20 VC 058: 10 Key Traits To Be A Successful Founder with David Wu, General Partner @ Maveron

David Wu is a General Partner at Maveron, which he joined in 2012 to help identify new investments in Web companies that have the potential to become leading consumer brands. He sourced and led Maveron's investment, Eargo and Darby Smart, also serving on their board. David is very much founder focussed and you’ll often find him coaching entrepreneurs at top Bay Area incubators such as Y Combinator, AngelPad, 500 Startups, and Stanford’s StartX and was previously EIR at Redpoint Ventures. His close ties to the Silicon Valley entrepreneurial community have led him to invest personally in over 30 start-ups, including Practice Fusion, Postmates, Tile, Jaunt VR, and SeatMe. In Today's Episode You Will Learn: How David made his move into the world of venture capital? How David perceives the current seed funding environment? What makes Stanford the breeding ground of tech unicorns that it is? How to create a bay area style culture? What is the most frequent problem David sees startups encounter and how do they overcome it? How can entrepreneurs know which funding source to go for? Crowdfunding, VC, Angel? Why should startups take seed VC money over angel money? What is the difference? What are the key traits required to be a great founder? How can products with early adopter usage transition to a mass market product? Items Mentioned In Today's Show: David's Fave Books: Game Of Thrones David's Most Recent Investment: Jott As always you can follow Harry, David, The Twenty Minute VC and Maveron on Twitter right here!

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

• 0:00Harry Stebbings?

  You're listening to episode 58 of the 20 Minute VC with your host, Harry Stebbings. And today I am so honoured to welcome a true Silicon Valley legend to the show. It is of course David Wu. David is a general partner at Maveron, which he joined in 2012 to help identify new investments in web companies that have the potential to become leading consumer brands. He sourced and led Maveron's investment in Iago, Darby Smart, also serving on their board. David is very much founder focused and you'll often find him coaching entrepreneurs at top Bay Area incubators such as Y Combinator, AngelPad, 500 Startups and Stanford StartX.

• 0:43Harry Stebbings?

  And he was previously entrepreneur in residence at Redpoint Ventures. And his close ties to the Silicon Valley entrepreneurial community have led him to invest personally in over 30 startups, including Practice Fusion, Postmates, Tile, Jaunt VR and SeatMe. It's an incredible episode and I can't wait to hear what you think. But first, we constantly hear how important the team is and how it's crucial to have the right team in place for your startup to be successful. But that's very hard and that all boils down to one thing and that's analysis. And HiringScreen's unique interface offers in-depth analysis of candidate profiles. They make a clear assessment of strengths and weaknesses before building you a shortlist

• 1:28Harry Stebbings?

  with a drag and drop functionality, allowing you to easily prioritise your candidates. But now it's time for me to shut up and for David to be introduced. Ladies and gentlemen, it is the fantastic David Wu, general partner at Maveron.

• 1:47Speaker 01

  You have now arrived at your destination.

• 1:49Harry Stebbings?

  David, it's an absolute pleasure to have you on the 20 Minute VC.

• 1:53Speaker 02

  Thank you for having me.

• 1:55Harry Stebbings?

  Now, can you get us started with telling us a little bit about your beginnings and walk us through the David Wu story?

• 2:02Speaker 02

  Sure, um, I um, I'm actually a Bay Area native. I grew up in the valley and my father was an entrepreneur and my mother was an artist. And I think that's where I've gotten some of my left, right brain, arm wrestling and why I like consumer so much. Um, spent the bulk of my career as an entrepreneur. Um, started off very much a tech and a product guy. And then over time became kind of more of a inside guy, keep the lights on guy, jack of all trades, master of nothing kind of guy. Um, was at a company for a decade called Homestead that became a very successful way to build websites and kind of web one point oh. Almost went public, almost died within a few months of filing and hung on by our fingernails for another seven years and built it back up to about a hundred million dollar revenue

• 2:45Speaker 02

  business and sold it in two thousand and seven to Intuit. At Intuit, I um, ran a bunch of their SaaS businesses and frankly, just missed entrepreneurs and missed consumer. And so I started doing a lot of angel investing. So for the last seven or so years, I think I've done thirty or forty angel investments. And then I joined Maveron full time three years ago and fell in love with the team and the platform. Maveron's sort of a unique venture fund in that we've been around for sixteen years and are really, really specialized in what we do. Every investment we make is something that is direct to consumer. So no enterprise, infrastructure and hardly even um, B to B to C. We like things that integrate in people's lives enough that we think they can be breakout

• 3:30Speaker 02

  consumer brands. Um, and I personally focus a lot on um, connected devices, marketplaces and mobile. And and almost all of our money goes towards earliest series A um, stage investments, but we also have a very aggressive seed program that we use to get to know teams really well so we can make a much more educated series A bet based on a team that has the right consumer DNA.

