dimensions that matter most?
- The first two modes seem to differ primarily on the experience dimension… what are the two modes and what are their strengths and weaknesses?
- Mode 3 you call the exec turned founder…. and mode 4 seems to have the ingredients for big outcomes or big flameouts. Walk us through each of these and their defining characteristics.
- We’ve discussed four modes, but based on your framework there should be eight. What about the other four modes?
- Do you think modes 1 and 2 work better for all investors or just HPVP?
- Dealflow filtering and evaluation… can you use the inspection characteristics?
- So we’ve discussed the inspection characteristics… let’s transition to the the second major category, the experience characteristics. Talk more about what they are and how you assess them.
- What are the five actions that matter most in startup teams?
- How do you handle a situation where the deal comes late and there’s already a term sheet and you don’t have time to observe these characteristics over time?
- What are the five styles that matter most?
- Self-reflection… Do you, Ira and Tim look in the mirror and consider these expectations w/ respect to the skills valued in running your firm, HPVP?
- How about for building the team at HPVP… do you apply founder assessment criteria in your hiring?
- Are there any soft skills or overlooked founder characteristics that you haven’t written about but you look for?
- What’s your take on the issues w/ ethics, not only amongst founders but at the investor level?
- Hyde Park Venture Partners
- Guy on Twitter
- People part 1: Successful Startup Team Modes
- People part 2: The Characteristics that Matter in Startup Teams
Nick: #Guy Turner, Managing Director at #Hyde Park Venture Partners joins us today on the program. #Guy is a Corporate Strategist turned VC, leaving #Boston Consulting Group in 2011 to cofound #HPVP. The firm invests in startups with 500K to 3M in revenue, raising their first institutional round. They often target B2B SaaS companies and are investors in #FarmLogs, #FourKites, #Zipnosis and many others. #Guy, thanks for joining me!
Guy: #Nick, thanks for having me!
Nick: Yeah! Let’s start out with your path to venture. Can you talk us through this whole process of kind of migrating over from the, the #BCG side to venture capital?
Guy: Sure. Yeah, I had actually started before that. I started like as a mechanical engineer. Always liked building stuff, making stuff. Wanted to kind of figure out what the rest of the world did though. Engineering can, can be at times a little siloed. So went back to business school. And, you know, while I think a lot of people in business school were sort of going in one direction doing recruiting for consulting and banking and so forth that didn’t get me all that excited. And, and I had this piqued interest in venture, you know, mostly because technology is fascinating, it’s cool, it’s exciting to be around and obviously every day affects our lives more and more. So I interned with an Angel group called #Hyde Park Angels and that’s where I met my now Partner #Ira Weiss. And we really hit it off and around the time I graduated, we decided that we’d endeavor to raise a fund, and that takes time. And I had the pleasure of working at #Boston Consulting Group for a couple years while #Ira and I worked on getting the fund off the ground on the side. And once we were able to do that, I left #Boston Consulting Group and have been a full time investor since.
Nick: Awesome. I was just chatting with #Semil Shah about sort of raising fund one, fund two, fund three, key challenges and differences between those. Can you briefly touch on sort of how that, that initial raise process worked out and how things have evolved?
Guy: Yeah. You know, so, so we were fortunate on fund one in that #Ira had a, a great track record and had, had created some really nice liquidity for a number of investors. So we were, we were able to use that to, to convince people that our thesis of investing in the midwest was a good idea and that we could actually make money doing it. And so we had that base of his prior investors to help support us in our raise and, and they were a significant part of our first fund. But, you know, look it’s a slog. I mean, we, we worked on raising that fund for close to two years. And, you know, meaning like actually showing decks to people and, and collecting checks, it wasn’t quite two years. And we were working on it, you know, as an idea. From idea to final close was almost was three years, maybe almost four years. So, well really there years. So that’s a really long time.
