20VC The Secret To Building Pattern Recognition, Why MBA Does Not Always Equal Great Founder & What Are The Right Reasons To Start A Company With Hardi Meybaum, General Partner @ Matrix Partners

In this episode of the 20 minutes VC, host Harry Stebbings interviews Hardy Maybaum, general partner at Matrix Partners and former founder of Grabcad. Maybaum shares his journey from starting Grabcad in Estonia, raising funds, and eventually selling the company for $100 million, emphasizing his determination and competitive spirit. He discusses his transition from entrepreneur to VC, the importance of investing in founders with genuine drive and domain expertise, and the challenges of venture capital, such as the lack of immediate feedback. Maybaum also highlights his investment approach, focusing on founders solving their own problems and his recent investment in SketchDeck. The episode also features promotional segments for Wonder Capital and Angel Loop, platforms that offer investment opportunities in solar energy and facilitate founder-investor communication, respectively.

• Harry Stebbings hosts a special feature week on Matrix Partners on the 20 minutes VC.
• Hardy Maybaum, a general partner at Matrix Partners, is introduced as the guest following Josh Hannah's episode.
• Hardy is recognized as a natural-born entrepreneur and founder of Grabcad.
• Grabcad was sold to Stratisys in 2014 for $100 million.
• Hardy's story is highlighted as inspiring due to his ability and determination to move to the U.S. and succeed.

You are listening to part two of this very special feature week of Matrix partners on the 20 minutes VC with your host Harry Stebings at H stepbings on Snapchat.

This quote introduces the special feature week on Matrix Partners, indicating the focus of the podcast episodes.

Now Hardy is a general partner at Matrix Partners and similar to Josh, Hardy is a natural born entrepreneur.

This quote introduces Hardy Maybaum as a guest on the show, emphasizing his entrepreneurial background and his role at Matrix Partners.

• The 20 minutes VC is supported by Wonder Capital, an online investment platform focused on solar energy projects.
• Wonder Capital offers investors up to 8.5% annual returns and promotes environmental benefits.
• Angel Loop is a platform that improves communication between companies and investors.
• Angel Loop helps founders update investors on business performance and assists investors in supporting founders.

The 20 minutes VC is supported by Wonder Capital, an award winning online investment platform that allows individuals to invest in solar energy projects across the US.

This quote explains that the podcast is sponsored by Wonder Capital, outlining its investment opportunities and environmental impact.

Angel Loop is free for all investors and only costs $59 for companies per month.

This quote describes the services offered by Angel Loop, detailing the cost structure and the benefits for investors and companies using the platform.

• Hardy Maybaum shares his unexpected journey into venture capital.
• He founded Grabcad in Estonia, where startup culture was not prominent.
• Initially unaware of what venture capital was, Hardy learned about raising money from VCs to grow Grabcad.
• Matrix Partners invested in Grabcad, leading to Hardy's move from Estonia to Boston.
• After selling Grabcad, Hardy became an angel investor and was then invited to join Matrix Partners as a general partner.

If someone would have asked me two years ago if I would be a vc, the answer would be definitely no.

Hardy reflects on his unexpected career shift from entrepreneur to venture capitalist.

And I really grew close to David Skock and built a company. And then we sold the company end of 2014.

Hardy discusses his relationship with David Skock at Matrix Partners and the successful sale of Grabcad.

• Hardy recounts the challenging journey from Estonia to securing U.S. funding.
• He chose to visit Boston due to its proximity to major CAD companies, despite common advice to go to Silicon Valley.
• Hardy faced visa challenges and initial rejection from VCs in Boston, Silicon Valley, and London.
• Despite personal sacrifices, including not drawing a salary, Hardy persevered to raise funds for Grabcad.

And I met a lot of other vcs in Boston as well, and in Silicon Valley, and every single Vc turned me down.

This quote highlights the initial difficulties Hardy faced in securing VC funding, with multiple rejections from investors.

And that was quite a frustrating time. And also, I had a six month old daughter with me, and Estonia has a pretty high quality of life.

Hardy shares the personal challenges he faced during his fundraising efforts, including the impact on his family life.## Initial Struggles and Challenges

• Hardy Maybaum recalls the difficulty of his initial stay in a motel far from Boston.
• He contrasts the challenging living conditions with the impressive American CEOs he met.
• The experience of feeling inferior to his peers and considering returning to Estonia is highlighted.
• Maybaum discusses the initial hardships in Silicon Valley and the process of finding quality connections.
• He mentions a particularly demoralizing encounter with a VC who dismissed the future of manufacturing.

"So we ended up staying in a motel that cost $50 a night... it was so bad that literally, the wind was blowing through the door." "And then as a mechanical engineer coming from Estonia, I met all these American CEOs who were just fantastic in pitching their ideas."

