20 VC 002 How to become a VC with Kris Jones



In the second episode of "20 Minutes VC" with host Harry Stebbings, entrepreneur and investor Chris Jones shares his journey from founding the Internet marketing agency Pepper Jam to selling it to eBay, and subsequently creating his investment fund, KBJ Capital. Jones, a former student turned accidental entrepreneur, emphasizes the transformative impact of the Internet on business and entrepreneurship. He discusses the importance of learning to generate and monetize web traffic, which laid the foundation for his success with Pepper Jam. Reflecting on the sale of his company, Jones candidly reveals the mixed emotions of excitement and loss that accompanied the transition. He also imparts valuable advice for aspiring entrepreneurs and VCs, highlighting key traits like optimism, decisiveness, gratitude, and focus. Jones advises VCs-in-the-making to build their professional network by adding value and showcasing their commitment through actions like internships and blogging. Finally, he shares his optimistic outlook on the tech industry, dismissing the notion of a tech bubble due to ongoing industry disruption and his continued investment in early-stage tech companies.

Summary Notes

Introduction to Chris Jones and KBJ Capital

  • Chris Jones is the former president and CEO of Pepper Jam, an Internet marketing agency.
  • He sold Pepper Jam to eBay in April 2010.
  • After the sale, he founded an early-stage technology investment fund, KBJ Capital.
  • Portfolio companies of KBJ Capital include highlifes.com, Frenchgirlsapp, and Referlocal.com.
  • Chris is a prolific writer on the technology industry.

"Now, Chris is the former president and CEO of Pepper Jam, an Internet marketing agency he founded and later sold to eBay in April of 2010. Having had this successful exit, Chris founded an early stage technology investment fund, KBJ Capital, whose portfolio companies include highlifes.com, Frenchgirlsapp, and Referlocal.com."

The quote introduces Chris Jones as a successful entrepreneur who transitioned into venture capital after selling his company to eBay, highlighting his current involvement with KBJ Capital and its portfolio companies.

Chris Jones's Background and Entry into Venture Capital

  • Chris Jones describes himself as an "accidental entrepreneur."
  • He spent nine years in higher education, obtaining degrees in psychology and law.
  • His interest in the internet's potential led him to start his own website while still a student.
  • He self-taught web traffic generation and monetization, which laid the groundwork for his company Pepper Jam.

"So, yeah, I've been what I call an accidental entrepreneur. I was a professional student for nine years after high school. So I went to Penn State and got an undergraduate degree in psychology, and then went on to graduate school where I studied experimental psychology and I got a master's degree."

Chris Jones provides a summary of his educational background and how his fascination with the internet's transformative potential spurred his entrepreneurial journey.

Development and Sale of Pepper Jam

  • Pepper Jam grew out of a gourmet food business taken online in 1999.
  • Chris leveraged search engine optimization and pay-per-click marketing to drive web traffic and sales.
  • Pepper Jam evolved into a prominent search agency and affiliate network in the United States.
  • Chris hired over 135 people and won numerous awards before selling the company.
  • GSI Commerce acquired Pepper Jam before it was subsequently acquired by eBay, becoming eBay Enterprise's affiliate network.

"But what I realized was that, wait, I could sell gourmet food online, but I could also build websites, generate traffic to those websites using search engine optimization and pay per click marketing and a number of other things that were still very early to the Internet at the time."

This quote explains Chris's realization of the broader potential for his internet marketing skills beyond selling gourmet food, leading to the establishment and growth of Pepper Jam.

Chris Jones's Philosophy on Acquisition Discussions

  • Chris Jones shared an experience from an Inc Magazine article about being asked his company's valuation during an acquisition meeting.
  • He suggests that in that instance, being open and honest was beneficial.

"And I actually read your article about the meeting where they asked you about acquiring the company, and they asked you the very pointed question of how much? And I was intrigued by your answer, because you said you went against the traditional ethos of reserving your own valuation for yourself."

The quote references Chris Jones's approach to discussing valuations during acquisition talks, highlighting a moment when he chose transparency over traditional negotiation tactics.

Show Notes and Competition Announcement

  • Harry Stebbings announces that Chris Jones's articles will be included in the show notes.
  • There is a competition for listeners to win books and a consultation with a VC.
  • Instructions on how to enter the competition are provided.

