20VC 3 Questions Founders Must Stress Test VCs with, What Separates the Good From The Great VCs & Why 80% of VC Detract Value From Board Meetings with Seth Sternberg, Founder & CEO @ Honor

In this episode of "20 Minutes VC," host Harry Stebbings interviews Seth Sternberg, the serial entrepreneur and CEO of Honor, a startup revolutionizing home care for the elderly. Sternberg, who previously founded and sold the web communications platform Meebo to Google, discusses his journey from social media to personalized home care and the mission-driven nature of Honor. He emphasizes the importance of team selection and the lessons learned from his first venture, such as hiring specialists for roles and quickly addressing team fit issues. Sternberg also shares insights on maintaining a long-term vision for a company, the value of having great venture capitalists who provide strategic advice without micromanaging, and the significance of aligning on vision and tactics with investors. The discussion also touches on the challenges unique to Honor, such as dealing with customers in delicate situations, and Sternberg's goal of creating a consistent, high-quality home care experience nationwide.

• Seth Sternberg is the founder and CEO of Honor, a startup providing home care.
• Prior to Honor, Seth co-founded and led Meibo, a web communications platform.
• Meibo was acquired by Google for $100 million in 2012.
• Seth served as a product director at Google, working on Google+ and Google X.
• He is an angel investor with investments in Fitbit and Gusto, among others.
• Honor has raised over $60 million from investors like Thrive Capital and Andreessen Horowitz.

"And we welcome an incredible serial entrepreneur in the form of Seth Sternberg, founder and CEO at Honor, the startup that provides home care your family will love."

This quote introduces Seth Sternberg as a successful entrepreneur and the CEO of Honor, highlighting his company's focus on providing quality home care.

"And prior to honor, Seth was the cofounder and CEO of Meibo, a web communications platform backed by the likes of Sequoia Kosler and True Ventures."

This quote provides background on Seth's previous venture, Meibo, and its success before being acquired by Google, demonstrating his experience in building successful companies.

• Seth Sternberg and his co-founder Sandy wanted to create a company that would positively impact people's lives.
• They spent about a year and a half searching for the right idea.
• Concerns about aging parents led them to focus on helping the elderly stay in their homes.
• Honor was founded with a mission to improve the lives of the elderly and care professionals.

"And we wanted to work on something where we could look a lot of people in the eye and know that we were going to make their lives fundamentally better."

This quote captures the founders' desire to create a company with a significant positive impact on people's lives, which led to the founding of Honor.

"And we're kind of thinking about what was next for us. And we wanted to work on something where we could look a lot of people in the eye and know that we were going to make their lives fundamentally better."

The quote shows the founders' motivation for starting Honor was based on a personal desire to improve the lives of others, particularly the elderly.

• Honor is driven by a mission to help the founders' own parents and others' parents.
• The personal connection to the company's mission influences the team building and problem-solving approach.
• The team at Honor is carefully selected to align with the mission and tackle complex problems.

"Honor is a mission company. Right. We do honor because it'll help us ultimately with our parents. It'll help people's parents."

This quote emphasizes the personal and sentimental reasons behind Honor's founding, which shape the company's culture and objectives.

"So I think when you start with mission first, you make a lot of different choices, and you also end up with a very different kind of team."

The quote indicates that starting with a clear mission leads to distinct strategic choices and attracts a team that is dedicated to that mission.

• Seth learned from his first entrepreneurial experience to avoid seeking "unicorn" employees who can do multiple roles.
• In his subsequent ventures, he acknowledges the need for specialized roles and hires accordingly.
• The second time around, Seth is more careful with team selection and quicker to address hiring mistakes.

"I think the most helpful thing is there are a lot of mistakes you make as a first time entrepreneur or things you do that slow you down, that you can just kind of speed through."

This quote highlights the benefit of experience, as past mistakes inform faster and more efficient decision-making in subsequent ventures.

"And second time around, you recognize that they're actually really two different skill sets and two different personality types."

Seth's experience taught him the importance of recognizing and respecting the distinct skill sets required for different roles within a company.

"And we really are extremely careful with who we bring in, but we're even much more aggressive this time around. Around. If we made a mistake, then we'll ask someone to leave."

The quote reflects Seth's approach to team building at Honor, emphasizing the importance of a careful hiring process and the willingness to make swift changes if necessary.

• A mission-driven company's success hinges on the right team composition.
• The team directly impacts the ability to improve the lives of the elderly, their children, and care professionals.
• Building a team aligned with the company's mission is crucial for sustainable change at scale.

"Specially when you're such a mission-driven company, is having the right team is what will make us succeed at making the lives of the elderly and their kids and the care pros better. Right. That is how we sustainably change the world at scale."

