20VC What Metrics LPs Really Use To Measure Manager Success, Why 10 Year Fund Structures Really Do Not Work & Why Venture Is So Similar To The Movie Business with Will Porteous, General Partner @ RRE Ventures

Summary Notes


In this episode of "The 20 Minute VC," host Harry Stebings interviews Will Porteous, General Partner and COO at RRE Ventures. They discuss the intricacies of venture capital, comparing the industry to the movie business with a focus on talent and market narratives. Porteous shares his journey from a prospective lawyer to a venture capitalist, emphasizing the importance of leadership and the ability to lead high-performance teams as taught by his mentor, Bill Campbell. The conversation also touches on the need for changes in fund structures to provide LPs with more predictable liquidity paths and the potential for location awareness technology to drive significant value creation in the future. Additionally, Porteous expresses concern over the dominance of incumbents in consumer markets but sees opportunity in grassroots adoption of new applications. Lastly, he highlights the investment in The Outline, a media company that successfully combines content creation, modern distribution, data analysis, and engaging advertiser experiences.

Summary Notes

Podcast Introduction

  • Harry Stebbings attempts to create unique intros for his podcast despite the challenge of having done a thousand episodes.
  • Will Porteous is introduced as the guest, a General Partner and COO at RRE Ventures.
  • RRE Ventures is a leading venture fund in New York with investments in BuzzFeed, Huffington Post, Giphy, and Paperless Post.
  • Will works primarily with media and hardware companies and is a director at several of these companies.
  • Steve Schlassman introduced Harry to Will, enabling the podcast episode.
  • Harry promotes WePay and Pipedrive, tools that offer integrated payment processing and sales CRM respectively.

Do you know how difficult it is to do different and fun intros when you've done a thousand podcasts? But still, I try.

This quote highlights the challenge of keeping podcast intros fresh and engaging after producing a large number of episodes.

And I'd love to see you there, where you can suggest guests and questions for future episodes on the show.

Harry encourages listener engagement by inviting them to suggest guests and questions on Snapchat.

But to the show today, and having interviewed the fantastic Steve Schlassman at Re, if you haven't listened to that one, by the way, it is a must listen, but I'm thrilled to welcome his colleague today, Will Porteous, general partner and COO at RRe Ventures, one of New York's leading venture funds, with investments in the likes of BuzzFeed, the Huffington Post, Giphy, and Paperless Post, just to name a few.

Harry introduces Will Porteous and highlights his role at RRE Ventures, along with the fund's notable investments.

I do also have to say a massive thank you to Steve Schlathman for the intro to Will today, without which this episode would not have been possible.

Harry acknowledges Steve Schlassman's role in facilitating the interview with Will.

But before we dive into the show today, I want to tell you about WePay.

Harry segues into promoting WePay, a payment processing service.

And how could we forget Pipedrive, something we use here every day at the 20 minutes VC to manage the pipeline for guests.

Harry promotes Pipedrive, a CRM tool used by his team.

Will Porteous' Background

  • Will originally planned to be a lawyer, following in his family's footsteps.
  • He delayed law school applications to join Netmarket, an Internet commerce company.
  • Will discovered a passion for the company-building process and realized he was not a natural entrepreneur but excelled in supporting roles.
  • He aimed to partner with entrepreneurs and contribute to the company-building process, leading him to venture capital.
  • Will joined RRE Ventures in 2000 as an associate and has grown within the firm.

Well, once upon a time, I was supposed to be a lawyer.

Will shares his initial career trajectory, which was influenced by his family's background in law.

I realized pretty quickly that what I loved was the company building process, and that I was probably never going to be content just being an advisor, being a principal, and being engaged directly working in the company building process was going to be important to me.

This quote reveals Will's realization that his passion lay in the active process of building companies rather than merely advising them.

Over the subsequent years, I was part of a number of sort of pioneers in the Internet commerce area.

Will reflects on his early career experiences in Internet commerce, which shaped his future path.

And I've been here ever since. And I've been lucky that this is a firm that has allowed me to grow professionally, given me a lot of opportunity, and where I continue to find great new challenges, both as an investor and in terms of managing and building a firm.

