20 VC 034 250 Investments, AngelList Syndicates and Microsoft with Jon Staenberg



In episode 34 of the 20 minutes VC, host Harry Stebbings interviews venture capital veteran John Steinberg, who shares insights from his extensive experience in tech investment and entrepreneurship. Steinberg, a Stanford alumnus and former Microsoft employee, emphasizes the importance of real-world experience before entering the VC world, as advised by mentor Woody Howes. He discusses his investment strategy, highlighting the significance of a startup's ability to improve user experience and the role of passion and vision in both leadership and entrepreneurship. Steinberg also touches on the evolving funding landscape, with platforms like AngelList syndicates democratizing investment opportunities and challenging traditional VC models. His recent investments, Kitchen Bowl and Kindara, exemplify his approach to backing passionate founders with clear, impactful visions.

Summary Notes

Introduction to John Steinberg

  • John Steinberg is a prominent figure in the tech and venture capital industry.
  • He has invested in 250 startups, including notable companies like Automatic, StubHub, and Docusign.
  • Steinberg has founded five companies and serves on the board of class.com and micropath.

"Now on today's show, I'm so excited to welcome a titan to the tech and venture capital industry, John Steinberg. John has made an incredible 250 investments in startups, including the likes of the amazing Matt Mullenwig's automatic stubhub and Docusign, just to name a few."

This quote introduces John Steinberg as a significant guest on the podcast, highlighting his extensive investment portfolio and entrepreneurial accomplishments.

John Steinberg's Background and Move into Venture Capital

  • Steinberg attended Stanford for his undergraduate degree and was drawn to the venture capital and technology sectors.
  • He worked for Acer Computers in Taiwan, gaining early technology industry experience.
  • After completing his MBA at Stanford, he followed mentor Woody Howes' advice to gain real-world experience before entering venture capital.
  • Steinberg worked at Microsoft for nearly five years before transitioning to venture capital, starting at a small outfit in Seattle and eventually raising three funds.

"And he said to me, look, you can do venture, but why don't you get some real world experience first?"

Mentor Woody Howes emphasized the importance of gaining practical experience in the industry before pursuing a career in venture capital, which Steinberg took to heart.

Key Takeaways from Microsoft Experience

  • Steinberg values hiring intelligent team members, demonstrating tenacity, and believing in the mission.
  • His time at Microsoft during its peak instilled a sense of working on something larger than oneself.
  • Bill Gates, as a leader, inspired the team with a clear vision of putting "a PC on every desk."

"It really taught me about hiring people that are way smarter than yourself, taught me about tenacity, it taught me about the possibilities, like we believe we drank the coolant."

Steinberg reflects on how Microsoft's culture of hiring smart individuals and embracing possibilities shaped his professional approach.

Establishing Companies and Leadership

  • The challenge of starting companies lies in selling the vision and assembling a committed team.
  • Steinberg's experience at Microsoft was instrumental in learning how to attract and motivate people to join a challenging endeavor.

"You've got to bring people on who are willing to climb the mountains with you, because it's never easy."

This quote underscores the necessity for a leader to inspire and recruit people who are ready to face the difficulties of starting and growing a company.

The Vital Quality of a Good Leader

  • A good leader must possess a clear, compelling, and sharable vision.
  • The leader must embody the vision daily and effectively communicate it to the team, fostering a strong sense of unity and purpose.

"Vision. Vision. And that vision has to be sellable, and that vision has to be clear. And that vision has to be something others can buy into."

Steinberg emphasizes that a leader's vision is crucial for rallying a team and guiding them toward a common goal.

Investment Strategy and Criteria

  • Steinberg has invested in over 250 startups, indicating a vast and diverse portfolio.
  • While there's no specific checklist mentioned, the number of investments suggests a broad and perhaps flexible approach to investment criteria.

"So it's probably over 250 startups at this point, just to update you."

This quote corrects the host on the number of investments Steinberg has made, indicating his extensive experience in the venture capital space.

Personal Investment Philosophy

  • John Steinberg expresses a lack of a specific theme or focus in his investment strategy.
  • He is drawn to investments by various factors such as the entrepreneur's passion, intelligence, and a well-thought-out business plan.
  • Steinberg acknowledges that sometimes the decision to invest is influenced by the group of investors involved in the deal.
  • The primary factor for investment is how a company improves the experience for the end-user in a significant and definable way.

"My most recent investment was a young man, 26 years old, who I just happened to see a little article on in a space that's super crowded that I never expected to lead around in and invest in, but he won me over and it's in the recipe space, it's called kitchen bowl." This quote illustrates Steinberg's spontaneous investment in a startup based on the entrepreneur's personal qualities rather than a pre-determined investment strategy.

"Most often is how is this company making an experience for the end user better, faster, cheaper in some way, in some definable way, in some way that's better in a marked way than what you have today." Steinberg emphasizes the importance of a company's ability to enhance the end-user experience as a key factor in his investment decisions.