Guy: I think for fund two it’s interesting in as, as we’re kind of in the middle of our fund two and now starting to think about fund three. Being in the middle of, of fund two, you know, and looking back at our fund raise for the company or for, for that fund, you know, I think investors give you a strong benefit of the doubt in fund two. You know, they look to see if you are doing what you said you would do, expectations for, for early liquidity are still pretty reasonable. And, you know, they don’t expect you to have returned the fund three times to them already. And, and we feel very lucky to have extremely supportive investors re-up in fund two with the evidence that we’re, you know, making good bets and getting great follow on investors and getting good mark ups. And, you know, as fund three comes, I think the expectation for liquidity is, is higher and understandably so. And that’s something that, you know, we really started focusing on.
Nick: Good deal. And what were the sizes of the first fund and, and the second?
Guy: So the first fund was 25 million and the second fund was 60 or is 65 and we’re, you know, still not halfway invested out of that fund.
Nick: Good deal. And can you tell us about what you focus on from an investment standpoint and if that’s sort of evolved and changed between the two funds?
Guy: Yeah. You bet. So it’s actually stayed very consistent. And I think that’s, that’s part of the story that gives confidence to our investors and having supported a second fund without significant liquidity, you know, we’re, we’re, we continue to do what we said we would do six years ago, which is to back early stage companies in fact doing between really zero revenue up to about three in run rate. So we, we have a very active seed program and do fund companies below 500,000 in revenue. And we’re focused on the midwest. So we know that the midwest is generally underserved in capital before late Series A or Series B when the coastal funds fly in. And we continue to do that. So there’s been no strategy creed. Our team’s a little bit bigger and that allows us to do more deals in the second fund than, than in the first fund. And if anything in fund one we were a little bit sub scale for our strategy. So we were writing $500,000 checks into the 3 to 4 million dollar rounds at the Series A. And now we’re able to write a one and a half million dollar check into that same round. But again it’s, it’s very much the, the same thing we’ve always been doing.
Nick: Got it. So today I want to talk about people. And of all the, the venture writers out there I think you and, and #Jason Lemkin have some of the best insights on people and talent and hiring and, and founder profiles of, of any that I’ve read.
Guy: Yeah, I know, I appreciate being on it, although I’m, I’m a little bit humbled by and, and worried about being compared to #Jason Lemkin. So I fear your expectations are too high.
Nick: No comparison. Just you and #Jason both I think have some very unique insights and break things down in sort of a, a framework way that, that allows us all to absorb what you’re writing in a way that’s truly valuable. So thanks for that! But, you know, #Guy, you’ve done a lot of investments at this point. The firm has over 50 startup investments. And, you know, I want to figure out sort of across your portfolio, what are the major founder profiles that have emerged and what are the kind of high level categories of characteristics that you’ve seen?
Guy: Yeah. We, so we, we’ve thought about it a lot. I mean, one of the things you have to be really careful about in venture is holding yourself accountable to learn from your experiences because, you know, of course in the, in the long run we, we answer to our LPs. But on a daily day to day basis, you know, it’s not like they’re, they’re asking us hey or how are things going today, how are things going yesterday. And so we spend a lot of time being introspective and, and trying to learn from the data set that, that we are building over the years. You know, the, the, what we found with the respective teams is they’re, they tend to be kind of three axis for characteristics that we look at. And, and these I would call, generally I’d split characteristics into two types. So one are the inspection characteristics. So the ones that you can sort of tell by meeting with them a few times, reading their resumes and talking to their references. And then there’s the experienced ones. Ones that you really only figure out by watching them and working with them, either pre or post investment over, over a number of months, a number of years. With respect to the inspection ones, there are kind of three groups. There’s whether they’ve done startups before. Whether they have a extensive professional history. So that’s sort of a function of age in most cases. And then probably the most important and the most consistent one is do they have industry and product expertise in the space they’re innovating in. And that last one is one we spend a lot of time on.
Nick: Got it. And do you also break it down, you kind of go into different modes that you see startups fitting or different models?
