The estimated reading time for this post is 11 seconds
Video interview with David Hornik, Partner August Capital. For more than a decade, David has worked with technology startups throughout the software sector. In 2000, David joined August Capital to invest broadly in information technology companies, with a focus on enterprise application and infrastructure software, as well as consumer facing software and services. Prior to joining August Capital, David was an intellectual property and corporate attorney at Venture Law Group and Perkins Coie. In his legal practice, David represented high tech startups in all aspects of their formation, financing, and operations, including the likes of Yahoo!, Evite (Ticketmaster) and Ofoto (Kodak). Before that, David was a litigator in New York City at Cravath, Swaine & Moore. You can find David on his blog Venture Blog or on Twitter @davidhornik
Transcript follows & video above
I was wondering what kind of themes you like to invest in? What’s your sweet spot with startups?
As a general matter our theme is people, it’s not about technologies or markets. We invest in great entrepreneurs who have come to an idea in a context of their history. Sometimes that’s an industry in which they’ve worked. Sometimes its a problem that they needed solving. They come to us & say: here’s how we’re thinking about this problem. We think it’s big & we think the way we’re solving it is interesting. And when we think to ourselves that’s true, it is a big problem & it’s a big interesting opportunity & we think that the entrepreneurs are going about it in a smart way, then we might invest. But we’re not a firm that wakes up on the 1st January & says OK we’re focused on big data, we’re going after bio infomatics, we need a mobile ad thinger whoozy. Our approach is, we describe ourselves as systematically opportunistic. We work very hard to see the most interesting opportunities that people can describe & we hope we have the good sense when we see them to say ‘yes that’s it!’
So would it be seed stage or round A or B?
It’s one of those tricky things. On the one hand we’ve invested $500k in a company & we’ve invested $130m in a company. So it’s an incredible range. We tend to invest in early stage ventures. I’ve invested in a number of 3 people with a great idea kinds of companies putting in $2m or $4m. I’ve invested in lots of series A investments where the team is a dozen people, they’re working on something interesting & they need the next $6 or $8m. I think that early is fun & interesting & the world’s your oyster! It’s also risky & challenging. Then we have a later stage fund where we invest in opportunities where the teams are doing great things & they need more money to leverage the skills they already have or the relationships they already have to acquire companies. So we’ve had lots of interesting opportunities there where we say Oh, we’ll invest $20m or $25m & you can buy this other company or we can spin you out of some other place. And we find that exciting as well.
I just love your office & you’re obviously a really creative guy. Do you like to get involved with the startups & if so what’s your boundary around that?
I wrote this blog post. I have a blog called Venture Blog & I wrote this blog post once “Every VC thinks he’s a Marketing Genius” Marketing is one of those things that you can opine on infinitely & if you think “You know what I think you should do!” My view of venture capital is that it is not our job to steer our companies. We’re not in charge. If you’re running the company then something has gone very, very wrong. On the other hand I think there’s lots of things I think we can be helpful with. Sometimes that’s recruiting & sometimes that’s thinking about the broader opportunity, sometimes that’s relationships. I’m happy to do what’s helpful for my companies & sometimes that’s “Hey David can we meet every week & talk about how the company is doing or whatever.” I have had that & very happy to do it. Sometimes it’s ‘I really need you to convince this great engineer to join the company.’ And sometimes it’s “We’re thinking about this particular product or market or whatever, what do you think about it?” I’m thrilled to help any way that you think is useful & I think I am that: I am the support structure for a great team of people that are going to build a big business.
Fabulous. So I wondered if you’ve invested in any female founded companies & what you think about that whole area of startups?
I like to think it’s not an area of startups. Women approach startups the same way as men. They’re founding companies across a range of technologies & a range of opportunities. I do think that there is an interesting challenge that the venture capital market has. I’m not someone who is going to look at you & say: This is a pure meritocracy & if women are disproportionately under invested that that’s their fault. Because the things that lead to investment are really amorphous. It’s about introductions & relationships, it’s about sales & marketing & convincing people & engagement & connection. To the degree that this is about making those deep connections, there’s clearly plenty of folks up & down Sand Hill Road where that’s a harder connection to make with people that are less like them. And Sand Hill Road is full of men! It’s a lot of men so I think it’s an interesting challenge. It’s a challenge that the venture community would be well served to be cognizant of & to try & make progress. Which isn’t to say funding women who are engaged in business you are not interested in, it’s more about understanding how you judge people & businesses & not creating double standards & not having expectations that make it harder for one group of people, whether it’s women or African Americans or Hispanics or whoever. Don’t create hurdles that get in the way of ‘This is a great business!’ Let’s go build it! That said I have backed female entrepreneurs. I look forward to continuing doing it. We recently funded in the second half of last year, 2 of our CEOs are women. We’re excited about that. So I don’t think this is a crisis at August Capital, I just think that people have to be realistic. They have to come in eyes wide open & look for the best athletes who are going to do the most interesting things whatever their background.
