About a month ago we announced the addition of Kate to our team. We regularly tell founders that hiring will and should consume the majority of your time, especially when hiring for key roles on the team, and it was no different for us once we published that we were looking for someone to join Homebrew. We recently conducted a retrospective to review what we learned from the process and we thought we'd share the results. And we're hopeful that our experience will help inform others in our industry who are making additions to their teams.
When we started the process, we wanted to make sure to cast as wide a net as possible. So we did a few things to try and get a large and varied group of applicants. First, we were public about the opening, something that isn't true of many (if not most) roles in venture capital. Second, we worked to have the role publicized within communities where our existing networks aren't as deep as we'd like. All Raise and Code2040 are examples of organizations that were kind enough to share our opening. Third, we only loosely defined the requirements of the role, not even giving it a title, as a means of encouraging individuals to not prematurely disqualify themselves. Finally, we created an application process that had a goal of being less reliant upon the traditional resume and the biases they can introduce.
We received hundreds of applications for the opening. And here are some of the facts.
Prior work experience varied dramatically but the most common employer was Google (perhaps influenced by our own networks). The most unique background was alpine skiing instructor.
Most admired entrepreneurs named by candidates were Elon Musk and Jack Ma, followed closely by applicants' parents. The most unique answer was definitely Alan Alda!
Answers to questions that required video responses were incredibly useful for us. They were what we reviewed first and we spent countless hours doing so giving our application had two questions, each of which asked for up to a 3 minute video response. We saw people respond while holding their pets, walking around town, sitting in traffic and doing voiceovers for slide presentations. There were even applicants who didn't submit videos and instead wrote "I'd rather not," "I don't have time right now," and ":)".
So what worked well in the process to get to these metrics? We solicited guidance from outside experts on how to ask for and receive diverse candidates and how to remove implicit bias from our evaluation. Broad outreach about the role was key. While we required a resume, it was absolutely that last thing we looked at when reviewing applications (I'm 99% sure Hunter can't tell you where Kate went to college). We didn't require candidates to come to Homebrew HQ to interview. We involved our entire team, including Beth, our Head of Talent, and Charo, our Operations Manager, in the process. We didn't make an offer until we completed reviewing every application and interviewing every last candidate. We gave every applicant a personal response.
What could we have done better? Even broader outreach to many more organizations and communities that aren't part of our existing networks. More opportunity within the application, for those who came from untraditional backgrounds, to express what they can bring to the table. More feedback to candidates on what they could do to be even better equipped for the next VC role they seek.
We're truly grateful for the interest that was expressed by so many in joining our team. We've added an incredible person to our team and we've learned a ton from the experience. If sharing both the things we did well, and our ideas for improvement, helps increase access to VC jobs for all candidates, we'll be even more pleased with the process.
*Defined to include U.S. Census Bureau categories of Hispanic or Latino, Black or African American, Asian, American Indian or Alaska Native, Native Hawaiian and Pacific Islander.
I recorded an episode of the Angel podcast with Jason Calcanis that was published a couple of weeks ago. It was a wide-ranging conversation, covering everything from cryptocurrencies to company culture to our portfolio companies. Because the podcast and Youtube video run nearly an hour and twenty minutes, I thought a transcript might be helpful for people who'd prefer to read and save some time. As with most transcripts, apologies for any errors and inaccuracies. You can find all 33 pages(!) here. I hope you get something out of it.
Once a year we have the VC equivalent of a board meeting, referred to as an Annual Meeting. And last Thursday marked our 4th Annual Meeting since starting Homebrew (Hunter and I have written about the prior ones here and here). It's always one of our favorite days of the year because we get to bring together the two groups of people who've bet on us and Homebrew – our investors and our founders. During an afternoon meeting, we tell our Limited Partners (the investors in our funds) how the funds and individual portfolio companies have been performing, our perspectives on the seed stage venture market and what we're doing and not doing well. The afternoon session culminates with presentations by the founders of a few of our companies, always a highlight for our LPs.
For me, the best part of the event is the dinner we hold that evening for our founders, advisors and LPs. It's something we've done from the beginning of Homebrew, and it's something that is more meaningful to us each time we do it. It also gives these groups visibility into the sides of VC that they normally don't get to hear about or participate in. Understanding their respective motivations and goals educates them about people who have an important impact on their worlds and also makes it easier for all of them to understand why VCs work they way they do. And that transparency can only benefit the entire ecosystem.
Here are some of the things we discussed this year that stand out relative to prior years.
