20 VC 005: Be The Best CEO with Kent Godfrey

In episode 5 of The Twenty Minute VC, we are joined by Kent Godfrey, General Partner at Pond Ventures. Prior to entering into the VC industry Kent was Chairman and CEO of Andromedia before merging it with MacroMedia. Kent was also CEO of Frictionless Commerce concluding with the sale of the company to SAP in 2006. Kent has previously served on the board of numerous companies including LiveRail (acquired by Facebook), TRM Corporation (Nasdaq:TRMM), HipBone Communications (acquired by Kana) and Vocal Point Inc (acquired by Telecom Italia). In this session you will learn: What is the most challenging aspect of being a CEO? Should CEO's have a clear and precise strategy for the future? What can a CEO do to position themselves to be more successful? How can an individual develop the skills to be a successful CEO? What Kent learnt from his meetings with Steve Jobs? What is the most challenging aspect of transitioning from CEO to VC? What do VCs do when concerned about an investment? What is the best aspect of being a Venture Capitalist? Is it possible to go straight into the Venture Capital industry from University? We end the episode with a quick fire round where Ken describes the future of the Internet Of Things (IOT). Why Founders are better than a Founder? Plus, what the biggest misunderstanding of the Venture Capital industry is? For all the resources mentioned in today's show heav on over to www.thetwentyminutevc.com

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

• 0:01Harry Stebbings?

  This is the 20 Minute VC with Harry Stebbings, session number five. This is the first episode recorded after the release of the podcast, so I just wanted to thank you all so, so much for helping us get to number two in the investing section of iTunes and the top 10 for business. But moving on to today's show, we have Kent Godfrey. Now Kent has had a stellar career in the tech industry. He was CEO and chairman of Andromedia and later CEO of Frictionless Commerce before joining Pond Ventures in 2005. But before we jump into the interview, would you like to win all the books mentioned in the first 10 episodes and a chance to pitch to one of the VCs we have interviewed?

• 0:42Harry Stebbings?

  If so, all you have to do is leave a review on iTunes and email [email protected] with the name you left the review under. Now you've heard enough from me, it's time to jump straight into the interview.

• 0:59Speaker 01

  You have now arrived at your destination.

• 1:02Harry Stebbings?

  Absolute pleasure to have you on the 20 Minute VC. Let's dive straight into it.

• 1:07Speaker 02

  All right, same here, Harry. Happy to do it.

• 1:10Harry Stebbings?

  Could you tell us a little bit about your background and what was the driving force for your entering into the venture capital world?

• 1:19Speaker 02

  Yeah, I think, well, as you probably know, my background is entrepreneurship all the way through from the early 80s till the present and, you know, 20 years of doing it on the company side and then after 10 years of being the CEO at two different companies, I really decided I wanted to focus on the things I really did well and be able to apply them to multiple companies simultaneously rather than a single company. So in a nutshell, I'd say that was my driving motivation.

• 1:55Harry Stebbings?

  So your aha moment was the specialisation of doing the thing that you were best at?

• 2:00Speaker 02

  Yeah, exactly, exactly. I mean, as a CEO, you know, you deal with all sorts of things. You're basically the chief problem solver and that's from, you know, solving why the toilets in the bathroom are always clogging to, you know, when is the right time to sell the company and everything in between.

• 2:18Harry Stebbings?

  Would you say that's the most challenging aspect of being a CEO, being the ultimate problem solver?

• 2:28Speaker 02

  No, I I would say, you know, in impact, um, the most challenging aspect of the being the CEO is figuring out timing of important decisions. It's, I think, most CEOs can figure out what the right thing to do is in every important instance, but figuring out when to do that and developing an instinct for that timing, I I think is the most important thing that a CEO needs to be good at.

• 3:02Harry Stebbings?

  So you'd you'd say that CEOs should have a clear strategic plan of where they want to be and when?

• 3:10Speaker 02

  Uh, yes, but the when part of it changes constantly because so much of what drives the timing decision on the when part is out of your control. And you can do the best you can at trying to predict the future and trying to, uh, come up with a sense for how these things are going to impact that timing decision, but at the end of the day, it is out of your control and you've got to be in a position to react to things as they change.

• 3:43Harry Stebbings?

  Absolutely, absolutely. And is there anything that a CEO can do to position themselves to be more successful?

• 3:50Speaker 02

  Um, I I think it really comes down to trusting your instincts, you you know, you um, you have instincts and you, above everyone else in the company, kind of represent the collective wisdom of the company and knowledge of the company. So you're the most informed overall and in the best position to, you know, have accurate and reliable gut instincts about these important decisions. And I I think you really need to get to a place where where you trust those instincts and you don't hesitate.

• 4:30Harry Stebbings?

  Okay. And and is that something that develops over time? I mean, would you say that there are people who are natural CEOs or would you say you evolve into it?

• 4:40Speaker 02

  I think there's a gene that some people have and some people don't. But I think that, you know, that's the starting place. And I think that the CEOs that achieve outlier performance are the ones who have the gene and develop that gene and really build these instincts and learn every step of the way.

