169. Product is Paramount (Brian Ascher)

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Brian Ascher of Venrock joins Nick to discuss Product is Paramount. In this episode, we cover:

  •  What is your story at Venrock and how have both you and your firm evolved over the past two decades.
  • Talk a little about Venrock and your focus there.
  • You were a product manager at Intuit, prior to Venrock.. what do you think is the VCs role in shaping product strategy?
  • What are your thoughts on SaaS investing and this increasing focus on the “Intelligent Enterprise”
  • You wrote an article a few years ago called “Goldilocks and the 3 SaaS Go To- Markets Models”… what are the three flavors of SaaS go-to-market and have they changed since you wrote the article?
  • Business Model: Price/seat vs. metered service vs. price for value
  • We’re about to close on our first fintech investment for fund I– can you talk a bit about fintech and why it’s so hot?
  • Some have said that digital currencies and/or the blockchain itself will be as disruptive as the internet– agree or disagree?
  • Something we’ve neglected a bit on the program is long-term governance. What are your thoughts on Managing a Board of Directors and what situations have you seen play out– for better or worse?
  • What is the percentage of healthy, well-functioning boards vs unhealthy boards?
  • How are chairman roles assigned/elected– are they often explicit and how useful is it to have an official Chairman?

Guest Links:

Quick Takeaways:


    1. While innovation and product are important, individuals and teams are the backbone.
    2. Product is an all-in commitment and one must be very detail oriented.
    3. Brian prefers to be a heavy user of products he invests in.
    4. Founders appreciate when investors go deep with the product management team.
    5. Product architecture decisions are often overlooked.
    6. A great indicator is when a company is constantly rebuilding their tech stack.
    7. Access to interesting and rich data sets are necessary to keep learning loops running.
    8. Three types of business models fit a SaaS driven business, and they all depend on product, pricing, and customer segmentation.
    9. The Freemium business model works well for products with broad appeal and easy customer onboarding.
    10. Inside Sales models are best for small businesses to mid-market companies that would otherwise have low conversion rates for freemium plans.
    11. Enterprise models have higher price points, with a heavy requirement to sell + do it well.
    12. It’s easier to start in the middle with SaaS models and then add enterprise features than vice versa.
    13. Enterprises favor traditional pricing models because they have predictable expenses.
    14. Digital Currencies and Blockchain will be as disruptive as the internet.
    15. Crypto and blockchain parallel P2P with added complexity and unique governance structures.
    16. Tech is experiencing a somewhat deserved backlash due to misuse of customer data.
    17. We are still in the “Dial up Era” for Ethereum architecture performance. Once these setbacks are solved, more interesting applications will emerge.
    18. When there is a healthy board dynamic, governance comes easy. Process and protocol are critical.
    19. The most important quality for maintaining board relations is transparency.
    20. There is often little difference between what the board and management want, especially in KPIs.
    21. The chairman role is underutilized in most companies. Dividing responsibility between the CEO and Chairman, especially if the chairman is experienced, creates a competitive advantage.
    22. In the tech ecosystem, it has become more important to “win at all costs,” forgetting customers and ethics.
    23. Brian Roberts at Venrock has impressed upon Ascher how important it is to reject pattern recognition. When the patterns no longer apply, the most interesting opportunities present themselves.

Transcribed with AI:

welcome to the podcast about investing in startups, where existing investors can learn how to get the best deal possible. And those that have never before invested in startups can learn the keys to success from the venture experts. Your host is Nick Moran and this is the full ratchet

Welcome back to TFR today 20 year

vet Brian Ascher joins us. Brian is a mainstay on the Midas list having invested in successes including Voicera, edify SlideShare, relay health and many others. And he’s an investor that I have unique appreciation for due to his focus on the importance of product. In this episode, we discuss why he’s so product oriented. What sort of business models work for different types of companies, how blockchain and crypto will impact tech, the keys to running an effective board. And finally, why Brian rejects pattern recognition.

If we’re keeping score, Brian is one of the better investors in the industry. His points really hit home for me, and I hope you find them useful. Here’s the interview with Brian Asher of Venrock.

