439. The Question that Every Investor Should Ask, Teasing out the Characteristics of Generational Founders, and Recruiting Lessons from 1000+ Interviews (Katelin Holloway)

439. The Question that Every Investor Should Ask, Teasing out the Characteristics of Generational Founders, and Recruiting Lessons from 1000+ Interviews (Katelin Holloway)


Katelin Holloway of Seven Seven Six joins Nate to discuss The Question that Every Investor Should Ask, Teasing out the Characteristics of Generational Founders, and Recruiting Lessons from 1000+ Interviews. In this episode we cover:

  • HR Tech Development and Investment
  • Changing Dynamics in the Venture Capital Industry
  • Identifying Strong Founders, Through Talent Identification and Instinct vs. Data-Driven Approach
  • Evaluating Startup Founders and Products Using a Standardized Scorecard System
  • Assessing Founders’ Integrity and Delivery on Promises
  • Important Questions to Ask Founders During Investment Meetings
  • Common Hiring Mistakes Founders Make, Overhiring, Not Pacing Hiring, and Hiring Too Senior

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Transcribed with AI:

0:18
Our guest today is Katelin Holloway, Founding Partner of 776, an early-stage venture firm she co-founded with Alexis Ohanian. Her track record as an investor includes some of the most notable startups, such as GoPuff, Lattice, Clubhouse among many others. Prior to co-founding 776 Katelin had a circuitous path to venture. Katelin began her career as a teacher, worked for Pixar, and was most recently the Vice president of people and culture at Reddit. Katelin, welcome to the show.
0:51
Thanks so much. I’m so happy to be here. Thank you for the inclusion.
0:54
I’ve been looking forward to it. You know, everyone claims that they have a unique path of venture, but I think yours is more unique than most. So can you start by giving us your path to breaking into Vc and CO founding? 776?
1:06
Absolutely. I’ll give you the short version, which is a is a gift because if I really went through my resume, logo, by logo, your your listeners would, you know, click the stop button pretty quickly. Only because it’s that storied. But yeah, the long and short of it is I have spent the majority of my career as an executive leading HR teams, people and culture teams at you know, some of Silicon Valley’s sweethearts, including cloud if you remember that your your Klout score from the early. I think you’re too young for this, but I’ve been around a minute, which I’m proud of, and grateful for, and read it. But before I made the leap into tech, I worked in film for a number of years, I worked at Pixar Animation Studios for five years. And before that, I did a number of other things that you know, I like to say don’t matter much to anyone else, but they mattered to me. Ranging from being a public educator, I taught first and second grade, I taught high school, to working at a hedge fund, umbrella firm to working in advertising and a bunch of other miscellaneous things. And my old CEO from Cloud, Joe Fernandez used to say, I’m just trying to get enough beans to make a burrito. And that’s, that’s more or less what I have done. I have a pretty tasty super burrito now. I feel.
2:27
So running out of ingredients over there.
2:30
Yeah, exactly. Exactly. Time to make more. We’re going to do the Taco Bell menu, we’ll start do nachos. We’ll, we’ll do the whole thing.
2:39
So when when do you? When did you first get into investing?
2:43
Yeah. So I this is the part that I think for this audience may be a little bit more interesting than, like I said, running through my resume. But I actually became an accidental investor. So once upon a time, back when I was leaving film, and joining the the world of startups, there was something that was occurring, that I found very curious. And so Cloud was my first job in tech, technically, after leaving Pixar. And I was so spoiled at Pixar having never worked on the HR team within that organisation, but now leading that at this young startup, in addition to everything else that was operational in those early days when you wear all the hats, and I didn’t realise how spoiled I was at Pixar, because we had so many internal tools and systems that were all built in house. And something that I recognised pretty quickly was that that was probably why our culture was so great, why our existence as employees, so I was, you know, I consider myself the customer of the people and culture teams at Pixar, because I was an employee and I wasn’t working on that team. But they had so many systems and tools for us to use to access anything from, you know, payroll, benefits, learning and development. Everything was built in house because we had the resources. And so we weren’t using big platforms or systems that were off the shelf that were made for larger organisations, everything was was kind of hand handmade, hand built by our systems and tools team there. And so when I made my way from film to Tech, I was like, Wait, you don’t have any tools? Like, what’s my tech stack here? And everyone looked at me and they’re like, I don’t know, Excel. Like, I don’t even think Google Sheets existed yet. And I was like, oh, oh, that’s not gonna work. Because a lot of that are operational work that needed to be done on the finance side on the HR side, was very important to the business and the health of the business, but was not the best use of human time, in my opinion. Because the very best work that we can do as business leaders as people working within organisations, is that creative, strategic empathetic work, and I like I said I was really spoiled at Pixar. And I was like, Oh, well, why don’t we just build something? And then, of course, my leadership team looked at me and they’re like, You’re crazy. We have, you know, eight people think we can build our own tools. And I was like, Okay, well, well, then let’s get something off the shelf, let’s go buy something. And so I went out to research and there was nothing on the HR side, there was nothing to buy, it was like, you could get workday, you know, or some other behemoth of a system that was you know, worth more than my salary. And I was like, well, that’s not going to work for us. And so I started begging my friends to build things. I was like, Hey, you have coding skills, you have design skills, can you just like make up something that works. And so this was the birth of HR tech. And so this is, I mean, at this point, I don’t know 1520 years ago. And it was at the start, when companies like culture, amp are coming out bamboo, HR greenhouse, all of these things are software platforms that, you know, back then were in their most nascent early budding development days, sometimes the just ideas on the back of a napkin small improvements was another one. So you know, a performance