Will expresses gratitude for the opportunities and professional growth he has experienced at RRE Ventures.

Venture Industry Similarities to the Movie Business

  • Will draws an analogy between the venture industry and the movie business, emphasizing the focus on talent.
  • Venture capitalists are likened to producers, seeking talented individuals who can lead companies in the market.
  • Understanding the market and the personal and professional readiness of individuals to commit to building a company is crucial.
  • The venture industry's focus on talent is compared to casting the right actor for the right role at the right time in their career.

I think the similarities are obvious. All of us in the early stage venture business spend our time really thinking about talent, and we could just as easily be talking about leading actors.

Will highlights the venture industry's focus on identifying and nurturing talent, much like leading actors in the movie business.

I use that analogy because it captures, I think, our frankly, obsessive focus on talent.

The quote emphasizes the venture industry's intense focus on finding and supporting talented entrepreneurs.

Are they really ready to commit the 80 to 100 hours a week for four to five years that it really takes to build a company?

Will discusses the commitment required from entrepreneurs and the importance of assessing their readiness to undertake this journey.

And I think the analogies are really strong to finding the right role for the right actor at a certain point in their career.

Will reinforces the comparison between casting in movies and selecting entrepreneurs in the venture industry, considering the stage of their career.## Entrepreneurial Traits and Challenges

  • Great entrepreneurs often come from challenging backgrounds and have overcome significant personal obstacles.
  • Entrepreneurs with strong survival and leadership skills are likely to apply their past experiences to their current ventures.
  • There is a balance between being commercially driven and holding idealistic goals to build something meaningful in the world.

"We look for people who have almost strong survival skills and leadership skills, who can apply the things that they've learned in other periods to growing something great."

This quote emphasizes the importance of resilience and leadership in successful entrepreneurs, as well as the ability to transfer skills and experiences from one domain to another.

"We look for people who are intensely commercially driven, but also, frankly, pretty idealistic in wanting to build something that matters in the world."

Here, the speaker highlights the dual nature of entrepreneurship, combining a strong commercial drive with the aspiration to create something of significance and value.

Vision versus Stubbornness

  • The line between being visionary and being stubborn is delineated by an entrepreneur's pragmatism.
  • Successful entrepreneurs inspire others with their vision while also making hard choices and simplifying tasks to achieve their goals.
  • Persuasion and the ability to lead people are key traits of the best entrepreneurs.

"The best entrepreneurs are able to take people up the mountain with them and show them the view way off into the distance."

This metaphor illustrates the entrepreneur's role in inspiring and leading others towards a shared long-term vision.

"You have to be able to see in that person the ability to focus in and make hard choices and simplify things in order to get them done."

The speaker stresses the necessity for entrepreneurs to have a pragmatic approach, focusing on essential actions and making difficult decisions to progress their ventures.

Fund Structures and LP Liquidity

  • The traditional ten-year fund structure with extensions is outdated and creates investment cycle compression and challenges for general partners and limited partners (LPs).
  • LPs require a more predictable path to liquidity, which could be provided by incorporating a defined secondary option within the fund structure.
  • Implementing a new fund structure with secondary options could increase the pool of funds available for venture and private equity.

"It was invented 40 years ago and it creates a ton of challenges for everyone involved."

This quote refers to the traditional ten-year fund structure, highlighting how it is no longer suitable for the current investment landscape.

"I actually think you could structure a fund vehicle that has a defined secondary option in it."

The speaker proposes an innovative solution to improve LP liquidity by integrating a secondary market option into the fund structure.

Barriers to Changing Fund Structures

  • Cultural barriers exist due to the venture industry's comfort with locked-up capital and control over its release.
  • To implement changes, general partners (GPs), LPs, and secondary buyers must collaborate and agree on the new structure.
  • The best secondary buyers display efficiency and speed, indicating that change is possible with the right participants.

"Well, I think they're cultural barriers, because the venture industry has gotten used to having capital pretty locked up and to having controls over the unlocking of that capital."

This quote identifies the cultural resistance within the venture capital industry as a significant barrier to changing fund structures.

