20 VC 014: Acquired by Salesforce turned VC with Kyle Lui

Kyle Lui is Principal at DCM Ventures where he helps entrepreneurs scale their companies and advise on product development across IOT, consumer internet and mobile and enterperise Saas. Prior to DCM, Kyle was Co-Founder at ChoicePass, a enterprise perks and rewards Saas company backed by prominent angel investors, later acquired by Salesforce.com and Rypple. At Salesforce, Kyle served as Director of Product Management on the founding product team for Work.com, growing the business to over 1,000 enterprise customers. Items mentioned in this episode: Learn Python the Hard Way AnyPerk Eaze In this episode you will learn: How Kyle made the leap from Startup Founder to Venture Capitalist? How did Kyle learn to code? How did Kyle feel on selling ChoicePass to Salesforce? What was it like working in such a large company, such as Salesforce? How did your role change when Salesforce was acquired? What was the most difficult element faced by Kyle in his time at ChoicePass? Where does Kyle see the future of incentivising employees and how important is this aspect of corporate life? When investing in a company what aspects really attract you to a deal and what can be a real red flag? Are University and College degrees necessary for you to invest in a founder? Is Kyle concerned that a potential increase in regulation could damage his investment in Eaze, medical marijuana delivery startup? We conclude today's show with a quick fire round where we hear Kyle's thoughts on what Kyle would do if all he had was a laptop and $100, what advice Kyle would give to entrepreneurs starting a company? For all the resources and items mentioned in todays show, head on over to www.thetwentyminutevc.com If there are any VCs you would like us to interview, send an email to [email protected] and we will arrange it!

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Harry Stebbings?

  Hello and welcome to episode 14 of the 20 minute VC with Harry Stebbings. Now, I am extremely excited to welcome Carl Louis on today's show. Carl is an entrepreneur and I'm really a product guy. He is principal at DCM Ventures, where he helps entrepreneurs scale their companies and advises on product development across consumer internet and mobile and the internet of things. Before DCM, Carl was co-founder and CEO of Choice Pass, where he led product management, user acquisition, sales and operations. Choice Pass was an enterprise perks and rewards SaaS company backed by some very prominent angel investors and then was ultimately acquired by Salesforce and Ripple.

• 0:46Harry Stebbings?

  But before we jump into the amazing interview with Carl, first, it's your chance to win a consultation with one of the VCs from the show. Would you like the chance to pitch some of your business, ask for advice on a business plan? All you have to do is head on over to iTunes and leave a review and then email [email protected] with the name that you left the review under and you will be submitted into the competition. Okay, enough from me, it's time to jump into the interview.

• 1:21Speaker 01

  You have now arrived at your destination.

• 1:24Harry Stebbings?

  Carl, welcome to the 20 minute VC. I just wanted to say a quick thank you to Joe Floyd of episode nine for introducing us, but Carl, it's an absolute pleasure to have you on the show.

• 1:33Speaker 02

  Thank you, I'm happy to be here and Harry, I've enjoyed listening to some of your podcasts in my commute down to Menlo Park, so.

• 1:41Harry Stebbings?

  Thank you very much, I'm glad we've entertained you. Now, I'm really curious about how you yourself got into the technology industry and then later made your transition into your current venture capital status. Could you tell us a little about that?

• 1:57Speaker 02

  Yeah, absolutely. So I actually started my career in finance. So after I graduated from college, I did a two-year private equity analyst program similar to the banks and was promoted straight through and thought I would sort of stay in that area, you know, for the, for most of my career, even spent a few years in Asia. And it wasn't until I got to Harvard Business School that I started exploring technology. So, you know, when you get an MBA, it's a great time to sort of reassess what, what you'd like to do. And, you know, I took a course called Launching Tech Ventures, which was really, you know, the first class I've taken that's technology oriented.

• 2:39Speaker 02

  And as part of that, did a project with a project man, a product manager director at Google. And then from there, decided to kind of focus much more into technology. And ultimately, that led me to start a company.

• 2:55Harry Stebbings?

  Cool. Choice Pass?

• 2:57Speaker 02

  Called Choice Pass, exactly.

• 2:59Harry Stebbings?

  Perfect. And at this point, could you code?

• 3:02Speaker 02

  No, no. Yeah, I, I, I had taken some computer science classes in college. But, you know, I, I never really used it since my career before that was in, in finance. And since then, I've, I've, I've learned to code. I think it's important. But it isn't sort of a core part of what, what I did at Choice Pass. I was definitely the, the business co-founder, but you really have to learn much more about technology. And, you know, I was very humbling in the beginning and, and it was a great learning experience for me.

• 3:35Harry Stebbings?