management platform where you can go in and share with your employees like, Hey, this is how you get from A to B, and develop and grow to, you know, bamboo HR, which was basically a system of record it was an HR is and so I started getting very close with that founder community. And you know, some of which were friends of mine, like Jack Altman, who is the founder of lattice, which initially started as an OKR tracking software. But you know, I wound up being very early on his cap table as an advisor, because I was like, hey, please build me this thing. By the way, if you build it, all my friends who are other, you know, people and culture leaders, they’ll buy it, too. If you build this thing, it doesn’t exist. And we all need it so that we can do our best, most impactful work. And you know, Jack is one of many examples of founders who were really early and kind of at the tip of the spear with HR tech, the modern version, that, you know, these products were not only taking care of the jobs that we felt robots should be doing. But they were doing it in a really beautiful way. And so this is a long way of saying, I started getting on cap tables before I had two Beans. So meaning I didn’t have two nickels to rub together, to be an investor properly, be an angel investor, I was doing it with blood, sweat, and tears. So this was sweat equity, I was earning. And turns out HR tech, while awfully boring, to most not to me, was also very lucrative. And so these companies started being acquired by some of the bigger logos out there that were in the space. And so like I said, while maybe a little bit boring, in terms of, you know, b2b fast, it was very lucrative. And so my, my sweat equity started turning into real equity, which started turning into real money. And so I took the approach where I was like, Hey, I didn’t, I didn’t pay anything for this, I’m just gonna put it back in the ecosystem, so I can invest in more. And so I became totally an accidental angel investor. And then as the HR tech space began to get more concentrated, we’ll say it was it was a little bit, we kind of over index there for a while, I said, Well, hey, let’s spread some of this dough out, and started putting bets on other companies for just products I wanted to see exists in the world. So I started investing in climate Tech, I started investing in women’s health, I started investing in ed tech, all things that and you know, random consumer things, things that I wanted to see in the world, things that I wanted, hopefully, to help make the world a better place, which is what angel investing more or less is, you’re investing in people that you really care about, that you want to see succeed in the world. And you’re investing in things that you you want to exist, right. So I started to build my early Angel portfolio, and more than the bets I was placing, what I began to really discover was that I was getting called more than anyone else on cap tables by the founders when things were really going sideways. And in the beginning, I didn’t think much of it. But as things began to develop, and as I began to understand more about the ecosystem, I quickly connected the dots that the reason I was getting those like 2am phone calls the calls from people saying, Caitlin, I’m in an Uber on my way home from our holiday party and my VP of Marketing just did something that I think is really inappropriate. What do I do to hey, I’m really struggling with my co founder to, Hey, I just found out that my wife has has terminal cancer. What do I do? How do I show up for my for my partner and how do I show up as a leader for my organisation through this next chapter, and those are really big, heavy people things right. And the reason I was getting the call and not their lead investor was because of my operation. skill set. It was because of how I was showing up for these founders throughout their journey and the literal toolkit that I had that I’ve developed over, you know, a decade at that point of working in an industry solving some of the most hairy and challenging people, problems within organisations. And so I begin to build a reputation. Again, it’s not because I think I’m utterly fantastic. It’s because I was different than everyone else on their cap table, I was providing value in a way that venture capital firms were not. And that became compelling to me. And at the end of the day, I more or less started to formulate a thesis that is, and I built a whole firm around it with, with Alexis. So I obviously believe this very much. It’s that early stage investing is very akin to the work I was doing, as an HR leader, you know, you are selecting the very best talent, you are deeply engaged with that network of talent to know where every single piece is moving on the board, the best players in the game, where are they going? Why, what what’s motivating them, that’s all recruiting, right? And then you’re developing that talent. So once you’ve made an investment into a founder or a founder set, you’re making sure that they’re developing appropriately, they’re staying engaged, they’re staying motivated, they have their eye on the prize, you’re building this performance culture, right? That’s all HR skill set, you’re helping them build their teams, you’re helping them, you know, bring in performance management, compensation, philosophy and design, you’re thinking about how they’re distributing the equity within their company. Those are all HR skill sets. And then ultimately, you’re helping them exit. And if you’ve invested correctly, if you’ve made the right selections up front, hopefully those exits are fantastic, right? You know, you’re you’re looking at m&a, you’re looking at at, you know, strategic acquisition, you’re looking at, you know, hopefully knock on wood IPOs. So some sort of, of positive exit. But in early stage investing, it’s a numbers game, right. And so you’re also going to be helping companies wind down, again, who is better served to help support that, then people with HR backgrounds, or people that at least deeply understand that human emotional component of investing your time, your effort, your energy into something that maybe goes away quietly, hopefully, not loudly. And so
12:27