"It takes a forward looking group of gps, for starters. It takes a group of lps who are willing to really, frankly, play a role in designing that fund structure."

The speaker explains the need for proactive and cooperative behavior among general partners and limited partners to facilitate structural changes in funds.

Investment Discipline and Diversification

  • Diversification by time is crucial in composing a fund to avoid concentration in a single period, sector, or stage.
  • Extending the initial investment period beyond four years can create issues for fund IRR due to the time it takes for investments to realize.
  • LPs desire early liquidity and evidence of fund activity within the first few years.

"Diversification by time matters. But once you get out beyond an initial investment period of, say, four years, you create other problems for yourself."

This quote explains the importance of time diversification in investment strategies and the potential problems that arise when the investment period is extended too long.

"I know that MyLPs want to see two things in the first few years of the fund. They want to see early liquidity."

The speaker acknowledges the expectations of limited partners, particularly their interest in seeing early returns and active fund management within the initial years of the fund's life.## Venture Fund Performance and Management

  • Venture funds face pressure to show early performance to demonstrate potential success.
  • The company building process is lengthy and filled with challenges, even for the most successful companies.
  • Venture investors need patience to build initial portfolios and support companies over time.

"And there is that pressure to, frankly, produce performance early in the life of the fund, so that everyone can look at it and say, well, gee, it looks good."

This quote highlights the pressure venture funds face to show promising early results to attract and reassure investors.

"The company building process is long and it's full of challenging moments."

Here, the speaker emphasizes that building a company is a complex and prolonged endeavor, suggesting that venture investors should be prepared for a long-term commitment.

"Frankly, as venture investors, we need more leeway just to be more patient in composing those initial portfolios and then going through the long journey with those companies."

The speaker argues for the necessity of patience in venture investing, indicating that a long-term perspective is crucial for success.

Location Awareness and Value Creation

  • Location awareness technology has evolved significantly since 2006, moving from hardware to software solutions.
  • Precise location technology is expected to drive richer consumer experiences and innovative applications.
  • The future of mobile platforms includes enhanced indoor location precision and augmented reality integrations.
  • Investment opportunities are being explored in location-aware companies that offer new consumer experiences.

"Starting 2006 with re four, we began to look really closely at the way the GPS and location technology market was going to begin to change."

This quote introduces the historical context of the speaker's involvement with location technology and its evolution.

"We're going to find ourselves informed by location awareness and what's around us in a much richer way."

The speaker predicts that location awareness will greatly enhance our interaction with our surroundings, offering a richer experience.

"I think we're going to see a next generation of location aware companies that deliver richer consumer application experiences than anything we've seen before."

Here, the speaker expresses a strong belief in the transformative potential of the next wave of location-aware companies and their impact on consumer experiences.

Consumer Innovation and Incumbency Advantages

  • There is a debate on whether consumer innovation is still exciting given the dominance of incumbent companies.
  • The incumbents' control over customer acquisition is a significant barrier for new consumer experiences.
  • New consumer experiences may emerge organically through community adoption rather than competing with incumbents' financial resources.
  • Observations suggest that some of the most innovative consumer experiences are emerging in Europe.

"I share a lot of Jeremy's concerns about incumbency."

The speaker agrees with the viewpoint that the dominance of established companies presents challenges for new consumer innovations.

"It's the trends, the sharing of new application experiences among communities that we as investors have to really watch for."

This quote suggests that investors should focus on community-driven adoption of new applications as a way to circumvent the barriers posed by incumbents.

"Some of the most interesting things we're seeing in this area are in Europe."

The speaker points out that Europe is a significant source of innovative consumer experiences, which could be key to understanding global trends.

The Importance of Communication and Environment in Modern Media Companies

  • Effective communication and management are essential for both investors and managers.
  • The book "Radical Candor" by Kim Scott is recommended for improving managerial and communication skills.
  • Building a positive work environment is crucial for media companies to succeed and retain creative talent.

"I just incredibly enthusiastic about this notion of having better conversations."

The speaker endorses the concept of improving communicative abilities, as discussed in "Radical Candor," which is valuable for professional development.

