20VC Homebrew's Hunter Walk on Why There Is No Series A Crunch, How To Package Portfolio Companies For The Next Round & Why The Bridge Round Is Not Always A Negative Sign

In this episode of "20 Minutes VC," host Harry Stebbings interviews Hunter Walk, a founding partner at Homebrew, a prominent seed fund in Silicon Valley with investments in companies like Ship, The Skimm, and Managed by Q. Before Homebrew, Hunter led consumer product management at YouTube and managed product and sales efforts for Google's AdSense. During the conversation, they discuss Hunter's transition from operating roles to venture capital, the importance of founder-market fit, and the impact of technology on societal issues like income inequality. Hunter emphasizes the value of supporting startups beyond providing capital, aligning with founders who possess a passionate commitment to their vision and the potential for technology to grow society positively if managed responsibly.

• Harry Stebings introduces the venture capital-themed podcast and himself.
• Harry mentions his Snapchat and the personal thank you messages he sends for all ads.
• He announces the guest, Hunter Walk, a founding partner at Homebrew.
• Homebrew is highlighted as a standout seed fund in Silicon Valley.
• Hunter Walk's background includes leading consumer product management at YouTube and managing Google's AdSense.
• Harry suggests checking out Hunter's blog and thanks Satya for introducing Hunter to the show.
• Harry promotes Foundersuite's fundraising software and Greenhouse's hiring tools, offering discounts to podcast listeners.

The start of another week in the wonderful world of venture capital with me, your host Harry Stebings, found on Snapchat at H Stebbings with two B's and all ads get a personal thank you message from me.

This quote is Harry introducing the podcast and himself, emphasizing his personal engagement with listeners and advertisers through Snapchat.

• Hunter Walk is introduced as a founding partner at Homebrew.
• Homebrew's investment portfolio includes companies like Ship, The Skim, and Managed by Q.
• Hunter's prior experience includes a significant role at YouTube and Google's AdSense.
• Hunter's blog is recommended for additional insights.

So joining me in the hot seat, we have Hunter Walk now. Hunter is a founding partner at Homebrew, one of Silicon Valley's breakout seed funds.

This quote introduces Hunter Walk and his role at Homebrew, setting the stage for his insights on venture capital and seed funding.

• Foundersuite is a software for raising capital with a significant track record in the startup community.
• Greenhouse Software offers tools for hiring processes and is recognized for its workplace environment.
• Promotional discounts are offered to podcast listeners for both Foundersuite and Greenhouse Software.

Foundersuite makes software for raising capital. In the last twelve months, startups using Foundersuite have raised over $130,000,000 in angel and vc funding.

This quote promotes Foundersuite, emphasizing its success in helping startups secure funding.

• Hunter discusses his transition from an operational role to venture capital.
• He describes his career progression and the decision to move into a helping role.
• The origin story of Homebrew is shared, including the partnership with Satya Patel.
• Hunter's angel investments and limited partnership experiences provided insights into venture capital.
• He emphasizes the personal fulfillment found in starting Homebrew versus joining an existing fund.

Sure. I guess for me it was really two things coming together. The first was at a point in my career where I created some headspace for myself of, hey, maybe one day instead of doing, I'll be helping.

This quote captures Hunter's thought process in transitioning from an operational role to one of supporting and advising other entrepreneurs, which ultimately led to the creation of Homebrew.

• Hunter reflects on the transition from being an operator to a venture capitalist.
• He mentions the preparation and understanding of the trade-offs involved in this transition.
• Hunter's prior angel investments and advisory roles provided a foundation for his venture capital career.
• The decision to leave Google and YouTube was made without regrets, with a sense of accomplishment.

I think I was aided by a few things in the sense that I haven't been surprised by what it requires, and I felt like I had a good sense of the trade-offs going in.

This quote highlights Hunter's awareness and preparedness for the transition from product management to venture capital, which helped him navigate the change effectively.

• Hunter discusses the dynamics of working with upstream venture capitalists.
• The importance of matching the right partner with a company is emphasized, especially in early stages.
• Homebrew's investment in The Skim and their strategic approach to a Series B round is used as an example.
• The concept of a "Series A crunch" is addressed, with Hunter expressing skepticism about its existence.

First thing is I love to piss them off by calling them late stage, even though you're doing a's and b's.

This quote humorously reflects Hunter's perspective on the venture capital landscape and his interactions with other venture capitalists who operate at different funding stages.

