Generated Transcript

[00:00:15] David Hornik
Hello and welcome to VentureCast. I am David Hornik from August Capital.

[00:00:19] Howard Hartenbaum
And this is Howard Hartenbaum, also from August Capital.

[00:00:22] Andrew Anker
This is Andrew Anker from actually nowhere these days.

[00:00:25] David Hornik
Unaffiliated.

[00:00:26] Andrew Anker
Unaffiliated.

[00:00:27] Speaker D
Mark Suster, crasher of August Capital, party tonight.

[00:00:30] David Hornik
So this is the most people we’ve ever had on Venture Cast. It should be distracting, frankly.

[00:00:37] Andrew Anker
Well, it’s probably not a good sign when there’s more people on the podcast than listening.

[00:00:43] Speaker D
Excellent.

[00:00:44] David Hornik
My son is working on this musical of the Diary of Anne Frank. And we were hanging out in Amsterdam with a friend of yours, actually, Michiel Frakers. And Michiel said, how long have you been working on it? He said, I don’t know, three years or whatever. And he said, exactly. Really, you probably shouldn’t be working longer on the musical than they spent in the annex. That’s a fair point. So he finished it this summer, so thank you, Michiel.

[00:01:06] Andrew Anker
Congratulations.

[00:01:08] David Hornik
You’re not really unaffiliated Andrew, by the way.

[00:01:10] Speaker D
That’s right.

[00:01:11] David Hornik
You are the chairman of, of the.

[00:01:13] Andrew Anker
Company that used to be called ebates.com, now Performance Marketing Brands.

[00:01:17] David Hornik
Performance Marketing Brands.

[00:01:19] Andrew Anker
It’s a holding company for multiple brands, ebates.com, fatwallet, and any coupons.

[00:01:26] David Hornik
Are we supposed to call it Performance Marketing Brands?

[00:01:28] Howard Hartenbaum
Why don’t we just call it Performance Marketing Services?

[00:01:30] Andrew Anker
We can go PMB if we want.

[00:01:34] David Hornik
What are we going to call it? Pmb.

[00:01:36] Andrew Anker
We’re going to call it a very good company that we’re very happy about.

[00:01:38] David Hornik
Right now and it’s doing great. It’s a great business.

[00:01:41] Howard Hartenbaum
When it goes public, it’ll be a great ticker. Pmb.

[00:01:44] David Hornik
PMB sounds like peanut butter and jelly or something.

[00:01:48] Andrew Anker
Well, it’s needless to say, not a consumer facing brand.

[00:01:52] David Hornik
So no one’s going to ever go to Performance Marketing Brands?

[00:01:54] Speaker D
No.

[00:01:55] Andrew Anker
Maybe a retailer will.

[00:01:56] David Hornik
All right, do you have any more acquisitions in the works that you’d like to speak of?

[00:02:00] Andrew Anker
Well, first of all, David, we should disclose. You’re a board observer yourself.

[00:02:05] David Hornik
It’s a genius business.

[00:02:06] Andrew Anker
You wouldn’t know that.

[00:02:07] Howard Hartenbaum
Just do disclosures now.

[00:02:09] David Hornik
Suddenly, suddenly in the land of disclosure, Mark, are you thinking about anything you’d like to disclose? Just, you know, you’re sitting there thinking, I know it’s about one of your businesses.

[00:02:18] Speaker D
I don’t have any thought Disclosure now.

[00:02:20] David Hornik
No. All right, good. That’s good. Let’s not, let’s, let’s not have disclosures about thoughts.

[00:02:25] Speaker D
Okay, I disclose. I was thinking about Scarlett Johansson.

[00:02:30] David Hornik
There was actually. I just saw an article this morning on Tech Meme. Pointed to from techmeme. I don’t actually remember who the article was. How much of the Internet is porn? And then it pointed to some stories, pointed to Wikipedia that asserted that 3% of the Internet is porn. But I don’t know by what.

[00:02:46] Speaker D
3% by page views or 3%.

[00:02:49] David Hornik
So 3% of the total number of sites on the Web are porn.

[00:02:53] Andrew Anker
Is this where you start singing Avenue Q songs?

