20 VC 058 10 Key Traits To Be A Successful Founder with David Wu, General Partner @ Maveron

Summary Notes


In episode 58 of the 20 minutes VC, host Harry Stebbings interviews David Wu, a general partner at Maveron, on his journey from a tech-focused entrepreneur to a venture capitalist specializing in consumer brands. Wu, a Bay Area native with entrepreneurial roots, shares insights on the seed funding explosion in San Francisco, the importance of a startup's team, and the transition from early adoption to mass market. He emphasizes the need for founders to have contagious passion, a clear competitive advantage, and exceptional recruiting abilities. Wu also discusses the evolving landscape of funding sources, advising founders to align with investors who complement their goals. Additionally, he predicts that the intersection of IoT and medical wellness will be the next disruptive industry. Throughout the conversation, Wu's focus on understanding consumer needs and his commitment to supporting founders with a strong consumer DNA is evident.

Summary Notes

Introduction to David Wu

  • David Wu is a general partner at Maveron, a venture capital firm.
  • He joined Maveron in 2012 to focus on investments in potential leading consumer web companies.
  • David is known for his founder-focused approach and involvement with Bay Area incubators.
  • His previous roles include Entrepreneur in Residence at Redpoint Ventures and over 30 personal startup investments.
  • David's background combines technology and product expertise with operational experience.

"David is a general partner at Mavron, which he joined in 2012 to help identify new investments in web companies that have the potential to become leading consumer brands."

This quote introduces David Wu's current role at Maveron and his focus on identifying promising web companies with the potential to become significant consumer brands.

David Wu's Early Life and Career

  • David grew up in the Silicon Valley with an entrepreneurial father and an artist mother.
  • His career began with a strong focus on technology and product development.
  • He spent a decade at Homestead, a company that provided a way to build websites during the Web 1.0 era.
  • David led Homestead through near-public offering, near-death, and eventual sale to Intuit for $100 million.
  • At Intuit, he managed several SaaS businesses before returning to his passion for entrepreneurship and consumer-focused ventures through angel investing.

"Spent the bulk of my career as an entrepreneur. Started off very much a tech and a product guy, and then over time became kind of more of an inside guy."

This quote summarizes David Wu's career progression from a technology and product-focused entrepreneur to an all-around internal operations expert.

Maveron's Investment Philosophy

  • Maveron specializes in direct-to-consumer investments, avoiding enterprise infrastructure and B2B2C.
  • The firm has a 16-year history and is known for its specialization and focus on consumer brands.
  • David Wu's personal investment focus areas include connected devices, marketplaces, and mobile applications.
  • Maveron invests primarily in early or series A stage companies but also has an aggressive seed program.
  • The seed program is designed to build relationships with teams that have the right consumer DNA for more informed series A investments.

"Maveron is sort of a unique venture fund in that we've been around for 16 years and are really, really specialized in what we do."

This quote highlights Maveron's long-standing specialization in the venture capital industry, focusing exclusively on consumer brands.

Seed Funding Environment in San Francisco

  • The seed funding environment in San Francisco has grown significantly, with a vast amount of capital and opportunities available.
  • The emergence of angel syndicates, crowdfunding through the JOBS Act, and numerous micro-VCs have contributed to the growth.
  • The Bay Area is considered one of the best places to start a company due to the abundance of seed funding.

"I think the seed funding environment in San Francisco is exploded almost beyond imagination and I think there's actually no looking back."

The quote emphasizes the explosive growth of the seed funding environment in San Francisco, indicating a permanent change in the startup funding landscape.

Impact of Seed Funds on Venture Capital Ecosystem

  • The increase in seed funds is seen as beneficial for entrepreneurs and the overall ecosystem.
  • While seed funds are numerous, series A deals have not increased proportionally, leading to a larger funnel for venture capital firms.
  • The key for venture capital success is to specialize and understand what they are good at.
  • The rise in seed funding is viewed as a positive trend that ultimately benefits the venture capital ecosystem.

"But at the end of the day, I think knowing what you're good at and what a venture fund specializes in and really concentrating there is the important thing."

This quote suggests that venture capital firms should focus on their strengths and areas of specialization to succeed in a competitive funding environment.

Bay Area's Startup Ecosystem

  • The Bay Area is recognized as a special place for startups, beyond Stanford's influence.
  • Three prerequisites for a startup ecosystem are: access to capital, access to talent, and a culture of ambition.
  • Bay Area's culture encourages doing the impossible and swinging for the fences.

"And I think that the, you know, we invest primarily all across the United States and the Bay area is a very special place." "I think you need great access to capital. I think you need great access to talent. And third, often overlooked, I think that you need a culture that really encourages swinging for the fences and kind of a culture that says that doing the impossible is actually something that happens every day."