Guy: That’s right. So, that’s right. So you can, you can take those three axis of inspection characteristics and two levels on each and multiply them together. And that would suggest eight modes. In fact, for us we really only consider kind of four modes because the whole set of four that’s defined by no or new to industry or no product expertise in the space, we really try to avoid. We just haven’t seen successful teams innovating in spaces that they don’t have any experience in. I think there are some notable exceptions in the world. So when a space is brand new, no one has expertise and experience in it. And so, you know, obviously like social media fifteen years ago or ten years ago would have been an example of that. But in most cases, these industries have been around for a while. And we do a lot of B2B software investing. And so, you know, when, when someone comes to us with an idea, we need to believe that that idea is based on a problem that they found in a space they know well. So that, the four modes, with that condition that we’ve, we’ve tended to see, two of the them have worked out the best. So the first one is what I call the YC mode. And, and of course, many people will, you know, both strive for this and also take a lot of pride in, in the successes they’ve found in these types of teams. But this is the first, a team with it’s first startup. They have limited professional experience. They might be directly out of college or, or maybe not even out of college. But they have a lot of industry and product expertise. And of course you ask well how do you have industry and product expertise if you’re right out of college? And, you know, the answer is either they were building a company when they were in college or, you know, they grew up in the industry, which sounds foreign to us people who go to, you know, college for years and years and years to enter an industry. But, you know, people grow up on farms, they grow up in trucking companies. Lots of people have experience with the industries early on. One great example in our portfolio is a company called #FarmLogs, which is an agtech software company based out of Ann Arbor. And in that case the CEO, #Jesse, he grew up on a farm. And he’d been experiencing the lack of technology on farms for decades. And when he got out of college, he and a friend were, were building custom software for their dad’s friends. And they realized they could make that a scalable endeavor. And that’s what they did. And they were literally a YC team in that they went through YC. So that’s, that’s the YC model. And the other one that’s worked out really well for us is, is sort of the obvious one you hear lots of funds talk about this. And you see lots of money going in this direction. But that’s the kind of do it again sam model. That’s a team that’s had startup, successful startup exits. Meaning they’re kind of minted. They’ve made money for investors before. Consequently they have an extensive professional experience and they tend to know the industry they’re in really, really well. And, you know, we’ve been lucky to be part of more and more of these teams. In our first fund, #G2 Crowd is a great example of that. The founding team there was, was part of the founding team at #BigMachines and also at #SteelBrick. And that’s, #G2 Crowd has turned out to be a terrific company for us, recently raising 30 million from #Accel. But we have a number of other companies in our portfolio that follow that same pattern. #Upfront Healthcare is one where the, the founders were involved in selling their prior company #Care Team Connect to the advisory board. So these, those two modes are kind of the preferred modes or at least the modes where we’ve seen the most success. There’s also the exec turned founder mode. These are a little tougher. We haven’t seen as much success here. So this is usually a first startup, lots of professional experience and lots of industry expertise, but there are often challenges in shifting from the corporate mindset and, and resource availability to a startup where it’s so limited. And that’s harder. And then we’ve seen also the, the, the other mode is kind of, this is the big one, this is, these are teams that are still relatively young, limited professional experience, they know the industry and maybe they’ve had a successful exit before but not a huge one. And so they want to, they want to make this one really big. And we’ve seen a few of those work okay. I think the only challenge with these is sometimes there’s a misattribution of, of why they were successful in the first one. So if they had a quick exit and were working at a company for two years and got it to a half a million in revenue and then, you know, sold it for ten or fifteen million, obviously a great outcome for them and maybe their, maybe their investors made a few bucks. But was it timing, was it scale, sometimes it’s hard to tell. When you get a company to a 40, 50, a 100 million in revenue, you know, there’s, of course there’s luck involved but, but clearly a lot of scaling. So sometimes there’s a misattribution in that mode.