Partner at Venrock Brian Asher joins us today from Palo Alto, one of the longest standing VCs in the country founded by the Rockefeller family, then rock is an early stage firm with 3.2 billion under management. Prior to Venrock. Brian worked for Intuit, and earlier in his career was a strategy consultant at the monitor group. Brian has been named to the Forbes Midas list multiple times for backing some of the most profitable winners in recent years. And he looks for talented entrepreneurs who want to change the world in the areas of enterprise, consumer internet, b2b, FinTech and artificial intelligence.

Brian, it’s a pleasure to have you. Welcome to the show.

Oh, thanks very much. Glad to be here.

So Brian, I typically ask investors for their their path to Vc. But I believe you’ve been at Venrock for 20 years now. Right? It’s hard to remember the path prior. I’d be more curious to hear sort of the story of Venrock and how both you and your firm have evolved over the past few decades.

Yeah, so the Venrock story does start well before me next year, we’ll celebrate our 50th year formally as Venrock. But the roots of the firm go back even further to the 1930s when Laurance Rockefeller was really a pioneering super angel investing in some of the interesting technologies of his day, which, going back that far, it was like commercial aviation, and electronics and chemicals and energy. But the firm got started in the late 60s with early investments in Intel, and a few years later, Apple and, and they were fortunate to have those early in career. But over the past 20 years, you know, we’ve seen several cycles of venture play out Venrock has chosen to largely stick to its netting in terms of being early stage focused, really concentrating on innovative, you know, non consensus ideas. We’ll talk more about that in a moment, but not raising monster funds, we’re still about that 450 $500 million size, still focused on the early stage. And believe that venture is all about committing the investment professional to the entrepreneur and doing whatever it takes themselves rather than all the bells and whistles, you know, that people are trying to employ today. I think a lot of that innovation is great. And we’re doing innovative things as well, but but by and large, it’s still individuals working together to try and do new things

on it. And what sort of categories or sectors were you focused on when you first started with Venrock?

Well, you know, we were certainly seeing the first build out of the network and the comms stack. I was doing some early consumer work the firm had never really invested in consumer. So one of my very first deals was a e commerce company called fog dog sports for those who may remember it. That was a very new thing for for Venrock to get involved in. Of course, now we’re we’re very active in consumer businesses like Dollar Shave Club was one recent one well known. But back then that was kind of a heretical idea. Yet the firm was open to new ideas and established the beginning of a consumer practice. Got

it? And tell us a little bit more about the firm today and your focus now.

Yeah, so the firm covers all major areas of innovation. on the IT side, its infrastructure, enterprise, consumer hardware, software, frontier markets, like aviation or space or ag tech. And then we have a thriving life science practice that does biotech and devices and diagnostics but also very strong effort in healthcare IT which is a market I invested in a long time Go but but really the main work has been my two colleagues, Brian Roberts, and Bob Koecher. And they’ve got a terrific portfolio. And it’s an area that leverages both sides of the house, our life science background and our IT background. So that’s an area we’ve we’ve been involved in for a very long time since the beginning and believe in strongly.

Got it. So you and I share a product management background. Of course, you were a product manager at Intuit prior to Venrock. I’m curious to hear your thoughts on sort of the VCs role in helping shape product strategy.

Yeah, it’s an interesting one, it’s, it’s sort of a delicate one, too. Because I don’t think founders will, you know, product is an all in commitment, right? You got to sweat the details, you got to live it, breathe it. And it’s hard to do that from the outside. But I do think as an investor, you do have to form a point of view on product, it is an essential ingredient of picking winners from losers. But yet, they’re I think there’s a belief that, you know, you focus on the other things, and you can never really tell and who are we to judge a product. But I think I think it is important to be a heavy user of the products, whether they’re consumer, of course, that’s easy, but enterprise etc. And, and I think you have to go as deep as you can and sweat the details and have some appreciation for the product management process and understanding the culture around that in the companies, I have found that board meetings are not the time to express one’s point of view on a product that needs to happen with permission sitting down with product teams outside of board meeting cycles, because you can easily go down into the weeds and or really upset the applecart if you start spouting off in the boardroom about specific product issues. But I do find that companies are appreciative of investors willing to go deep, particularly when you can be helpful by bringing outside insights, showing them interesting new products that might have elements that are worth thinking about for your particular product, and particularly helping to find product talent, which is always in short supply.