• 3:55Harry Stebbings?

  And how do you find the seed funding environment in San Francisco? In London, the seed funding environment's exploded. Is that similar in San Francisco?

• 4:03Speaker 02

  You know, I think that the seed funding environment in San Francisco is Exploded, you know, almost beyond imagination and I think there's actually no looking back. There is so much capital and opportunity out there, whether it's angel syndicates or the job acts adding crowdfunding or the plethora of micro VCs. I've heard, you know, stats in the staggering number of billions of dollars that are new funds specifically created at seed programs. I often hear, you know, large scale VCs starting up seed programs and some of them have, you know, also staggering numbers where they'll allocate a few hundred million dollars towards seed.

• 4:42Speaker 02

  So I think it's a phenomenal environment in the Bay Area. It's, it's, um, probably never been a better time to start a company in the Bay Area if you're a founder.

• 4:50Harry Stebbings?

  And does that competitive threat worry you with the emergence of so many seed funds?

• 4:55Speaker 02

  You know, I think that, um, seed funds are out there for a variety of different reasons. You know, at the end of the day, I think if it's good for the entrepreneur, it's probably good for the ecosystem and in turn is good for the venture funds. Um, I think that, um, the seeds tend to be less competitive in the Series A. There are so many seeds getting funded out there, but at the end of the day, the As are still happening and they're happening later in larger figures, but there's not that many more Series A deals getting funded. So it creates a larger top of the funnel. So it takes more time and effort to see everything that's happening, but at the end of the day, I think knowing what you're good at and what a venture fund specializes in and really concentrating there is, is the important thing.

• 5:39Speaker 02

  And so I think it raises all boats.

• 5:41Harry Stebbings?

  And you said there about ecosystems and startup ecosystems. You started out at Stanford. I mean, what are, what are they putting in the food, David? There's just tech titan after tech titan. What do you think makes it so special?

• 5:55Speaker 02

  You know, I, I, I, you know, I'm a big fan of Stanford, you know, I, I, I still am a strong supporter of Stanford, but I think it goes beyond just Stanford to the Bay Area. And I think that the Bay Area, you know, we invest primarily all, all across the United States. Um, and the Bay Area is a very special place. And when I think about the right environment to create a startup ecosystem, there's kind of three prerequisite criteria. I think you need great access to capital. I think you need great access to talent. And third, often overlooked, I think that you need a culture that really encourages swinging for the fences. And kind of a culture that says that doing the impossible is actually something that happens every day.

• 6:35Harry Stebbings?

  And how do you create that culture in in a place where it's not already prevalent?

• 6:40Speaker 02

  You know, when I look at the barrier versus some of the new up and coming areas like LA or even New York, you know, the culture is a little different. And I think it starts off with who are the heroes and the role models in the area. So a- a- as as companies see breakout success, doing amazing things, I think all of a sudden they become the new normal. And so there's not a secret recipe for it. But I think that, you know, one of the big differences between the financial mindset of New York is in in the Bay Area is New York starts off with, well, you know, this is as big as you possibly can get. And this is what's rational for, you know, what what could happen. And the Bay Area is still a very dreaming town. And I think the fact that you see the Facebooks and the Googles

• 7:25Speaker 02

  and the history of these little product companies that start taking over the world lends credibility to that's what can happen.

• 7:34Harry Stebbings?

  And you talked about the access to talent and access to funds. I think, you know, Y combination and the accelerators have to be the amalgamation of the two. And you actually coached a lot of these demo days. What was the most frequent problem that you see startups encountering? And how do they overcome it?

