20VC Investing Lessons From Fred Wilson and Brad Burnham @ USV, How CEO's Can Operationally Utilise Their Board & The Single Most Important Quality of A CEO with Andrew Parker, General Partner @ Spark Capital

In this episode of "20 Minutes VC," host Harry Stebbings interviews Andrew Parker, General Partner at Spark Capital, discussing Parker's journey from UI design and web development to venture capital, his tenure at Union Square Ventures, and his approach to VC at Spark Capital. Parker shares insights into the importance of persistence in CEOs, the role of naivety in entrepreneurship, and his strategy for board membership, highlighting the need for board members to be helpful rather than just authoritative. He emphasizes the significance of operational experience for board members and the evolving nature of IPOs. Parker also touches on the challenges of diversity in tech and the potential for ICOs, while advocating for a helpful, duty-bound approach to VC-startup relationships.

• Harry Stebbings hosts the "20 minutes vc" podcast.
• The podcast occasionally diverges from its usual focus on Snapchat.
• Harry Stebbings can be found on Instagram at hstebbings1996.
• Kevin Thor, a general partner at Spark Capital, was previously featured on the podcast.

You are listening to the 20 minutes vc with me, Harry Stebbings and mixing it up a little here, away from the usual Snapchat.

Harry Stebbings introduces the podcast and mentions a departure from the typical content related to Snapchat.

• Andrew Parker is a general partner at Spark Capital.
• Spark Capital is one of the best-performing funds of the last decade.
• The portfolio of Spark Capital includes Twitter, Slack, Oculus, Medium, Postmates, and Cruise.
• Andrew Parker has led investments in companies like Carter, Socratic, Splash, Particle, and Quantopian.
• Andrew previously worked at Union Square Ventures and has experience in UI design and user experience testing.

And today I'm delighted to be joined by Kevin's partner. So I'm thrilled to welcome Andrew Parker, general partner at Spark, one of the best performing funds of the last decade.

Harry Stebbings introduces Andrew Parker, highlighting his position at Spark Capital and its impressive portfolio.

• Harry Stebbings thanks Rob Go and Fred Wilson for their assistance in making the episode possible.
• Acknowledgment of the contributions from partners Nabil and Bijan in bringing Andrew Parker to the show.

I do also have to say a big thank you to rob Goat next to you and then Fred Wilson at USV for all they did to make this episode possible with questions and introductions.

Harry Stebbings expresses gratitude towards Rob Go and Fred Wilson for their help with the podcast episode.

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Harry Stebbings discusses the month's partnerships with Naturebox and Lisa, emphasizing the importance of healthy snacking and good sleep.

• Andrew Parker was a tree mascot at Stanford University.
• The experience of being a tree mascot at Stanford required creativity, ingenuity, and hustle, which parallels the entrepreneurial process.
• Andrew moved to New York City to follow his girlfriend and had the opportunity to work with Fred and Brad at Union Square Ventures.
• Andrew was hired at USV without a traditional resume review, based on his web presence and a blog he maintained.

Well, being a tree was certainly a unique experience. I think if you're in and around the valley, it's kind of like a part honor, part joke. I just fell over backwards on the opportunity to work with Fred and Brad at USC found the job via Fred's blog.

Andrew Parker shares his experience as a tree mascot at Stanford and how it somewhat prepared him for his career in venture capital. He also recounts how he secured a position at Union Square Ventures.

• Andrew chose to work at USV over attending Columbia's computer science master's program.
• The interview at USV focused on the future of mobile internet, which Andrew initially misjudged.
• Despite his misjudgment, Andrew's defense of his point of view demonstrated his background in product design, leading to his hiring at USV.

They never asked for my resume. They never checked any references. They just wanted to see my web presence. The interview was mostly around one question, which in retrospect I was like dead wrong.

Andrew Parker discusses his unconventional hiring process at USV and the pivotal interview question that he answered incorrectly but defended well.

• USV helped Andrew develop an investment thesis.
• The thesis at USV could be summarized as "large networks of engaged users, differentiated through user experience, defensible by network effects."
• The process of developing the thesis was thorough, involving blog posts, whiteboarding sessions, and developing a PPM for the fund.
• Andrew credits Brad for the formulation of the thesis and acknowledges the formative nature of the discussions he observed at USV.

They helped me understand what it takes to develop an investment thesis, which by the time I left, could be summarized there as large networks of engaged users, differentiated through user experience, defensible by network effects.

Andrew Parker reflects on how his time at USV was instrumental in learning how to develop an investment thesis and the key components of that thesis.