The first quote describes the poor living conditions Hardy Maybaum and his daughter faced during their early days in the United States. The second quote reflects his feelings of inadequacy when comparing himself to American CEOs who were adept at pitching and running their businesses.

• Maybaum describes meeting David as a significant event that did not result in an immediate rejection or acceptance.
• The experience with various VCs in Boston and Silicon Valley, including rejections and negative feedback, is recounted.
• The narrative shifts to a positive note when Maybaum's venture gets into Dexter's incubator and secures funding from Matrix.

"And then the highlight of this trip was really meeting David... he didn't give me no. But he didn't give me yes." "We raised money from Matrix. That definitely helped a lot and things improved."

The first quote captures the uncertainty and hopefulness of Maybaum's interaction with David, which did not result in a clear outcome but was a key moment in his journey. The second quote marks a pivotal moment where his venture began to gain traction and received crucial funding.

• Hardy Maybaum shares that his competitive nature and desire to win drove him to persevere through tough times.
• He emphasizes the importance of giving his all to his endeavors and being content with failure only if he has put in maximum effort.
• His passion for the company, users, customers, team, and industry fueled his determination to succeed.

"I'm a very competitive person, one side, and I want to win and I don't want to give up." "If I've given everything I got and I fail, it's okay. I don't feel bad about that."

The first quote reveals Maybaum's competitive drive and unwillingness to give up, which were key factors in pushing through difficult periods. The second quote underscores his philosophy on effort and failure, indicating that he can accept failure as long as he knows he has done his utmost.

• Hardy Maybaum reflects on the challenges he anticipated and has faced in transitioning from an operational role to venture capital.
• He discusses the lack of immediate satisfaction and achievement compared to being a CEO.
• The absence of a feedback loop in venture capital is highlighted as a major difference from entrepreneurial work.

"Now I work the same hours... and I do not have that feeling of achievement in most of the weeks." "You don't know if you're good at your job because... you just don't know if those deals become good till five, six, seven years."

The first quote illustrates Maybaum's struggle with the lack of immediate gratification in venture capital compared to the direct results of operational work. The second quote points out the challenge of not having a feedback loop to gauge success in VC, contrasting it with the immediate feedback of launching a product as an entrepreneur.

• Maybaum provides insight into his current time allocation between sourcing new deals and working with existing portfolio companies.
• Given his recent start in venture capital, he spends a significant majority of his time on new deals.

"I do not have a big portfolio of boards... so my time allocation is definitely towards finding and sourcing new companies."

This quote explains Maybaum's focus on discovering and engaging with new companies due to his relatively new position in venture capital and a smaller set of existing commitments.

• Hardy Maybaum acknowledges the learning opportunities from all partners but has a closer relationship with David Skock.
• The mentorship from David, who was on his board and shares similar investment interests, is recognized as valuable.

"I am more closer to David Skock because he was on my board and we're looking similar investments."

The quote highlights the special mentorship bond between Maybaum and David Skock, stemming from their past collaboration and aligned investment focus.## Trusting One's Gut in Venture Capital

• Hardy Maybaum discusses the importance of trusting one's instincts when evaluating companies and investment opportunities.
• He emphasizes that, despite seeing many companies fail, it's crucial to believe in one's judgment about the right timing for a particular venture.
• Maybaum has learned from his partners, including Antonio Rodriguez and David, to trust his "cut" and to delve deeper into understanding the underlying metrics of a company, especially in the SaaS sector.

"I would say the things that I have learned from these guys is trust my cut. Like listen, but trust my cut."

This quote underlines the lesson Maybaum has learned from his colleagues about the value of trusting his instinctual judgment in the venture capital process.

• Hardy Maybaum recognizes his lack of extensive experience in venture capital compared to his colleagues.
• To compensate, he focuses on specific fields to develop pattern recognition, narrowing his scope to become thesis-driven and understand specific vectors in-depth.
• Maybaum also studies successful founders and inventors to identify what characteristics contribute to their success, such as drive and motivation.

"So one of the things where I focusing because I need to look at myself and think, okay, what are the things that I'm strong at?"

This quote reflects Maybaum's introspection on his strengths and his strategic approach to developing expertise and pattern recognition in venture capital.

• Hardy Maybaum has found that an intense drive is a common trait among the best founders.
• He can quickly assess a founder's level of drive and seeks to understand the motivations behind their desire to build a company.
• Maybaum believes that understanding a founder's drive is one of the most crucial aspects of evaluating their potential for success.

"One of the first thing I really look for, and I know, it sounds very, very obvious, but I'm looking this drive and it's really amazing that when you're looking these young founders, or typically the older the founder gets, you can see that the drive is starting to reduce."

This quote highlights the importance Maybaum places on the drive as an essential characteristic when evaluating founders for potential investment.