Nick: Got it. So the first two, the, the YC model and the, the do it again Sam, those are, those are modes that seem to have worked out well for you. Do you, do you think that those are startup profiles that tend to have better success outcomes across the board? Or do you think they’re just a better fit for your firm?
Guy: You know, that’s a great question. I, I can’t, I can’t speak for the whole world of startups. I will say that as we look around our peer funds in the midwest, I think they’ve had a similar, relatively similar experience. And of course there are always exceptions. but, but certainly within, within our experience this has been true. And so some of it, you know, to your point, #Nick, may be a fit for where we are best, best suited to help and build relationships with people and, and help companies be successful as well.
Nick: You started off by saying that the four modes that you didn’t talk about, are those that don’t really include the, the industry experience or the market experience, domain expertise. How do you think about those founders that have let’s say tech expertise versus those that have domain and market expertise? And what I mean by that is, you know, I may find a founder that is doing an AR startup in, let’s say, heavy industry, right.
Nick: And these, these founders might not have any heavy industry experience. Right? They, they’ve never worked in, let’s say, industrial capital equipment before. But they’ve got unique and significant expertise in the AR tech space.
Nick: Let’s say they’re some of the foremost leaders in the AR tech space or AI for that matter. How do you think about the, the expertise of founders in sort of a tech area versus in a market area?
Guy: I would say that team is much less likely to be successful without someone on that team who knows, who really knows the space. That doesn’t mean everyone needs to. But if, you know, the founding CEO or founding COO or founding C whatever has a long history in that space, maybe they worked for #Caterpillar or maybe they worked for a mining company or, or, you know, some iteration like that, they are much more likely to be successful for a number of reasons. The first is they’re much more likely to design a product that solves a real problem in the space. And then the second part is they’re much more likely to be able to sell it if they have the credibility and experience and understanding of how customers work in the space.
Nick: Got it. You started off by talking about these inspection characteristics and how these are observable kind of from afar, right. These are existing data points that you can, you can view. If we have investors in the audience that are trying to improve their process, is this something that you can use as a filter for your deal flow? I mean, do you, do you inspect these, these characteristics from afar, find the, the mode one and mode two startups that seem to be a really strong fit for #HPVP and then take meetings or take them to sort of the next stage of your, your deal flow evaluation cycle? Is, is that kind of how the inspection process works? Or do you kind of evaluate everything independently and take meetings and then start applying sort of the mode structure and mode framework on it?
Guy: You know, I think we’re, we’re always thinking about these factors. One thing though is, you know, venture is a business of, of exceptions. Right? It’s not a business of averages. And if you make lots of average investments, you won’t make money in venture. And if you follow every rule of thumb, you won’t make money because there are always these, you know, exceptions that can drive a lot of value for a fund. And so again, you know, back to the framework, you know, the founders of Facebook were not experienced in social media. But again at that time no one else was. So that industry experience question in that case didn’t matter very much. And obviously that was way before a time. But, but, you know, we always think about that chance that something falls outside of the, the rule zone or the, or the normal mode. And so I would say that we use these in our, we consider these modes when we meet with companies early but we never would throw out an opportunity purely because of that. And, and, and that’s really important. And that goes for any framework that we’re using. Right? It’s all, it’s very qualitative in the end how you decide to back both the team and a company at the earlier stages. Once you’re above one million dollars in revenue, things get much more quantitative. But below a million, it’s extremely qualitative and, and you do have to be flexible.
Nick: So we spent some time talking about these inspection characteristics. I wanted to transition to the second major category, which is the experience characteristics. #Guy, can you talk more about what they are and how you assess those?