that was a very, very long winded way of saying, I got into investing on accident. And as I was leaving Pixar, or excuse me, not Pixar, as I was leaving Reddit, I had the option to, you know, that we knew we were on path to IPO. And I knew from my experience at Pixar being acquired by Disney, that I’m not a public company, Gao, I’m a builder. I like the zero to one, I like the blitzscale. I don’t so much like the public company side of things. And so my options were, you know, go and find another young company, another tech company, and continue to lead people and culture teams, or scale the work that I loved so very much and actually work with a whole portfolio of founders. And so I made that decision. And so I went and I started pitching Sandhill Road folks to say, like, have you ever thought about giving an HR lady a chequebook? And the answer is no. I got a lot of notes. And ultimately, I went to Alexis who, you know, I worked with it, read it for a number of years and pitched him my thesis of, you know, having people really at the centre of early stage investing in a genuine, authentic and meaningful way. And he took a chance on me again, and so he hired me at initialised capital. That was my first institutional investing role. And flash forward several years later, five years later, here we are we you know, we started 776, almost four years ago. And the rest is history.
14:01
Yeah. And you guys are coming up on your fourth year anniversary. Not too long, right? This September.
14:06
Ah, you got it, man. Yeah, we’re excited. Yeah.
14:09
Well, congrats on all the success that you guys have had thus far. I’m definitely curious to go deeper on your background and how that connects and gives you a unique competitive edge in venture. Before the show you mentioned. If many early stage investment investors cite the importance of the team, and if they actually believe this, they would have more investing partners with an HR background or a recruiting background. So there are a number of things that I want to unpack here a bunch of questions, but first, why do you why do you feel like people with this background aren’t as sought after for more investing roles versus some of the more traditional ones that we see?
14:49
That is a really good question. I you know, I’m gonna give you a bigger answer than I think you probably expect, because I don’t think it’s I don’t think it’s skill set. I think it’s mindset. And I think that the world of venture capital is going through a pretty big point of evolution. Many, many, many things have changed in even just the four years that, you know, 776 has existed. You know, we, we started in this it well, one, we started in the middle of COVID. So COVID is a big game changer for any industry, right? It really kind of shook out value set, it shook out, you know, the mode of work, how we work, where we work, all of those things, I think we’re really battle tested through COVID. But it was also the world of ZIRP, one of my favourite VC acronyms, but you know, it was a time of abundance, you know, the last 20 years of venture has been a time of abundance, a lot of capital flowing in a lot of big swings, and a lot of of capital returned to investors, and to those limited partners. And with capital so readily available. You had this really beautiful golden age of technology, founders were being funded, businesses were being built, not just funded, but they were able to grow. So you know, you see Facebook, you see Instagram, Twitter, the company, formerly known as Twitter. All of the the giants of of not just social media, but really, technology, consumer technology. So technology had changed the point where, you know, we have our phones that are in our pockets. And so you had accessibility to so much. And so there’s it really was a beautiful golden age of startup life that was very well funded and made great returns, we don’t live in that world anymore. And so there are I think it’s a confluence of events that is, is assisting with the shift and change in the ecosystem. One, the world is simply different to the economy is shifting and changing, you got geopolitical stuff at play there, there’s so many layers to that onion, but it is different. And none of us have a crystal ball to say like, are we ever going to go back to that, that space, and you know, including me, so I don’t know, I wouldn’t put my money on it. And then the last thing is, and this is some of the unexpected part, I think, the big players in the venture game, they are retiring, they’re retiring for a variety of reasons. One of them is they’ve achieved an incredible amount of success and wealth, and they don’t need to work and they’ve been doing it for you know, 20 3040 years, and they’re hanging up their hats, great, get your gold watch, get your you know, your company pin and get out, it’s great, it’s fine. There’s a changing of the guard. But there are also a number of people who are retiring because they have spent the majority of their career doing that having a more traditional path growing up through through finance, through private equity through, you know, having those terrible, terrible analyst jobs at those big brands, I won’t name any who work you literally to death. And then you know, we’re able to break out and get into venture the Promised Land, build their firms build their their network, their wealth, their their success, their brands, and doing it during a time, that was easier. And so the work has become harder. And if you’ve achieved any amount of success, and the work becomes harder, you start asking yourself the question, why is this worth it to me? Is this worth it to my family, I’m now pulling longer work hours, it’s now you know, to find the very best companies is harder to build a team is harder. Also this new generation of people who are there to do the work for you and with you demand different things from their employer. They are demanding more transparency, they’re demanding more accountability, they’re demanding flexibility, heaven forbid, I don’t come into the office five days a week anymore. I’m gonna post COVID world. And so the world of work has changed. And so there’s a lot of folks who, you know, maybe they were going to retire five years from now. They’re saying, you know, what, not worth it. And so, I think, like, I think there’s a variety of reasons. And I know, the question that you asked me is, why are HR people or, you know, folks who people backgrounds not being hired? I think it’s because the old guard never considered it. And there’s their system and their algorithm for building a successful venture firm worked for them. However, it is changing. And so I actually have great confidence, you’re seeing more and more people who have backgrounds that look like mine, who spent, you know, a decade as HR leaders, starting to not only be interested in the space and having that same sense of of impact and shifting of the tides changing of the guards that I have seen. And I’m obviously very vocal about because I believe it’s a movement that’s important, but you’re seeing them get the jobs. And so to me, that’s much Other than the canary in the coal mine here is saying, whoo, we should do this. This is a great competitive advantage. But you’re actually starting to see them get the jobs. So that’s a very long winded way of saying, I don’t think they were ready for us yet, but they’re starting to get ready for us now.