Interesting, what are some of the specific areas on the product side that that you’ve worked with entrepreneurs on? Is it you know, messaging? Is it UX? Is it pricing, positioning, I mean, what are sort of kind of the key areas that you find yourself talking to entrepreneurs most about, it’s

a little bit less, you act certainly, you know, pricings, you know, falls right into the whole business strategy, go to market strategy, which which we definitely get involved in and is super important. You know, one area that I found often gets not enough attention until it’s too late is some of the architectural choices. And what I mean by until it’s too late is, you know, your company gets up and running, and you do what it takes to get an MVP out the door and things are starting to happen and you’re meeting customer requirements and adding new features. And then you inevitably get to that point a couple of years in where the tech debt has gotten big and, and maybe it’s time for a re architecting. And if you miss that, that point, and don’t choose to re architect at that point, then then another two years goes by and holy cow, can you be in trouble? If you now have to do a replac forming later in life? Sure, you may not have the right people to do that as well. Because chances are, if you didn’t upgrade the technology stack to take advantage of this new tools and techniques, then then you may have the people who built the first version not familiar with those and not willing to make a big change later on. So those are a couple of trouble spots I’ve seen enough to be very acutely aware of and and hopefully in front of with our companies. I feel I don’t know if you’ve experienced the same Yeah,

I was just gonna say I feel like I see this time and time again. Because one of the the strange outcomes of success is, you know, you need a more robust and scalable stack. And, you know, I see startups having to rebuild time and time again. And in some cases, the tech folks to build a product and get to empty MVP, maybe aren’t the same folks that can help you scale. And so, yeah, I’ve seen this and it’s it’s a challenge.

Yeah, well, you know, it’s a good sign if they are rebuilding the tech stack over and over. It’s a bad sign when they haven’t.

That’s right. Yep. Well, good. Well, you know, I wanted to also kind of get your insights on this emergence of the the intelligent enterprise, right, also kind of how that sort of SAS investing and the emergence of SAS is impacting this division.

Yeah. I am so excited about this area. And I’m particularly excited about where we stand, like right now, because for a couple of years now, you know, we’ve been back in in any AI spring and people in that excited about it, but but I think the first efforts to apply AI in the enterprise, you know, in test applications was really, people just slapping AI into our PowerPoint, and saying what or AI for healthcare or where AI for, you know, finance or logistics or what have you. But folks, we’re really leaving it to the customer to figure out what problem they wanted the AI to solve. It was like selling a toolkit, or a basic capability. And I don’t think that customers really knew what to do with it. And I don’t think that the horizontal tools were really all that capable of going deep on on business problems. But I think now we’re at the point where folks are finding the meaningful, highest uses of AI, that is where the value will be created. So when I say meaningful, I am most interested in teams of founders who have first and foremost identified a really interesting problem that AI and ML can uniquely solve. And we can, we can talk about a few examples. Then second, they start to talk about how they have unique access to a really interesting and rich data set, whether it’s super wide or super deep, or both. But it’s got to be compelling, unique and very importantly, dynamic so that the learning loops can keep running constantly. And only third, in the priority queue would be talking about how brilliant your algorithms and your data scientists are. I think if you start with the problem, and then the unique data, and then the algorithms that’s that’s sort of the right set of priorities to have an A creates the most interesting solutions to new problems. So just to make it real for you, yeah, one company I’ve done recently, a seed investment in is called contract Wrangler. And their observation was that in every business, but particularly larger businesses, mid markets, business, people fight tooth and nail to to negotiate contracts, and there are these complex documents, and you fought for every term. And then they get stuffed, you know, in an online file system or in a cabinet somewhere and everyone forgets what you agreed to until you get into trouble or it’s too late or some reason you try and track down that contract and read it. But it’s essentially the blueprint of what everyone has committed to. And so whether it is renewal dates, or service level commitments, or remediation, or reporting requirements, etc. Like there’s a bunch of stuff that the business teams need to know about. And it’s hidden away. And when you have 10s of 1000s, hundreds of 1000s of contracts, it’s a complete mess. And this has been validated by every CEO, CFO, VP, sales, like you name it, people have had horror stories by missing a renewal date or forgetting about a key term in a contract somewhere. So there has been a category of software to manage contract terms, but it’s, you know, contract management software, but it’s essentially a form on a database. And if someone has to manually enter 10s of 1000s of contracts in there, it just doesn’t happen or it doesn’t happen with any sort of clarity so that the category is under penetrated and vastly underutilized. But if you use AI to actually understand a legal contract, extract the key terms, be able to trend across contracts, build benchmarks, search contracts, alert, workflow, dashboards, then all of a sudden, the business people have the ongoing awareness and insight that they need to honor those commitments and to do better the next time they’re entering a business relationship that’s codified in a contract. So it’s a really cool use of the technology couldn’t be done manually. And it’s just a good example of a real concrete business problem that AI can uniquely solve. I guess, you