Market Considerations in Investments

  • Steinberg is skeptical about the value of market projections presented in pitches, as he finds them to be speculative.
  • He relies on his own judgment to assess the potential of a market segment.
  • Steinberg finds the rapid change in markets challenging for predicting future opportunities, exemplified by the emerging virtual reality sector.

"It tends not to be. I can't tell you how many people get to the third or fourth slide in their presentation and then have the hockey stick market slide." Steinberg expresses his disregard for market projections in pitch decks, indicating that he does not rely heavily on them for making investment decisions.

"How much of the market has to be here already and how much of it's going to be here?" This quote reflects Steinberg's contemplation on the balance between existing markets and emerging ones when considering investments.

Investment Rounds Preference

  • John Steinberg identifies as an early-stage investor but admits to being somewhat round agnostic.
  • He enjoys working with entrepreneurs in the earlier stages where he feels he can add more value.
  • Steinberg has also invested in later stages, as seen with his investments in Docusign and Avalara.

"I tend to think of myself as an early stage investor, but having said, know I'm in docusign, which I did later, and then Avalara, those are two Seattle companies later." Steinberg shares that while he prefers early-stage investments, he has also participated in later-stage investments, indicating a flexible approach to investment rounds.

Role of Venture Capitalists Post-Investment

  • Steinberg believes that venture capitalists (VCs) often overvalue their role and contribution to startups.
  • He suggests that entrepreneurs may also overestimate the value-add of VCs.

"Yeah, I think in general vcs overvalue their role and their value add." Steinberg criticizes the tendency of VCs to overestimate the impact they have on startups they invest in.

VC Relationships and Value Addition

  • The relationship between venture capitalists (VCs) and entrepreneurs is critical.
  • VCs are not just funders but can provide introductions, mentoring, and advisory support.
  • Entrepreneurs should seek VCs they can confide in and bounce ideas off of.
  • The CEO role can be isolating, so having a VC as a confidant is valuable.
  • Geography can play a role in the value a VC adds, such as offering local competitive insights or introductions.

"But the VC or the entrepreneur or the investor, this is a relationship. And I don't think that most entrepreneurs spend enough time. If you really, really are looking for value add, look for someone you can confide in, someone you can talk to, someone you can bounce ideas off of."

This quote emphasizes the importance of the personal relationship between VCs and entrepreneurs, suggesting that entrepreneurs should invest time in finding a VC who can be a confidant and advisor, not just a source of funds.

Recognizing the Right VC During the "Dating Period"

  • Due diligence is essential when startups are choosing a VC.
  • Startups should research potential VCs, including their track record and reputation.
  • It's important to talk to other companies the VC has invested in, including those that did not succeed.
  • Transparency and information availability in modern times make it easier to vet potential VCs.

"Well, you know, we live in such an interesting time of transparency, right? You go into meetings and you've already got a dossier on anybody you're meeting with that literally comes up automatically on your phone. So I think more than ever, if you don't do your homework, shame on you."

This quote highlights the era of transparency in which we live, where information about potential VCs is readily available, suggesting that startups should thoroughly research and vet VCs before committing.

Impact of AngelList Syndicates on Funding

  • AngelList syndicates are changing the funding environment.
  • Traditional VC funds are declining in number due to broader investment sources.
  • AngelList syndicates offer optionality and access to deals for investors, including VCs.
  • The intertwining of investment avenues provides more options for startups.

"And who are some of the most prominent investors in angel list vcs, and why would they do that? Because they want the optionality. They want the look at this. They want to make sure they're not missing out."

The quote explains that prominent investors, including VCs, are participating in AngelList syndicates to gain optionality and ensure they have access to a broad range of deals, indicating a shift in how investments are approached.

Crowdfunding as a New Avenue for Funding Opportunities

  • Crowdfunding platforms like AngelList and OurCrowd are raising significant funds, comparable to traditional VC funds.
  • Crowdfunding allows angel investors to observe deal flow and industry trends.
  • Entrepreneurs have become adept at presenting their businesses, facilitating efficient information transfer.
  • The future of crowdfunding's impact on funding and startups is promising, though uncertain.

"I think in the last year, both of them had over $100 million raised through their vehicles. Well, that's the size of a good fund. Putting out that kind of money, I mean, that's a serious fund."

This quote points out the significant amount of money being raised through crowdfunding platforms, emphasizing that these platforms are now on par with sizable traditional funds, which underscores their growing influence in the startup ecosystem.

Global Entrepreneurialism and Crowdfunding

  • Entrepreneurialism and startups are no longer confined to Silicon Valley and the US.
  • Crowdfunding platforms have contributed to this global spread of entrepreneurial activities.
  • Crowdfunding can serve as marketing and attract attention to companies.

on Valley and the US are no longer the only places where you're going to see entrepreneurialism and startups, and that's pretty exciting. And crowdfunding has something to do with that as well.

This quote highlights the global expansion of startup culture and the role of crowdfunding in this trend.

John Steinberg's Experience with Syndicates

  • John Steinberg has completed five syndicate raises.
  • He is an investor in AngelList and uses syndicates to understand the platform.
  • Syndicates can serve as marketing and help companies get noticed.
  • Syndicates have helped companies get on the radar for future funding rounds.