Guy: Yeah, you bet. So the, the, I guess first on how we, how we assess them over time, the key is over time. So it’s very rare for us or any venture fund to, you know, in a, in a four week period go from first meeting to term sheet to a closed deal with a company they don’t know or have never met. That certainly does happen in later stages of companies. And again, that’s when things can become much more quantitative. There’s a ton of, a huge amount of evidence specifically to that company and not just about founders’ backgrounds and track records. But in their early stages, you know, it takes, it takes a lot of time to build confidence essentially in, in a team’s ability to execute, hire, learn, build relationships and communicate. Those are the kind of five areas that we look at. And I would say on average the companies that we invest in are companies we’ve known for probably the median is around nine months. And in some cases it’s up to three years. And in very, very rare cases it’s, you know, less than 3 months, but that’s unusual. And, you know, one of the ways entrepreneurs can think about their time with VCs is as soon as you have your first meeting with the VC, you know, the, the stop watch has started. So you said you’re going to achieve some things and every, every meeting that comes along afterwards, they’re going to look back at their notes and say okay you said you’re going to do this, did you do it? They may not actually say that to you because they want to be nice, they don’t want to be rude. But that’s what they’re thinking. And, and so we’re, you know, we’re doing that throughout the process of getting to know companies. And, of course, the first thing we’re looking for is did they execute on what they said they would do? And then, you know, within that it’s did you hire the right people to do it? What mistakes did you make, how did you learn from them? And how well do you communicate? And the last two, kind of the building relationships and communication part, we spend a lot of time thinking about our time with entrepreneurs and how well they communicate and, and sell and build a relationship with us, because we know that in the end their ability to build revenue is going to be largely a function of that, and the culture that they build around, you know, their own communication style. And that’s, that’s a really, really big one for us. So there is a number of times when we’ve been very interested in an investment upfront and then backed off because we felt like the CEO was not, was not strong enough at building relationships, attracting talent and communicating. And ultimately CEOs like that end, end up failing on building strong cultures and, and building strong customer bases.
Nick: How do you handle situations where, let’s say, a deal comes to you late and there’s already a term sheet, so you, you don’t have as much time to kind of observe these experience characteristics and, and see, you know, maybe a, a full quarter of communication from a startup founder, you know. How do you handle those situations where you have to get conviction much quicker?
Guy: Yeah. So, you know, I, I can think of a, a great example of that. So we’re very lucky to be involved in an investment in a company called #Hubdoc, which is in the accounting software space. The company has done phenomenally. Both the team and, and their lead investor shared the deal with us when it was, you know, pretty well baked early this year. But we had actually known the company for a couple of years. You know, we make it our job to be on the ground in the five to seven cities that we, we deeply cover and we make it our job to know almost every company. Of course, we miss some, but we have probably met at one point eighty to ninety percent of the companies that are, that are around. And that’s very much part of our strategy. And so in that case, yes this company ended up raising capital and getting a term sheet and we hadn’t been in the process, but we had the fortune of seeing it. And because of our focussed geographic strategy we had known the company before and also knew a lot of people who knew them, and were able to gather some of this kind of experienced evidence through other people that we trust and also through our own time with them. So that, that was sort of a non-answer to your question, which is to, to kind of argue with the premise. We certainly had cases where, you know, we’ve seen deals come together, we didn’t know the company, and, you know, we were being asked to participate or, or given the chance to participate. And to be honest, in most cases, we’ve, we’ve ended up passing because we, we weren’t able to build a comfort level. Or in other cases we might put a small amount of money in and, and learn with the company over the next 6 or 12 months so that we’re positioned well to put a, a larger investment in the next round.
Nick: So you talked about sort of these five action areas- execute, hire, learn, build relationships, communicate. You’ve also written about these five sort of style elements that matter most for startup founding teams. Can you talk about each of these a little bit?