"Chris is also a prolific writer on the technology industry and all of his articles will be included in the show notes for you to read after the podcast. Don't forget about the competition, a chance to win all the books mentioned in the first ten episodes, as well as a consultation with one of the vcs where they will deep dive into your business plan, pitch and advise you on what you need to do to get funding and answer any questions you might have."

The quote serves as an announcement for additional resources and opportunities for listeners, emphasizing the value-added components of the podcast episode.

Intuition in Decision-Making

  • Chris Jones emphasizes the importance of intuition in business decisions.
  • He acknowledges the need for smart people to help in negotiations but also trusts his gut feelings.
  • His intuition played a role in the deal with GSI Commerce, which led to an acquisition by eBay.

"Yeah, I mean, I'm a big believer in using your gut. I think that your gut, that sort of intuition that we all have, it's important to get in touch with that and use it as often as possible."

This quote highlights Chris Jones's belief in the significance of intuition or gut feeling in making business decisions, suggesting it's a valuable tool alongside rational analysis.

Transition from Entrepreneur to Investor

  • Chris Jones discusses his shift from entrepreneur to investor after selling his company.
  • He founded KBJ Capital to invest in early-stage technology companies.
  • His passion lies in entrepreneurship, and he enjoys mentoring and coaching other entrepreneurs.

"And that gets to your question, which, know, why did I start investing in companies and why have, you know, known as sort of a venture capitalist or an angel investor? And it's because after I sold my company and was part of a much larger company, I realized that where my passion and my excitement came from was really entrepreneurship building and starting things."

Chris Jones's quote explains his transition from being an entrepreneur to an investor, driven by his passion for building and starting new ventures, and his desire to support other entrepreneurs.

Emotional Impact of Selling a Company

  • Chris Jones describes the sale of his company as both terrifying and anticlimactic.
  • He candidly shares that the financial gain was exciting but selling a business you've built is emotionally complex.
  • The sale opened up new opportunities, including increased credibility and network access.

"Sucked. It was terrifying... A big wire transfer occurred... But at the same time, just to be brutally honest, we put so much heart and soul into entrepreneurs do into building companies that when that moment happens, yeah."

The quote reveals the emotional complexity of selling a business for an entrepreneur, indicating that despite the financial rewards, there can be a sense of loss and fear associated with the transition.

Reflections on Financial Success and Generosity

  • Chris Jones had achieved financial independence before selling his company.
  • He mentions that his financial success allowed him to think differently about helping others.
  • Post-sale, he was able to provide for loved ones and donate to charity.

"You know what, I'll just be brutally honest to that. I actually had achieved a level of financial independence and success before I sold... I did swipe a couple of checks to people I love, and I probably gave some money away to charity and stuff like that, which I wasn't in a position to do prior."

Chris Jones's quote illustrates that his pre-sale financial success gave him the ability to be generous with his wealth, supporting people he cares about and contributing to charitable causes.

Lessons Learned from Entrepreneurship

  • Chris Jones shares that successful entrepreneurs have specific characteristics that contribute to their success.
  • He reflects on the decisions he made with Pepper Jam and how they led to a positive outcome.
  • He now shares his insights and experiences with other entrepreneurs through investment and writing.

"Here's the lesson. The lesson is that there are a number of specific characteristics and qualities of successful entrepreneurs... But ultimately, those characteristics that I referred to are really the value that I give the companies that I invest in."

The quote from Chris Jones encapsulates the key lesson he learned from his entrepreneurial journey: certain traits and qualities lead to success, and he aims to impart this knowledge to the companies he invests in and through his writing.

Gratitude as a Founder's Key Characteristic

  • Positive aspects of life should be the focus to breed optimism.
  • Gratitude correlates with a desire for more while appreciating current possessions.
  • Entrepreneurs often mistakenly concentrate on what they lack, which is a waste of time.

"And those are the type of characteristics that correlate with being grateful for what we have, even though we want more."

This quote emphasizes the importance of gratitude in entrepreneurship, highlighting the balance between ambition and appreciation.

Characteristics of Successful Entrepreneurs

  • They are optimistic and decisive, especially with hard decisions.
  • They avoid becoming overconfident and recognize their own skill limitations.
  • Hiring team members who complement and enhance one's weaknesses is crucial.
  • Perseverance in the face of hardship is essential and defines character strength.
  • Motivation and the drive to overcome obstacles are key to success.