• Andrew Parker credits Union Square Ventures (USV) for providing a safe space to learn and make mistakes.
• Fred Wilson from USV was instrumental in teaching Andrew about deal modeling, waterfall analysis, and comparable valuations.
• Andrew's quantitative nature allowed him to grasp these concepts quickly and he spent time meditating over deal documents to self-teach.

Fred Wilson especially was helpful when it came to learning deal modeling, waterfall analysis, comparable valuations.

The quote highlights Fred Wilson's role in educating Andrew Parker on the technical aspects of venture capital, which were critical for his professional development in the industry.

• Andrew Parker is a second-generation venture capitalist, inspired by his father.
• His father's career progression from a lab bench to VP of R&D, transition to venture capital, and co-founding Ampersand Ventures were influential.
• Andrew's father later founded life sciences companies, including Boston Heart Diagnostics, and a co-working lab space, Lab Central.
• Observing his father's entrepreneurial spirit and drive taught Andrew the value of persistence and energy in entrepreneurship.

His story is really great. I mean, he started at a lab bench, working upwards inside of a publicly traded chemicals and materials company to become their vp of R and D. And then he transitioned to VC...

This quote describes the career trajectory of Andrew Parker's father, which provided Andrew with a model of entrepreneurial success and transition from science to venture capital.

• Andrew Parker believes the most important quality in CEOs is dogged persistence.
• Henry Ward, CEO at eShares, exemplifies this persistence.
• CEOs must be determined to make a significant impact despite challenges.

I think probably the most important quality, and the common theme across all of them is just their dogged persistence.

The quote emphasizes that persistence is the most critical attribute a CEO can possess, as it enables them to overcome obstacles and achieve their goals.

• Naivety can be a beneficial trait for entrepreneurs, as seen in the success of Venmo.
• The right balance involves being persistent but also open to new evidence and willing to reconsider positions.
• Strong opinions that are weakly held allow for adaptability and informed decision-making.

And so I think that naivety actually reinforces the persistence when necessary.

This quote suggests that naivety can sometimes support persistence by allowing entrepreneurs to pursue innovative ideas without being hindered by conventional wisdom or perceived barriers.

• Andrew Parker values board members who see their role as being helpful to the CEO rather than just overseeing them.
• He appreciates the approach of Henry Ward in engaging board members with business units.
• This involvement deepens board members' understanding and improves board meeting discussions.

I really like working with board members that have a sense of duty in being helpful to the CEO.

The quote reflects Andrew Parker's belief in a proactive and supportive role for board members, which enhances the functioning of the company and the effectiveness of the board.

• Directors have a fiduciary duty to the shareholders.
• While the board's mandate includes hiring and firing the CEO, board members should work in service to the company's interests.

Yeah, I mean, I think a director has a fiduciary obligation in service to the common share of holders of the company.

This quote clarifies the dual responsibilities of board members: to support the CEO's leadership while also upholding their fiduciary duties to the shareholders, which can include making executive decisions about the CEO's role.

• The role of a board member extends beyond hiring and firing the CEO.
• Emphasizing the importance of being helpful as a director on a day-to-day basis.
• Eshares' strong company culture values helpfulness, which is reinforced through internal recognition and actions.
• The concept of a board working for a CEO in a spirit of helpfulness while still maintaining objectivity in performance evaluation.

"o a responsibility there is hiring, firing the CEO, but certainly not the only thing. And I think the nuance to how you behave as a director on a day to day basis is like, are you a helpful person?" "They even named one of their conference rooms be helpful." "Helpfulness doesn't prevent you from objectively analyzing performance data or making difficult decisions."

These quotes emphasize that the responsibilities of a board member are multifaceted, with a significant aspect being the provision of day-to-day support and helpfulness to the CEO and company, which aligns with Eshares' cultural emphasis on helpfulness.

• Acknowledging personal strengths and weaknesses as a board member.
• The importance of complementing the board with independent directors who have operational experience.
• The practice of adding a current or recovering CEO to the board for operational insights and empathy with the founder.
• Learning from industry veterans like Fred Wilson about board composition and crisis management.

"I haven't founded five companies before and have this really deep personal experience in building companies directly hands on." "Frankly, I got this move from Fred, from shadowing him on boards." "But a current or recovering CEO on the board, in the boardroom, is going to be able to provide like 100 foot level, exact tactics of execution."

These quotes reveal the speaker's self-awareness regarding their limitations due to lack of direct founding experience and the strategy of including experienced CEOs on the board to provide tactical and empathetic guidance to the company.

• Expressing contentment with the current venture capital career.
• Recounting a personal anecdote that reflects on career trajectories and satisfaction.
• Declaring a lack of temptation towards operations and a strong appreciation for the current role in venture capital.

"I'm incredibly lucky to have the opportunity at spark to really stretch my wings and figure out, am I any good at this?" "I just have the best job, so I'm not tempted towards operations today, nor anytime soon."