[00:02:55] David Hornik
Yeah, it actually cited Avenue Q. The Internet is for porn.

[00:03:00] Howard Hartenbaum
Howard, you’re not gonna sing again, are you?

[00:03:02] David Hornik
I already did. It’s too late.

[00:03:05] Howard Hartenbaum
We’re having a party tonight here.

[00:03:07] David Hornik
I know.

[00:03:07] Howard Hartenbaum
And I’m looking out the window at the name tags, and the number one on the list is Anchor.

[00:03:12] Andrew Anker
Nice.

[00:03:13] David Hornik
Your very first. That, of course, means that Jennifer Acker couldn’t make it.

[00:03:17] Andrew Anker
Yeah.

[00:03:17] David Hornik
That means A, A K, E R.

[00:03:19] Andrew Anker
Or Marc Andreessen, I guess, wasn’t invited.

[00:03:23] David Hornik
Mark was invited. So to the extent that he’s not here, it’s not because it was his choice. Now, this is an interesting question. I will get the opinions of the venture capitalists and former venture capitalists in the room. Mark and Driese, which is everybody, that’s all. Is at least is alleged to be an introvert. That. An incredible introvert. That he does not like to go to crowds. He does not like to schmooze. He’s an introvert.

[00:03:47] Howard Hartenbaum
So am I. I guess I have a lot in common with him.

[00:03:50] David Hornik
You’re an introvert?

[00:03:51] Howard Hartenbaum
Yep.

[00:03:52] David Hornik
By what measure, Howard? Are you an introvert?

[00:03:55] Howard Hartenbaum
I hate crowds. I just pretend like I like them.

[00:03:57] David Hornik
So it’s just. You just overcome it for the sake of your profession?

[00:04:00] Howard Hartenbaum
Because I have. That’s my job.

[00:04:03] David Hornik
All right, let’s pretend like Howard’s telling the truth. Do you think. Do you think you could be a VC and an introvert simultaneously?

[00:04:11] Andrew Anker
Do I. Oh, absolutely.

[00:04:12] Howard Hartenbaum
I was measured on Myers Briggs. I’m intj. Big I for introvert.

[00:04:17] Speaker D
Yeah.

[00:04:17] Andrew Anker
I mean, I’ve known Mark since 1993 or so, and he was certainly more introverted in 1993 as an engineer at Netscape than he is now as a. What do you call, venture mogul?

[00:04:28] David Hornik
Luminary.

[00:04:29] Andrew Anker
Luminary.

[00:04:32] David Hornik
We’re merely venture capitalists. He is a venture mogul.

[00:04:35] Andrew Anker
But, yeah, no, I think it’s totally possible. I mean, I don’t know Mark well enough to speak to Mark, but I think it’s totally possible.

[00:04:42] David Hornik
Schuster, you’re not. You are an extrovert.

[00:04:44] Speaker D
That’s True. Entp.

[00:04:47] David Hornik
Entp. Which is not an eye, ears, nose and throat doctor.

[00:04:50] Speaker D
No, I’m back to Myers Briggs.

[00:04:52] David Hornik
Yes, yes.

[00:04:53] Howard Hartenbaum
Extroverted thinking. Ent.

[00:04:57] Speaker D
Oh, it’s, you know, like, I think on the scale of whether you’re intuitive.

[00:05:01] Howard Hartenbaum
Extroverted, intuitive thinking, and P is J is judgmental, P is party.

[00:05:05] Speaker D
I think it’s, you know, like, I do like the parties, but I can, like.

[00:05:09] Andrew Anker
So I. There was a point, I don’t know, maybe two years ago, where I was at a party in San Francisco for Web2L or one of the conferences, and it was a bunch of people all off to their side talking to their friends. And then, like, the next day it was. I think Montgomery had a party in la. And I flew down to that and literally I was there by myself and I knew almost nobody. And I probably spoke to every single person in that room. Not because I was specifically because I’m more introverted than extroverted, but because every single one of them had to come up and introduce themselves. They figured out I wasn’t important and they then went on and moved to the next person. That’s why.

[00:05:41] Howard Hartenbaum
Exactly.

