20VC Ashton Kutcher on Early Lessons From Investing in Airbnb and Spotify, Why VC Ownership Requirements Are Becoming More and More Egregious & What Being Good At Product Truly Means

In a comprehensive conversation on "20 Minutes VC," host Harry Stebbings interviews Ashton Kutcher, founder and general partner at Sound Ventures. Kutcher, renowned for his media presence, is also celebrated for his savvy investments in tech startups like Spotify, Alibaba, and Airbnb. With his partner Gaia Siri, Kutcher has propelled Sound Ventures to the forefront of West Coast investment firms. Kutcher's journey from biochemical engineering student to actor and then to a tech investor illustrates his unique approach to investing, driven by cultural trends and an unwavering dedication to building a happier future. He emphasizes the importance of a company's narrative and product sensibility, sharing how personal experiences, including fatherhood, shape his investment perspective. Kutcher’s vision for Sound Ventures is not defined by fund size but by the positive impact and the collective strength of a network dedicated to solving the world's most challenging problems.

• Harry Stebbings introduces the show "20 Minutes VC" and mentions his Instagram handle.
• Harry expresses excitement about the guest, Ashton Kutcher, praising his work in media and as an investor.
• Ashton Kutcher is introduced as the founder and general partner at Sound Ventures.
• Harry acknowledges Shaq Khan and others for contributing to the preparation of the episode.
• Ashton Kutcher's investment portfolio and recognition by Time magazine are highlighted.

This is the 20 minutes VC with me, Harry Stebings, and you can see all things behind the scenes on Instagram at H. Debbings 1996 with two B's. But to the show today, and I've wanted to do this episode for a long, long time. We're all fans of his media work, but he's also the most incredible investor and product mind, and I'm just very, very honored and grateful to be able.

This quote introduces the podcast and the host, Harry Stebbings, while setting the stage for the featured guest, Ashton Kutcher, highlighting his achievements in media and investment.

• Hellosign is mentioned as a successful company with a user-centric product, acquired by Dropbox.
• Hymns is introduced as a wellness brand for men, addressing hair loss and skincare, with a special offer for listeners.
• Silicon Valley Bank is presented as a long-standing bank for visionaries, offering banking services to startups.

Before we move into the show today, though, I wanted to take a moment to mention Hellosign, a great example of a company that found success in building a product focused on user experience.

This quote is a promotion for Hellosign, emphasizing its success due to its focus on user experience and its acquisition by Dropbox.

• Ashton Kutcher studied biochemical engineering at the University of Iowa, which was his first introduction to computing.
• He pursued acting but maintained an interest in technology, using AOL chat rooms as an early form of social media marketing.
• Kutcher predicted the digital shift in content consumption and sought out companies that could help with content distribution.

Oh boy, what a journey. So I'd have to probably start. I went to University of Iowa School of Engineering. I was studying biochemical engineering, but that was really my first introduction to the power of a computer.

Ashton Kutcher describes his educational background and initial exposure to technology, which played a role in his later interest and success in the tech industry.

• Kutcher hired Sarah Ross to run his digital division and was introduced to key figures in Silicon Valley.
• He made his first investment in Optimizely and continued to invest in companies like Skype and Alibaba.
• Kutcher's early success in investing led him to continue and expand his investment activities.

Well, so at that point, I started reaching out and looking for companies that could help me quantify the distribution of content. And then I started looking for other companies that would help me accelerate the distribution of content.

This quote explains Kutcher's initial strategy in tech investments, focusing on companies that could enhance and quantify content distribution, which led to his first investment, Optimizely.

• Kutcher's perspective on investing is influenced by his age and the age of entrepreneurs.
• As a father, Kutcher explores new areas of interest for his children, which informs his investment decisions.
• The experience of raising teenage stepdaughters and having young children has broadened his understanding of technological trends.

Well, here's what's somewhat interesting. I believe that the people who are creating the future of the Internet are perpetually young.

This quote by Ashton Kutcher reflects his belief that young entrepreneurs drive the future of the internet, and his role as a father has given him insights into emerging technological interests, impacting his investment choices.

• The concept of self-perception and how one's sensory experiences shape their understanding of the world.
• The expansion of empathy and perspective through the experiences of others, particularly one's children.
• Empathy for children is described as having multiple "heads," each representing a different viewpoint.

"You can't see your own face. I mean, you really can't see your own head. So the only thing that occupies the space of your head is the world around you that your lens, or your ears, or your sense of feeling draws in. That is what occupies the space of our head. And when you have children, you have more than one head because you have such empathy for those individuals."