20:12
Yeah. Well, I’m sure you have so many lessons from being a VP of people in culture from Reddit or others. And we could talk all day about lessons, but specifically around talent identification, and how that pertains to identifying strong founders that and take it the distance? Are there any tactics that you can share that you’ve learned? Or that you can pass along to the audience about how to identify those founders? Or is it more of a gut instinct just from being trained on interviewing so many talented people that
20:47
okay, I have a lot of thoughts on this one, too, and I will try to not pull out my soapbox. One, I think that the value of hiring someone with a background like mine is exactly what you’ve you’ve said is we’ve had so many laps around the track, I am hesitant to use the word instinct, although I rely on mine heavily. But let me explain that I think that I think that instinct can be taught. And that means that it’s a skill that you can build versus something you are inherently born with or not. And oftentimes when people say instinct, they they are being dismissive of data, they’re being dismissive or or assuming that it’s emotional, or that again, you either you have those units a QA and you are not. But it historically has that the challenge with saying instinct, or relying on instinct is that you’re really it’s just really confirmation bias. And it’s, it poses some pretty big challenges as it relates to diversity, equity, inclusion and belonging, right. So my instinct says, you are like me, I am like you, I see myself and you, therefore the egoist, and all of us the humanity, and all of us is going to subscribe to vote with or for or put your bet, or your money on. likeness, sameness, and that is typically passed off as instinct, oh, my gut says. And so as an HR leader, having the experience and understanding and trying to train an untrained people on that instinct is actually the valuable part. And ironically, if you do this, it is that instinct that helps you understand very quickly, do I have enough conviction in this human to put my money on them, literally, whether you’re hiring them as an executive within your organisation, or you are making that selection as an investor. And so there’s danger in saying it’s instinct. But that’s actually the easiest way to say it. So I want to back up into that by saying, The reason by a compelling reason to hire someone with a an HR or recruiting background is that they you are tapping into their earned experience that sharpened tool within their toolkit to say, I have literally interviewed 1000s of humans, I have literally hired 1000s of humans, I have fired 1000s of humans. So understanding that that instinct is based on data is based on experience is far more valuable than saying, like, I met with him for 30 minutes, and I could totally grab a beer with him and we vibe. So that’s not instinct. But I do really think that there are there are certain things that make one human more compelling as a founder than others. And we at 776 are doing our very best to articulate what that is develop that productize it so that not only are we taking note for ourselves, and developing that instinct, and developing and understanding and visualising our blind spots, and where we get it right and where we get it wrong. And I’ll explain how we do that in a minute. But we’re also able to then train others to build that skill set around early identification, like what is that thing that makes this you know, founder who had a multi billion dollar exit different than this founder, you know, who was equally matched based on skill set or a resume? What was the difference between them? Was it nature? Was it nurture? We again, were they born with it? Those are important questions. And it’s important to note that even the very best recruiters, even the very best HR folk, if you look at the stats, they’re still going to get it right and wrong. almost the exact same percentage, I should say. Sorry, I said that wrong. The very, very, very best are going to get it wrong 25% of the time. Those are the stats so those are your your best top athletes in the recruiting space, you’re going to get it wrong 25% of the time and F Every little bit we can do to get that average up or be you know, sharpen again, that tool to get those numbers a little bit better is going to be great. But if you are not best in class, you’re gonna get it wrong 50 75% of the time. And so how do we develop and train? People who maybe haven’t hired 1000s of people in their careers or fired 1000s of people in their career? How do you train that? And so, what we do at the firm here at 776, is Alexis built software proprietary software called cerebro. And it’s our operating system, everything we do goes in there, including our network, and including our notes when we take pitches. And so a very interesting example of how do we sharpen that instinct, or that skill set is when we take a pitch, we are evaluating two things. So we’re early stage investors, that means we’re everything from incubation through Series A, this is where we believe we can have highest impact on on the company’s outcome and their success. And when we take a pitch, we have a scorecard that pops up. And so every person that’s on the pitch, and typically, we have almost everyone at the firm, we’re still tiny, we’re 14 people, we have almost everyone at the firm showing up for every pitch. And, you know, we invest collaboratively, we support collaboratively. And this is a