Guy: Yeah, absolutely. So the, the five that I’ve named are, are being fast, tenacious, confident, motivated and practical. And, you know, each of these manifest in different ways. Fast is sort of obvious. I mean, the clock is just ticking on startups. You’ve got 18 months at most to prove a lot before you have to go out and fund raise again. In, in, in many cases it’s really only 12 months. And so you have to be able to move fast. And, you know, that’s not just a function of like do you work really long hours, and, and are all the developers at their desks at 9 am and working till midnight or whatever. You know, fast is also about how you make decisions, how quickly you make decisions. At what level, what is the onus of proof that you require to make decisions? Are you comfortable navigating in more vague environments and with maybe 80-20 information rather than 100 to 0. So we look for that a lot. We’ve, we’ve met great companies who work really hard but have trouble making decisions, have trouble throwing an experiment to the side because it wasn’t successful. Tenacity is, is kind of this concept of running through walls. So it’s not taking no for an answer. The best entrepreneurs never take no for an answer, either, you know, from customers, from, in fund raising, and they, they push through those, push through those obstacles. And obviously confidence and motivation matter a lot. I think of these five, one of the ones that matters the most is practicality. That’s not to undermine the need for founders to be very passionate, and in some cases idealistic about the problem they’re solving. But from a business perspective, and being a successful leader of a business, you also have to be practical. And, and there’s two reasons for that. One is in the upside case, you know, you want entrepreneurs to say hey, you know, I think we may not reach the billion dollar valuation that we wanted but, but this company has come along and offered us 300 million, and I think this is a local maximum, let’s take it. You would be surprised at how many really talented entrepreneurs who were fast, tenacious, confident and motivated have been impractical about exits and regretted it later. And that’s, that’s a real bummer. And then in the downside, you know, when things aren’t going well, you really need practicality, otherwise companies just become extremely dramatic and time consuming. And that’s no fun. So, you know, we’ve, we’ve been in situations where a company hasn’t been going well and everyone starts pointing fingers at each other. And it becomes a, essentially a battle of wills and emotions. And that’s no fun. People need to be practical and, and that saves a lot of time. And it saves a lot of energy, even when things aren’t going bad or its if things aren’t going well.
Nick: Got it. I will say from personal experience, on, on the fast dimension, you are the fastest email responder of anybody I’ve ever interacted with. I’d love to see what your average time to response is, but I bet it’s, I bet it’s in the minutes. So, you know, on that note, I’m curious, you know, you guys, in a way you’re founders too. There’s a parallel here because you’ve started your own firm and you’ve built it
Nick: from the ground up. You know, do you, #Ira and now #Tim, do you guys look in the mirror and kind of consider and assess yourselves on these same sort of dimensions that you’re assessing startups?
Guy: Yeah, we do. So there’s, you know, one of the challenges and things about being a VC, and I think this is not that different from being an early stage entrepreneur, it takes a really long time to figure out if you’re good at it. Just, you know, based on the, the, the basic way you measure yourself, which is ultimately returns. And so in the meantime, you know, before you have big exits and are sending lots of checks to your LPs, you need to look for kind of intermediate milestones and, you know, just like entrepreneurs do. They say oh well I reached this, this level in revenue or I was able to raise a, a great round from a great investor at a high valuation. Those are all good intermediate milestones. And those milestones matter to us as well. And that’s one of the ways that we measure ourselves. But we also measure ourselves on, on our decision making, on how we deploy capital, whether the capital appears to be following the good companies in our portfolio or the bad ones. And so we spend a lot of time on this. We’ve done, you know, 360 surveys on our team before, on the qualitative side and on the, on the style side as well, because, you know, just like a founding team we spend a lot of time with each other and, and, you know, we need to develop together and we need to learn from our mistakes and, and improve. And all that sounds kind of like a, a throw away answer, but it is, it’s extremely important because in particular in, in cases where the financial outcomes are something that come later, you know, you need to be able to assess whether things are going well in the middle. And it’s, it’s harder to measure in this industry than it is in most, just as it is in startups.