know, every organization has just a surplus of contracts and a variety of, you know, downstream consequences that can happen, right? This probably isn’t just unique to one sector or one market, I would imagine that most enterprises could benefit from from such a tool. That’s

the hope. That’s the hope. Just think about the m&a process when you’re asked to produce all your contracts for due diligence and represent all sorts of things like that’s, that’s a breakout in a cold sweat moment for the CFO. So you know that that’s an interesting problem to solve.

Okay, cool. Well, let’s talk about go to market a bit. So you wrote an article a few few years back called Goldilocks and the Three SAS go to market models. Yeah, Brian, what are the three flavors of SAS go to market? And have they changed since you wrote that article?

I’ll tell you, I’ll tell you why I wrote it. And that’ll answer the question of how it’s changed. I feel like a couple of years ago, people were very much conflating SAS meant self service. Right? We were all very, very enamored and intrigued with b2b companies that could offer a freemium self service product. This was the days of Yammer, the early days of box and Evernote, et cetera. And we have come to Cloudflare that has benefited greatly from a freemium model. And I think it is one of the most powerful For business models in the world, if you can build a product that has such broad appeal, and such easy onboarding, that customers can essentially, self serve their way into, into being a paying customer, that is fantastic. But what I have seen over the last few years as people have remembered that well, but that doesn’t apply to every product, some markets are a little more narrow, so you can’t withstand the consequences of the winnowing down of a funnel. And the you know, relatively modest conversion rates you’re gonna get from free to paid. And so we’ve seen the emergence of the whole inside sales process driven by sales, development reps, business development reps, and the ability to really scale that process in rigorous quantitative way. So that to me is like the the mama bear the middle, the middle porridge, that just I don’t want to say it’s better or worse. So it’s not the just right, but sort of that in the middle approach, where you’re pricing things in the 10 1000s, to maybe, you know, very low 100,000 A year kind of price range going for small business or mid market, or maybe departmental sales in the enterprise, heavy inside sales, heavy online, lead gen, and, you know, a modicum of customer success intervention. And very little, and this is, you know, this is where some of the biggest companies have scaled, I think it was, you know, the Salesforce and NetSuite sweetspot Marketo, we have several companies in this zone, one of our own companies, Athenahealth, and dynamic signal really played here. And then there’s big enterprise and for a while, it was out of favor, except for the people who really believed like, you know, the founders of Workday, and viva, and this is a big field selling high price points, heavy installation, sometimes longtime to customer value. And, and I felt like for a while, it was very out of favor, people felt like all those attributes were the things we were moving away from when we went from on prem to the cloud. But you know, what big enterprise still has complex needs complex buying cycles, and they want to benefit from all the advantages of cloud delivery, but they’re not going to self serve their way into your offering, they might have like a departmental or an individual level, but by and large, you’re gonna have to show up and sell and configure and support. And that’s, that’s just fine. If the price points are there, and the market is there, it’s a great way to build a business. So those are the three models, sort of small, medium, large. And my main point in analyzing this was really just understanding how you, you want alignment between you, you’ve chosen a market segment, you’ve applied the right sort of go to market offering and pricing, et cetera. And you haven’t committed some of the sins of under pricing for the enterprise or overcomplicating for the freemium, etc. These are a couple of things that can fuddled by startups, do

you feel like certain go to market models work better for different types of businesses? Or is it that within a business, the go to market strategy will change as they go through different stages? You know, how do you apply the go to market model? And think about which is most appropriate? And is it a timing thing and a stage thing? Or is it more dependent on the type of business and the type of product?