• 5:04Harry Stebbings?

  And how would you say that someone could develop those skills? Is there any activities they could do themselves that could enhance their own ability?

• 5:13Speaker 02

  Yeah, I think the main thing is is building mentorship relationships, you know, with a handful of people that, you know, that have been there, done that.

• 5:24Harry Stebbings?

  Okay.

• 5:26Speaker 02

  And just, you know, being willing to listen to them and learn from them.

• 5:33Harry Stebbings?

  So would you recommend reaching out through LinkedIn or through something like that to the mentors that you'd like or that you admire and say, you know, I'd love you to mentor me and guide me through this process? Is that how you'd recommend attaining the mentors? Or would you recommend using an inner circle?

• 5:52Speaker 02

  I would more use the inner circle, more, more, you know, people that you have just by happenstance met along the way.

• 6:01Harry Stebbings?

  Okay.

• 6:04Speaker 02

  Yeah, because I think that the issue you have here, most of these entrepreneurs, CEOs, who are likely to achieve these outlier performances come with big egos. And that is an important ingredient, but it's one that the really successful CEOs are capable of kind of checking at the door when it's necessary and listening to people who have important things to say to you and really absorbing those things and, you know, practicing and, and learning, learning from them.

• 6:41Harry Stebbings?

  At what stage do you think a big ego becomes arrogance?

• 6:47Speaker 02

  Yeah.

• 6:50Harry Stebbings?

  And is there anything you can do to have a big ego but not be arrogant?

• 6:56Speaker 02

  Well, I'll tell you what what we look for. It's it's actually interesting. You know, you sent me a quote of the day here as sort of the preface to this conversation, being the people who are crazy enough to think they can change the world are the ones who do.

• 7:11Harry Stebbings?

  Absolutely.

• 7:12Speaker 02

  I I think, and I had an opportunity in the early eighties to spend quite a bit of time with Steve Jobs, coincidentally.

• 7:21Harry Stebbings?

  Wow.

• 7:21Speaker 02

  And one time we spent a solid hour talking about naivete, not about, you know, craziness, but naivete and how important that ingredient is to successful CEOs achieving outlier performance. And it's I totally believe him in that regard that if he really knew everything there was to know about the path you were embarking on, most, if not all, would never do it.

• 7:57Harry Stebbings?

  Absolutely. That's that's an incredible insight, really, when you think about it. Thank you for sharing that with us. And and I I wasn't actually aware about your interaction with Steve. How did that come about, if you don't mind telling us?

• 8:09Speaker 02

  It's yeah, it's really funny, actually. The first company I ever worked for when I graduated undergrad was a company called Varian Associates down in Palo Alto. And Steve Jobs' mother was the office admin in our department. And when she retired, the department had a lunch for her and Steve came along. And this was nineteen eighty-three.

• 8:40Harry Stebbings?

  Okay.

• 8:42Speaker 02

  So it was, you know, kind of the first time Steve Jobs was becoming, you know, God, if you will.

• 8:47Harry Stebbings?

  Yeah.

• 8:48Speaker 02

  To the entrepreneurial world. And so it was that um opportunity that I had to just sit with him and and just, you know, talk entrepreneurial shop for a little while.

• 8:59Harry Stebbings?

  What an unbelievable experience. Wow.

• 9:02Speaker 02

  Yeah.

• 9:02Harry Stebbings?

  And and and now slightly swapping sides of the table. You've been a VC for the last ten years. What has been the most challenging element of the transition from CEO to VC?

• 9:15Speaker 02

  Yeah, that that one's really easy. Um. That that's the, what I call the line between um nose in and fingers out.

• 9:25Harry Stebbings?

  Okay.

• 9:25Speaker 02

  When when you're a CEO, your nose is in and your fingers are in and you're just all over everything. Um, when when you flip the table and you become the VC and a board member and a representative of the money you've invested. Your fingers really need to stay out. Um, your nose is in. And you're constantly smelling for things that don't smell right. And you're letting the CEO know um that your sense is that this or that is not uh, you know, really going in the right direction. But you really need to stop at that point and you can't really, you know, stick your fingers in there like you're so tempted

• 10:11Speaker 02

  to just um kind of nudge the CEO aside for a time being and go fix those things.

• 10:17Harry Stebbings?

  Absolutely. So it's maintaining that backward role.

• 10:22Speaker 02

  Yeah, and and, you know, containing your your own frustration and your own kind of instincts to just do it, because tha- that's what CEOs do. They just go fix problems constantly.

• 10:36Harry Stebbings?

  So if you as a VC smelt something fishy in an investment that you had, would you address it with the CEO? You wouldn't dive straight in yourself?

• 10:45Speaker 02

  Yes. Now, now, in some instances, and Live Rail being a great example of that, um, that's a company that uh we sold out of our portfolio about six months ago to Facebook. Um, you you know, with the permission of the CEO or at the request of the CEO in numerous instances here, you know, I would get directly involved with some specific issue. Um, you know, where my skill set and my time availability um lent themselves properly to to being the best way to sort these issues out.