Nick: Yeah. You know, I’ve noticed myself in interviews I’ve been doing recently for, for analysts and, and so on that have worked with me, I find myself kind of adopting a frame that’s very similar to when I’m chatting with founders. So, you know, I’m curious, when you’re building up the team at #Hyde Park of, of various directors and associates, I, I know a number of them and they’re pretty amazing people. But do you, do you wear a similar hat? Do you think about sort of that team and, and adding to that team as if they’re, they’re a founder? Are you looking for, you know, some domain expertise in venture capital? Are you looking for is it a fit? You know, is it a person market fit here? Or is it kind of a whole different sort of evaluation set?
Guy: Boy, that’s a good question. I, I think it’s, I think it’s pretty similar but it also depends a lot on levels. So, you know, when, when #Tim joined us as a partner in our second fund and we had worked with him for a number of years as an advisor, one of the things that really attracted us to #Tim, and I think where he saw the fit in our group, was his deep operating experience. Which was a gap for #Ira and me. So, you know, in that sense, we were looking to create a more complete team by including #Tim. And, you know, he, he is, he had been an angel investor for a number of years but, but certainly hadn’t been a, a full time VC. But he brought this huge expertise in operating and then also market expertise in marketing tech. And that was extremely complimentary. So it’s a little bit different I think than what we look for in a founding team. Obviously in a founding team we want a, a complementary expertise and skills and that’s something that we consider. But as, as hirers of people ourselves, at the senior level we, we think a lot about complementary experience and skills. And then, of course, also sort of commonality in culture and how we approach things. At the junior levels or, you know, less senior levels, we don’t look for industry expertise necessarily. It’s certainly nice if it’s there, but a lot of the, a lot of the skills that are needed as a VC are, early on, are sort of about relationship skills of sourcing deals, and analytical skills of, of reviewing deals. And you’re not yet looking for hey is someone able to, to put dollars to work and prove that that is a good investment. I mean, that’s sort of an unreasonable expectation of, of an associate who’s, who’s starting out even if they had been in a firm before. So, in other words, track record and that kind of thing only matter at the senior levels. At the junior levels, you’re looking for ability to build relationships, ability to network, and ability to be analytical about opportunities.
Nick: Got it. Are there any other soft skills maybe that we haven’t touched on or that investors tend not to write about and not to feature that you’ve found are particularly important when it comes to founders and what you’re looking for when, when you’re meeting early stage entrepreneurs?
Guy: Yeah. So I mean, the obvious one are, are ethics. And I think that I mentioned that when I talked about this stuff before in blog posts. But, you know, all of us I think passively agree that being an ethical and moral person is really important and it tends to be this throwaway of yeah well obviously we all mean that. Right? But I think some of the things that we’ve seen in the market over the past year, #Theranos, #uBeam, you know, there’s recently been some stuff in Chicago. You know, it just brings to light how critical ethics really are. And it’s, it’s not a throwaway. And we spend a lot of time thinking about that with teams. One of the things that’s a huge red flag for me is when I’m with an entrepreneur and I feel like I’m getting a lot of half truths, or questions are being dodged. And some people would say well, that’s just good salesmanship. And, and I don’t think so. I think really good sales people do a lot of listening and understand questions and answer them in, in a pretty thorough way, and when they don’t have any answer they say I don’t know. So that’s, you know, that’s something we think about a lot with entrepreneurs. You know, we’ve been fortunate not to have any really significant ethical problems in our portfolio. Hopefully we can keep it that way. You know, there’s certainly been, been a thing here or there, but that is, you know, that’s a, I think a, a, a really important part of what we do is filter people on that because, you know, look, in an environment where people have nothing and they’re telling you we’re going to have something in three years, it’s very easy to understand how the line between what is ethical and moral behavior gets very blurry because in essence we’re all telling stories about these companies. But it’s how you go about doing it and how you communicate to, to your constituents whether they are investors or whether they are customers that really matters. So the way, the, the simplest test for me on ethics is do people communicate the risk accurately? So if you promise something to a customer, does the customer understand, you know, what the probability of your delivering is? Is it a 100%? Is it 80%? Is it a 100% on this part of the product and 80% on that part of the product? And likewise with investors. And so I think that transparency is, is really critical. And that’s why we get very, very nervous when we get half truths or dodge questions or we meet with entrepreneurs.