Even though there is more seed stage venture capital and a greater number of seed VC firms than ever, the number who are fighting for the same seat at the table as Homebrew is relatively stable. We tell founders we want to be an "Investor of Record". The investor who is going to put not just dollars, but also sweat and reputation behind them. The investor that will work tirelessly alongside them to build the company that they envision. There are usually only one or two of these investors in a company, often referred to as lead investors. And in our view, the vast majority of new seed money that has come into the market currently doesn't target that strategy. In addition to the lead investors, every investment syndicate tends to have supporting investors, those that typically write a smaller check and can be reactively helpful. It's this category where capital has exploded, which is a great benefit for founders. We enjoy great relationships with many of these firms and consider them to be fantastic partners more than competitors.
As the cost of starting companies has dropped, the size of most venture firms has not. The natural gravitational pull of these larger firms is to write larger checks, which often necessitates taking less risk. Hence the need and opportunity for founders to sometimes raise small amounts of money to prove a few things before raising a larger round of capital. That money used to come from friends and families. But now, because it often comes from small institutions and might be closer to $750k than $250k, it's called "pre-seed" capital. Our view, is that pre-seed capital is just a choice made by a founder about how much risk he or she is willing to take on at a particular moment in time. And pre-seed capital has emerged to fill the gap left by larger institutions that are unwilling to take what would historically be called seed stage risk. Homebrew is in the business of seed stage risk, and that doesn't change based on the size of our first check into a company. In the past 12 months, we've made 7 new core investments, two of which would be considered pre-seed based on check size. But of those 7 companies, 4 were pre-product and 3 had only early versions of their products that were certainly pre-product/market fit. So are we pre-seed investors or seed investors? It doesn't matter. Homebrew just aims to be the lead or co-lead investor within the first $0m-$3m of capital into a company.
Homebrew sits at the intersection of a focused investment strategy and a thematic focus, which we refer to as the Bottom Up Economy. The crux of that thesis is that as technology continues to get cheaper, more flexible and more accessible, it opens up its benefits to constituencies and industries that haven't been able to leverage it historically. Small business can automate workflows, individuals can generate new income streams, traditional industries can access new data, etc. But underlying that thesis is the awareness that we aren't going to be the ones who will see the future. The best founders show us the way. And we were reminded of that when five of our founding teams presented to our LPs at the meeting. If you would have told us four years ago that our portfolio would include a children's clothing company, an AI robotic systems company, a service for helping people have amazing offline experiences, a business analytics software company and a consumer hardware company (yet to be announced but incredibly delicious!), we would have laughed heartily. But we do. And we couldn't be more proud of the fact that these incredible founders have chosen to partner with us as part of the Homebrew family.
We appreciate that raising money is a nerve-wracking and time-consuming experience for founders. So we try to get to "no" and communicate it quickly. And we need to continue to get better at that so we can devote as much time as possible to the small number of founders to whom we've pledged our time and energy.
As we tell our investors, we could talk for days, not just hours, about our business and our founders. So these are just a few of the many topics we reviewed at our Annual Meeting. We're continually learning and iterating to improve the Homebrew product. And we're so lucky to have the opportunity to do that. Thanks to our founders, advisors and LPs for making it possible. We're just getting started.
The founders we meet each month are always passionate, ambitious and determined. And they're always working like mad. But too often, especially as of late, I find that they're making little to no progress despite their endless work. This isn't because their ideas are bad, their teams are weak or they're capital constrained. It's because they've fallen into the trap of being busy, but not productive.
It's so easy as a startup to spend your hours building, selling, recruiting, etc. You always want to be doing something. What startup founder doesn't say that he or she is "really busy" when asked how they're doing? Because if you're doing something, you're surely making progress, right? Unfortunately, not really. Progress at a startup is ultimately measured not by hours but by risk. In the early days of a company, everything is uncertain and the risk is extraordinary. Progress is made by reducing risk. And the only way to reduce risk, is to learn. Being productive at a startup means focusing all of your activity on learning so that you can reduce risk in the business.
Unfortunately, for lots of startups, learning takes the form of doing something and then seeing what happens. That's not learning. That's just being busy. True learning requires asking a question and forming a hypothesis before taking action. That action (a test or an experiment) then helps you prove or disprove your hypothesis. In addition, most founders think about learning only in the context of their products. But being productive and focused on learning applies to every aspect of the business. Marketing, hiring, pricing, etc. all need to be hypothesis-driven so that you're always learning about whether you're targeting the right customer, hiring someone with the right experience or capturing the right value for your product.
It's only learning that helps you reduce the risk in your business. And ultimately, that's what enables you to attract capital when the time comes. During your next fundraise, any new potential investor is going to want to know what you've done since the last investment. That's really his or her way of asking what risks have been reduced or eliminated in the business. They don't want to pay a higher price for the same risk that earlier investors took. They only want to pay up for reduced risk. That comes from being productive instead of just busy.