The quote reflects on the philosophical idea that one's perception of self is limited to the sensory input from the external world. Having children broadens one's perspective as you empathize and care for them, effectively extending your sensory experiences through theirs.

• Ashton Kutcher's unique approach to venture capital investment, influenced by his background in the entertainment industry.
• The typical technical background of major VCs and how that influences their investment choices.
• Ashton's focus on cultural narratives and trends to guide investment decisions.

"I think most major VCs in the valley, at least most of the partners in those firms, come from a technical background... We have technical chops on our team, but it's not the first lens that we're looking at companies through."

The quote explains that while many venture capitalists have a technical background, Ashton and his team prioritize cultural insights when evaluating potential investments. This approach distinguishes their investment strategy from the norm.

• Ashton Kutcher's investment strategy is informed by observing cultural movements and identifying enduring trends.
• Investments are made in companies that address cultural demands, such as those arising from the MeToo movement.
• The importance of adding value to the companies they invest in, particularly through crafting a compelling narrative.

"We move our investment thesis based on what we feel to be cultural trends, and then our value add as investors and the companies we're interested in working in are only the ones that we feel like we can add value to."

The quote emphasizes the strategy of aligning investment decisions with cultural trends and ensuring that as investors, they can contribute significant value to the companies, particularly in terms of shaping their narratives.

• Ashton's initial venture sourcing methods included raw search and networking.
• The shift in sourcing tactics over time, incorporating public input and pattern recognition.
• The example of Spotify demonstrates how cultural trends can lead to successful investments.

"I do a lot of sourcing through other people... And then I just run pattern recognition across thousands or hundreds of home screens and then pick off the apps that appear to keep showing up that I don't know what they are, and then I start the investigation process."

Ashton describes his method of sourcing new ventures by analyzing the home screens of smartphones, which he gathers from a wide audience. This pattern recognition helps identify popular and potentially investable apps.

• The concept of "the art of the pick" in venture capital, referring to the skill of selecting successful ventures.
• Ashton's interest in a founder's ability to persevere through challenges.
• The updated interview question that evaluates the founder's journey and achievements relative to their starting point.

"So if you look at where somebody came from and where they've gotten to, that is the more important metric than what's the hardest thing that you've persevered through?"

The quote introduces a refined approach to understanding a founder's resilience by comparing their starting point to their current status. It suggests that the journey and progress are more indicative of a founder's potential than just the challenges they've overcome.

• The use of personal vulnerability to create a more authentic interaction with founders.
• Ashton's method of showing his own vulnerability to encourage founders to open up.

"If I sense that that's the case, I usually move towards a space of vulnerability for myself. And generally, if you're willing to be vulnerable with someone, they then open up and realize they see your humanity as opposed to the image of who they think you are."

This quote explains how Ashton Kutcher uses vulnerability to connect on a human level with founders, which helps break down barriers that his celebrity status might otherwise create.

• The challenge of developing strong intuitions for products in unfamiliar areas.
• The advocacy for using the product extensively before deciding to invest.
• The example of living in Airbnbs to understand the service before investing in Airbnb.

"So I think it's hard to have strong intuitions about product in areas where you're not too familiar. I think you need to get familiar."

Ashton emphasizes the importance of becoming familiar with a product to develop a strong intuition about its potential success. This involves personally using the product to gain insights that might not be evident from the outside.

• Steve Jobs' launch of iOS revolutionized user interface (UI) and user experience (UX).
• This change made technology accessible to those previously unable to use computers.
• The clear nomenclature on the screen indicated the next action for users.
• The success of consumer apps in the app ecosystem influenced enterprise software.
• Enterprises adopted consumer-friendly UI/UX to improve click-through rates and funnel efficiencies.
• Good product design is about understanding what people want and simplifying their journey to achieve it.
• There's a balance between creating friction for less important actions and simplicity for key actions.
• The most important action should be the most accessible, like the central placement of Instagram's "add photo" button.

"And that nomenclature led to what I would call the amplification of many consumer products, which were like the first successful applications that came to the app ecosystem."

This quote highlights the significance of the user-friendly language introduced by iOS, which catalyzed the success of early applications in the app ecosystem.

"So it's really about how do you get people what they want, but also that is the most valuable thing for your company."

The quote emphasizes the dual focus of product design: fulfilling user desires and creating value for the company.

• Ashton Kutcher is sought after for his ability to increase distribution funnels.
• Early in his career, his significant Twitter following was used for promotional purposes.
• Kutcher mentions a successful sign-up strategy collaboration with Spotify.
• His partner, Gaio Siri, is influential in music management, aiding in branding efforts.
• Kutcher's experience in public life and PR provides valuable crisis management skills.
• The team's product sensibility helps companies think about present and future product development.
• They have expertise in identifying crucial metrics and growth strategies.
• Storytelling is at the core of their approach, influencing company narrative and mission.

