20 VC 025 Finding the Right VC and The Evolution of Summly with John Henderson of White Star Capital

In the 25th episode of the 20 minutes VC, host Harry Stebings interviews John Henderson, principal at White Star Capital, exploring his multifaceted career journey from co-founding a business straight out of university to becoming a strategy consultant and eventually transitioning into the tech industry with roles at Facebook and as head of business development and operations at Sumley. John shares insights into the importance of the right VC fit for startups, the value of due diligence from both investor and entrepreneur perspectives, and reflects on his own experience with angel investing, particularly in CoinDesk, emphasizing the potential of blockchain technology. Additionally, he recommends Ben Horowitz's "The Hard Thing About Hard Things" for tech founders and discusses his news consumption habits, highlighting the significance of nurturing relationships in the venture capital ecosystem.

• John Henderson is a principal at White Star Capital.
• Prior to joining White Star Capital, John was head of business development and operations at Sumley, which was acquired by Yahoo in May 2013.
• He has experience in product management, business development, and played a key role in Sumley's acquisition.
• John has also held roles at Facebook and was a strategy consultant at Boston Consulting Group, as well as a lawyer at Allen's Linklaters.

"John is currently principal at White Star Capital and prior to White Star, John was head of business development and operations at Sumley, which was acquired by Yahoo in May of 2013."

This quote introduces John Henderson and his professional background, highlighting his current position and his significant role in the acquisition of Sumley by Yahoo.

• John's career began with entrepreneurship, co-founding Bush Campus with a high school friend.
• Bush Campus provided outdoor recreation experiences for high school students.
• John and his co-founder parted ways after realizing the business wouldn't scale significantly.
• At 23, John transitioned back to his training and became an M&A lawyer, focusing on technology M&As in Australia.

"I co-founded a business called Bush Campus, and that was a business that essentially provided an outdoor recreation experience for either a weekend or a week to high school students."

This quote describes John's first venture into entrepreneurship with Bush Campus, giving an insight into his early business experiences and decision-making process.

• John worked on technology M&As at an Australian law firm, gaining insight into the tech sector.
• He moved on to management consulting with Boston Consulting Group, focusing on digital transformations and content distribution strategies in the era of smartphones and tablets.

"So there I was doing technology M&As, essentially. So, you know, we did the merger of the third and fourth biggest Australian telcos."

This quote reflects John's experience with technology M&As, which provided him with a foundational understanding of the tech industry and its legal aspects.

• John's brief stint at Facebook led to his introduction to Sumley.
• Sumley had a summarization technology for condensing long-form content to fit an iPhone screen.
• John joined Sumley and helped launch news apps that provided personalized, summarized news.
• Sumley's apps were well-received, featured by Apple, and acquired by Yahoo in May 2013.

"And it was from Facebook that I was introduced to a company called Sumly. And that was a very young, early-stage company that essentially had a piece of summarization technology."

This quote details John's transition from Facebook to Sumly and the innovative technology that Sumly developed, which played a significant role in its success and acquisition by Yahoo.

• As head of business development and operations at Sumly, John worked closely with the young founder, Nick.
• His role evolved as the company grew and eventually led to the acquisition by Yahoo.

"We ended up launching a couple of smartphone apps, first for iPhone and then for Android. And we went after the news vertical. So we essentially made news apps so that you could read personalized news in summarized form on your phone."

John's quote explains his involvement in Sumley's product development and business strategy, emphasizing the company's focus on news apps and summarization technology that contributed to its acquisition by Yahoo.

• Nick was 16 years old and still in high school when John Henderson joined him.
• Despite Nick's age, he was recognized as a phenomenal entrepreneur with technical skills and a keen eye for design and product.
• Nick was also adept at managing relationships with stakeholders, including customers and investors.
• John Henderson found the experience of working with a younger boss to be unusual but positive.

"Nick's age was interesting. But Nick is a phenomenal entrepreneur of any age. He's technically gifted. He has an unparalleled eye for design and product."