So that’s your advice for the venture community, would you have any tips for women who are wanting to raise venture or angel investment? Is there anything that you could say that would encourage them (because obviously that’s the basis of my interviews)?
Sure at the end of the day, it’s always the same. Relationships drive activity in Silicon Valley. Everything is relationship driven. My advice is very much the same that I have given many starting entrepreneur which is that, you need to engage in a meaningful way with the broader ecosystem. The way you come to the venture community is through friends of the venture community. Because ultimately if someone I trust says you should meet with this entrepreneur, I’m not filtering it by are you female or male? I’m filtering it by who made this introduction? So to the degree that there is any differentiation between men & women engaging in that behaviour, then I think that “Be bold, create relationships & get to know people & live & die by the things that you’re doing. I do think that Silicon Valley is a meritocracy in many respects. I think that many people are looking for great opportunities & they’re willing to be convinced that the things you’re doing are exciting. So make those connections, build those relationships & get in front of lots of people. And I think that ultimately you will prevail even though it may take a few more of those relationships, a few more of those connections, a few more walls you have to break through. But boy that’s what entrepreneurs do all day!
What is a Good Pitch?
I wondered if you could tell me what constitutes a good pitch to you when an entrepreneur comes in to pitch their startup? What are the things that you’re looking for that’s going to say hey I’m interested in this startup?
It’s one of those, in some ways, very tough questions to answer. I know it when I see it! But the reality of it is that pitching a business is about selling a vision. It’s about selling a vision in 2 respects. It’s about selling a vision on a person who is well suited to bring this thing to fruition. And then it’s about this thing that I want to bring to fruition is interesting & engaging & will change the world in some meaningful way. The greatest pitches are the ones where you say: “Wow that’s an interesting opportunity I hadn’t thought about & it’s exciting. Secondly, man I really want to back that entrepreneur to go do it because it looks like he or she is just going to kill it!” And I often say that the best judge for me of what was a great pitch is the next morning when I wake up. Because if I wake up thinking about that pitch, thinking about the opportunity then we’re onto something. If I wake up thinking about breakfast or my kids or what meetings I have that day, I’m not going to fund you. It’s because you haven’t captured my imagination in a way that has occupied my brain. But the things I have funded: I finish the meeting & I go wow that’s really interesting. I go into the next meeting & in this background process I’m thinking about the last meeting. Those are the pitches where you just say “Oh OK that’s amazing, I wonder if they thought about this etc.” It’s hard to describe that magic but it’s all about vision & it’s all about passion. And passion can be expressed lots of ways. It doesn’t have to be about me, frenetic passion. I’ve funded founders who are very no nonsense & methodical but you don’t question for a second that the thing they’re doing is what they were born to do. So when you leave with that feeling, that this person was put on this earth to build that search engine for data or to build that price optimisation or whatever, you leave excited & energized & wanting to spend more time with them.
Thank you so much David, I really appreciate your time today.
Sure, thanks for talking.
Advice for European Startups
I know you were recently at Le Web & I wondered if you’ve got any comments for European startups & how the market is fairing over there? (That’s where I originally hailed from.)
Sure it’s the same thing no matter where we are. We have a wealth of riches in Silicon Valley. We have a lot of people that live & breathe this company building stuff. So that’s hard to create in other places. So you kind of have 2 choices: you either come here, fine lots of people do that because there’s lots of money & there’s lots of investors & there’s lots of advisors. And there are people who’ve done all that stuff. Or you have to create that universe & it just means more work. It means that if you come here & meet with a dozen executives to talk about a startup some fraction of them are likely to engage in a conversation about a good idea. I think in Europe that dozen people really needs to be twenty. So it is harder, it’s more work. On the other hand, there’s less competition, there are fewer startups, there are great engineers that are looking for jobs. So understand your unfair competitive advantage, use it to the degree you can & then just…. Startup building to me is amazing because it’s so hard, it’s just stunning to me that anyone manages it. It’s crazy! When it works, it’s the most euphoric, amazing thing but it takes a lot of work & it’s really risky & it’s really hard. So in many places it’s harder & it takes more work but there are things that may make it more satisfying or less risky. So just take advantage of those things while doing what all great entrepreneurs do: just kill yourself to overcome all those barriers that you’re going to be overcoming for a decade to come.
Fabulous that’s very encouraging!