[00:05:41] David Hornik
The three who monopolized your time.

[00:05:43] Andrew Anker
Absolutely. But there’s no question that I think to be in la, you almost by definition have to be an extrovert.

[00:05:48] Speaker D
But I think it’s still completely. Oh, come on, that’s rubbish. That’s rubbish. Look, there are introverts and extroverts in every city across America or the world, in every line of business. I think you can create people who have introverted or extroverted characteristics and be successful. Like, you know, we know that the mythology about the extroverted CEO, and I think there’s probably more extroverted CEOs than introverted. But I think introverted CEOs can be tremendously effective and they’re more reflectful and thoughtful and probably better at preparing their businesses and taking more pragmatic risks. I think it takes all types.

[00:06:32] David Hornik
But see, VCs don’t actually have to build anything or do anything, so we don’t have to be that thoughtful. So you can just, like, go out and schmooze. Don’t you think, like, the typical VC is probably an optimistic extrovert?

[00:06:46] Speaker D
It may be the typical vc, but what I think you probably need to do to be a good vc, and I will say probably, I’ve been doing it four years. I think you need to be a really good judge of people and a judge of character. And I don’t think that necessarily takes an Extrovert. And I think you need to be good at coaching and I don’t think that takes an extrovert. And I think people need to respect your opinion and respect you as an individual and I think you need to be judicious and you know, the idea of and have money, having money always helps.

[00:07:21] David Hornik
But none of those things will actually get you to see a single deal. Right. So you could be all those things, you could be all that plus a slice of bread or whatever the heck it is. But if someone doesn’t tell you about their business, then you can’t go give them really good advice.

[00:07:34] Speaker D
So yeah, you’re saying something needs to fill the top end of the funnel.

[00:07:37] David Hornik
Yeah. So like how do you do that if you’re not at least a little bit extroverted?

[00:07:43] Speaker D
Fair point.

[00:07:44] Andrew Anker
Well, you may also be now talking an age divide, you know, of sort of the older VCs where there was much more of a supply constraint on money. And so they had to come to you because there was a road that, you know, had all the VCs right versus now. So I mean certainly if you look at some of the older VCs that I think we all know, you might suggest that there’s they skew more introverted, whereas I think more of the new VCs probably skew more extroverted. Taking your point, Mark, that it’s going to be a balance no matter what group you look at.

[00:08:12] David Hornik
I mean, I think you have to be all those things or you should be all those things. I mean, I’m hopeful that we are all thoughtful and helpful and all of those things. But it’s.

[00:08:22] Howard Hartenbaum
I think if you’re introverted or extroverted, it’s just more how comfortable with you when you like walk into a room of people that you don’t know. I mean you can do the job either way. But some people enjoy going from person to person. Some people don’t enjoy it as much and find it to be a little bit stressful.

[00:08:35] Speaker D
So let me talk about a weakness of some extroverts. A weakness is it’s from personal experience.

[00:08:41] David Hornik
Or are you judging me?

[00:08:43] Speaker D
Yeah, I would not. I definitely have weaknesses. I would not put what I’m about to say in the basket of my weaknesses which I will readily back to performance management pmb.

[00:08:57] David Hornik
This is not the disclosure piece.

[00:08:58] Speaker D
This is not the disclosure piece. We’re not back to Scarlett Johansson. So you know, listen, I think that there are a large number of people in general and then we’ll narrow down to VCs who have an inherent need to be liked. And I don’t feel that I like being liked, but I don’t feel like I have to be liked.

[00:09:19] David Hornik
Why is it always the people who people don’t really like say that?

[00:09:24] Speaker D
No, but I think that was great. Yeah, but I’m bummed. It was like having to be liked.

[00:09:32] Howard Hartenbaum
And feeding off of, like, need to be recognized are the same thing or are they different things? Because I think there’s a lot of people who are fed by press because it makes them seem important. But that might be different.

[00:09:42] Speaker D
Let me peel back the onion and say, like I’ve often said, for me, the best CEO is someone who cares more about being respected than liked. And as a venture capitalist and before as a CEO, that’s how I feel. I want to be respected. And sometimes being respected isn’t being liked. It’s making hard decisions. It’s being willing to stand on principle. It’s having a fucking opinion. Am I allowed to swear on the show?