David Wu highlights the unique characteristics of the Bay Area in fostering a successful startup environment, emphasizing the importance of capital, talent, and a supportive culture.

Establishing a Startup Culture

  • The culture of a region is influenced by its successful companies and role models.
  • The Bay Area's mindset is contrasted with New York's, with the former being more open to dreaming big.
  • Successful companies like Facebook and Google set a precedent for what's possible.

"And I think the fact that you see the Facebooks and the Googles and the history of these little product companies that start taking over the world lends credibility to that's what can happen."

David Wu explains how the success stories of major companies inspire a culture that believes in achieving the extraordinary, shaping the mindset of the region.

Challenges for Startups

  • Startups face three main challenges: assembling the right team, achieving product-market fit, and securing funding.
  • The competitive recruiting environment makes forming the right team difficult.
  • Startups need to rapidly iterate products and understand consumer needs.
  • Entrepreneurs are constantly fundraising and must navigate a variety of funding sources.

"A lot of these early startups have lots of different things they're working on, but generally I bucket into three areas, which is getting the right team, finding product market fit and raising money, aka not running out of Runway."

David Wu categorizes the primary challenges faced by startups, emphasizing the importance of team, product alignment with the market, and financial sustainability.

Choosing the Right Funding Source

  • The landscape of funding has diversified, offering more choices to startups.
  • Entrepreneurs should seek funding sources that align with their needs and provide more than just capital.
  • It's important to conduct due diligence on potential investors, considering how they support both successful and struggling portfolio companies.

"Now you can kind of mix and match like a component stereo and get smart advice from old founders, paying it forward, and advisors, and you can get money from dumb money, or angels, or seed funds, or series A funds and control."

David Wu describes the modern funding environment as one where startups can selectively seek the type of support they need, from advice to financial investment.

Angel Money vs. Institutional Money

  • The main difference between angel investors and institutional funds is the source of their investment capital.
  • Angel investors use their personal funds, while institutional investors manage other people's money.

"So I think that there's one critical difference between angel money and institutional money, and what it really comes down to is angels are generally investing their own money, whereas most institutional funds are primarily investing other people's money."

David Wu delineates the key distinction between angel investors and institutional funds, which affects their investment approach and the relationship with startups.

Investment Motivations of Angels vs. Institutional Money

  • Angels invest for various reasons, not solely focused on return on capital.
  • Institutional investors are primarily concerned with generating returns for their limited partners.
  • Institutional money adheres to a power law curve, aiming for a few major successes to cover the entire portfolio.
  • Angels have diverse motivations, and alignment with the founder's goals is crucial.

"Angels are often investing for, as I said kind of earlier, for a plethora of all different kinds of reasons. They may be doing it for lots of things that are not even return on capital focused things like they like you, they're passionate about what you're trying to do, they want to pay it forward, and they made a lot of money in their last company."

This quote emphasizes the diversity of motivations behind angel investors, which can range from personal affinity to the desire to support entrepreneurship beyond just financial returns.

"Institutional money, for the most part, is investing in some kind of thesis about how they're going to make their limited partners money."

This quote outlines the primary goal of institutional investors, which is to create financial returns for their limited partners, often through a focused investment thesis.

Mavron's Founder and Team Focus

  • Mavron is unapologetically driven by the team and founder when making investment decisions.
  • Consumer deals increasingly depend on the team's ability to connect with end consumers.
  • Mavron uses a scorecard with ten key traits to evaluate potential investment CEOs.
  • Examples of key traits include contagious passion, category advantage, and recruitment skills.

"We are definitely unapologetically team and founder driven."

This quote conveys Mavron's strong emphasis on the importance of the team and founder in their investment approach.

"We kind of put together a list of ten key traits that we believe are kind of the key success traits for a Mavron consumer successful founder."

The quote explains that Mavron utilizes a structured approach to assess founders, employing a specific set of criteria they believe indicative of success.

Backing First-Time Founders and Preferences

  • Mavron often backs first-time founders, believing past success predicts future success.
  • They evaluate a founder's life achievements, not just previous entrepreneurial experience.
  • Mavron does not strictly require founders to have prior startup experience.

"We often back first-time founders."

This quote indicates Mavron's openness to investing in first-time founders, challenging the notion that only experienced entrepreneurs can be successful.

"I can learn everything I need to know about you based on what you did in high school."

The quote suggests that Mavron considers a founder's entire history of achievements, even from as early as high school, as indicators of potential.