  Now, a lot of our listeners have actually emailed me saying they'd love to get into the tech industry and startups, but they don't know how to code. And, and I was wondering then, how, how did you, you said you've learned to bid and the basics. How did you learn that? Was that online? Was that through, other than through obviously your college course? Did you take books or online resources? How did you do it?

• 3:58Speaker 02

  Yeah, definitely online is, is the, the easiest way. And, you know, learn, learn an easier language. So I.

• 4:08Speaker 02

  At ChoicePass, we use Python. And so there's an excellent course called Learn Python the Hard Way, which is an online course. And it just walks you through, you know, assuming you know pretty much nothing, to being able to build kind of simple, simple applications. And so just going through that process, I think, is really helpful in working directly with developers, which I had to do both my time at ChoicePass as well as Salesforce.

• 4:41Harry Stebbings?

  And all the resources mentioned in today's show can be found on the website.

• 4:45Speaker 02

  Yes.

• 4:46Harry Stebbings?

  But now, ChoicePass was acquired by Salesforce. And that leads me to ask you a few questions, actually. And the first and most important, I think, is how did you celebrate the acquisition? Was it a time of great excitement? Obviously, it was your first startup. Were you extremely excited or was it actually quite saddening? Was it selling off of a part of you?

• 5:10Speaker 02

  I think it was a little bit of both, but I think it was definitely a lot more excitement, especially sort of with the team. Everybody was really excited about like Salesforce as a company. And when we started, we sort of looked at, you know, companies that we admire, companies that we'd like to partner with, potentially get investments from, or potentially be acquired by. And Salesforce is definitely at the top of the list. And so the whole acquisition happened pretty quickly. We're, you know, they were pretty motivated and it was pretty strategic to a new division that Salesforce was launching, which is now called Work.com.

• 5:51Speaker 02

  But prior to that was just sort of the generic kind of HR cloud that, you know, Marc Benioff was super excited about back in 2012. And we all went out to a very nice dinner, you know, the entire team.

• 6:09Speaker 02

  Um, just sort of talked about the the roller coaster and our good times and just talked about how exciting it was to be part of Salesforce. So uh but part of me again was was sad because you know you always feel like you can build something something bigger and so there's always that that aspect of it.

• 6:29Harry Stebbings?

  And so how did you come to that conclusion that you could you could further the company with Salesforce's help? Did you think that you'd reached the capacity you could and and Salesforce were the only ones who could propel you to that next level?

• 6:43Speaker 02

  Well, no, not necessarily, but what they were offering was pretty appealing. So it was um you know, because they were building a new HR cloud and and uh our visions really aligned. Um, I spoke to a number of execs at at Salesforce um and you know, including the co-founders of Ripple who had just sold their company

• 7:03Harry Stebbings?

  Sure.

• 7:04Speaker 02

  Uh to to Salesforce a few months prior. And you know, it was really about, you know, continuation of the vision and building something bigger and building the next billion dollar business for Salesforce. And that that was really exciting for me and my team.

• 7:19Harry Stebbings?

  And what was it like working in in such a huge company, such as Salesforce? Did your role change a lot from the startup system that you had going at Choice Pass?

• 7:29Speaker 02

  Uh, there's definitely um a adjustment in the in the beginning because you're moving from, you know, there were yeah, there were ten of us that we see every day and you know, the tech and product team, there was five of us. And so from that to, you know, a massive organization where no one really, you didn't know, you, there's no way you can know everybody. It's quite a difference. And you know, frankly, um Salesforce was the largest company I've worked for by several orders of magnitude. So, you know, having to kind of navigate that could be scary. But um because we were kind of our own business unit with uh with the HR cloud and with Work.com,

• 8:10Speaker 02

  it felt very much, at least in the early days, like a startup within a much larger company.

• 8:16Harry Stebbings?

  Okay.

• 8:16Speaker 02

  And so that was actually really exciting. We, you know, had our own, um, you know, we're essentially our own division. And so went from that and then eventually I transitioned into Sales Cloud, which is the, you know, large. Multi-billion dollar entity, and I think if that were to happen from the beginning, I pro- I, you know, I don't think I would have enjoyed myself as much, so it was actually a good transition.

• 8:40Harry Stebbings?

  And how long were you at Salesforce for again?

• 8:42Speaker 02

  Uh, a little over two years.

• 8:44Harry Stebbings?

  Okay. Now, as, uh, obviously as founder of Choice Pass, you experienced a lot of difficulties uh in growing a startup. What would you say was the most difficult element that you faced in your time at Choice Pass?