The quote highlights Nick's capabilities as an entrepreneur, emphasizing that his age did not define his skills and potential.

• John Henderson's role did not change significantly as the acquisition interest grew, but the workload increased.
• It was crucial to continue focusing on product development and not be overly distracted by the acquisition process.
• John maintained his responsibilities with the iPhone and Android apps and pursued partnerships while handling acquisition preparations at night.
• The importance of keeping the company operational in case the acquisition fell through was stressed.

"So at that time, we were still only a handful of people. And it's tremendously important at that stage that you keep doing what you're doing and keep building a great product."

This quote emphasizes the importance of maintaining focus on the core business and product development even when facing potential acquisition.

• Sumly's integration into Yahoo News Digest was described as a tremendous success and was completed quickly.
• The technology behind Sumly was seen as potentially useful across various Yahoo mobile products, not limited to news.
• John Henderson did not have visibility into the broader use of Sumly's technology at Yahoo since he was no longer with the company.

"So within, I think it was within three weeks of the acquisition being announced, sumly had been included within Yahoo. News Digest, which is their mobile app product."

The quote indicates the rapid and successful integration of Sumly into Yahoo's product, setting a record for the fastest integration within the company.

• Yahoo was primarily interested in the technical team, including the CTO, head of the algorithm, and Nick.
• John Henderson's skill set was not the focus for Yahoo, and there was mutual disinterest in his joining the company post-acquisition.
• John's role was instrumental in getting Sumly to the point of acquisition, but not beyond that.

"To be honest, Yahoo was specifically after the technical people in the company."

This quote explains why John Henderson did not join Yahoo after the acquisition, as the company was targeting the technical team members responsible for Sumly's technology.

• John Henderson reflects on the differences between working in a startup and in venture capital (VC).
• In startups, tasks and goals are clear, with obvious ways to allocate time.
• In VC, the ultimate goal is to deliver a return to investors, but the effective use of time towards that goal is less clear.
• John spends more time in his VC role at White Star Capital helping people without immediate returns, including entrepreneurs they may invest in later.

"Ultimately all that matters in venture is whether you deliver a return to the investors in your fund. But how you spend your time to achieve that is completely unclear."

The quote captures the core objective of a VC, which is to generate returns for investors, and the ambiguity in how to effectively reach that objective compared to the clear-cut environment of a startup.

• Venture capital firms like Whitestar actively engage in supporting entrepreneurs and the broader startup ecosystem.
• Reputation in the venture world is critical for attracting potential investment opportunities.
• Building a positive reputation through helpfulness can lead to recommendations from entrepreneurs.
• Venture capitalists spend considerable time assisting others, even when it does not directly lead to an investment.

"We at Whitestar, all six of us, go out of our way to be helpful, and it's partly reputational. I think in the venture world your reputation matters tremendously."

This quote emphasizes the importance of reputation for venture capital firms like Whitestar and their commitment to being helpful within the startup community.

• Finding a well-suited VC is crucial for early-stage startups.
• The right VC can provide valuable connections, validation, and a support network.
• Horizons Ventures is cited as an example of a VC that contributed significantly to the growth of Sumley.
• Whitestar has a unique advantage with offices in both Europe and the U.S., aiding companies in cross-Atlantic growth.

"I think it's tremendously important, and I think this is a lot of early stage startups don't realize quite how important it is to have the right people around the know."

John Henderson highlights the significance of having the right VC partners for early-stage startups and how it can impact their success.

• Entrepreneurs should conduct thorough due diligence on potential VC partners.
• Reverse due diligence involves meeting other entrepreneurs who have been invested in by the VC, especially those who have faced challenges.
• This process reveals the VC's behavior during both good and tough times.
• A good VC firm should be willing to facilitate meetings between potential investees and their current portfolio entrepreneurs.

"Once you have a term sheet from a fund, go ahead and ask to meet three or four of the entrepreneurs that they've invested in."

John Henderson advises entrepreneurs to engage in reverse due diligence to understand the VC's support level during different phases of a company's journey.