• Hardy Maybaum prefers founders who are solving problems they have personally experienced or are intimately familiar with.
• He shares examples of companies like Sketch Tech, which was born out of the founders' personal experiences and needs.
• Maybaum is skeptical of founders who start companies in markets where they lack passion or experience, even if there is a clear market opportunity.
• He believes that domain expertise and a deep understanding of the customer are critical for building great companies, as they lead to better products, marketing, and sales.

"I'm a very big believer of backing founders that are solving a problem they have their own."

This quote encapsulates Maybaum's investment philosophy, which favors founders who are addressing personal problems or issues they have directly encountered, as it indicates a deeper understanding of the market and customer needs.## Importance of Domain Expertise

• Domain expertise is critical in understanding the complexities of a specific industry.
• Lack of domain expertise often leads to underestimated challenges and failure in traction.
• Hardy Maybaum observed competitors without domain expertise in CAD (Computer-Aided Design) not being taken seriously and failing despite initial enthusiasm.

"But they don't understand our underlying reasons why nobody have built it."

This quote highlights the common oversight of hidden challenges in an industry that only domain experts are likely to be aware of.

"CAD is a very difficult space."

Here, Hardy emphasizes the complexity of the CAD industry, suggesting that it requires specific knowledge and experience to navigate successfully.

"I would never take them very seriously because I know that they were just not going to get traction."

Hardy explains his reasoning for not considering competitors without domain expertise as serious threats, as they are unlikely to gain market traction.

• The book "Deep Work" is influential for Hardy, emphasizing the importance of focused, undistracted work.
• It advocates for dedicating time to deep work amidst a transactional VC environment filled with constant communication and tasks.
• Hardy finds the practice of deep work beneficial for generating ideas, learning, and writing.

"It's a great book that reminds that especially as a VC, you can be super transactional and can spend every minute of your day just reading and responding emails and looking through the pitches."

This quote underlines the transactional nature of venture capital work and the need for dedicated time to engage in deeper, more thoughtful work.

• Selling Grabcad was a significant highlight for Hardy, marking a successful outcome for all parties involved.
• Hardy values hard work and the sense of achievement that comes from realizing a successful venture.

"Grabcad was a great outcome for everyone involved and that was just a very hard work for me."

Hardy reflects on the sale of Grabcad as a career highlight, emphasizing the effort put into the venture and the positive outcome for all stakeholders.

• Hardy aims to assist entrepreneurs and contribute to the success of companies that positively impact people's lives and work.
• He aspires to play a role in helping a company grow significantly and make a beneficial difference over the next ten years.

"If in ten years I've been able to play a small role in helping a big company that does something good and really helps people to work better or really influences how people live their lives, that for me would be an amazing win."

This quote outlines Hardy's long-term vision of contributing to companies that have a meaningful and positive impact on society.

• Hardy enjoys reading influential blogs, particularly David Scott's blog, which provides insights relevant to his work in venture capital.
• He refers to these blogs for refreshing knowledge and addressing challenges faced by companies he has invested in.

"I'm reading less blogs nowadays, but I do still enjoy reading David Scott blog called A and now other partners are starting to write stuff there as well."

Hardy notes a decrease in blog reading but still finds value in specific blogs like David Scott's for their relevant content and insights.

• Hardy's recent investment in Sketch Tech, a Y Combinator company, was driven by his personal connection to the product and admiration for the CEO's thoughtfulness.
• He identifies with the challenges the product addresses and is impressed by the CEO's proactive approach to business improvement.

"I would have used that product. I would love to have that product when I was running Grabcad."

Hardy's quote reveals the personal relevance and potential utility of Sketch Tech's product in his past entrepreneurial experience, influencing his investment decision.

"And I really liked the CEO, Chris there, who I think is extremely thoughtful guy."

This quote highlights Hardy's positive impression of Sketch Tech's CEO, which played a role in his decision to invest.

• Wonder Capital offers an online investment platform for solar energy projects, providing up to 8.5% annual returns.
• Investments support small and medium-sized businesses in adopting solar panels, with repayments made monthly to investors.
• Wonder Capital does not charge fees for managing investments.

"And with Wonder's online investment platform, you have the ability to earn up to 8.5% annually."

This quote promotes the potential financial returns of investing in solar energy projects through Wonder Capital.

• Angel Loop is a platform facilitating communication and data sharing between companies and investors.
• It allows founders to track performance metrics and update investors, while investors can offer support through introductions and funding.
• Angel Loop offers a free two-month trial with a promo code, showing their commitment to accessibility and investor relations.

"Founders have the ability to track their performance metrics and send out really clear updates to their investors on the state of their business."

This quote describes the functionality of Angel Loop in helping founders communicate effectively with their investors.