phenomenal, phenomenal learning tool. So if you look at our partnership, three of the four of us have untraditional backgrounds, right? And so how do we take advantage of the operator skill sets that we’ve hired for in our partnership trickled down the earned and lived experience and our individual skill sets to the rest of the team? And how do we then build up our bench? Right? How do I help the analysts on our team, for example, take advantage of and learn lessons, you know, vicariously through us, but also have first hand experience and saying, Oh, how did you look at that differently than I looked at that, or here’s something that I found that I might be able to offer to the conversation. Every one of those opinions matters to us. And so if you are on a pitch, a scorecard pops up, and we’re evaluating both the product and the founder set. And we have a standardised set of questions for both of those to help us evaluate and what we call our steel man conversation. It’s the what could go wrong. And so not only are we taking note of you know, their their metrics and their numbers and how they’re progressing. But early stage, that that is pretty thin, in some cases non existent, right. And so, what we are trying to train and track, and it’s all it’s all evolving, every day, every time we take a pitch. But if you can standardise some of those core things like when I’m thinking about a founder or looking at a founder, we’re talking about their coachability factor. We share feedback live in a pitch, how did they respond to that feedback? Are they open? Are they closed? What was their body language? If there is a group of founders, maybe there’s two co founders or three co founders on a call? How are they engaging with one another? How are they sharing the airtime? How are they propping one another up or not?
28:08
There are other things in there, you know, around agility being compelling. A big part of being a founder is your ability to sell, not only are you selling to investors, you’re selling to your customers, if you’re selling to your employees, it is a big part of your job, the entire lifecycle of your business is to be able to show up, communicate effectively, clearly, concisely and in a compelling way, right. And so there are a number of of different traits or things that we are doing our very best in a short period of time to to note or mark similar to a candidate scorecard. And then likewise on the product side. And so what happens is every person makes those ratings. They go into the system, they’re anonymized. And then before our deal meeting, we can see is this one an easy pass where you know, there was majority or consensus? That’s going to dictate a different conversation? Is it majority pass consensus, different conversation? Is it mixed, wildly different conversation? And then over time, what occurs is let’s let’s play out a positive scenario. We end up making an investment. And so what happens to that scorecard? How are we actually developing it other than understanding our own, you know, click, click, click Submit, right? Six months after we take that first pitch, you go into a meeting with this founder, maybe I’m running a compensation workshop with with a founder. I go into cerebro. I’m like, Oh, I’m meeting with his portfolio company X. Loop. It’s been six months, my scorecard pops back up, but it’s blank. And it says, Please rate, the exact same things, the exact same measures from when you took the pitch. So now I’m looking again, I’m looking at the way this person communicates I’m now making now I have worked with this company for six months, right? That’s an intimate time after our company has funded that first six month period. Okay, now I’m rewriting this founder or this founder set I’m rewriting the product. But I don’t remember what I initially marked. And so once I complete my scorecard again, six months in, that scorecard comes back side by side. Now I’m developing myself against myself, I am saying, Wow, I rated this person as being very coachable based on that initial interaction I had. Was I right? Sometimes I am. Sometimes I’m not. So now not only am I this is that self competition of how can I make that better? Gosh, I got that. So wrong. That person, actually, I rated them maybe low on the coachability. But now having worked with him for six months, they’ve taken and ingested feedback in a really beautiful way. And they developed it this way, or they pushed back or they challenged in this way that actually was best for their product, because they’re the founder and they know best. Who knows, right? But like, now I’m looking at these things. And so I’m developing not only my people skills around early identification, I’m also developing my product skill. So someone, you know, I, I’ve been around products for, you know, 20 years, I’ve been supporting people building products. But if you were to compare Alexis is ability to rate a product versus my ability to rate a product given it’s his area of expertise. He has a better track rate than ite or track record than I do on on his scorecards, but mine is getting better, right? Because I’m learning from him. I’m learning with him, and I’m learning against myself. And so not only does that apply to the partners within the firm, it’s anyone who was in that pitch, whether you’re an EA or an analyst, you now are, it’s your scorecard for yourself to say, Gosh, I’m actually kind of good at identifying, blah, fill in the blank. And so now we’re developing our entire organisation.