• 8:58Speaker 02

  Yeah, I know. I think that's a great question. So the, you know, our original idea for Choice Pass was a mobile membership platform for local merchants. So um back in two thousand eleven, two thousand twelve, your Groupons and Living Socials were the king of the world. And we wanted a way for, for um local merchants to be able to, to cheaply bring back those customers. And we actually raised our seed round based on that, but as we, you know, as the months went by, uh, the data was showing that it wasn't working. And so we had to pivot. Um, and so my co-founder and I, you know, we locked ourselves in a room. We had an all-day, uh, several-day strategy session where we were talking about what are the problems we can solve?

• 9:43Speaker 02

  And then that ultimately led us to Choice Pass because a lot of the local merchants that we were talking about, uh, talking to, um, really wanted more corporate business and they really wanted more regular business rather than the clientele that was coming from, you know, daily deal sites. And so that ultimately led us to create the first version of Choice Pass, which is a, a corporate perks platform, which then evolved into focusing more on um employee rewards, which is actually the side of the business that um was most appealing for Salesforce and what we focused on at Salesforce.

• 10:16Harry Stebbings?

  Perfect. And, and that, that interest that you have in incentivizing people is, is clear in your investments because you've invested in any perk?

• 10:26Speaker 02

  Yes, yes.

• 10:27Harry Stebbings?

  And where do you see the future of incentivizing people and how important do you feel it is?

• 10:33Speaker 02

  Well, I mean, and I've always had this thesis that your people are your most valuable resource. And there's no other place that where that's more true than in the valley where uh you know, talent really has a number of different options that they can go to. And so I really believe that um having the right culture and having the right uh incentives and rewards is critical for the success of a company. And I felt that there's a lot of unfinished work, um you know, with Choice Pass and with Work.com. And then now having moved into venture. And so I've kept in close touch with the AnyPerk team. And I think that they've done a really good job of um executing, of delighting their customers.

• 11:18Speaker 02

  And um and I think they're well positioned to to really own this this market.

• 11:23Harry Stebbings?

  Absolutely. And um moving then on to your investment strategy. When investing in a startup, are there aspects which really put you off? Or or really make you excited, uh e- either one? Um and and why does that happen? What so what really gets you going and what doesn't? What is a red flag?

• 11:45Speaker 02

  Yeah, when I when I when I evaluate startups, um you know, I'm really looking at kind of three major areas. The the first is the team and who's the co-founding team? Or who what's the background of the sole founder? And how do they interact and compliment complement each other? And how committed are they to to uh you know, to this startup? Um and you know, there's there's no replacing um in-person meetings here. I mean, you really have to meet the person. Sometimes we we meet entrepreneurs, uh you know, maybe a dozen times, you know, to to to talk about everything from strategy, go-to-market, product, vision, hiring, before we make an investment.

• 12:28Speaker 02

  And I think the people people element really can't be um, you know, can't be underestimated.

• 12:36Harry Stebbings?

  I get asked a lot as well about university and college degrees. Would you would you say that's a necessity for you when investing in a company? Does the founder need to be a college graduate or or not?

• 12:48Speaker 02

  Um, not, not necessarily. I mean, if you look at the data, there's a number of, you know, very, very successful companies where.

• 12:56Harry Stebbings?

  The anomalies are there, yeah. Facebook as well.

• 12:59Speaker 02

  And, and, uh, you know, I, I don't think it's, it's, it's necessary, but if they didn't go, go to college, they didn't graduate from college, I think. You know, they, they, they must have been do- doing something extremely exciting, like they started their first company, or. They've done something that sort of re- replaces that, because I think that for the majority of people, that's, that's generally the path, so.

• 13:22Harry Stebbings?

  Did you meet your co-founder for Choice Pass at college?

• 13:25Speaker 02

  Uh, no, we didn't. We actually met, uh, through a friend when we were, uh, traveling in Morocco, so, but that's an entirely different story.

• 13:33Harry Stebbings?

  Okay, well, we'll leave that one for another day. So we've got the team. What are, what are the other two aspects?

• 13:39Speaker 02

  Yeah, the, the other two elements is the, the market as a whole, the, the market that they're, that, that the company is looking at, and that. I think is important for a few reasons. You have, um, uh, few different types of VCs. You have. Some VCs that are generalists, where they've done a ton of different deals across different industries and different markets, and then you have VCs that are very focused. And I think that, uh, the value of being very focused on specific industries is that you really build. You know, deep knowledge in those industries. So you have VCs that focus just on, um, just on FinTech, for example. Me personally, I've been looking, uh, a ton into mobile-enabled services, so sort of the on-demand space. I've also been.