This quote emphasizes the critical role of a well-assembled team in achieving the company's mission of enhancing the lives of the elderly and those around them, which is the cornerstone for enacting large-scale, sustainable change.

• The approach to building tech teams is highly selective with a focus on fewer, but more capable engineers.
• The company seeks engineers that meet a high standard, aiming for the 'ten x productive engineer.'
• The recruitment process is rigorous, resulting in a powerful and efficient team.

"So what we do is extraordinarily selective, but low numbers of engineers. So it's really hard to find engineers that we want to work at honor because our bar is frankly just so high."

This quote clarifies the company's strategy for assembling a tech team, which involves a highly selective process to hire a smaller number of highly skilled engineers, reflecting a commitment to quality over quantity.

• Each startup faces unique market-based challenges.
• Honor deals with sensitive customer situations, such as dementia and end-of-life scenarios.
• The company strives to create sustainable systems and processes to handle these challenges effectively.

"So frankly, in honors case, one of the most difficult things is that we often deal with customers who are in difficult states in their lives."

This quote highlights the unique and delicate issues Honor encounters with its customer base, necessitating tailored, sustainable solutions to address these challenges.

• The founding team includes two married couples, creating a distinct dynamic.
• Roles are clearly defined among team members, including those in executive positions.
• Decisions are made collectively during dedicated meetings, with each member having an equal voice.

"And the way we make most decisions is we kind of lock ourselves in a room for 3 hours on Mondays and Wednesdays."

The quote reveals the team's decision-making process, which involves scheduled, intensive collaboration sessions, ensuring that all voices are heard and roles are respected.

• The best VCs understand their advisory limits and do not attempt to run the company.
• They provide strategic advice and support for difficult problems.
• A key trait of great VCs is knowing where they can be helpful and where to trust the founding team.

"You know, one is they really understand that the company is run by the founders and they understand the limits of their knowledge on what's going on on the inside, kind of tactically."

This quote describes the ideal relationship between VCs and founders, where VCs offer strategic guidance but respect the founders' operational control and insight into the company.

• Founders should assess personality fit, vision alignment, and tactical agreement when selecting investors or board members.
• These elements are critical for a productive and harmonious working relationship.
• Disagreements on tactics can lead to difficulties, even if there is a shared vision.

"So the three things that we look at are personality fit, first and foremost. So when you pick a new investor, you are going to work with this person for a really long time."

The quote outlines the three essential criteria for selecting investors, emphasizing the importance of compatibility, shared goals, and agreement on methods to achieve those goals.

• The company has not experienced a situation where it went against a board decision.
• The implication is that there is a strong alignment and understanding between the board and the company's executive team.

"I literally can't think of a time when we've had a board decision."

This quote suggests that the company's decision-making process is cohesive and that there has been no significant conflict between the board's decisions and the company's direction.

• Board decisions should ideally be unanimous and not require formal voting.
• Good entrepreneurs listen to advice but make their own decisions.
• A split vote on the board is generally a negative sign.

"So I can't think of any. But it's almost because I can't think of a time when we really had to have kind of a quote unquote board decision."

This quote emphasizes that unanimous board decisions without formal voting are preferable and that formal board decisions are rare and potentially indicative of issues.

• Importance of having the right board members.
• Regular communication with board members is key.
• A small percentage of VCs add significant value to board discussions.

"I think about 80% of vcs, frankly, detract from the value of the kind of board in the discussion. I think 10% are neutral and I think 10% are really positive."

This quote stresses the speaker's belief that only a small portion of VCs truly contribute positively to a company's board, highlighting the critical nature of selecting the right VCs.

• Ruloff's analytical skills and note-taking precision are noteworthy.
• His ability to simplify complex problems is valuable for entrepreneurs.

"Probably one of the top things about Ruloff is he's just so analytical and so good at working through complex situations and kind of boiling them down to, okay, well, this is probably the way I would look, like, break down that very complex problem and think about it."

The quote captures the speaker's admiration for Ruloff's analytical abilities and how they have been beneficial in the speaker's entrepreneurial journey.

• A long-term view is essential for making the right decisions.
• Focus on passion rather than short-term gains or exits.
• Personal life changes, such as having children, can refocus an entrepreneur's priorities.

"I think that people should really work on what they're super passionate about. That is the most important thing."

This quote conveys the speaker's belief that passion should drive entrepreneurial endeavors rather than short-term objectives or the prospect of a quick exit.

• Parenthood leads to more efficient time management.
• Responsibility for a child can enhance empathy and understanding of a broader range of people.

"So you definitely spend your time more carefully. I do three things in life. I do honor family, and I ride bicycles to stay in shape."

The quote reveals how parenthood has streamlined the speaker's focus to three main aspects of life, suggesting a shift towards more intentional time management.