31:39
There are 10s of questions that I would have as a follow up to that. But I’m curious what characteristic you guys find across the team is most difficult to accurately assess about the founding team after a first call. If there is one,
31:58
it is super inconsistent, which is why I say our process is always evolving. I wish that there was like one thing that we could like drill in on, I would say, one of the top false signals. So if we’re talking about that, remember that 25% chance of getting it wrong, even if you’re great. Yeah, I would say the one that we have a more discerning eye around now because of our scorecard system, because of our tracking of like, Oh, hey, like, you know, what is that thing over there? It’s actually it actually lives in the compelling factor, because that one is so subjective. But what happens if you are a very compelling human? Meaning, you know, a lazy VC translation of this is like, are they a good salesperson? The beauty of a great salesperson is they can sell you anything, including themselves. Right? But after you’ve worked with that founder more intimately? Did they sell you a bill of goods that didn’t exist, right. And so the compelling piece needs to be coupled with results and needs to be coupled with data. And so we’re getting better now at it through the diligence process of like, wow, that person sold me on X, Y, or Z. Let’s look at some more track record more proof. And if if a product or a company is very, very young, which for us, oftentimes it is, all we can do is go to their past and go to their history to see you know, do you deliver what you promise, and part of that is and is a mechanism of sales. But another big part of that, that I think is often overlooked is this integrity quotient, right? So you can also measure this in other ways. So maybe in a past life, you maybe were a salesperson, and I can look at your numbers Did you deliver. But when it’s a founder who doesn’t have that background, where that the numbers are less accessible, you can talk with people they’ve worked with, or customers, they they have worked with users that they have supported to say, Does this person do what they say they’re going to do? And when they don’t? Because we all don’t have 100%? When they don’t? Did they make it right? It is one of my favourite questions to ask. Interesting.
34:11
That is a great question. Are there any other questions that have become common staples? When you’re getting to know founders that may not be so obvious, right? Like, of course, there are all the basic fundamental questions that you have to ask as an early stage investor, but anything outside the obvious that you feel like is important to get to know or any other tools in your toolkit that you find yourself using again and again. Yes,
34:37
yes, there are. So I’m actually going to borrow one of Lexuses. You know, he’s been in this game for a lot longer than I have and has a really incredible track record of picking great founders and great products to back. And one question that I would never have been compelled to ask had I not heard It comes out of his mouth so many times, but makes all the sense in the world like, I kind of feel like a ding dong for not having it be like my, for my question set is is a very simple question. That is, why are you going to spend the rest of your life building this? And it is so on the nose like it just is. So like, Duh, like, why wouldn’t we ask that question, right? But it’s a question that I would have never ever ever asked a candidate, right? So if I was hiring a CPO, or if I was hiring a VP of engineering, I’m never asking him that question, because I know that the the average tenure in tech ranges from 18 months to four years when your your best date occurs, right? And so I would never in a million years Africa candidate, why are you going to spend the rest of your life dedicated to this, this logo, and you’re going to bleed the company, you know, colour. But you should very much be asking a founder that and the answers, we get a wild, wild, you learn so much about their character about their interests, about their motivation. And it doesn’t matter. And I’m using real examples, it does not matter if they are selling dry dog food, or if they are literally curing cancer. The answer to that question inevitably tells me everything I need to know about how this person is going to operate. And you know that it is good. And this This is this is potentially going back a little bit on my my, my comments about instinct. This is the question that the very, very best people we have invested in the hairs on my arm stand up that that emotional feeling of oh, there’s something here. Yeah, they’re gonna run this person. Yes, exactly. And so it’s I don’t know, if other VCs has that. I only know Alexis, but it’s a great
36:51
question. It really is. I it also has me curious. Is there a founder that you’ve ever been very excited about? With an opportunity that you’re very excited about? But you hated the answer to that question? You, Joe. You
37:05
not yet. Not? Yeah, not yet. Which is why I say it’s a good one. Like,
37:09
what happens? Because I want to hear that story.
37:12
Totally, totally. i It’s funny, because I actually don’t know, again, this might be one of those, like, pattern matching appropriately or inappropriately. I don’t know. But I feel like if you had don’t have a great answer that question, we’re not reading attack. Yeah. Like there are there are very few Pass Fail questions. And that’s one of them. Personally,
37:35
the others that you that you deem Pass Fail. Without it, maybe maybe the list is very short. And that could be the most salient, but I’m just curious, because it’s such a powerful question, that I think it’s worth doubling down and and seeing if there are others.
37:49
Yeah, you know, we we don’t have like, productize shortlist of those questions. But I would say majority, I wouldn’t, I wouldn’t say this is 100% Pass Fail. But majority. If you exhibit if you have a co founder set and you exhibit nasty or negative behaviour towards your co founder, that’s a do not pass go for us. There have been very, there have been cases where we’ve had founders who obviously MIT have some conflict, or they may not see eye to eye on something, you know, when one gives one answer, and another gives another answer. That’s a mixed bag of you know, are they gonna move forward or not? But if I’m trying to, I’m trying to think back again, to look at our, all of the pictures we’ve taken over the last almost four years, if there is any sense? And I would say, I don’t think it’s gender specific. I was gonna say, you know, is it between a male founder and a female co founder, but it’s no, it’s between any co founders if one person is obviously and acutely unkind, or dismissive or disrespectful to their co founder? It’s a no go. Yeah, that’s the only one yeah, those are the only ones I can think of off the top of my head, I would say otherwise, we’re pretty open. And we do a pretty good job of challenging one another to make sure that we don’t have like an intrinsic bias where it’s like, you know, oh, if it’s a type of company, you know, we would never invest in a bla company that you know, based on on the product type, obviously, it’s not in our LPA or restricted from investing in but I would say we’re pretty open.