"They tend to be optimistic. They tend to be decisive. A characteristic of an unsuccessful entrepreneur is the inability to make decisions, in particular, hard decisions."

Chris Jones outlines decisiveness as a critical trait for successful entrepreneurs, contrasting it with the indecision that can hinder progress.

The Silver Bullet: Focus

  • The ability to maintain focus is a "silver bullet" for entrepreneurial success.
  • Entrepreneurs should resist the temptation to chase too many ideas and instead remain focused on a few key goals.
  • Staying focused can lead to significant accomplishments and boost self-esteem.
  • Entrepreneurs should concentrate on one to three things at a time to be more productive.

"The final one, dude, this is the silver bullet, is one's ability to stay focused."

Chris Jones identifies focus as the ultimate game-changing trait for entrepreneurs, elevating it above other characteristics.

Advice for Aspiring Venture Capitalists

  • Aspiring VCs should build up their professional network by adding value to others.
  • Influential connections are made by offering value, not by asking for favors.
  • Building influence is a key step towards entering the venture capital industry.

"One is, you need to work on building up your influence. So building up your professional network."

Chris Jones advises aspiring venture capitalists to focus on cultivating a strong professional network through value-driven relationships.

Adding Value to Venture Capital as a University Student

  • University students can engage with venture capitalists (VCs) by asking thoughtful questions about their published work.
  • Reaching out to VCs after reading their articles with insightful queries can provoke thought and challenge their ideas.
  • This approach is distinct and more valued compared to common requests VCs receive.

Internships asking them a very thoughtful question on something that they've written. I mean, if I write something and get it published, and someone reaches out, not unlike you did, and says, hey, I read your article here or there on your blog or on Techcrunch or wherever, and what do you think about this?

This quote emphasizes the importance of doing one's homework before reaching out to a VC, showing genuine interest and engagement with their work, and providing a fresh perspective or challenge to their ideas.

The Reality of Engaging with Public Figures in Venture Capital

  • Chris Jones notes that while he receives many sincere business inquiries, there's often an unrealistic expectation for quick success.
  • He values hard work and perseverance and is willing to support those who demonstrate these qualities.
  • The distinction between adding value and seeking to take something is crucial when engaging with VCs.

But I also get a sense that because I'm very public socially and whatnot, they'll read articles and stuff and they'll think that I could just go out for lunch with them or just very quickly give them what they need in order to be successful.

This quote reflects the misconception that public figures in venture capital can provide immediate and easy pathways to success, overlooking the hard work and dedication required.

Professional Approaches to Entering the Venture Capital Space

  • Taking relevant coursework and gaining experience are appropriate steps for those interested in venture capital.
  • Interning at a venture fund is a practical approach to entering the industry.
  • Starting a personal blog to express thoughts on startup companies can prepare aspiring VCs and provide a solid foundation for reaching out to established figures.

Intern at a venture fund. So, in other words, I think there's a professional angle here, which is, hey, you reach out to someone like myself or someone else and say, I've been prepping for this. This is something I'm really interested in.

This quote suggests that gaining professional experience through internships and showing a proactive interest in the field can make a positive impression on established VCs.

The Power of Positive Thinking and Big Goals

  • Chris Jones believes that the size of one's goals correlates with their achievements.
  • Thinking big can lead to accomplishing greater things in life.

Because I think that what we achieve in life tends to correlate with what we think we're capable of achieving. So the bigger our goals, the greater the things we think we could accomplish, the more likely it is that we are to accomplish them.

This quote underlines the philosophy that setting high aspirations can be a self-fulfilling prophecy, leading to significant accomplishments.

Perspectives on the Tech Bubble

  • Chris Jones does not believe there is a current tech bubble despite high valuations.
  • He argues that the industry is going through a period of disruption, with traditional industries challenged by new technologies, especially mobile.
  • He expects several more years of disruption before a shift to other industries.
  • Chris Jones is investing his own money in early-stage tech, focusing on mobile, social, local, and ecommerce due to his background.

No, I think the valuations right now are very high, but I don't believe so. And the reason I don't believe there's a tech bubble is because I believe that the period of time we're in right now is a period where you're going to see a lot of disruption...

This quote explains Chris Jones's view that the high valuations in the tech industry are justified by the significant disruption and innovation currently taking place, rather than being indicative of a bubble.

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