• 14:24Speaker 02

  Actively looking at, um, drones and, uh, the drone space and, and AI, which is quickly emerging. Uh, and as you, a- and also obviously enterprise software, given my, my, my prior experience, and so. When you're, when you're kind of diving deep into specific industries, you can really provide tremendous amounts, tremendous value, right? And I'm sure other VCs say this, but capital is a commodity. There's so many different sources of capital now that you need to really provide. Things that are different, and I think that having that, um. Difference, you know, having that industry knowledge is is is quite important. And then the third area is, you know, metrics.

• 15:05Speaker 02

  So there needs to be some way to measure the current success of a company and how it's tracking. And for for every company, there is there is some metric, no matter how emerging the industry. And so we look at those, you know, on the on the mobile consumer side, they tend to be around engagement and user growth, right? How engaged are the users? How how quickly is the growth? And how, you know, how much money have they spent to actually acquire those users? Right? And then on the enterprise side, we look at how we look at, you know, obviously churn is important. And we also look at monthly recurring revenue and how that's growing over time.

• 15:48Speaker 02

  And again, how much money they're spending to acquire those customers.

• 15:51Harry Stebbings?

  And if you were going to prioritize one of those aspects, which one do you personally place is the most important?

• 15:58Speaker 02

  The team is always the most important because you can't build a company without a strong team.

• 16:02Harry Stebbings?

  Okay.

• 16:03Speaker 02

  Um, so the team is always the most important.

• 16:05Harry Stebbings?

  Team over product?

• 16:08Speaker 02

  Yeah, I mean, the the team is absolutely the most important because with a good team, you can you can, you know, accomplish most things and fix most solvable problems. But if you have a bad team, it's gonna be it's it's or not not a bad team. But if you have a lower performing team or you have teams that sort of lack a certain skill set that would be required to be successful in that market, then it's it's an uphill battle from the beginning.

• 16:34Harry Stebbings?

  Awesome, awesome. Now, with the recent deregulation of marijuana consumption in the U.S., we've seen a lot of marijuana startups. I know Founders Fund recently made a substantial investment in Leafly. And you yourself have invested in one being Ease, the Uber for medical marijuana. Are you concerned about the prospect of possible increasing regulation? And where do you see the future of integrating tech with marijuana?

• 17:01Speaker 02

  Yeah, no, I think I think that's a great question on on the on the regulation side. I think that, you know, VCs generally have to take a bit of regulation risk, right? You you either make a call that regulation is going in in the direction that's favorable towards towards, um, you know, the potential investments you're looking at or they're not. And it's not specific to marijuana. If you look at um, anywhere for if you look at things like um, like uh, the the drone space, for example, and the FAA just recently coming out with regulations, which largely have seemed to be positive towards the development

• 17:43Speaker 02

  of commercial drone space. Or if you look at education as an as another example, or um, you know, a number of other industries, even like Uber, when they first started, it was technically illegal in a ton of municipalities. So I think that you have to make a call on where you see regulation going. And, you know, specific to your question, I think that uh, there is increased acceptance that medical marijuana is something that should be legal, not just, uh, you know, in certain states, but potentially federally. And I think that, you know, we we as a DCM, as a fund, really saw that uh, regulations were shifting i- in a way that we hadn't seen in the last uh, couple decades. And so uh,

• 18:29Speaker 02

  this led to real market opportunity for for innovators, and I think ease is certainly one of them.

• 18:35Harry Stebbings?

  Fantastic. And and now, moving on, I I hope it's okay with you if we move on into a quickfire round.

• 18:41Speaker 02

  Yeah, sure.

• 18:42Harry Stebbings?

  Perfect. So, okay, this this one's a bit off the track. I'm just giving you a bit of a warning. If I took everything that you have away from you and left you with a laptop and a hundred dollars, what would you do?

• 18:55Speaker 02

  I would build an iPhone app to help people do one thing better, whether that's building a skill or connecting with their their family, um, or uh, or, you know, something that increases their convenience. I think, you you know, there's tremendous value there.

• 19:13Harry Stebbings?

  Okay, perfect. Um, and if you could give entrepreneurs starting a company one piece of advice, what would it be?

• 19:23Speaker 02

  Think about why you're really starting a company, you know, don't do it just because it's the the cool thing to do now, like really think about what your motivations are.

• 19:32Harry Stebbings?

  Fantastic. Well, Carl, thank you so much for having coming on the show. It's been an absolute pleasure to have you here and I really hope to have you on again sometime.

• 19:42Speaker 02

  Yeah, it's been a pleasure.

• 19:44Harry Stebbings?

  Now, for all the resources and items mentioned in today's show, head on over to www dot the twenty minute vc dot com. And I'd love to hear your thoughts on some questions you might like to be asked in the future. In that case, please do email harry at the twenty minute vc dot com. Thank you so much and we can't wait to see you in the next episode.