20VC Mythbuster Is Mobile Dying Is ARVR Overhyped Is The Excitement Around Bots Justified with Sean Flynn, Partner @ Shasta Ventures

Summary Notes


In the 20 minutes VC podcast, host Harry Stebings interviews Sean Flynn, managing partner at Shasta Ventures, who shares his journey from a childhood interest in investing to a career in venture capital. Flynn reflects on his time at Yahoo, emphasizing the importance of passion and focus for driving innovation and success in technology companies. He also discusses the significance of investing in founders with tenacity and the ability to overcome challenges, as evidenced by his investments in companies like Zephyr and Nextdoor. The conversation delves into the venture capital perspective on market size, the potential of mobile platforms despite maturity, and the future of emerging technologies like AR/VR and voice interfaces. Flynn remains bullish on mobile, citing untapped opportunities in consumer health and financial services, while expressing skepticism about the current hype around bots, suggesting a need for more compelling use cases. Flynn's latest investment in Tally highlights his investment strategy, focusing on massive markets, unique customer acquisition angles, and founder resonance.

Summary Notes

Introduction to the Podcast and Guest

  • Harry Stebbings hosts the 20 minutes VC podcast and invites listeners to follow him on Snapchat for behind-the-scenes content.
  • Sean Flynn, managing partner at Shasta Ventures, is the guest for the interview.
  • Sean Flynn invests in mobile-enabled consumer, Internet, and enterprise software companies.
  • Sean has led investments in companies like Dollar Shave Club and Whisper, and serves on the boards of Timehop, Zephyr, Swipely, Block, and Tiger Text.
  • Prior to Shasta Ventures, Sean worked at Yahoo, focusing on communication and messaging products.
  • Harry introduces DesignCrowd, an online marketplace for custom design services, and offers a promo code for listeners.

"This is the 20 minutes VC with your host Harry Stebings. And you can follow me on Snapchat at hstebings to see behind the scenes footage of the show and the interview process. And joining us for today's interview, I'm thrilled to welcome Sean Flyn, managing partner at Shasta Ventures."

This quote introduces the podcast episode, the host, and the guest, Sean Flynn, highlighting his role and expertise in venture capital.

Sean Flynn's Background and Path to Venture Capital

  • Sean Flynn's interest in investing began at age ten through his father, a lawyer who managed retirement funds.
  • After college, Sean pursued a career on Wall Street with Morgan Stanley but found investment banking unsatisfactory due to its superficial engagement with companies.
  • In 2004, despite the Internet bust, Sean joined Yahoo, believing in the Internet's transformational potential.
  • Sean's experience at Yahoo was divided into two periods: initially positive and educational, but later frustrating due to the lack of innovation at a large company.
  • This frustration led Sean to desire involvement in the early-stage ecosystem and eventually to join Shasta Ventures.

"My story starts quite early on. When I was probably about ten years old, my dad introduced me to the idea of investing."

This quote explains the early influence of Sean Flynn's father on his interest in investing and foreshadows his career in venture capital.

Takeaways from Yahoo Experience

  • Passion and dedication are crucial for turning great ideas into reality; mere presence without passion is insufficient.
  • Focus is essential; companies that try to be all things to all people often end up being mediocre.
  • Sean Flynn applies these lessons in his venture capital work, emphasizing passion in founders and focus in early-stage companies.

"The first is if you're just showing up to work and your career is a nine to five activity, you're very unlikely to do something great, you're very unlikely to do something special."

This quote highlights the importance of passion and commitment beyond a standard workday in achieving greatness, a principle Sean values in founders.

Myth Busting in Venture Capital

  • The podcast episode aims to address common myths in the venture capital industry.
  • One myth discussed is whether the team or the product is more important in investment decision-making.

"So I want to start with one that's so commonly discussed in VC and it's whether it's the team or the product that comes first in decision making."

This quote sets the stage for a discussion on a prevalent topic in venture capital, the priority of team versus product in investment decisions.

Product vs. Team in Investment Decisions

  • Sean Flynn deeply values product quality, believing that no amount of marketing or sales can compensate for a deficient product.
  • Despite this, as an early-stage investor, the team is often the primary bet, as they are the ones to bring ideas to reality.
  • Key traits Sean looks for in founders include tenacity and an ability to draw energy from failure.

"It's ultimately the people that we're betting on that are going to take these ideas and make it a reality."

This quote emphasizes the importance of the founding team in early-stage investments, as they are responsible for executing the product vision.

Investment Decisions and Founder Tenacity

  • Sean Flynn discusses his experience with the company originally named Movieclips, now called Zephyr.
  • He highlights the founders' resilience and determination, particularly that of founder Zach James.
  • Despite initial concerns about market size, the founder's refusal to accept rejection played a significant role in Sean's conviction in their potential for success.
  • The company's ability to pivot and adapt to challenges is emphasized as a key factor in building a successful business.
  • Sean Flynn refers to the "entrepreneurial gravitational pull" that certain founders possess, which gives them advantages in capital, partnerships, and talent acquisition.