• Post-investment, it is crucial for companies to identify milestones to understand their business better, derisk, and prepare for the next round of funding.
• Founders who agree on milestones and achieve them have no trouble raising an A round.
• The increase in the number of seed companies allows investors to choose those with momentum and potential for venture-scale growth.
• Achieving milestones is a strong indicator of a company's ability to raise further funding.

"None of them have had problems raising an A round."

This quote emphasizes the correlation between meeting agreed-upon milestones and the success in securing an A round of investment. It underscores the importance of setting and hitting milestones for startup growth and investor confidence.

• Best investors understand the specific milestones needed to secure the next round of financing.
• Milestones are particularly important in mature and well-understood verticals where benchmarks and comparisons are readily available.

"The best investors are those that know very specifically the milestones it takes to raise the a in the next round of financing."

This quote suggests that the ability to identify critical milestones is a key attribute of successful investors, as it directly relates to a company's ability to secure future funding.

• Seed investors may need to educate the market about opportunities in industries that are not well understood or are pre-revenue by traditional metrics.
• Companies in nascent industries or with non-traditional metrics require investors to help convey their story to future investors.

"We knew that part of our job as a seed investor was needing to go and educate the market about why this was an opportunity and do that alongside the founders."

This quote highlights the proactive role seed investors sometimes play in advocating for their portfolio companies, especially when the companies operate in emerging industries or have unconventional business models.

• Gap rounds, such as second seeds or bridges, are not always indicative of a lack of product-market fit.
• Investors must discern whether a company needs more time to scale or if it has a sound growth trajectory that requires additional runway before raising an A round.

"Is it a case of smart people, smart team, but they're still kind of wandering in the desert they haven't figured out exactly how to scale."

This quote reflects the need for investors to assess whether a company requires more time for strategic development or if it is fundamentally struggling to find its market fit.

• Accelerated learning is a highly valued trait in founders, as it indicates the ability to adapt and grow quickly.
• Founder-market fit and the founder's passion and conviction are also critical factors in investment decisions.
• Homebrew's investment philosophy values founder traits and intentional company building.

"It would probably be something around founder, market fit, or the why? Why are they building this company?"

This quote underscores the importance of a founder's personal connection and motivation in relation to the business they are building, which is a significant factor in Homebrew's investment decisions.

• Homebrew VC is selective with investments, focusing on compatibility with founders.
• They prioritize a few high-quality investments over quantity.
• The firm is comfortable walking away from potential investments if there is a cultural mismatch.

"So we don't have to be the right partner for every talented founder, so long as we're making a set of 6789 investments each year that will ultimately turn into some number of meaningful, viable, transformative businesses."

The quote emphasizes Homebrew's strategy of making a limited number of investments in transformative businesses, indicating a quality-over-quantity approach and the importance of cultural alignment.

• Homebrew does not suffer from FOMO due to their strategy and self-awareness.
• The firm recognizes the abundance of investment opportunities and focuses on their successes.
• They aim to concentrate on what they are getting right rather than on potential missed opportunities.

"And so we try to focus much more on what we're getting right than worrying about what other people are doing or what we might be missing."

This quote reflects the firm's philosophy of focusing on their successful investments and strategic decisions rather than dwelling on missed opportunities or the actions of others.

• Homebrew's reputation was built on the founders' prior experience and relationships.
• Transparency, accessibility, and honesty are key to their brand.
• The firm relies on referrals from founders they work with to attract new investments.

"But I think it would have been much harder for us if we sprung forth without that particular operating history or reputation, because most of the at the seed stage, deal flow is more, I think, about what I'd call sort of dark deal flow, deals that don't get seen outside of a handful of funds than necessarily 50 funds all fighting over and tracking the same company."

The quote highlights the importance of Homebrew's operating history and established reputation in securing deal flow that is not widely visible in the market.

• Founders frequently mention transparency and honesty as key attributes of Homebrew.
• These values are not always prevalent in the VC industry.
• Homebrew aims to embody the values they wish to see in the broader technology community.

"And many of them say transparency and honesty over and over again."

This quote reflects the positive feedback from founders about Homebrew's approach, which is characterized by transparency and honesty, and stands out in the VC industry.

• Homebrew wants the VC community to reflect the values of the broader technology sector.
• They encourage participation in politics, NGOs, and diversity efforts.
• Homebrew believes in leading with values and emotion alongside intellect.

"I think seeing more and more people make sure that they're giving before they get. Not just by holding office hours for entrepreneurs, but by getting involved in politics, by putting their capital behind ngos, nonprofits, diversity efforts."

The quote advocates for a more value-driven and socially responsible approach within the venture capital community, beyond just business interactions.