"The reality is that the great media companies have over and over again succeeded by creating an environment where creative people can thrive."

This quote stresses the importance of a supportive work environment in the success of media companies, highlighting the need for investment in company culture.## Value Creation in Media Investing

  • Investing in media attracts exceptional creative talent, which drives significant value creation.
  • The logic of media investment is grounded in the potential for creative individuals to foster innovation and growth.

an attract exceptional creative people who will in turn help drive massive value creation for you. That, to me, is a key piece of logic in investing in media.

The quote emphasizes the strategic importance of attracting creative talent in the media sector as a means to generate substantial value.

Media Consumption Preferences

  • Will Porteous reads Fred Wilson and Ben Thompson's Stratachery regularly.
  • He also reads BuzzFeed News out of habit.

I read Fred Wilson religiously. I read Ben Thompson Stratachery pretty religiously. And I read Buzfeed news because I can't help it.

This quote lists the media outlets that Will Porteous consistently engages with, highlighting his personal consumption habits and preferences.

Mentorship and Leadership

  • Bill Campbell was a mentor to Will Porteous, known for coaching tech leaders and building high-performance teams.
  • Porteous learned about authentic leadership and communication from Campbell.
  • Campbell emphasized that everyone needs leadership, regardless of their intelligence or ambition.

So I was incredibly fortunate to have a close working relationship with Bill Campbell, the former chairman of Columbia University, chairman and CEO of Intuit, and someone who was Steve Jobs, coach Jeff Bezos, coach Sergey Brin, and Larry Page's coach.

This quote introduces Bill Campbell as a mentor to Will Porteous and outlines Campbell's prestigious background and influence.

It was the value that Bill was often good at communicating, that smart people, people of all walks of life and backgrounds, less smart people, less ambitious people, everyone needs to be led.

The quote conveys the core lesson from Bill Campbell that leadership is essential for all individuals within an organization, regardless of their capabilities or backgrounds.

Investment in The Outline

  • The Outline is a media company with a vision that aligns with key principles for building successful media companies.
  • Creating engaging content, understanding modern distribution, and committing to data are essential.
  • Providing excellent experiences for advertisers is critical and often overlooked in the media industry.

So our most recent public investment, the one that I led, is in a company called the Outline, which is a media company founded by Josh Topolski.

This quote announces The Outline as the most recent public investment led by Will Porteous.

And those three things are, quite simply, yes, you have to be able to create very engaging content experiences, things that people want to watch and they want to read, and that's nice.

The quote outlines the first principle for building a great media company—creating content that engages and attracts audiences.

But alongside that, you have to have a deep understanding of modern distribution and a deep commitment to data, a deep commitment to understanding how that piece of content is consumed, how it is shared, where it shows up and how it might or might not proliferate.

This quote highlights the second principle, emphasizing the importance of understanding content distribution and using data to analyze content consumption and sharing patterns.

And thirdly, and the thing, frankly, that we see the least of is you have to have a commitment to creating really great experiences for advertisers.

The final principle mentioned in the quote is the need for media companies to create valuable experiences for advertisers, an area that is often neglected.

Acknowledgements and Social Media Promotion

  • Will Porteous expresses gratitude for being on the show.
  • Harry Stebbings endorses Will's episode and promotes following on Twitter and Snapchat.
  • Stebbings also promotes Wepay and Pipedrive, tools for integrated payments processing and pipeline management.

Thanks, Harry. It was totally a privilege and thanks for having me.

Will Porteous thanks Harry Stebbings for the opportunity to be on the podcast, demonstrating appreciation for the platform provided.

Now, anyone that agrees with me on fun cycles is automatically a fantastic episode, but a huge hand to will for giving up the time today to come on the show.

Harry Stebbings gives a positive review of Will Porteous's episode and thanks him for participating, while also promoting their social media handles for further engagement.

I want to tell you about Wepay. WePay helps online platforms increase revenue through integrated payments processing...

...how could we forget Pipedrive, something we use here every day at the 20 minutes vc to manage the pipeline for guests.

These quotes serve as endorsements for Wepay and Pipedrive, explaining their benefits and encouraging listeners to try these services.

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