"And the founder, a guy named Zach James, effectively wouldn't accept no for an answer. And I just remember being so compelled by the way he tackled that and just became convinced this guy was not going to lose. He was going to do whatever it took to be successful."

This quote underlines Zach James's tenacity and Sean Flynn's belief in his determination to succeed, which was a significant factor in the investment decision.

"It's that tenacity that I saw when he wasn't willing to accept no. That gave me great conviction that he was a special founder."

Sean Flynn explains that Zach James's unwillingness to accept rejection showcased his tenacity, convincing Sean of his potential as a special founder.

Entrepreneurial Gravitational Pull

  • Sean Flynn describes the entrepreneurial gravitational pull as a unique charisma that founders have, enabling them to envision and convincingly articulate the future of their company.
  • This pull creates "unfair advantages" for founders in acquiring resources essential for building a successful company.
  • The story of Nirav Tolia, CEO of Fanbase (now Nextdoor), is used as an example of a founder with such pull, who, despite market size concerns, managed to pivot and succeed.

"One of the other things that we look for is what I call this entrepreneurial gravitational pull. They have this special charisma, this ability to look into the future, tell you a story about the future, and convince you that it's absolutely going to happen, and they're going to be the people that make it happen."

Sean Flynn's quote defines the entrepreneurial gravitational pull and its significance in creating a compelling vision for the future that attracts investment and resources.

Market Size Considerations in Venture Capital

  • Sean Flynn addresses the importance of market size in venture capital investments, as large returns are needed to offset the risks and failures inherent in early-stage investing.
  • While acknowledging the necessity of targeting big markets, he also notes the difficulty in predicting market size years in advance and the potential for missing out on future opportunities by focusing too narrowly on current market size.
  • Sean Flynn mentions relaxing the market size constraint for special founders who demonstrate an ability to build significant businesses.

"And the only way you can make the economics work in totality is by having really giant returns. And that only happens when you're going after big markets."

This quote explains the venture capital requirement for large market opportunities to achieve the scale of returns needed to make the investment model viable.

"So we do tend to relax that constraint a little bit... because we felt like we had special founders that were going to find a way to build a really big and important business."

Sean Flynn discusses the flexibility in market size considerations when dealing with founders who exhibit exceptional potential and capabilities.

Mobile Platform Potential

  • Sean Flynn challenges the notion that mobile is a dying platform, citing the rapid shifts in technology trends and the tendency for people to follow these trends without critical analysis.
  • He argues that mobile still has significant potential to address unmet consumer needs and professional challenges.
  • Examples of areas where mobile can create value include consumer health, financial services, and unique user experiences like Pokémon Go.
  • Sean Flynn maintains a bullish stance on the mobile platform's capacity to solve big problems and create value.

"I think there are still lots of unmet needs and lots of challenges that consumers face, that workers in the context of their professional lives face, that mobile as a platform and as a device, is uniquely positioned to solve."

The quote emphasizes the ongoing opportunities for mobile platforms to address various consumer and professional needs despite the market's maturity.

AR/VR Hype and Market Timing

  • Sean Flynn expresses excitement about the long-term potential of AR/VR platforms to create value in education, healthcare, and enterprise.
  • He underscores the importance of timing in early-stage investing, noting that being too early may not yield returns.
  • The current focus for investors, according to Sean Flynn, should be on the enabling technology that will lay the groundwork for future AR/VR applications.

"Long term? Absolutely. I'm very excited about long term the potential value to be created from these platforms."

This quote reflects Sean Flynn's belief in the long-term potential of AR/VR platforms to revolutionize various industries.

"Being early doesn't always pay right. When I think about where we are in the development of this technology, I think we're still developing the underlying enabling technology."

Sean Flynn discusses the importance of market timing in investing and the current stage of AR/VR development, which is focused on creating the foundational technology.

Emerging Platforms and Their Phases

  • Emerging platforms like AR and VR require an installed base and mature enabling technologies to create special experiences.
  • The big wins in emerging platforms are expected to come during the deployment phase, not the installation phase.

"It'll be some time before those applications really emerge. It'll be some time before you get enough of an installed base to build a big enough business."

The quote emphasizes the time required for emerging platforms to develop an adequate user base and for the technologies to mature enough to support significant business opportunities.

"I think ultimately that's where the really big wins will come in the long term. Absolutely."

This quote from Sean Flynn agrees with the perspective that the deployment phase of emerging platforms is where the most significant gains will be realized in the long run.

GPS Technology as an Analogy for Emerging Platforms

  • GPS technology initially focused on the enabling technology and specialized devices.
  • The true value of GPS was unlocked when integrated into mobile phones, leading to applications like Uber and Yelp.
  • The integration into widely used devices allowed for the creation of special applications that brought significant value to the world.

"But what really unlocked the value was when that technology was embedded in these mobile phones that got out to everyone in the world."

Sean Flynn explains how embedding GPS in mobile phones was a pivotal moment that unlocked the technology's potential, leading to transformative applications.