[00:10:08] David Hornik
Yeah.

[00:10:08] Speaker D
Oh yeah. Having an opinion. And honestly, it’s willingness to pass on deals. And I feel like the need to be liked feeds into this, like, fomo, you know, fear of missing out, like, club deal. Everyone’s doing it. If I don’t do it and everyone else is in, then I’m gonna look stupid or whatever. I just don’t.

[00:10:27] David Hornik
Isn’t that the thing we call social proof? You call it FOMO and they call it social proof.

[00:10:32] Speaker D
Yeah. So I would just say like, I personally don’t care. I don’t care if I’m not in a club deal or if everyone calls me and says we’re all doing it and I’m just not interested. I don’t. And I feel like, well, back to the point of extrovert introvert. I think introverts are probably, generally speaking, better at not falling prey to that kind of behavior. So I’m an extroverted cynic and maybe this cynic helps me. You know, maybe we need a two by two. Like, you know, the ex consultant in me can’t think other than I was.

[00:11:04] Andrew Anker
Just gonna say we’ve just switched to consulting.

[00:11:07] David Hornik
So, you know, these, these groups, group deals. I was reading this article, this article was in the Wall Street Journal called Jedi Council and Lady Gaga team up to help Menlo seed startups.

[00:11:18] Speaker D
Oh boy.

[00:11:19] David Hornik
Apparently, apparently, now that Shervin Pishbar has joined Menlo, he’s bringing some of the, you know, seed goodness to, to Menlo, including bringing on Lady Gaga. Now it turns out that that is through Troy Carter, who is Lady Gaga’s manager.

[00:11:36] Speaker D
Yes.

[00:11:37] David Hornik
Has anyone met Troy Carter? I’ve heard about Troy Carter. I hear he’s like, kind of the man, but I. Have you met him, Schuster? If anyone’s gonna meet him, it’s you.

[00:11:45] Speaker D
So I’m skating into an area that I can’t discuss.

[00:11:50] David Hornik
Wow. That.

[00:11:51] Andrew Anker
First of all, I think answer is yes, then.

[00:11:52] David Hornik
First of all, that never happens on Venture Cast. There’s nothing. No one has ever said.

[00:11:57] Howard Hartenbaum
Wait, so you’ve got something to disclose, but you won’t actually disclose it.

[00:12:00] David Hornik
So you may or may not have met Troy Carter, who may or may not be a film with Lady Gaga and something that you may or may not be investing in.

[00:12:07] Speaker D
Invite me back.

[00:12:08] Andrew Anker
By the way, David, don’t ask me anything about Obama because I can’t talk about it right now.

[00:12:13] Speaker D
Just don’t ask him about Scarlett Johansson or Scarlett Johansson.

[00:12:17] Andrew Anker
I’m prohibited by a council from saying anything.

[00:12:20] David Hornik
You know, while I was at. I was in Chicago at the Accelerate Labs demo day. And so this is in Chicago. It’s, you know, this like YC and others. It’s Accelerate Labs is in the. The Chicago company. And they were doing their demo day, and the new mayor of Chicago, Rahm Emanuel. Rahm Emanuel came to speak at Demo Day. I was like. And someone said like, he’s everywhere. It’s the first hundred days of his. Of his. Of his fiefdom or whatever. I thought that was pretty good that ROM came in, kind of did the wave, said, you know, innovation is what matters here in Chicago. We’re all about innovation. So thank you for innovating on the innovation. And then he moved on. But then I can’t really disclose what happened after that. So anyway, maybe Schuster’s met Troy Carter, but he won’t tell us how great he is. Maybe in a couple months. But Troy Carter is apparently working with Shervin on their startup thing. But the bigger point is this was at a panel at TechCrunch disrupted. So the guys on this panel then started talking about their seed deals. So Joe Kraus of Google Ventures was on the thing on the panel. How many deals do we think Google Ventures claims that no has done? According to Joe Krause, how many seed.

[00:13:30] Andrew Anker
Deals has Google done since the beginning?

