Venture Capital

Two Hours at Highland Capital

Anyway you slice it, getting a meeting with a leading VC is tough, and getting to spend an hour plus is almost impossible. Yet as members of the BC Grad Tech Club and the overall BC Community, we have had the great fortune of having it become almost commonplace.  Only a few weeks ago, we were able to spend an hour with Spark Capital’s Bijan Sabet, and a number of our student entrepreneurs recently discussed business ideas 1:1 with Highland General Partner and BC Alum Peter Bell.

Last Friday was no exception as a group of us were fortunate enough to spend almost two hours in Highland’s Cambridge office on the top floor of One Broadway.  BC Alumni Dan Nova and Chris Protasewich hosted us, answered our questions, and dropped some serious knowledge.  While my notebook contains several pages of scrawled notes, I’ll do my best to distill it down to my impressions of a few key takeaways.  A huge thanks to Dan and Chris as well as the whole Highland team for being such staunch supporters of the school and our programs!

highland

Key Take-Aways

On what type of companies they look for and fund:

  • Highland is looking for revolutionary companies that seek to reshape an entire industry such as Uber with transportation, HourlyNerd with Consulting, and Rent the Runway with high end fashion.
  • This requires founders with big ambitions who are a little bit crazy.  In often cases, these are people with goals to start a movement or reinvent the future.  For successful entrepreneurs, opportunities to make a few million by selling early can be hard to say “no” to but can also hamper the potential of a company.

On Highland’s People First Approach

  • Highland evaluates opportunities with a People, Market, Product, and Deal Terms approach-in that order.  They sees themselves as selling a relationship based on trust and value-add and therefore the most important element is people.
  • Highland looks for solid, smart, and hard-working people.  They believe that if they find the right people, they will be able to adjust successfully to the changing market.
  • Of more than a thousand meetings each year, Highland will only fund about 15-20 companies after a great degree of due diligence on the people.  As Dan says, “There is no substitute for time when you are investing in a relationship.”
  • They look for people who can communicate well and honestly even when its bad news.  In Dan’s words, “We make a living dealing with bad news.”  Highland has a lot of experience and can often recognize patterns that allow them to provide sage advice as long as the founder comes to them honestly and in time to take action.

On Corporate Venture Funds

  • Dan is not personally a fan because there is often a disconnect in alignment between them and companies like Highland.
  • Corporate Venture groups move less slowly and they usually have a strategic interest that can alter the natural course of business development.

On Continued Investment

  • Highland recognizes that companies often require more than one infusion of cash, as a result they set aside a dollar for every dollar they invest initially to be used for further investment.  This allows the company to continue to support its portfolio companies as needed.

On the Future

  • “We are in the Golden Years of Major Marketplace Shifts.”  Transport, Housing, Fashion, Consulting, are all being rocked at the core and Dan believes this will continue to take place.  There are a lot of entrenched but ridiculously inefficient industries out there and the market and technology is now prime for disruption.  We can expect to see a lot more of this.
  • Immersive 3D Virtual Reality is here and will be huge.  Dan believes that the moment is here though he admits he is awfully bullish on it and my may be a bit early
  • VCs do not know all.  In an admirable moment of self honesty, Dan also admitted that VCs have a lot of experience and insight but certainly do not know all.  He asked about what are the most popular technologies on BC’s campus and was surprised to hear the anonymous social app Yik Yak was among the leaders.  He admitted he isn’t big on the anonymous thing, calling it “…the stupidest thing I’ve ever seen,” but appending his statement with “but I said that about Twitter…”

David LoVerme is a 2nd Year MBA at Boston College and the President of the Grad Tech Club

Lessons from a VC and a Founder

Meeting with a Tech recruiter in NYC last week, I was given the advice to monitor where VCs were investing in looking for potential employers.  I was reminded that one of the world’s leading VCs, Spark Capital co-Founder Bijan Sabet resides right in my backyard.  It’s moments like those that remind me how lucky I am to be at BC, because today I had the opportunity to spend an hour with Bijan and Runkeeper founder and CEO Jason Jacobs as they visited the Undergrad TechTrek Class.  As with Rent the Runway and Bain Capital at Cyberposium, it was fascinating to hear the story of the initial Runkeeper investment from both the Entrepreneur and VC perspectives.  As I have come to expect from anything Professor John Gallaugher organizes, the event was a veritable firehose of knowledge.  Jason shared his experiences in starting a company without a Technical cofounder, scaling a business, and the ups and downs of running a consumer startup in Boston.  Bijan talked about what he looks for in founders, Bitcoin and the TV industry, and how to approach reunions.  While I highly recommend any opportunity to hear these guys speak, I have included some of the key takeaways I found most interesting below.  Please note, however, that these come from my notes and are not direct quotes.

Runkeeper

Runkeeper’s Jason Jacobs

  • On Consumer Products: The key is to remove the friction and add some magic.
  • The biggest blessing of running a startup is also the biggest curse.  In a normal company you can work like an owner, do twice as much as anyone else, and maybe get 10% more.  A startup is a neverending firehouse of knowledge and opportunity.  The rewards are there but the more you do, the more things need addressing.
  • On Culture and Scaling Up:
    • Runkeeper might actually have waited too long to define values.  As the company scales, the stresses increase and you need to keep reinventing the leadership team.  Some people will be scared of bringing in new members but the key is to keep the focus on growing the company and keep people who prioritize that.
    • We are in the middle of a business school case.  The first half is already written and there are two possible endings.  We have to do everything we can to choose the right one.
  • On starting a company without a Technical Co-Founder: When you are dropped into foreign territory, the rulebook goes out the window and its all about survival.  Jason was singularly focused on product evangelism.  Ideas aren’t the key, its the execution.  You have to do anything and everything you can to make it work, tell everybody and force accountability on yourself.  Jason even ran the Boston Marathon dressed as an iPhone.  As Bijan put it, he “willed Runkeeper to happen!”

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Spark Capital’s Bijan Sabet

  • On what impresses him:
    • We are drawn to areas where traditional gatekeepers are no longer needed.  We look for disruptive technologies that draw us to the edges.
    • At the earliest stages, its less about growing the user base and more about compacting it and making a small subset really happy.
    • The thing we look for is the “why.”  Why is the founder starting this company?
    • I value Founder, Product, and Mission more than I value Market, Model, and Team.
    • I ask myself, “would I want to work for this company?”
  • On Venture Capital Firms:
    • Imagine running a company with five CEOs, sounds dysfunctional, but its intentional dysfunction.  We don’t make a move unless everyone is excited.
    • I’m more “on demand” than “push”.  My job is to help my entrepreneurs find true north, not to prescribe a step by step approach.
  • On Bitcoin: As an alternative currency it probably isn’t capturing its full value but as a protocol for facilitating payment, that’s what we are excited about.
  • On TV industry: TV Ads are an $80B/yr industry but half of US households own a dvr and we know social engagement peaks during prime time.  People aren’t paying attention to ads and something is going to break.
  • On scaling a company: Every company hits some turbulence during scaling, its normal.  If you go through adolescence without getting a pimple, that’s weird.
  • On college reunions: I was a computer geek who married a cheerleader, I make sure I go to every reunion!

David LoVerme is a 2nd Year MBA at Boston College and the President of the Grad Tech Club