39:27
I also want to get your like some tactical advice for founders on hiring when you back a company what are some of the common mistakes that you see founders make when they’re hiring their first let’s call it five to 10 employees.
39:45
There are so many Nate we do not have time for this on the show
39:49
that’s stopping a weekly weekly recurring call.
39:56
I was gonna say I just talk a lot but hey, fishing it So let’s see what are what are some of the biggest mistakes? If I were to give a shortlist of like, hey, best practice, let’s not do this to founders. The first one is if, okay, hold on, I guess I have so many I’m trying to be succinct. But the advice that I give to founders to use the things first one is don’t don’t over hire. This is the obvious one. I liked the the old old HR adage of hire slowly fire quickly, I will forever have etched on my wall. I don’t actually that would be really dorky. But I say it enough times a week that I mean it, we adhere to it ourselves here at the firm, and I make every founder swear to it. And when they don’t, I hold them accountable. There is I also have a lot of rules around firing, like I have a lot of rules that are best practice
40:52
around around termination. But the reason I have so many is because founders are very bad at hiring.
40:59
And so if you’re bad at hiring, you have to be really good at firing. That’s, that’s the other the second one so so yeah, don’t don’t over hire, don’t fight, don’t hire too quickly, you’re gonna break what what got you to this point that was working, you’re gonna they always underestimate that amount of time for onboarding and getting someone up to speed to have them be productive. So if you do have a big hiring plan for that capital that you just raised, you gotta metre it, you got to pace it. And so another general rule of thumb around pacing or hiring is you never want to double more than double your team size in a year. Especially as technology like AI and all these other efficiency tools are becoming more accessible, and more helpful. Actually. I may even reduce that number. But as of right now, the current the current adage for me is, I never want you to more than double in size in a year. And if you’re meeting someone early, and they’re like, but we’re a team of two. There may be some exceptions to the rule. But depending on those inflection points that early early days, I might reduce it from a year to six months and say like, okay, but like, let’s assess. But if you’re if you’re a team of five, and you show up on on day one, with a hiring plan of 15, you can bet your bottom dollar, I’m swatting that out of the sky super hard. I do like to be suggestive not directive as a as a as a VC having worked with far too many investors that were directive and not suggestive and knew very little about the businesses I was building. So I’m sensitive to it. But hopefully, if I’ve done again, if you get really good at hiring, and so for my job, if I get really good at picking and investing in the best founders, you avoid a lot of problems down the road. The next rule that I will tell you that I learned and developed as an HR leader was hard to hire, hard to manage, hard to fire. So if you are going through a hiring process with someone who’s asking you, for the sun, the moon and the stars, they have a list of questions, they want to do all of these reference checks, they have their lawyers review their offer letter they’re asking for, you know, things that are totally unreasonable for the long term of the company. They they’re worried about idle, they’re worried about their future team that they can build, like, all of those things like that just are like, gosh, I’ve been courting this person for so long. what winds up happening is founders are so desperate for talent, that they’re like, I actually have this fish on the hook, I can reel them in. And so it’s sunk cost bias. And that because they’re like, Oh, I put so much time and effort and energy into this person. And they have such a beautiful shiny resume with all of the right logos, and they have the right network. I swear to you, Nate, if they don’t see your vision, and they don’t subscribe, and you know, there’s always room for negotiation. We want that, right. But if it becomes belaboured, and you start losing sleep over, you know, at night over it, or if you need to reach out to your investor to say, Oh, can you help me get this person over the line? They ain’t it? I promise you 10 out of 10 times they’re going
44:05
to be gone. That’s good, right? Yeah, that’s a rule you don’t hear about as frequently. That’s a great one gives
44:11
you all the signal you need. It’s because they aren’t high conviction, right. And you need those early people to literally bleed your, your company colour and so yeah, hard to hire hard to manage hard to fire because they’re also going to be that nasty when you have to ask them to leave and you eventually will. And the last one that I will give you is don’t don’t hire too senior. I see this all the time. You get that first check and you’re like, great, I need a C level this that the other thing and nine times out of 10 That’s it. That’s a first time founder mistake because you’re like I obviously need other adults with me to build this. You don’t need the people who are willing to be scrappy, wear all the hats. Maybe they’re the person who has been you know, living under a glass ceiling at an organisation where they just can’t break through because the person that they report to has to, you know, get fired, quit or die for them to progress. They’re ready, they’re hungry. So be be more discerning in your level and your years of experience. And instead search for the the hunger and that person who is ready to go and can move as quickly as you can. Yeah,
45:17
similar, similar to how we were talking about questions as founders that are very much pass fail, right? Why do you want to spend the rest of your life building this company? Are there any questions that you recommend that founders asked to candidates that you that you would say are Pass Fail? That’s
45:36
a really good one. I’ve done less thinking on this one. I’ve done less documenting on it, because I’ve done it for so long. Whereas the investor question set, I’m still learning and so I think about a lot because I’m trying to develop my my own personal playbook or question said, my bank, my bank, I’m trying to think of some of my personal ones versus just generic ones. But okay, for me, personally, as a hiring manager, I probably shouldn’t be giving away my secrets. But this is one that you’re going to you’re going to question everything about me, I will typically drop some sort of language foul, meaning, I will say a word that is probably not traditionally used in an interview. And then I will, and apologise and take it back to gauge their reaction. This is a personal one for me, because I have the mouth of a sailor. This is not at all the question that this is not the answer you wanted for this question. But interesting,
46:34
I want to hear this.