[00:13:33] David Hornik
50, you say?

[00:13:34] Andrew Anker
150.

[00:13:35] David Hornik
150.

[00:13:36] Speaker D
100.

[00:13:37] David Hornik
So 100 is closest?

[00:13:38] Speaker D
80.

[00:13:38] David Hornik
Joe said. We’ve done 80 seed investments this year, so probably 150 for the forever or whatever.

[00:13:45] Howard Hartenbaum
That’s like two to three a week.

[00:13:46] David Hornik
Let’s see. George Zachary didn’t say. He responded that they do it all the time. He’s enthusiastic. Than Rich Wong from Excel. How many. How many Excel deals this year? You’re not here.

[00:13:59] Speaker D
Yeah, see deals.

[00:14:02] David Hornik
8.

[00:14:02] Andrew Anker
Yes. 20, 30.

[00:14:04] Speaker D
Holy Cannoli Stick Sell has done 30.

[00:14:08] David Hornik
Seed investments, according to Rich. But wait, but wait, but wait.

[00:14:12] Speaker D
There’s more.

[00:14:13] David Hornik
There’s more. Greylock Slavic James Slavett on the. On the panel said, we have a quick decision fund. That’s like premature ejaculation or something. Oh, quick. Go to the quick decision fund. If it’s less than 500k, you can go to Greylock for the quick decision fund. How many people have had premature decisions at greylock? Anyone? Guessing?

[00:14:33] Howard Hartenbaum
75.

[00:14:34] David Hornik
75, 70, 40, 91. 91 companies.

[00:14:42] Howard Hartenbaum
So I think it’s interesting how the concept of, like, what is a seed investment has changed because we did two series seed investments in the past month. One was $2 million and one was a million and a half dollars. And we were the only investor. And they called it a seed investment. It was a seed valuation. We did. We met the funds.

[00:15:03] Speaker D
So 15 pre.

[00:15:05] Howard Hartenbaum
No seed investment. This is one of them. We met the partnership. We met them on a Monday and we decided, negotiated by Wednesday and the deal was closed 10 bit. 10 business days later closed.

[00:15:19] David Hornik
So actually, people who are saying, oh, you can’t do a price round and get it done quickly and cheaply are wrong. That.

[00:15:24] Andrew Anker
And that was quick.

[00:15:25] David Hornik
And that wasn’t a ton of money.

[00:15:26] Speaker D
It was the first meeting.

[00:15:27] Howard Hartenbaum
It was 2 million bucks. We had to meet the whole partnership. We met on a Monday and two and a half Wednesdays, whatever. Later, the deal was closed.

[00:15:35] David Hornik
All Troy Garner involved?

[00:15:38] Howard Hartenbaum
I don’t know.

[00:15:38] Speaker D
Have you met him?

[00:15:39] Howard Hartenbaum
Troy Carter. And if I did, I couldn’t disclose.

[00:15:41] Speaker D
So could I describe to you our policy?

[00:15:43] David Hornik
Yeah.

[00:15:44] Speaker D
Is that okay?

[00:15:45] David Hornik
How many have you done? That’s a good question.

[00:15:47] Speaker D
So we have a $200 million fund. We’ve allocated 5 million of it to seed investments. So 5% of that. Did I say 5 million or 10 million?

[00:15:58] David Hornik
You said 5.

[00:15:59] Speaker D
No, I meant 10 million. I’m sorry, 10 million. 5%. I was getting the percent. Suddenly as I came out, I’m like, why doesn’t you correct yourself? Yeah, yeah.

[00:16:07] Andrew Anker
Mr. Introvert is a math guy.

[00:16:08] Speaker D
Yeah, no, sorry, of course you’re introvert.

[00:16:11] David Hornik
You went to mit. You’re an introvert by design.

[00:16:14] Howard Hartenbaum
Yep. That’s why they let me in.

[00:16:16] David Hornik
Thankfully for the world.