• Homebrew is optimistic about technology's potential to expand economic prosperity.
• They support technology growth alongside active efforts to manage its societal impacts.
• The firm believes in aiding those affected by technological transformation.

"And then it's our job to work with private sector government to help figure out how to deal with distribution and redistribution of that pie."

This quote suggests a balanced view where technology growth is encouraged, but with a responsibility to address the resulting income inequality through collaborative efforts.

• The firm aims to prove its capability beyond its initial reputation.
• Homebrew is focused on demonstrating responsible management of investor capital.
• They plan to maintain their current fund size and strategy over a long-term horizon.

"But I have a real urgency to prove that we are good, worthy holders of their capital."

This quote conveys the firm's commitment to validating their investors' trust by effectively managing their investments and delivering returns.

• Homebrew's investment focus is on early-stage companies.
• The firm prefers a concentrated investment approach, investing both capital and time.
• The goal is to have a legacy tied to the success of companies across multiple funds rather than creating an intergenerational firm.
• Homebrew is open to changing their investment strategy as it's still early in their journey.

We want to stay focused on early stage companies that we can put not just capital, but time behind so it means a relatively concentrated investment philosophy.

This quote emphasizes Homebrew's commitment to early-stage companies and their strategy of not only providing capital but also investing significant time into the companies they choose to back.

• Hunter Walk enjoys Ben Thompson's writings and considers the subscription a bargain.
• He prioritizes reading Thompson's email column daily, sometimes saving it for a deeper understanding.

I've always loved Ben Thompson's writings. [...] And the one email column that I will make sure that I don't end a day without reading unless I'm going to save it to pocket and read it a second time or third time to really understand what he's saying.

Hunter Walk expresses his admiration for Ben Thompson's work and his personal habit of thoroughly engaging with the content, highlighting its value to him.

• Homebrew's second fund has many unannounced companies.
• The announcement of a seed round is increasingly seen as the start of a Series A fundraising effort.
• Joy Mode, a Los Angeles-based company, is a recent investment.
• Joy Mode offers a membership service for experiences over ownership, aligning with the trend towards valuing experiences more than possessions.
• Homebrew led Joy Mode's seed round in early 2015, and the company operated stealthily before announcing.

But one that was recently announced was a company called Joy Mode out of Los Angeles. [...] And it's part of Joe's notion that we're all going to spend less money on ownership and more money on experiences.

This quote explains the investment in Joy Mode, emphasizing the shift in consumer behavior towards experiences rather than ownership, and Homebrew's early involvement in the seed round.

• Harry Stebings spends 8-10 hours on each podcast episode.
• The process includes extensive research, recording, editing, and marketing.
• Marketing efforts involve reaching out to the guest's network to maximize the episode's distribution.

So it's about between eight and 10 hours an episode. [...] And then the marketing and the distribution side is another four without a doubt.

Harry Stebings outlines the time commitment and various stages involved in producing a podcast episode, highlighting the importance of marketing and distribution.

• The content of the podcast is tailored to ensure guests are happy with the final product.
• Certain content, such as unintended noises, unannounced news, or sensitive information, is edited out.
• The decision to remove content can come from Harry, the guest, or the guest's PR team.

Ultimately, my opinion is always that it's a product that you have to be happy with, because if you're not happy with it, you're not going to share it.

Harry Stebings discusses his philosophy on content editing, emphasizing the importance of guest satisfaction for the success and sharing of the podcast episode.

• Harry Stebings finds Snapchat to have a higher conversion rate than other channels.
• He uses Snaplytics to analyze and optimize his Snapchat content.
• He values the community and connections formed on Snapchat.

My Snapchat is currently a 64% open rate. [...] And they allow me to break down all my analytics for Snapchat channels so I can optimize conversion.

Harry Stebings discusses the effectiveness of Snapchat for engaging with his audience and the tools he uses to measure and improve his outreach.

• Harry Stebings shares his childhood nicknames related to his past obesity.
• He uses these anecdotes to connect with his audience on a personal level.

So my brother used to call me Augustus, from Augustus Gloop and Charlie and the chocolate factory. [...] Everyone still calls me Hazzer everywhere I go.

Harry Stebings shares personal nicknames from his childhood, providing a glimpse into his personal history and building a rapport with listeners.

• Harry Stebings thanks Hunter Walk for his contributions to the show.
• He promotes his and Hunter's blogs and social media accounts.
• Harry mentions Foundersuite and Greenhouse software as valuable tools for startups and hiring.

And I want to say a special thank you to him for all he's done for me in the show.

Harry Stebings expresses gratitude towards Hunter Walk for his support of the podcast, reflecting the importance of collaboration and community in the podcasting industry.