Transitioning Consumer Brands to Mass Market

  • Mavron focuses on identifying a "cauldron of consumer passion" in companies.
  • They avoid companies with technology in search of a market or problem.
  • The origin story of Mavron, linked to Starbucks, illustrates the potential of overlooked market opportunities.

"We spent a lot of time internally talking about this phrase that we've coined called the cauldron of consumer passion."

This quote highlights Mavron's strategy of looking for companies that have already tapped into a strong consumer passion, which is critical for mass market success.

"We were started at Mavron by two coffee guys out of Seattle, Howard Schultz, that has hence gone back to run Starbucks."

The quote provides context on Mavron's founding, linking its consumer brand approach to the success story of Starbucks, which also faced skepticism before becoming a mass market phenomenon.

Consumer Passion in Funding Decisions

  • Importance of consumer passion in the success of consumer brands.
  • Transition from early adopter markets to mass markets hinges on product/service integration into daily life.
  • The key indicator for potential success is the depth of product/service embedding in the lives of consumers.

"And that was the beginning of this cauldron of consumer passion."

This quote highlights the inception of consumer passion as a pivotal element in deciding which companies to fund.

"What we're looking for is how deeply is something embedding its service or its products in the everyday lives of real people."

This quote emphasizes the criterion for predicting the success of consumer brands, which is the degree of integration into consumers' daily routines.

David Wu's Favorite Book

  • David Wu's current favorite book series is Game of Thrones.
  • Expresses frustration over the potential for the HBO series to outpace the books.

"Favorite books probably right now are the Game of Thrones books."

This quote reveals David Wu's current preference in reading material.

"I'm incredibly nervous that the HBO series is going to pass the speed of his slow writing."

David Wu shares his concern about the television adaptation potentially surpassing the book series in narrative.

Biggest Mistake and Overcoming It

  • Acknowledges the common trait of revisionist history among successful CEOs and entrepreneurs.
  • Reflects on missed investment opportunities in Stitch Fix, Instacart, and Dollar Shave Club.

"I think on the entrepreneur side, I often tell people that one of the most common traits in successful CEOs and successful entrepreneurs is revisionist history."

This quote suggests that successful individuals often reinterpret their past, potentially downplaying their mistakes.

"The biggest mistakes have to be my personal unportfolio to date or anti portfolio."

David Wu identifies his greatest mistakes as the missed opportunities to invest in certain successful companies.

Advice to a 20-Year-Old Self

  • Recommends focusing on improving sports skills, specifically basketball and golf.
  • Highlights the ease of finding time and ability to improve at a younger age.

"I would tell myself to go get better at both basketball and golf."

David Wu would advise his younger self to invest time in getting better at sports that are easier to learn and enjoy at a younger age.

The Next Industry to be Disrupted

  • Bullish on the intersection of Internet of Things, connected devices, medical and wellness.
  • Believes in the potential for devices to evolve from step counters to providing superhuman abilities.
  • Discusses investment in Ergo, a disruptive hearing aid company.

"The intersection of the Internet of Things and connected devices and medical and wellness."

This quote identifies the specific intersection of industries David Wu believes is ripe for disruption.

"We made the recent investment in Ergo, which is a truly disruptive hearing aid."

David Wu explains his investment in a company that represents the type of innovation he expects to disrupt the medical device industry.

Favorite Newsletter

  • Was a fan of Circa, an app designed for mobile news consumption.
  • Expresses disappointment over Circa's lack of funding and subsequent closure.

"I'm a big fan of circa, which is an app that Matt Gallagher did."

David Wu shares his preference for a mobile news consumption app that no longer operates due to funding issues.

Most Recent Investment

  • Invested in Jot Jott, a peer-to-peer messaging app for teens.
  • The app functions with or without connectivity, showing great growth within schools.
  • The investment was influenced by the potential of the messaging area and the entrepreneur behind it.

"The most recent investment, I think, was a seed in a company called Jot Jott."

David Wu discusses his most recent investment, highlighting the company's innovative approach to messaging.

"We've seen great, explosive growth inside of schools."

This quote explains the reason behind the investment, which is the significant growth and potential of the messaging app in schools.

Conclusion of the Interview

  • David Wu expresses pleasure in participating in the show.
  • Harry Stebbings promotes resources related to the interview and introduces his new show about angel investing.

"My pleasure, as always."

David Wu concludes the interview by affirmatively acknowledging his enjoyment of the conversation.

"All of the incredible resources and tools mentioned in Stay's incredible interview with David can be found on the blog at WW dot, the twentyminutevc.com."

Harry Stebbings provides listeners with information on where to find additional resources related to the interview.

"It's called Angel Insights and it takes you inside the world of angel investing."

Harry Stebbings promotes his new show, providing insights into angel investing, expanding the content available to his audience.

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