The speaker conveys a strong sense of fulfillment in their venture capital career and indicates no current desire to shift into operational roles, highlighting the enjoyment and gratitude for their position.

• Discussing the mechanics of investing and the approach to company valuation.
• The concept of not turning down a company based solely on valuation.
• Considering the broader context and underlying concerns that might manifest as price sensitivity.

"I like that quote in a vacuum where the only issue that you're thinking about, or the issue that's preventing you from falling in love, is the price of the deal." "A great deal, definitionally, is never too expensive in hindsight." "You're just having Ajita over the price because you're worried about XYZ."

These quotes tackle the complexity of investment decisions, particularly the issue of price sensitivity, and suggest that a singular focus on price may obscure other fundamental concerns that need to be addressed.

• The strategy for reserve allocation in venture capital.
• The process of concentrating capital into the best-performing companies.
• The consideration of reserve allocation as part of the investment lifecycle.

"we close the fund to new investments with ample reserves to continue to support the portfolio over the life."

This quote indicates that reserve allocation is a deliberate part of the fund's strategy, ensuring that there are sufficient resources to support existing investments throughout their lifecycle.

• The investment reserve is updated quarterly without prioritization.
• Deal sponsors contribute their estimates of what a company will need over its lifetime.
• A probability-weighted approach is used for planning.
• Monte Carlo simulations are sometimes employed to predict outcomes.
• Reserves are not guaranteed but are likely if a company shows clear progress.

Now the reserve estimates are updated quarterly. We don't do a stack or a prioritization at that time.

This quote explains the periodic process of updating reserve estimates without ranking them, which is part of their investment strategy.

We've even done a Monte Carlo simulation against those estimates to see where that would land.

Monte Carlo simulations are used to forecast potential outcomes and inform investment decisions.

Reserves aren't guaranteed, but that said, I haven't seen that be the issue.

Although reserves are not promised, they are typically provided to companies demonstrating progress.

• Communication with founders about progress is tied to the company's capital raising activities.
• If a company cannot attract outside capital, tough conversations ensue.
• The firm supports companies that can attract outside capital, avoiding negative signals.

Well, I mean, that'll always be in the context of running a Runway.

The context for communication with founders is their company's ongoing capital raising efforts.

But if they're able to recruit outside capital, then we always find a way to be supportive.

The firm's support is contingent on a company's ability to raise external capital.

• Andrew Parker's favorite book is "Snow Crash" due to its prescience and addictive nature.
• He believes that IPOs will significantly change or possibly disappear in the next decade.
• Parker is optimistic about the energy surrounding Initial Coin Offerings (ICOs).

It's definitely snow crash.

This quote reveals Parker's favorite book and suggests its impact on his thinking.

I think that ipos are going to look very different in ten years.

Parker predicts a transformation in the way IPOs are conducted in the future.

I'm really enthusiastic about all the energy around them.

His enthusiasm for ICOs indicates an openness to new investment mechanisms.

• Parker considers his wife his biggest mentor, learning from her about excellence and values.
• These lessons impact his daily business conduct.

I would say it's my wife.

This quote highlights the personal influence on Parker's professional life and decision-making.

• Matt Levine's "Money Stuff" is a must-read newsletter for Parker.
• He finds it compelling and insightful.

Oh, definitely Matt Levine's money stuff.

Parker's endorsement of this newsletter indicates its value in his financial literacy and information gathering.

• Parker wishes to see an improvement in diversity within the tech ecosystem.
• He believes the industry should better represent the broader population.

I really wish we more impactful in helping change our diversity challenges.

This statement reflects Parker's desire to address diversity issues in the venture capital and startup sectors.

• Parker's most recent investment was in a company called Particle.
• His investment thesis, which he blogs about for each deal, was influenced by the CEO and the organic developer community around the company.

I really love the CEO, Zach and the rest of the team.

The quote indicates that leadership and team quality are crucial factors in Parker's investment decisions.

• Harry Stebbings thanks Andrew Parker for his participation and contributions.
• Parker's father is mentioned as a potential guest for future engagement.
• Stebbings promotes the podcast's social media presence and upcoming partnerships.

Oh hey, thank you so much for having me.

Parker expresses gratitude for the opportunity to participate in the podcast.

You can find more from him on Twitter at Andrew Parker.

Stebbings provides information on where to follow Parker for more insights.

• Naturebox is introduced as a healthy snacking option for offices.
• Lisa is promoted as a company providing a better sleep experience through their mattresses.

Well, that's where Naturebox comes in.

The partnership with Naturebox is highlighted as a perk for employee wellness.

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The mention of Lisa underscores the importance of health, particularly sleep, in the context of New Year resolutions.