"I think on PR, we're very versed on that, having lived in public for 20 years and done enough stupid things that no reason why I should even still have a career to some degree."

This quote reflects Kutcher's extensive experience in public relations, which has been honed through years of public exposure and learning from mistakes.

"And I think the biggest thing sort of goes back to the end of the day if you understand the narrative of your company, and storytelling is what's at our roots."

Here, Kutcher stresses the importance of understanding a company's narrative and the foundational role of storytelling in shaping a company's direction and public image.

• Ashton Kutcher acknowledges challenges in scaling from angel investor to institutional investor.
• Mentors like Ron Conway and Dan Rosensweig provided insights into different investment stages.
• At the angel stage, diverse advice is crucial, and cap tables serve as an early advisory board.
• As investments grow, some funds seek control through ownership percentages.
• Kutcher's team avoids taking board seats or demanding large ownership stakes.
• They have increased their average check size over time, which presents new challenges.
• The return on investment (ROI) and time spent must be justified with larger fund checks.

"As the check sizes grow, it's interesting. A lot of funds have these mandates about how much of a company they need to own to make the investment of value to them."

This quote discusses the growing trend of investment funds seeking larger ownership stakes in companies as the size of their investments increases.

"And FRANKLY, a check size that is worth your time is harder. Especially when I was writing my own checks."

Kutcher reflects on the difficulty of ensuring that the larger check sizes from the fund are justified in terms of the time and effort invested by the team.

• Sound Ventures aims to balance time spent on existing investments with sourcing new deals.
• The team focuses on adding value to companies they've invested in.
• Ashton Kutcher emphasizes spending at least 40% of the time on value addition.
• Building an enduring fund involves collaboration with other funds and making significant contributions to portfolio companies.

"And the thing I'm constantly pressing on my team is let's make sure that we're proportionately spending enough time adding value to companies relative to looking for the next deal."

This quote underscores the importance of dedicating a substantial portion of time to enhance the value of current investments, which is key to maintaining a sustainable and reputable fund.

• Ashton Kutcher discusses the long-term vision for Sound Ventures.
• The focus is on solving hard problems and improving lives, not on tracking returns or fund size.
• Ashton aspires to invest in a happier future, which may involve adjusting capital investment based on the impact rather than financial goals.

"My mantra is invest in a happier future. And if you want to know what the future looks like, build it."

This quote reflects Ashton's philosophy of shaping the future by investing in solutions that contribute to overall happiness, indicating that financial metrics are not his primary concern.

• Ashton Kutcher recommends "The Undoing Project" and "Scale" for their insights into human behavior and systems.
• He admits to being socially awkward despite appearing as a social animal.
• Ashton values the ability to afford to take one's time as a measure of true happiness.
• Building a high-quality team is highlighted as a current challenge at Sound Ventures.
• Celebrity investing is viewed skeptically, with Ashton predicting financial losses for many.
• Kindness in investing does not always yield direct returns but can have unexpected benefits.
• Ron Conway is mentioned as a mentor, with the takeaway being the importance of building a valuable network.
• Community, a messaging platform, is a recent exciting investment for Sound Ventures.

"True happiness is being able to afford to take your time."

This quote captures Ashton's belief in the intrinsic value of time and how it relates to one's happiness, which is a recurring theme in his investment philosophy.

• Ashton Kutcher prefers working with talented individuals on challenging issues.
• He does not fixate on the size of the fund or the number of partners.
• The goal is to create a positive impact and a happier future through investments.
• Ashton's approach to investing is driven by the potential for societal improvement rather than strict financial metrics.

"I've never been one to track returns. Personally, I just like working with the best and brightest people on the planet, solving really hard problems and making other people's lives better."

This quote highlights Ashton's focus on the qualitative aspects of investment, such as the caliber of people and the nature of problems being addressed, rather than quantitative financial returns.

• Harry Stebbings expresses gratitude for having Ashton on the show and looks forward to Sound Ventures' future.
• The episode concludes with a promotion of various services and products not directly related to the core discussion.

"I mean, what can I say? One of the highlights of my time doing 20 vc doing that episode. Such a pleasure to have Ashton on the show and cannot wait to see the exciting times ahead for him and sound."

Harry Stebbings concludes the podcast by reflecting on the enjoyment and significance of the episode with Ashton, indicating the value of the insights shared during their conversation.