• The goal is to retain foundational team members as the company grows.
• Admiration for companies like Google and Facebook that have retained early team members.

"I'm really jealous of what I think both Facebook and Google have. So, like, if you look at Google, you've got people like Sindar who are there totally from the start, right?"

This quote reflects the speaker's aspiration to maintain a stable, long-term team similar to that of successful tech giants, valuing the continuity and depth of experience those members bring.

• Rapid growth helps maintain interest and retention for employees.
• Empowering smart individuals is crucial; dictating their actions is ineffective.
• Trusting senior leadership to manage their areas is important for success.

I think it helps when you're growing really quickly because I think it keeps it interesting for people. And then I think empowering people to clearly both Larry and Sergey and then Mark did a good job of truly empowering really smart people because you cannot keep really smart people. If you kind of just tell them what to do, it doesn't work. So entrusting the senior leadership that you hire to kind of run their show, I think is also really important in.

This quote emphasizes the importance of growth and empowerment in retaining employees, especially smart individuals, by giving them autonomy and responsibilities.

• Determining if someone is scaling with the company involves assessing their fit with the evolving roles.
• Roles change rapidly, and some individuals are better suited for specific stages or roles.
• Founders often experience a sudden realization when someone who was once incredible no longer fits the role.
• It's important to address the issue quickly, considering reassignment, hiring someone above them, or letting them go.

When people don't scale with the company? It's really interesting. It really means that they're not scaling with the role that they're in with the company because roles do change very quickly and some people just are better for certain stages in certain roles. And what usually happens when you talk to founders, you'll kind of hear this same story over and over again. Person X was absolutely incredible. And then one day I woke up and I realized that Person X was no longer incredible and it blew my mind. And all founders, I think, have had that happen to them. And really the most important thing to do is quickly start to talk to that person about what you perceive and figure out if new role would be better for them or it would be better to bring someone in who they report to, or is it better for them to leave the company and go do something else because they like that role at that stage and they should go do it again at another company?

This quote discusses the challenge of individuals not keeping up with the growth of the company and the need to make tough decisions regarding their role within the organization.

• Seth Sternberg's favorite book is "The Firm" by John Grisham, which is the first long book he read cover to cover.

Probably the firms. It's a John Grisham book. It's one of the first he did. I think it's the one that put him on the map. And it's because it's the first long book that I actually got through my add to be able to read cover to cover.

Seth Sternberg shares his favorite book, highlighting its significance in his reading journey.

• Ensuring the right team is in place is the most important aspect for Seth Sternberg.

It's actually really team. My job is have an amazing team because they're the ones who make honor real. So ensuring that we have the right people is the number one thing for me.

This quote underscores the significance of having the right team for the success of his company, Honor.

• Seth Sternberg often refers back to the KISS principle: "Keep it simple, stupid."

Oh, wow, actually kiss. Keep it simple, stupid. I think when you overcomplicate things, it usually becomes too hard to do.

The quote reflects Sternberg's belief in the importance of simplicity in processes and decision-making.

• Getting his pilot's license and experiences while flying have taught Seth Sternberg to make decisions quickly and distinguish important information from noise.

Actually probably the process of getting my pilot's license and then a few of the things that have happened when flying airplanes, because sometimes things happen really fast and you have to make decisions really fast. But the number one thing in flying an airplane is you learn that you get all sorts of data coming at you, like, here's my altitude and here's the way the plane is pointing, and here's my air speed. And sometimes they seem to conflict. It's too much information and you don't know how to process it all. And so you have to kind of pick signal from noise and make a decision without perfect information, but based on kind of the best information you have. And that applies to running startups very well.

The quote illustrates how piloting has shaped Sternberg's approach to decision-making and information processing in the context of running startups.

• Sternberg surrounds himself with people who share his beliefs and are committed to pushing hard.

I think the people around me honestly believe most of the things I do. Like I surround myself with people who believe and they push really hard.

This quote explains that Sternberg values alignment in beliefs within his team and network.

• The goal is to build a consistent, solid home care experience across the country.
• Honor aims to introduce new products and services that will redefine home care.
• The focus is on improving the lives of the elderly, their children, and care professionals.

The first and foremost is to just build a really consistent, solid home care experience across the entire country that does not exist today. And if we do that, we'll have made the world. So much better for the elderly and their kids and the care pros. And we'll do that in partnership with the existing home care industry because that's a big part of our model. And then also within five years for sure, we'll have introduced kind of new products and services into the homes. That really changed the face of what home care is considered to be today, but will make it so much better for kids and their parents.

Seth Sternberg shares his vision for the future of Honor, emphasizing the importance of partnerships and innovation in improving home care services.