Nick: Yeah. There’s been a bit of a, a black mark on the, the industry
Nick: lately. Not, not only at the founder level, as you’ve mentioned, but also at the investor level. You know, a number of high profile folks either leaving or getting ousted from, from some very notable firms. What do you make of the, the overall situation and, you know, how this is playing out and affecting the sort of image of the industry and, and sort of compromising the integrity of what we do for a living?
Guy: Yeah, #Nick, I think that’s, I think it’s a great point. And, and actually I, I should have brought that up. Right? So I’ve talked about the, the ethics of, of entrepreneurs and not the ethics of investors. And I think it goes both ways. Obviously there’s been a lot of problems, you know, with kind of personal misconduct amongst GPs. And that’s extremely disappointing. You know, I think it’s ,the best way to, I guess the best way to say it is, you know, it’s, it’s embarrassing and it’s sad to see in the industry. But when you say it’s sad to see, that doesn’t imply that I wish we just didn’t know about it. It’s, it’s actually a great thing that it’s coming out. And I think we’ve seen in the past three years, firms really proactively trying to address that by hiring more women, trying to bring more women onto boards, and, you know, more people of, of minority status and so forth. And, you know, that’s a, that’s a really good start. And we’ve got to keep doing more and more of it. I guess I’ll leave it at that.
Nick: #Guy, what topic and/or guest should we feature on the program here?
Guy: Oooh. I mean, you know, I know we talked a little bit about the ethics thing, but I, I think, I, I think that’s worth spending more time on. I’m trying to think who would, who a good guest would be, you know, other than a partner at #Benchmark which would be pretty fascinating right now. But, for me right now that’s something I’m thinking a lot about. And, you know, both practically and, and professionally but also, you know, philosophically.
Nick: Yeah. I’ve been considering actually having some of the, the perpetrators, you know, on the program to kind of hear, you know, what happened. But at the same time, I, I don’t feel like I want to give them a platform. So.
Guy: Yeah. No, that’s fair. Absolutely.
Nick: #Guy, what investor has influenced or inspired you most?
Guy: You know, we’ve, as a firm, we’ve been really lucky to have two of our companies funded by #Ajay Agarwal at #Bain Capital or #Bain Venture Capital. And he’s someone that my partner #Ira and I met early on when we started #Hyde Park Venture Partners. And he is just a, a brilliant person, a terrific investor and, and has brought a ton of value to our portfolio and his involvement. And, you know, we, I remember we visited him for about 30 minutes at his office in San Fransisco I think about 4 years ago, because we were just meeting with a bunch of experienced VCs and trying to pick their brains. And, you know, the number of like tweetable quotes that he dropped in a period of 30 minutes, but that weren’t just bullshit, and they were, you know, based on experience and, and really good kind of rules of thumb were, were just incredible. And one of the things he said which is, has really stayed with us, is he said look, you know, most people think about venture as a rule of thirds. So you have the third, bottom third companies that don’t perform, the middle third, that, you know, maybe are singles and then the top third where you make all your money. He said that’s not the way it works. The way it works is it’s the top third of the top third where you make all your money. And that has been, been something we’ve thought a lot about as our portfolio has matured. That’s just an example but there are like ten other things he said in that thirty minute meeting that had a similar impact on us.
Nick: And finally, #Guy, what’s the best way for listeners to connect with you?
Guy: Yeah. They can email me at firstname.lastname@example.org or message on Twitter @guyhturner
Nick: Awesome! The man is #Guy Turner. His blog is vcwithme.co. He writes great content over there on the venture capital industry as well as talent, people and a variety of other topics. #Guy, thanks so much for joining us. Look forward to chatting again soon.
Guy: Thanks, #Nick, appreciate it.