The Rise of Bots

  • Bots are currently seen as more hype than reality.
  • Messaging platforms aim to create value for themselves by turning their ecosystems into development platforms.
  • The current bot applications often provide a more cumbersome experience compared to using dedicated apps.
  • Applications native to communication, such as Giphy and payments, may have more immediate value.

"Yeah, it's interesting. I think this one is probably more hype than reality, at least at this stage."

Sean Flynn expresses skepticism about the current state of bot technology, suggesting that it is more hype than a practical reality for users.

"But I feel like at this stage, it's more about the platforms trying to create value for themselves than actually think about the value they're creating for their end users."

The quote highlights a concern that the development of bots is currently more focused on the benefits to the platforms rather than the end users' needs.

Business Model for Bots

  • The use cases and problems solved for users must be identified before establishing a sustainable business model.
  • Bots that facilitate native communication experiences may have compelling use cases.

"Yeah, I think even before you get to the business models, just figuring out the use cases, right?"

Sean Flynn points out that understanding the problems that bots solve for users is a prerequisite to determining a viable business model.

Voice Interaction Interfaces

  • Siri has faced challenges due to being tethered to mobile devices and the underlying technology still maturing.
  • Voice interfaces have potential in contexts where using a phone is inconvenient or dangerous, such as in cars or during dinner.
  • Amazon Echo and Alexa provide a "magical experience" and show promise in music control and home automation.
  • There is interest in platforms that allow developers to build applications for multiple voice interfaces.

"A couple challenges that Siri's faced, you know, one, being tethered to the mobile device makes it more of a challenge for people to truly understand the value of that interaction paradigm."

Sean Flynn identifies the limitations of Siri, noting that being limited to mobile devices hinders users from appreciating the full potential of voice interaction.

"I'm a huge fan of Amazon Echo and Alexa. I got it early on. We have two of them, we've got one in our bedroom, we've got one in our dining room."

Sean Flynn shares his personal positive experience with Amazon Echo and Alexa, highlighting their effectiveness in providing a seamless voice interaction experience in the home.

Voice Technology in Brand Extension

  • Voice technology is seen as a valuable tool for large technology providers to extend their brand.
  • Developers can benefit from creating applications that distribute across multiple platforms, enhancing value creation.

"I think many of the large technology providers today that are on mobile, that are on the web, will want to use voice as a way to extend their brand with their customers."

This quote emphasizes the potential for voice technology to play a significant role in brand engagement and customer experience across various digital platforms.

Pros and Cons of Being a VC

  • The pro of being a VC, according to Sean Flynn, is the opportunity to work with smart, passionate entrepreneurs who use technology to make the world a better place.
  • Continuous learning is crucial in technology, and interactions with founders provide learning opportunities.

"For me, the pro is the people, right? Every day I wake up, I get to spend my time with really smart, passionate entrepreneurs."

Sean Flynn highlights the rewarding aspect of venture capital, which involves collaborating with innovative and driven individuals.

Favorite Book and Its Message

  • Sean Flynn's current favorite book is "What Do You Do With an Idea?" by Kobi Yamada.
  • The book, appreciated for its simplicity and powerful message, is about nurturing ideas despite doubts and criticisms.

"And there's this one book called what do you do with an idea? It's by Kobe Yamada."

This quote introduces the book that has made a significant impact on Sean Flynn, particularly due to its relevance to both children and adults in the context of fostering ideas.

Hiring Partners at Shasta

  • Hiring a partner like Doug Pepper involves assessing investment skills and cultural fit within the organization.
  • Mutual respect and trust are key in a partnership structure.

"But even more important to us than that was that he would be a great cultural fit."

Sean Flynn explains that while investment acumen is important, ensuring a new partner aligns with the firm's culture is paramount.

Favorite Blogs and Newsletters

  • Sean Flynn's preferred industry newsletter is Nuzzel, which filters news through his social networks.
  • Outside technology, he enjoys 538 blog for its data-driven analysis on sports and politics.

"My favorite email to open is nuzzle... I'm a huge fan of 538 blog."

Sean Flynn shares his go-to sources for curated technology news and data-centric insights on broader topics.

Recent Public Investment in Tally

  • Tally is a financial technology company that simplifies credit card management and saves customers money.
  • The investment decision was based on the market size, Tally's unique customer acquisition strategy, and the founders' characteristics.

"The most recent investment is a company called tally... The reasons why we made the investment really kind of boils down to three things."

This quote outlines the rationale behind Sean Flynn's investment in Tally, highlighting the market potential, competitive advantage, and the founders' qualities.

Conclusion and Contact Information

  • Harry Stebbings concludes the podcast by thanking Sean Flynn and promoting various ways to connect and receive updates.
  • DesignCrowd is mentioned as a resource for design projects with a promotional offer for listeners.

"And I'd like to say a huge thank you to Sean for coming on the show today... do not forget to head over to designcrowd.com VC."

Harry Stebbings wraps up the episode with gratitude towards Sean Flynn for his insights and provides listeners with information on a design service platform and ways to stay connected with the podcast.

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