[00:16:19] Speaker D
Anyway, you were saying $10 million, 5% of our fund. That’s what I meant to Say, and what we’ve done is we’ve said that seven and a half million of it is primary, two and a half is follow on. And what we said is we’re going to do no more than 10 investments in the fund, not per year in the fund. And we want to treat them mostly like normal investments. However, we kind of divide it into A, B and C. If the company is demonstrating kind of extreme takeoff, if you want to call it that, and we get super excited, then we move quickly and we try to lead an A round proactively and we don’t force anyone. We say, if you want to take this money, we’re ready to go. You don’t have to shop it. Here’s your money. That’s category A. Yeah. Category Debt Equity.

[00:17:11] David Hornik
All equity.

[00:17:12] Speaker D
Equity Equity. Category C. And I’m gonna come back.

[00:17:17] David Hornik
To B. Oh, confusing.

[00:17:19] Speaker D
Category C is, look, you know, you just really didn’t perform. It’s not a good concept. It really didn’t. You didn’t perform to expectations.

[00:17:30] Howard Hartenbaum
So we’re only gonna give you a million.

[00:17:31] Speaker D
No, we’re not gonna fund. No, this is. Sorry, this is after we’ve done the deal.

[00:17:35] David Hornik
Oh, this is the follow.

[00:17:36] Speaker D
This is a follow on. It’s a follow on. Sorry, I didn’t, I didn’t, I didn’t expl.

[00:17:42] David Hornik
That was the shooting surprise.

[00:17:46] Speaker D
We’ll do, call it 250k to maybe 500k in the first investment. We might do a little bit more and once we’ve done the investment. But I tell people this up front before we do the check. You’re part of the seed program. This is not an A round. And of the deals that we do, let’s say we do 10, you know, my expectation is two or three are going to be A. And by the way, that’s already happened. We’ve had some really successful stuff kind of take off out of that. The C is, look, mate, it just ain’t working like this is going nowhere. And I tell. Yeah, and I tell people up front that there’s no guarantee. And my expectation is, call that two deals. So the real challenge is the Bs. So what do you do when a company has some amount of traction that they really haven’t killed it? They’re not figuring it out. So that’s why we took two and a half million dollars and said for people who are having some amount of success, working hard, demonstrating at least that they’re thoughtful about how they’re building their company, I’ll always write the second check. But the Second check is with a condition. And the condition is this is the last money.

[00:19:00] David Hornik
Second condition is you have to stop sucking.

[00:19:03] Speaker D
Yeah, stop sucking. So we call the SSP stop sucking provision.

[00:19:08] David Hornik
Yeah.

[00:19:08] Speaker D
And we work it into the legal docs. It’s part of our standard format. And, and so what, what I basically say with the second check is there’s no third check.

[00:19:18] Howard Hartenbaum
So except if they’re doing really great, then there is.

[00:19:21] David Hornik
Well, yeah, if they turn it around.

[00:19:22] Speaker D
Yeah. So 9 to 12 months, hopefully that gives you enough. 9 to 12 months. Now in the 9 to 12 months you either have to find an external investor or you have to show massive trending up of some metric. Or I say to people like kind of at month six, if it’s 12 months or month seven, maybe we ought to talk about having a safe home for this business. It ain’t working. And by the way, of course we don’t force that. But what I don’t like, and this happens in a lot of VC deals that I see, people wait till month 11, it’s like, oh fuck, like you’re out of money and it’s not working and no one else is funding you. So we had the conversation pretty early. So I tell this to people before the whole thing starts. But honestly, I spend as much time, almost as much time with seed deals as I do a normal.

[00:20:09] David Hornik
Yeah, so you can do, first of all, you can have a theory and you can implement it across 10 deals. Yeah, but imagine trying to. You’d have to hire like a bunch of people to do that across 90 or 80.

[00:20:20] Speaker D
That’s why we don’t do 90. Well, that’s why we don’t do.

[00:20:23] Andrew Anker
It’s an index.

[00:20:24] Speaker D
90 is an option. It’s an option. And I don’t think that’s a great outcome for entrepreneurs to take an option.

[00:20:30] David Hornik
So you think it’s an index fund.