• 7:52Speaker 02

  You know, um, a a lot of these early startups have lots of different things they're working on. But, you know, generally, I bucket into three areas, which is getting the right team, finding product market fit, and raising raising money, AKA not running, you know, not running out of runway. Um, on the right team side, I think the recruiting environment's getting as competitive as as ever been. And that's sort of the downside to how easy it is to get seed funding. And not only in terms of the talent that you need on the team, but the combination of the mindset that, you know, frankly, the day you put on a CEO hat is the day that your full time job is as a recruiter. And secondarily, there you need a variety of different skills.

• 8:35Speaker 02

  So I often tell a lot of the entrepreneurs to kind of figure out, you know, to be on the right track with smashing success, what do you need to achieve in the next six months? And do you really have the right variety of skills between now and six months from now to get you there? And then frankly, it's rapidly iterating, especially on the consumer side, understanding what that end consumer really wants and starting to get kind of MVPs in their hands and iterating like crazy until you find something that captures kind of the hearts and minds of these consumers. And then, you know, frankly, every entrepreneur I know, whether early or late stages, always fundraising in some fashion or another. And understanding when and who to take that money from is as challenging as ever because,

• 9:19Speaker 02

  you know, of the paradox of choice. As I was saying earlier, these environments, there's more funding sources than ever before. And every, you know, potential funder has a different motivation for why they may want to fund you and different skills they can bring to the table. So triaging through all that opportunity is also an area that, you know, entrepreneurs spend a lot of time trying to really figure out.

• 9:41Harry Stebbings?

  And how do you know then which is the right funding source with all the different funding sources that you mentioned emerging? How do you know which VC is the right one for your startup?

• 9:50Speaker 02

  You know, I, it's interesting because in the old days, you know, there's this great unpackaging kind of going on, which is in the old days, you took funding, you know, from maybe one of 10 VCs that you had heard of and you get control, advice and money from the same source. Now you can kind of mix and match like a component stereo and get smart advice from, you know, old founders paying it forward and advisors and you can get, you know, money from dumb money or angels or seed funds or series A funds and control, you may even be able to kick down the road to your series A or series B. So there's just so much choice out there. You know, in a lot of ways, I encourage entrepreneurs to figure out what do they really need in

• 10:33Speaker 02

  terms of skill sets around the table that they're missing? And in the same way that you would hire an individual or a company to be on your executive team, do that same amount of diligence and, you know, go talk to. Portfolio companies, probably the most successful and the least successful portfolio companies in some of the investors that you're thinking of taking money from and really understand, you know, how do they act when things are going well, how do they act when things are not going well? And, you know, really, what's the character, um, values and, you know, cadence of these individuals?

• 11:07Harry Stebbings?

  And for startups maybe raising a seed, uh, seed round, um, why, why should they take, uh, seed VC money over angel money? What's the difference? What should they expect there? Obviously, you as an angel, why do you think they should fall?

• 11:22Speaker 02

  So I think that, you know, there's one critical difference between angel money and institutional money and, and what it really comes down to is angels are generally investing their own money. Whereas most institutional funds are primarily investing other people's money and they're investing other people's money for a living. And, and that, that, that shows itself in that angels are often investing for, as I said kind of earlier, for a plethora of all different kinds of reasons. They may be doing it for lots of things that are not even return on capital focused. Things like, you know, they like you, they're passionate about what you're trying to do. They want to pay it forward and they made a lot of money in their last company. You know, it really runs the gamut.

• 12:07Speaker 02

  Um, institutional money, for the most part, is investing in some kind of thesis about how they're going to make their limited partners money. And so they're very focused on this power law curve where, you know, most of the companies are not going to do that well. So it's the one or two giant hits that are going to cover the, all the rest of the portfolio and the upside return. And as a result, I think that institutional money wants to put more money to work. It's more of a zero sum game where they have to elbow everyone else out and they're going to take a much more active role with a much higher risk profile. Where, you know, they may accept that there's a high chance you, you may not be that successful.

• 12:49Speaker 02

  But if you are successful, they want you to be a giant, huge company. On the angel side, you know, it really runs the gamut. As I said before, you can get all different kinds of angels that have different motivations and the key is to find motivations that are aligned, not only with your company, but... Also with what you're trying to achieve in your company in the next few years.

• 13:10Harry Stebbings?

  And then talking about VCs, let's, let's discuss Maveron a little. You're, you're very founder and team focused. So what do you look for in a team? What are your preferences? Do you have any strict guidelines?