I think there’s a little bit of a there is a natural fit to certain markets. So if you’re serving doctor’s offices, like Athenahealth was, I think that the middle market, you know, the inside sales, you know, high velocity approach with with some customer success, support is the right one, right? You can’t afford field selling to SMBs and you know, heavy configuration, etc. Nor can you expect that they will all find you on their own sign up, configure and do everything that a freemium self serve model does so so I think certain markets are going to lend themselves to certain treatments. Yet there are certain markets where you literally have room for all three flavors. I think the sass billing market was a good example of that where I feel like Zara came right into the middle and did a beautiful job selling and marketing for a lot of other SaaS companies who had a need but not overly complicated needs. We have accompany REO systems that went at the high end of that market going after telcos and other people who have very, very complex billing systems and needed help there. And then there were players who started at the very, very simple bottom end Recurly and others. And I think to a large extent there were there were market opportunities for all three of them. Your point about can you migrate over time? I think I think you can. I think Salesforce has done a terrific job going all the way up to big enterprise. Yeah. Over time. I think it’s it’s a very debatable topic, but I do think it’s easier to start in the middle and go up and add Enterprise feature sets then it is to have an enterprise DNA and simplify your product for the mid market. Although you could probably point to examples of companies going in both directions. But I do think having an initial focus that really lines up with the customer audience you’re going after is the right way to start and expand over time as you gain the traction and the understanding of exactly what each customer segment wants. What

about on the business model side, you know, when it comes to selecting and refining the business model, whether that be price perceived or metered service or price for value? You know, how do you think about business model?

I think that the type of pricing model can apply in each three of these different flavors, you know, small, medium, large approaches, I do think that the enterprise, you know, is a little more set in its ways. And so they have a certain buying cycle and a comfort zone. So for example, I’ve had lots of companies attempt risk sharing models with large enterprise customers where, you know, we’ll take a percentage of the upside, or, you know, et cetera. And they always sound like a good idea. And they actually lead to interesting discussions with customers. But at the end of the day, the enterprise seems to favor predictable expenses. And they tend to want to go back to traditional models. Now, whether that’s price precede or per user per usage, I think it totally depends on what your product is, I think there’s a natural appeal to the per usage that so nicely equates value with your expense structure. And I think you’re seeing more and more of that than just the per seat model. Because more and more, I think we’ve become aware that driving lots of engagement is really good for long term customer delight and stickiness as as the vendor. And so we want to incent lots and lots of users. So don’t create a barrier by charging for all them if there’s a different unit of value.

Right? Right. Interesting. You know, I also kind of want to get your take on fintech. We’re about to close on our first FinTech investment for for fun one here, can you talk about, you know why you’re so interested in the sector and why it’s so hot?

I think it’s so hot, because it is such a enormous market. In fact, it’s it’s a collection of many different enormous markets, whether you know, lending, investing, insurance payments, it’s trillions and trillions of dollars of market opportunity. It is an inherently digital concept, even though we have branches, and you know, we have paper money, etc. Like all this is essentially an abstract concept of value or obligations, etc. And so it lends itself perfectly to digital, more so than mobility or, you know, food or anything like that. And then the why Now, question is the incumbents are just so right to be disrupted, you know, in a variety of different ways. You know, I start with the most, you know, obvious one is the build out of ranch offices and physical infrastructure that most incumbents have done, whether in the banking, or investing space, or insurance space, like that is something that was right for the bygone era. But but it is a very heavy expense structure that we don’t need with the next generation of consumers who prefer a virtual and digital. So that’s point 1.2 Is the middlemen that had to live within infrastructure, the agents and the brokers, and the Commission’s they earned and the weird incentives that were not aligned with the consumers. Those are the people who live in those branch offices, and they need to either go away or have their incentive structures shifted to more of a support of what’s in the consumers best interest, because the software creates much more transparency, and can do a lot of the information provisioning that these agents and brokers used to do and the selling that they used to do. Obviously, there’s a ton of paperwork and analog handoff work and exception handling that happens in financial services, whether it’s loan underwriting or investment management and all that needs to be digitized. We have still have a long, long way to go on that front. And then we have we have the opacity that needs to have a light shone on it in terms of conflict of interest and fees and performance. Like that’s a particularly interesting one in the digital wealth management space where the old wire houses that were expensive commissions to the investment managers and hidden fees and obtuse performance reporting or non existent performance reporting like all that needs to be made much more transparent and today’s digital disruptors are totally moving into that breach, and I think we’re in a reasonably favorable regulatory environment. Things got a little tight there. And, and that wasn’t necessarily a bad thing. It just meant that there, you know, the rules were changing and startups needed to figure out what the rules were and then play within them. But the time has come. And we’re seeing the the examples of success. And I think it’s going to be an area that continues to be really, really rich with opportunity.