[00:20:32] Andrew Anker
It’s an index fund in the sense that you’re basically betting on Silicon Valley or whatever market you’re putting that money into. Something will work, something will work. And that was the approach. Don’t mean this in a disparaging way, but Ron Conway played it brilliantly in the 90s, where for a while it worked and then at a certain point it was shutting down a lot of companies. But the thing that I’m fascinated, and again I’ll now ask this question as a representative of the entrepreneurial community, since I’m the only non VC here, that when you talk about these seed stage deals and you talk about quick decisions and stuff like I understand When Yahoo had to put that program in place so they could buy companies for under $50 million fast, because they didn’t. Board approval, public company, billion dollar. So I get why a company like Yahoo or a large company would need that. But a partnership of 5 or 10 or even what Greylock is 15 people. Why would you need a fast process? Like, is it that hard?

[00:21:21] David Hornik
Are you so slow otherwise?

[00:21:23] Andrew Anker
Yeah, I mean, I thought part of the point of being a partnership is that it’s very easy to get everybody in the room. And an early stage company, a seed stage company, almost by definition has very little that you can do diligence anyway.

[00:21:33] Howard Hartenbaum
Because I think that deals, many deals are going so fast, there’s not even time to meet more than two partners in the fund because an entrepreneur has a great idea and there’s so many angels lined up, they’re like, okay, it’s Wednesday afternoon and we’re closing this on Friday.

[00:21:45] David Hornik
Yeah, I think it’s just such a, you know, fast is in the eye of the beholder. Right. You know, you have this story of Dave McClure getting a ride to the airport, but some entrepreneur who he then funds at the end, you know, like, thank you for the ride and here’s 100k.

[00:21:57] Andrew Anker
So these deals are literally about giving a checkbook to one partner or maybe two partners and saying you can go up to a certain amount without even bringing it to the rest of the partnership.

[00:22:06] Speaker D
Yeah, I think I would add to that. And that’s been my experience with other partnership. We don’t work that way. But the other thing is that you may place more scrutiny over a deal where it’s a 3 or 4 million dollar check or 5 million dollar check, where you want to be more thoughtful about the investment and research competition more, and you want to play with what you think the monetary basis might be, or you want to play with the product for a while. You might talk to customers, make reference calls, you might ask them for references on their individual character. Right. Where the premise is for 250k, like, you know, and, and, and what? Again, what I have to say, I don’t like the option mentality.

[00:22:47] David Hornik
Well, it doesn’t make any sense, right? If you have 100 deals or whatever, you don’t even know their names.

[00:22:53] Speaker D
Right.

[00:22:54] David Hornik
Never mind. So what, what’s the option? Right. Do you honestly think that someone’s calling you up and saying, hey, you were an early investor and then provided no particular value to me? So do you want to fund by Series B?

[00:23:03] Speaker D
Okay, but I will tell you this and it shouldn’t be. But my experience is there is some emotional resonance or connection or loyalty or obligation. It took me four words to get to the right word. There’s an emotional obligation that I’ve seen in entrepreneurs. So I’ve been competing for a deal where I wanted to do the A round. And I’ve had the entrepreneur saying, yeah, well, we’re talking to you, but we’re also talking to X and he’s already a seed investor. And I’m like, how much did he invest? Okay, 100k. Okay, well, who gives a fuck? That’s irrelevant. Now let’s talk about your A round. Right? Yeah, right.

[00:23:37] Howard Hartenbaum
Be the opposite. You should be saying, well, I don’t really want to do this now because he’s got the inside track on this and he’s not going to pay the market price.

[00:23:44] Speaker D
But for. But for 100k. Like, you know, obviously for me, I’m not going to say I don’t want to do it. But I will tell you that the. I think the emotional obligation is there. But you’re happy and it shouldn’t be.

[00:23:57] Howard Hartenbaum
But you’re happy to compete against a venture firm as an insider bidding on their own deal?

[00:24:01] Speaker D
Yes. And I’ll tell you why. If I know that someone’s done three or four million dollars and isn’t willing to step up in the next round, that’s a signal, right? Like to take the word that everyone likes to use, that’s a signal to me. If they’ve done 91 deals, I know that they have no idea if this company is doing well or not. And so I can form my own opinion.