• John Henderson discusses his approach to angel investing and compares it to professional venture capital investments.
• Angel investments are typically made earlier in a company's lifecycle, focusing more on the founder and the team.
• Henderson's first angel investment was in Coindesk, a leading news site for bitcoin and cryptocurrencies.
• He suggests considering market opportunities similarly in both angel and professional investments.

"So my first angel investment was in a company called Coindesk, which I guess is now the leading news site for bitcoin and cryptocurrencies."

This quote introduces John Henderson's first angel investment, highlighting the company's success and his investment approach.

• Shaq's advisory role at Sumley and involvement with Spotify influenced the investment decision.
• Track record in a relevant space can indicate potential success for a new venture.
• Whitestar prefers to build a relationship with founders before investing.

get him on this show, actually. But Shaq was a tremendously helpful advisor to us at Sumley. I know he's been helpful to a whole bunch of other companies like Spotify and others, and I was just confident that he could pull off a great company in any space.

The quote highlights Shaq's successful advisory history, which gave confidence to the investor about his capabilities, contributing to the decision to invest.

• Building a relationship with founders is considered better for investment decisions.
• It's important for investors to understand the founders' passion and execution capabilities.
• Founders should also feel comfortable with how the investors operate and contribute.

But at Whitestar, we always like to have a relationship with the founders for quite a while before we make that first investment. And I think it's important both ways.

This quote emphasizes the mutual benefit of a pre-existing relationship between investors and founders, enhancing understanding and compatibility before investment.

• John Henderson is bullish on bitcoin and blockchain technology.
• He acknowledges short-term volatility but believes in the long-term disruptive potential of blockchain in finance and other industries.

So I'm hugely bullish on bitcoin. I think in the short term there will be ups and downs and maybe a few more scandals. Long term, though, I think the blockchain or this public ledger technology will be fundamentally disruptive to the finance industry and others.

The quote reflects John Henderson's positive long-term outlook on bitcoin and blockchain, despite expecting short-term fluctuations and scandals.

• John Henderson uses Yahoo News Digest, blog aggregators, and Nuzzle to stay informed.
• He also scans major tech news sites for updates.

Oh, interesting. Well, obviously yahoo. News digest is my first port of call. [...] I also use blog loving a lot, which is a blog aggregator. And I use that as a sort of RSS feed to try and keep on top of the blogs I follow and that I think are interesting. I use a product called Nuzzle a lot, which essentially, essentially takes your social feeds and puts articles in front of you that a lot of people in your circles are reading.

The quote provides insight into John Henderson's methods for keeping up with news and trends, highlighting the tools and platforms he finds useful.

• Recommends "The Hard Thing About Hard Things" by Ben Horowitz.
• Suggests "The Innovators" by Walter Isaacson for historical context of computer science.

I think one would be Ben Horowitz's recent book, the hard thing about hard things. [...] And then I think it's also worth knowing a little bit about kind of the history and the development of the space. And so I quite like Walter Isaacson's book the Innovators.

This quote shares John Henderson's book recommendations, focusing on practical advice from industry experience and understanding the historical development of technology.

• Recent investment in Dice, a London-based ticketing service for live events with no booking fees.
• Investment decision based on a strong team with industry knowledge, a working prototype, and key industry relationships.

It's a company called Dice Great London based company, a seed stage investment that we made, and it's a ticketing service for live events that charges its customers no booking fees whatsoever. [...] I think the key factors were a spectacular team with directly relevant industry knowledge and product expertise.

The quote explains the rationale behind the recent investment in Dice, highlighting the importance of team expertise, product viability, and strategic relationships in the event space.

• The 20minutevc blog provides resources mentioned in the podcast.
• Encourages joining the Facebook page and book club for updates.

Now for all the books and resources mentioned in today's show, head on over to the blog at w Dot the twentyminutevc.com. Likewise, please do join our newly created Facebook page, the 20 minutevc book club, and sign up to the book club where you will receive all the updates.

The quote directs listeners to additional resources and community engagement opportunities related to the podcast, promoting further learning and discussion.