46:38
If I and you could pick up on on the offence level. And I typically it’s not wild and crazy, I’m not in there dropping F bombs, but you know, I might drop a shit or, you know, whatever. I don’t know if we’re allowed to cuss on your show. But I will drop something that’s a little bit more casual and a little bit more Cavalier. And this is a direct reflection of bad experiences I’ve had because I am more casual in my language, I am a little bit more relaxed in the workplace, not aggressively. I mean, I was the HR lady like, of course, I Cross my T’s and.my eyes and my, my chips together. But I will say my shit is together. And so for me personally, and so I think what I’m trying to illustrate here is Know thyself. Founders know who you are, and how you work. And so if I say H E double hockey stick in front of a candidate, and they react negatively, or poorly, or oh, there’s a pearl clutching that’s occurring. Yeah, that is not going to work. And so that’s a very small behavioural exam.
47:46
I think that’s, that’s a really interesting one. Because I think for the interviewer, it has me thinking, you want to be authentically yourself, because that’s gonna be the culture within the organisation. So if there’s a veneer between the candidate, yes, and the interviewer, and there’s this very formal relationship, there’s not that natural chemistry. And if there’s not that natural chemistry, and you have a bunch of heterogeneous personalities that are in the organisation, not going to have that cohesion as a unit and work together truly, as a team, when things fall down from there. But I think that’s it’s a great lesson.
48:26
It’s like I said, I know that’s not the answer you wanted, but it’s, it really is Know thyself, like, whatever that thing is that that makes you you and you don’t have to be sneaky about it. I, you know, my mind feels a little bit more like behavioural scientists of like, Oh, I’m testing you. I’m, most of my questions are not what you see is what you get there. They’re pretty straightforward. But people are programmed in an interview setting to respond appropriately. And that is one of those things that especially over zoom, since a lot of hiring is done over zoom these days. It’s, it’s something that you if you catch the person off guard with it, and then you you apologise for it, or you take it back to Oh, I’m so sorry. You’re gonna get a more genuine, authentic human reaction to it. Some people are like, Oh my gosh, perfect. Don’t worry, like I that is me, right? And then and then you kind of move forward and you understand that, like, it probably is not a big deal for him. But people are trained in an interview setting to be very professional, very formal. And that’s just not something that they expect. And so when you do something unexpected people tend to have a more organic reaction to things. Yeah,
49:39
they will and if we could interview anyone on the show, who should we chat with and what topic would you like to hear them speak about?
49:47
You have such interesting people on the show already and you’ve you’ve already interviewed so many people that I would have otherwise recommended? Let me think let me think let me think Do you know Cleo Abram from huge if true Now I don’t. So she’s a phenomenal content creator YouTuber who has this show called huge if true. And she also happens to be an emerging manager. So huge if True Ventures is her firm. I learned so much from this human from her her YouTube show from her podcasts from all of the content she creates, she’s always looking at, like, this isn’t tip of the spear. This is like bleeding edge technology, where as the title would would imply, if this technology actually fulfils its potential. Holy cow. This is incredible, right? And so it’s anything from like Hyperloop technology to space tech to artificial wombs. Like, she’s all over it. And it’s awesome. And now knowing that she is also a GP. In her research, she’s said, you know, as she’s creating this content, she’s now able to invest in the technology that she is vetting and pulling back the curtain on. I think she’s phenomenal.
51:02
Yeah, that’s, that sounds very interesting. And then last, what is the best way for listeners to connect with you and 776?
51:10
Yeah, well, we are internet natives. So you can find us on AIX, you can find us on LinkedIn. You can find us on intro if you want to have a direct conversation if it’s more if it’s more of a pick your brain type of thing. Shout out to portfolio company intro. But yeah, we were out there. We’re pretty available. Alexis Nice.
51:31
Awesome. Well, thank you again, for coming on the show. We’re gonna have to do it again sometime because I feel like we scratched the surface of topics that we could have gone deep on today.
51:41
I had a lot of fun. Nate, thank you so much for having me. I really appreciate it. It was fun course.
51:52
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 him 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