[00:24:23] Andrew Anker
I mean, the problem for the entrepreneurs is it’s very asymmetric, is they may feel that sense of obligation to the investor, but as you said yourself, the investor doesn’t have the same sense of obligation back. So the only reason that the investor has a fast track is because the company’s doing well. Or the only reason that the investor wants that wants it is because the company is doing well. And the second things go badly, said investor is not going to be there for. This is where entrepreneurs get let down.

[00:24:48] David Hornik
We just got the. We just got the. Look, I’m watching out our window at the. The crowds are mounting here at the August Annual.

[00:24:55] Speaker D
I know, I see eight people, eight whole. It’s gonna be a barn burner.

[00:24:59] David Hornik
And then, yeah, all eight of them are gonna eat our food and drink our alcohol and then drive home. So I. The thing I like about the August annual. You started the August Annual, right?

[00:25:11] Speaker D
Andrew, I was part.

[00:25:12] Andrew Anker
Yeah, it wasn’t me. It was.

[00:25:14] David Hornik
We were a group of people.

[00:25:15] Andrew Anker
It was a group of people, but I was. I was leader of the project, so to speak.

[00:25:20] David Hornik
I know enough about August Capital to say, looking back on the history, that I think it’s safe to assume that this August, the August annual, the party we are about to have, is entirely.

[00:25:29] Speaker D
And about. Andrew, what’s the intent?

[00:25:31] Howard Hartenbaum
And does every summer is like, everybody back to work?

[00:25:35] Speaker D
Does every VC do this? Like, does everyone have an annual party?

[00:25:38] Andrew Anker
So the intention, and this is, you know, 12, 13 years ago @ this point, is at the time, August Capital was a firm that was more known for the partners than the name. August was a firm that used to be called TVI. It renamed itself, and I think it was 96. My memory’s 95. And this was like 99, 98, 99. And there were people, not only outsiders, but even some portfolio companies that knew, like a Dave Marquardt more than they knew that his firm was now called August, not tvi. And so we were talking about ways to get the brand of August to be more well known. And one of the ideas was that August is a month that nothing happens in venture capital. And so it originally started as a party in the last week of August. And in fact, it was not until I left that it finally got moved to September, because September. There’s one thing that I sort of tried to keep was that it was actually going to take place in August, and it was going to be for the people who hung out and were still around in August, with the idea being that those venture capitalists that are in their summer homes or wherever, they’re not the ones working, we’re the ones working, and we’re here.

[00:26:48] David Hornik
The funny thing is that as Howard, who joined us three years ago, his version of the August Annual is the one that it’s become, which is it’s after Labor Day or whatever, and it’s the time to get back to work. Something had a great summer. Let’s rejoin with all the people in the industry and, you know, and get back at it, which is sort of what it’s become. But it’s really just put together the people that are friends of the firm and say, hey, hang out in Schmooze.

[00:27:17] Speaker D
Have you ever talked about on this show the origins of the lobby? That might be interesting to people.

[00:27:24] Howard Hartenbaum
We’ll do that next time we’re back.

[00:27:25] Andrew Anker
To David the Extrovert.

[00:27:26] David Hornik
Yeah, right. Yeah, exactly. There you go. I am an unabashed extrovert. There’s no question about it. And so I need to move to my people. More importantly, Mary, who ended our last show by opening the door and telling me I had to go, has just wandered by the window and said, we have to go.

[00:27:41] Speaker D
Okay.

[00:27:42] David Hornik
And she controls your calendar. My calendar.

[00:27:44] Howard Hartenbaum
She can make your life miserable.

[00:27:46] David Hornik
Yeah. So with that, well, thank you for listening. Adventure cast. This has been David Horn Hornick of.

[00:27:51] Howard Hartenbaum
August Capital and Howard Hartenbaum at August Capital. And thanking our two guests, Andrew Anker.

[00:27:56] Andrew Anker
I guess, of performance marketing brands, and.

[00:27:59] Speaker D
Mark Schuster, crasher of August Capital’s annual September party.

[00:28:04] David Hornik
Awesome. Well, thank you, guys. And we’ll get you back in next. Next month.

[00:28:10] Speaker D
Stay tuned.