You know, some have said that digital currencies and or you know, the blockchain itself will be as disruptive as the internet, you agree, disagree.

I tend to agree. And I think it’s, it goes well beyond FinTech and just currencies and contracts, I think this whole notion of kind of web three and distributed architectures. In some ways, it feels like the excitement we had around peer to peer, yeah, but just in a much more sophisticated way with governance structures that are unique and interesting. And frankly, it couldn’t come at a more interesting time, while tech is experiencing a somewhat deserved backlash from regulators and consumers around misuse of customer data, and kind of just some, frankly, bad behavior and sloppy execution. Now, all of a sudden, we’re taking the ginormous central monopolist out of the equation and making these distributed applications available to that is very, very interesting and potentially disruptive to the whole ecosystem. Yeah,

I mean, to your point before about contracts, and, you know, complicated contracts with a lot of provisions, I mean, having things like Aetherium, to help manage and strike, you know, smart contracts, could be a game changer.

Totally, totally, we just, you know, we’re still in the dial up error in terms of performance of some of these new distributed architectures, but you know, it feels inevitable that that will get sorted out. And when, when it does, we’re then gonna find, you know, some very, very interesting applications of that technology approach. I couldn’t

agree more. I mean, I hear a lot on the currency side about how, you know, today, it’s only used for speculation or store of value. But I have to think that soon enough, regardless of the type of coin or the type of currency, you know, just on the currency side, it will be used as a medium of transaction. And there are so many other uses of the enabling technology for currencies underlying including the blockchain.

I couldn’t agree more. It’s a really exciting time. It’s, you know, it’s we’re maybe now in the trough of disillusionment. But that’s okay. We know that truly valuable ideas come out the other end in ways that you never could have predicted and expected and it’s usually bigger than people first prophecies during all the hype. Right,

right. You know, Brian, something we’ve neglected a bit on the program is long term governance, you know, working with founders and boards over over a long period, I tend to focus on sort of the early stages of venture capital here on the program. But I know that you serve on a number of boards, I think it’s nine by my count. And but this counting, and you’ve, you’ve served a number of boards in the past of companies that have moved to exit, but what are your thoughts overall, on managing a board of directors, and what situations have you seen play out for better or worse,

the high order bit on that topic is really more of the kind of health of the relationship more than it is about strict governance, etc. I think if you have a healthy board dynamic, then governance becomes easy and more a matter of process and protocol. And where I’ve seen companies get off on the wrong foot, once they transition from a startup with essentially no board to taking outside money and having a board is, first and foremost, realizing that you’re you’re all in this together. And the expectation should be that we’re going to face a lot of problems and challenges. And it is incumbent upon both sides to be really transparent, that that’s what we’re here to do identify them, discuss them and solve them together. And so if you can start by recognizing that you don’t have to sell your board, you don’t have to hide things from your board, you don’t have to impress them each and every time. What you should impress them with is your ability to see problems early and share them transparently, and then get on to the problem of solving them. And when you do that, then you build a virtuous circle of the board can relax knowing that the team is sober minded, execution oriented and really trustworthy in terms of sharing what’s really going on in the business. When you don’t have that then then board members will often get a vague sense that something is wrong, and then they press harder. And that might result in a defensive reaction, which starts to cause the investors and board members to get even more nervous, and things can unravel and get pretty ugly. So I think it really is both sides agreeing that no matter how promising a startup is, business is mostly about solving problems. But you know, it really is As up to the board, if management founders come to you with problems, you have to be constructive and not freak out, not hit back. But really roll up your sleeves and help where you can, at the very least do no harm. But I think I think there’s lots of ways we can actually help solve problems. So that’s the first principle. The second principle is really good reporting, you know, board meetings take a lot of time, like, There’s no way around it, the prep work can be significant. My philosophy is there’s really no way around that fact. But hopefully, you’ve set a frequency of board meetings, it’s not that’s appropriate. So whether it’s six every six weeks, eight weeks, sometimes it could be four weeks, and you’ve set a format that works a length of time, and you’ve agreed on on what type of materials will will go out ahead of time, my philosophy is, you know, let’s try and find the the KPIs, the key performance indicators that management really cares about too. And so that there’s very little difference between what the board wants to see and what management at the senior level focuses on. And it’s often not that easy to figure out what that set of information is. But once you do, then I think it’s really powerful, because everyone is focused on the key drivers of the business. I think the last thing I would say is the board and the and the CEO in particular have to get in sync on how they like to communicate with each other. I’ve, I’ve seen a lot of CEOs get very frustrated about how hard it is to manage schedules, and get everyone in a boardroom at the same time and how much work it is to communicate. And my philosophy is, look, we have to serve you. You can’t worry about having to schedule so that every single board member can be at every meeting. And so just do your best. And if directors miss it, then shame them. But don’t kill yourself trying to meet their vacation schedule in August, like do we need to do and you know what, they have an obligation to you, they’ll make it fit. I’ve seen CEOs breathe a real sigh of relief when they realize that that is an allowable approach. And then you find you know, directors get with it. I think they respect the fact that okay, you know, I gotta be there. I gotta be on time I gotta be prepared. It’s all about setting the right set of expectations and the right tone. Do you have any different ideas on the topic? I