• 13:23Speaker 02

  You know, you're, you're exactly right. We are definitely unapologetically team and founder driven. And I think that ties back to our consumer DNA and consumer focused in that there's less and less differentiation on the IP of consumer deals and much more around how well the team understands how to connect with end consumers. We actually take this very seriously. We, we've kind of put together a list of 10 key traits that we believe are kind of the, the key success traits for a Maveron consumer successful founder and we actually score um all our potential investments. CEOs against this scorecard and we often look back six months later or

• 14:05Speaker 02

  12 months later to see how well they did against that scorecard and what has changed. Um. I think that you could actually find some of these bullet points on our, on our blog or on our, our website. But I'll, you know, I'll signal a couple of, as examples, you know, three that I think about all the time is one is contagious passion and relentless perseverance. And that's the idea that these people are just insanely passionate about what they're doing and, and, and, you know, failure is not an option. Another one we look closely at is category advantage from their past experiences or things they've done before. They give them an advantage over, you know, their nearest competitor. And then third one, we talked about a little earlier as well is, you know, I'm really looking for people that are all-star recruiters and, and this isn't just recruiting

• 14:49Speaker 02

  employees, but this is recruiting greatness to be affiliated with a company, whether it's in a board role and advisor role in ecosystem or business development, you know, that the best entrepreneurs are focused on company building and are recruiting every hour of every day.

• 15:05Harry Stebbings?

  And then do you, do you back first time founders? Do you like technical founders over non-technical? What's your preference on that?

• 15:13Speaker 02

  You know. We often back first-time founders and, you know, I'm one of those believers that past success is often indicative of future success. And so, even a first-time founder, you know, maybe a nineteen-year-old coming out of the UK, has had some body of work, of things they've accomplished in their life, whether it's winning awards in sports, or scholastics, or, you know, one, one very successful entrepreneur I know that's run really, really large companies says, "I, I can learn everything I need to know about you based on what you did in high school." And so, we will, you know, we generally like to understand what people have done across

• 15:54Speaker 02

  the body of work of their life, but we don't think that you necessarily have to have started a company to be fundable for your next company.

• 16:03Harry Stebbings?

  And you specialize in consumer brands at Maveron. And a, a big, you know, with Ego and August, and a big problem that these brilliant solutions often encounter is transitioning from an early adopters market to a mass market. How do you bridge that gap and really transition it to a mass-market product?

• 16:23Speaker 02

  Right, so we, we spend a lot of time internally talking about this phrase that we've coined called "the cauldron of consumer passion." And, you know, every company we look at, we're really trying to identify, have they found this cauldron of consumer passion? You know, we're very rarely going to look at a company that has a neat technology in search of a target market or in search of a problem. Um, I think it goes all the way back to our founding roots, you know? We were started at Maveron by two coffee guys out of Seattle, Howard Schultz, that has hence, hence gone back to run Starbucks, but is still working alongside of us, and Dan Levitan, who partnered with Howard in the old days to take Starbucks public. And he tells the story of how, when they were thinking about taking Starbucks public,

• 17:08Speaker 02

  I think there were forty stores in the early nineties up in the Pacific Northwest, and he went back to talk to a lot of the bankers in New York about the opportunity, and everyone poo-pooed the idea, saying, "That doesn't make sense, you know? No one's going to wait in line for coffee, and, and, and coffee's something you can get anywhere. How could that possibly be an interesting company?" And yet- Dan went back and alongside Howard went and visited the people in line at the Starbucks in the Pacific Northwest. And noticed, one, how passionate they were about that experience, how frequently they were going back. And how much they would miss that experience if it were taken away. And that was the beginning of this cauldron of consumer passion. And I think both in terms of deciding what company is the fun.

• 17:52Speaker 02

  But also as they tip from kind of an early adopter Kickstarter techie market to the mass market. What we're looking for is how deeply is something embedding its service or its products in the everyday lives of of real people? And and that's really the key to to where we see these consumer brands tipping.

• 18:14Harry Stebbings?

  And then I'd love to dive into a a quick fire round with you. So. Your favorite book and why?