• 11:23Harry Stebbings?

  Absolutely. And and is there something you wish that someone had told you before you made the transition from CEO to VC, if they had given you some advice?

• 11:34Speaker 02

  Um, I I would say just, you know, how frustrating that feeling can be as a VC, not, you know, being able to just jump in there and do it and tell people, you know, what to do.

• 11:49Harry Stebbings?

  Yeah.

• 11:50Speaker 02

  Um, you know, as a CEO, that that's just so much more efficient. As a board member, investor representative, uh, where you have to watch the CEO and the organization make mistakes and know that that's part of the learning process.

• 12:08Harry Stebbings?

  Yeah.

• 12:08Speaker 02

  Uh, just, it it can just be very painful.

• 12:12Harry Stebbings?

  And if the nose in fingers out is the hardest part for you, what what's the most enjoyable part of being a VC for you?

• 12:21Speaker 02

  I think the most enjoyable part is being able to do this with multiple companies simultaneously.

• 12:27Harry Stebbings?

  Okay.

• 12:28Speaker 02

  It just doesn't get boring. You know, I think as exciting as, you know, companies like Andrew Media and Frictionless were, you know, when you're sort of focused a hundred percent on one thing for, in my case, five years each time, you know, you just kind of yearn for something else always. Um.

• 12:49Harry Stebbings?

  Having a VC lets you have the flexibility of engaging in multiple companies.

• 12:54Speaker 02

  Yeah, and we, you know, at Pond, um, you know, we do four or five companies per partner. So we're not in that, uh, tr- more traditional Sand Hill Road mode of ten to fifteen companies per partner where you're not really dug in very deeply on any of those companies.

• 13:12Harry Stebbings?

  Absolutely. So you think having a fewer number really enables you to give your full time and energy to that company?

• 13:19Speaker 02

  Yeah, I mean, obviously it enables me to give twenty percent

• 13:23Harry Stebbings?

  Absolutely.

• 13:24Speaker 02

  of my time to each one of five, which I think is enough to really get to know the team well enough, get to know the business well enough, the industry they're in, um, to be able to really bring value at an operating level.

• 13:39Harry Stebbings?

  And, and many people think nowadays that to become a VC, the only real route is to be a successful CEO or founder of a startup. Do you think it's possible to go straight into the VC industry from university anymore?

• 13:54Speaker 02

  Oh, I think anything's possible, but I think that's unlikely. Um, and I think even more important is, is, you know, VCs invest at all stages of companies from very, very early to very, very late. Um, and I think it is important that you have operating experience at whatever stage or stages you're investing in. I, I don't think having just pure, um, startup experience helps a whole lot when you're trying to invest in a pre-IPO company that's already doing half a billion in revenue and has a market cap in the private

• 14:35Speaker 02

  sector or in the private, uh, valuation of ten billion dollars. Um,

• 14:41Harry Stebbings?

  Absolutely, it's different scale.

• 14:43Speaker 02

  And, and vice versa, I think for people who've worked in large, uh, um, private companies and have been with them through the IPO process, to be joining an early-stage VC and, and expect to bring operating value to a seed-stage startup is, is not relevant either.

• 15:04Harry Stebbings?

  Well, thank you so much for that. And, and now, if it's okay with you, can we progress into the quickfire round where I say a word or short statement? And you give me your immediate thoughts. Is that okay with you?

• 15:16Speaker 02

  Yeah, go for it.

• 15:17Harry Stebbings?

  Okay, so the biggest misnomer of venture capital.

• 15:24Speaker 02

  Overrated value of the VC's personal network.

• 15:29Harry Stebbings?

  Okay, the future of the internet of things.

• 15:35Speaker 02

  Coming, but lacks the immediate near term killer app, quote unquote, to make it a here and now.

• 15:46Harry Stebbings?

  And what do you think that will be? Do you think that is a connectivity problem? Or do you think it's a lack of necessity? Do you think we need, you know, our burglar alarm to be connected to our stereo system?

• 16:00Speaker 02

  I, I think it's um ease of installation and ease of use um mapped against the actual value proposition.

• 16:12Harry Stebbings?

  Okay, absolutely.

• 16:13Speaker 02

  Still too hard.

• 16:15Harry Stebbings?

  And finally, founder or founders, which one do you prefer?

• 16:24Speaker 02

  Two.

• 16:25Harry Stebbings?

  Two.

• 16:26Speaker 02

  Business and a tech.

• 16:27Harry Stebbings?

  Absolutely. Well, Ken, thank you so much for coming on the show. I've hugely enjoyed chatting with you and it's been an absolute honour. Now, for all the resources mentioned in today's show, head on over to www dot the twenty minute VC dot com. Likewise, if you have any suggestions for VCs who we haven't yet interviewed, please do email harry at the twenty minute VC dot com, where we would love to hear from you. Thank you so much and we can't wait to see you in the next episode.