don’t, you know, I don’t serve on many boards. I’m an observer on a couple. I don’t take many direct seats, intentionally I invest precede. So we do a lot of investments, you know, I can’t afford to be on 20 boards, to be honest with you, most of the challenges at my stage are developing the product getting some customers getting in the market, there are very few governance issues, you know, just getting to series A is kind of the target. So we don’t spend a lot of time in board meetings with with the founders at the stage where I enter.

Yeah, I hear you governance is generally and hopefully a pretty small part of what directors do even at the Series A, B or C and beyond stage, obviously, as you prepare to go public, that’s when it gets real serious, I think of it is it’s probably a sign that there’s something not quite right, until you get to those latest stages.

Got it? You know, I probably should qualify my answer. Often, if we’re the lead investor, or a significant investor, we’re, I’m in communication with many of my founders multiple times a week and at least once a month. So it’s not that we’re not having touch points. We just, you know, when there’s very few sort of stakeholders in the business, it’s, it’s often one to one. Well,

absolutely. And that’s where the best boards do their best work outside of the boardroom. Like it’s those ad hoc interactions. It might happen monthly, weekly, or daily, or even multiple times a day, depending on the particular circumstances and that moment of time. Totally. Right. What would

you say is, you know, percentage of well functioning boards that you’ve served on versus ineffective or unhealthy boards? Oh, wow. Without naming names, of course.

Well, yeah, exactly. Fortunately, I’ve never been on a truly broken board where there was acrimony, and things are coming down to votes, and you’ve got real real problems. I think more often than not, you see, a certain director from a fund or an outside director might lose interest and spend, you know, their attendance starts to fall off, or their contributions or activity outside of the boardroom between board meetings tends to flag so it’s almost inevitable that you have a few active board members and a few less so and I think good CEOs can manage that. I’ve definitely seen funds recognized when they’ve lost a little interest or enthusiasm in the company and like willingly give their board seat to an outside director or put an operating partner in that seat and likewise, rotation of outside directors, you know, who are not investors. I think that’s important for the CEO to manage and, and a good venture investor who’s remaining active can also help with that recruiting of other board members. So that’s what I’ve experienced more than the real horror stories of dysfunctional boards, fortunately, but it happens and and you hear about it, and it’s some thing you hopefully want to avoid. But you know, sometimes sometimes things get real broken.

Is the chairman role? Is it often explicit? Or is it, you know, sometimes just agreed upon sort of in principle, or how does that play out? I

think it’s an underutilized role in most companies, to be honest, you know, very often CEO also gets Chairman title or maybe a former founder becomes chairman, and that that could actually be interesting and useful. Sometimes Chairman can be more symbolic than anything else, you know, set the agenda, open the meeting, but I have seen occasion where it’s really, really useful. You know, when you have an executive chairman, someone who is playing a role within the company, and operational role, maybe not full time, but a day, a week, a couple days a week, that sort of thing. And having that division of responsibility between a CEO and a chairman, can be a fantastic thing, particularly if it’s a first time CEO and an experienced Chairman, we have, we have actually done that several times, we have one particular gentleman on the life science side, John Stuart Nagel, who is a fabulously good mentor to new CEOs, extremely experienced in the world of Life Sciences. And having him as your executive chairman, is an absolute competitive advantage. And that’s a model that can work really well, you just have to have the right chairman, available, and the CEO has to see the benefit that they’re gonna get by by really giving that person some responsibility and some authority. So I think we can do much more of it, and it would serve companies. Well. But,

Brian, if we could cover any topic here on the program, What topic do you think should be addressed? And who would you like to hear speak about it?