• 18:21Speaker 02

  You know, my my my favorite books at probably right now are the the Game of Thrones books. But at the same time, a little bit frustrated because I'm incredibly nervous that the HBO series is going to pass the speed of his slow writing and I will be stuck um to reconcile the show with the books.

• 18:41Harry Stebbings?

  The biggest mistake you've made and how you overcame it.

• 18:45Speaker 02

  You know, it's funny, I think on the entrepreneur side, I almost I often tell people that one of the most common traits in successful CEOs and successful entrepreneurs is revisionist history. So from an entrepreneur's perspective, I think I've made probably tons of mistakes, but I actually can't remember any of them. Um, but from an investor perspective, I would probably say that, you know, the biggest mistakes have to be you know, my personal unportfolio to date or anti-portfolio. And three that come to mind are all for different reasons where companies that I passed on that looking back have turned into quite successful companies would be Stitch Fix, Instacart and Dollar Shave Club.

• 19:26Harry Stebbings?

  Fair enough, absolutely. And then what advice would you give to a twenty year old self?

• 19:32Speaker 02

  You know, probably the advice I would give to a twenty year old me is something outside of the professional area. I, looking back, you know, I've always loved on playing sports, but if I had to give advice to my twenty year old self, I would tell myself to go get better at both basketball and golf. Because as a twenty year old, it's much easier to find time and your ability to get good at those two sports is much better than than it is at my age.

• 19:59Harry Stebbings?

  The next industry to be disrupted?

• 20:03Speaker 02

  The next industry to be disruptive. You know, I'm very bullish on the intersection and and and my Irgo investment is in this category, the intersection of the internet of things and connected devices and medical and wellness. I think in the middle of there, you're gonna go up the pecking order from devices that, you know, count steps to actually give people superhuman powers. You know, we made the recent investment in Irgo, which is a truly disruptive hearing aid and it's gonna change both how people buy, but also the types of people and how you wear a hearing aid. So I think there's gonna be a lot of innovation in those areas.

• 20:45Harry Stebbings?

  Your favorite newsletter or blog?

• 20:48Speaker 02

  You know, I'm a big fan of Circa, uh which is an app that Matt Galligan did that unfortunately didn't get enough funding to keep going, but you know, I actually consumed a great deal of my news in sort of this atomized content format that was designed for the mobile phone. So I'm I'm bummed out about that one.

• 21:06Harry Stebbings?

  And then finally, the most recent investment you've made and why you said yes?

• 21:11Speaker 02

  The the most recent investment, I think, was a seed in a company called Jot. J O T T and it is a peer to peer um kind of mesh network over the top messaging app for teens and whether you have connectivity or no connectivity because you have no wifi and you maybe don't even have a cellular plan on that phone it'll work to connect to other people in your school and you know of course we made the investment because we love the entrepreneur Jared Allgood that has all the right dimensions of a great entrepreneur um but at the same time we think that this messaging area where you actually can create technology that can

• 21:56Speaker 02

  bring more people into the platform than perhaps was available before it makes a lot of sense to us and and we've seen great explosive growth inside of schools.

• 22:06Harry Stebbings?

  Well David it's been absolutely incredible having you on the show. Thank you so much for giving up your time.

• 22:11Speaker 02

  My pleasure.

• 22:12Harry Stebbings?

  As always all of the incredible resources and tools mentioned in today's incredible interview with David can be found on the blog at www dot the twenty minute V C dot com and for any of you interested in angel investing I would love to hear what you think of my new show uh brought to you by Syndicate Room it's called Angel Insights and it takes you inside the world of angel investing not quite in twenty minutes but it depends and it varies and it's a fantastic show which really gets inside the industry in a really fascinating perspective uh and that's obviously found on iTunes at Angel Insights and I'd love to hear what you think of that show and before we leave today's episode Malcolm Gladwell once said there can be as much

• 22:56Harry Stebbings?

  value in the blink of an eye as in months of rational analysis well that is certainly the case with our dear friends at Hiring Screen whose full analytics dashboard provides easy access to key analytics and metrics and statistics allowing me to monitor the data on screen and generate comprehensive reports based on the candidates up for grabs and you can find out more about the Hiring Screen process at www dot Hiring Screen dot com or I highly recommend you send an email or a tweet to Richard and you can find him at Hiring Screen R H and uh thank you so much again for listening to today's episode and we can't wait to see you in the next episode.