No, I've done five syndicates now, and I'm learning a lot. It's a new tool, it's a new platform, and I'm trying to think about partly I'm doing it because I want to see how it works. For full disclosure, I am an investor in angel list and so for me, I'm not sure. I think there's some really great benefits. For one thing, it's a bit of marketing. Quite frankly, I have several thousand followers on angel list, so if I put a deal up, then people at least take notice of what this company is and what they do, and that can be very good for the company. The other thing that was interesting in this last field that I hadn't necessarily expected, but refers to a point I made earlier, is that several vcs saw that we were doing the syndicate, contacted the company and said when you're doing your next round, we'd be interested in talking to you. So it actually put them on the radar screen for future rounds of funding, which I thought was a nice benefit too.

John Steinberg discusses his personal experience with syndicate raises, their marketing benefits, and unexpected advantages in terms of attracting VC interest for future funding.

Approaching John Steinberg for Syndicate Leadership

  • John Steinberg receives many inbound inquiries due to his AngelList presence.
  • He has to decline many opportunities due to time constraints.
  • It's difficult for him to consider opportunities that don't come through his known network or ecosystem.

Well, the one thing about angel list is I'm getting a lot more inbound inquiries and quite frankly, I'm one guy and trying to run a startup wine business and do my angel investing and other things. So I've had to say, literally, it was hard at first, but I've had to say, I'm sorry, I just can't do this right now. And I feel bad about it because I want to be helpful and supportive to the startup community, but I just can't do it all. So in answering your question, if someone doesn't come to me through someone I know or has an ecosystem of investors that I know, it's very hard for me to take a look at.

This quote explains the challenges John Steinberg faces in managing his time and investments, and his preference for working within his established network.

Lightning Round: Personal Highlights and Advice

  • John Steinberg feels fortunate for his past experiences, including working at Microsoft.
  • He advises aspiring individuals to never give up and to surround themselves with the best and brightest.

So fortunate, so blessed. So, you know, working at Microsoft back in the day for me was just fabulous in terms of propelling me into being able to do many, many things and getting me excited about this industry. So that's certainly one of them. And now to be able to do a startup in the wine world and actually get to deploy a lot of the things I've learned over the years is super exciting. So there's not one and I've been just super lucky.

John Steinberg reflects on his fortunate experiences and how they have shaped his career, emphasizing the value of past experiences in current ventures.

Aspiring know, Churchill said it, never ever give up. And I just think this stuff's hard. The second tip, and I know you only asked for one, is surround yourself with the best and the brightest. Surround yourself with people who give you energy, who create energy, who create positive.

John Steinberg offers advice to aspiring individuals, citing Churchill's encouragement to persevere and the importance of a supportive and energizing network.

John Steinberg's Recent Investments

  • John Steinberg recently invested in Kitchen Bowl and Kindara.
  • Kindara is a women's fertility app that combines software and hardware.
  • He was compelled by the app's solution to a real need and the strong team of investors and entrepreneurs involved.

Well, we talked a little bit about it. Kitchen bowl. Although I also just did a deal called Kindara, which is a mobile app. Yeah, Kindara, which is a women's mobile fertility app. It's both software and hardware. And for me, again, really compelling case, really solving a real need out there in a very elegant way. And around the table with me are a bunch of great investors who I know, and again, you had an entrepreneur who in very passionate way, in a very dogged way, came to me, fed me the information, kept me updated, and I'm super excited about the possibility of that actually have a profound impact on the world.

In this quote, John Steinberg shares his reasons for investing in Kindara, highlighting the product's potential impact and the strong team behind it.

Show Conclusion and Resources

  • Harry Stebbings thanks John Steinberg for joining the show.
  • The 20 Minute VC will take a short break.
  • Listeners can follow John Steinberg on Twitter and find links and resources on the 20 Minute VC website.
  • Harry encourages feedback and future guest suggestions.

Well, John, thank you so much for coming on the show. It's such a pleasure to have you here and I hope to have you on again soon.

Harry Stebbings expresses gratitude to John Steinberg and looks forward to future interactions.

So the 20 minutes VC will be going off air for a few weeks as I will be going to see John in Seattle. Just kidding. But John, I intend to take you up on your offer. And thank you so much for listening to today's show. And all of the links can be found at ww dot the twentyminutevc.com and you can follow John at Steinman S-T-A-E-N-M-A-N on twitter. And we look forward to seeing you in the next episode. Now, all the resources and items mentioned in today's interview with Chris can be found in the show notes on the blog at the twentyminutevc.com and I would love to hear what you think of the episode, so please do not hesitate to contact me. As to questions you'd like asked in the future, you or future guests that you'd like to have on the show, please email me at Harry at the twentyminutevc.com. And I look so forward seeing you in the next episode. Thank you.

Harry Stebbings wraps up the episode, mentioning a break, providing resources, and inviting listeners to engage and suggest future content.

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