Well, I do feel like Silicon Valley, you know, in air quotes, you know, the broader tech ecosystem, we’ve lost our way a little bit, I think there’s always been a lot of money at stake in technology, because of how quickly you know, companies can grow and create value. But I think it’s now become so important for startups to very quickly become unicorns and the stakes have gotten so high. And we have so much admiration for, you know, celebrity founders and even celebrity investors that it feels like we’re in a phase of win at all costs, even at the expense of your customers interests are crossing the ethics lines with their customers. So I’d love to see some discussion of how we get back to the perhaps idealistic notion that we are trying to improve lives and use technology to make the world better without going over the cliff and doing things that are maybe not in the best interest, you know, we’ve, we’ve addicted our kids to smartphones and data breach it like the list of sins has gotten quite large. Who could speak about it? I don’t know, I’m thinking someone like a Tony Robbins, and why him I think people who really understand the human condition, and what makes us happy and fulfilled, would maybe have a unique perspective on why the over the top pursuit of wealth, and all about maximizing money, at the expense of everything else, is not ultimately what leads to the most happiness or fulfillment. And I think you’re starting to see tech leaders get there on their own. But I think there’s more to be explored there and open dialogue. And I’d love to see the tech industry, get back to a little bit of the idealistic, improve the world ways that that we had, maybe in earlier years. Appreciate that.

I haven’t heard anyone suggest that topic and couldn’t be happier to have Tony or others on to talk about it. Just two more questions here, Brian, what investor has influenced you most?

Well, yeah, to be honest, it’s been my colleagues at Venrock. And I think I think that is what you want within a venture firm is a group of people who come together and make each other better and are more powerful than the individual helping their companies. In particular, my colleague, Brian Roberts has really impressed upon me and all of us how important it is to reject the notion of pattern recognition. You know, it’s often said that that’s what VCs bring to the table, we’ve seen so much. So we just apply pattern recognition. The only problem is, it’s when the patterns no longer apply that the most interesting opportunities present themselves. And every problem has kind of a unique angle to it. And so you don’t want to just, you know, solve the same problem, you know, a different problem the same way you probably solved every others. And it’s also a notion that Brian is sort of instilled in all of us that, you know, our role is to help entrepreneurs run through walls, that’s the name of our own Venrock podcast and solve problems. And that means, you know, working however long it takes, however hard it takes, until it hurts to solve these problems. So there’s kind of an ethic of, you know, keep your head down and keep going through the darkest and nastiest hardest bits that I think is is an important entrepreneurial lesson and an important lesson for investors. And so I learned that through through Brian and my other colleagues here.

And finally Brian, what’s the best way for listeners to connect with you?

Well, I’m I’m BDA. Those are my initials bda@venrock.com. You can also find me on the socials. And you know, I spent a lot of time taking breakfast, lunch, dinner and coffee meetings that trying to expand my network. So chances are, we know someone in common and if you go in through them, and they can vouch for you, that’s helpful too. But if you want to send me an email out of the blue, take some time to send me a thoughtful email. And I’ll try and give you a thoughtful response and return awesome.

Are you still you still serve and Brian are heavy guide

as often as I can, which is never enough. But I still love it. Hence my Twitter handle VC surfer dad. Not not implying priorities there. But that’s my handle. Awesome.

Yeah, I lived in Santa Barbara for for a few years and love to get a surface campus point before before work. But now Oh, yes. Yes. Now that I’m back in the Midwest, there’s not a whole lot of that.

I’ve gotten both a parking ticket and tar on my feet at Campus.

Wow. Awesome. Well, Brian, thanks so much for making the time today. This has been a real pleasure. And I look forward to chatting again.

Thanks for the opportunity. This was fun for me as well.

All right, that’ll wrap up today’s interview. If you enjoyed the episode or a previous one, let the guests know about it. Share your thoughts on social or shoot them an email. Let them know what particularly resonated with you. I can’t tell you how much I appreciate that some of the smartest folks in venture are willing to take the time and share their insights with us. If you feel the same, a compliment goes a long way. Okay, that’s a wrap for today. Until next time, remember to over prepare, choose carefully and invest confidently thanks so much for listening