20VC When Should CEOs Ask Their VC For Help, When Do Companies Really Need A Board & What The Series A Expansion Means For Startups with Max Gazor, General Partner @ CRV

In the latest episode of "20 Minutes VC," host Harry Stebings interviews Max Gazor, a general partner at CRV (Charles River Ventures), a venture capital firm with a storied history and a portfolio featuring companies like Twitter and Zendesk. Gazor, who previously worked on Cisco's corporate development team, shares insights on the venture capital industry, discussing the importance of company culture, the difficulty of breaking into VC, and the significance of founder integrity and resilience. He also touches on strategic reserve allocation for startups, the evolving benchmarks for Series A funding, and the value of maintaining a frugal mindset before achieving product-market fit. Additionally, Gazor highlights the underutilized tactic of building powerful boards and the potential of AI in shaping future tech opportunities.

• Harry Stebbings introduces the episode of the 20 Minutes VC and welcomes listeners to follow his Snapchat.
• He announces that the episode will feature Max Gazor, a general partner at CRV.
• CRV is highlighted as one of the oldest and most successful VC firms, now on their 16th fund.
• Max Gazor's background includes leading deals for companies like Airtable and Simplivity, and working with Cisco's corporate development team.
• A thank you is extended to Max's colleague SAR Gur for introducing today's episode.

Harry stebings here for another episode of the 20 Minutes VC, where you can see all things behind the scenes on Snapchat at h stepbings with two b's. It'd be fantastic to see you there. But to the show today and following Monday's episode with Will Porteous at Rre on the east coast, we return today to the Valley. And joining me in the hot seat, I'm thrilled to welcome Max Gazor. Max is a general partner at CRV, one of the nation's oldest and most successful VC firms, now on their 16th fund and with a portfolio including the likes of Twitter, Yammer, Zendesk and Class Pass, just to name a few. As for Max, he's led deals in the likes of airtable, Simplivity, Xamarin and many more incredible companies. And prior to CRV, Max led acquisitions and investments across enterprise and emerging technologies for Cisco's corporate development team. I do also have to say a huge thanks to Max's colleague and previous guest SAR Gur for the fantastic intro today. And if you haven't seen Sar's episode, then that really is a must.

The quote introduces the host, Harry Stebbings, and the guest, Max Gazor, highlighting Max's role at CRV and his professional background, setting the stage for the podcast episode.

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• Max Gazor shares his admiration for VC and his technical background.
• He describes his opportunity to work with CRV in Cambridge after business school.
• After leaving Cisco, Max reacquainted himself with CRV and joined the firm within a week.
• Max emphasizes the importance of cultural fit and the apprentice model in VC firms.

You know, I'd always admired VC from the outside, pretty technical background, and had always been around the valley professionally and so admired vcs and sort of wanted to know more about kind of how the business works. So when I graduated business school, I had an opportunity to spend some time with the folks at CRV out in Cambridge and kind of got to know them culturally and what the firm was about. And about a year later had an opportunity, after having left Cisco, to kind of figure out what was next for me and got to reacquaint myself with the team at CRV. And quickly, within about a week, I had an opportunity to join the firm.

Max Gazor recounts his path into venture capital, highlighting his technical background, admiration for VC, and the significance of cultural understanding when joining a VC firm.

• Max Gazor discusses why breaking into VC is difficult due to the value placed on firm culture.
• He notes that small team sizes and the apprenticeship model make the integration of new members a careful consideration.
• Max's familiarity with CRV's team helped him overcome these barriers.

Yeah, I think it comes down to the fact that vcs really cherish their cultures and the cultures of the firms. These are organizations that have kind of honed specific cultures over decades, and bringing on someone new is sometimes scary for folks in terms of understanding how they fit internally. I think the advantage that I had in particularly breaking in was that I had spent some time with the team and I'd shown myself and had also become familiar with the people at the team. And so it was a much easier decision. But in general, I think because they are small teams and it's an apprentice model and you spend and invest a lot of time in people, you really want to make sure that the people that you bring on are strong fits internally. And I think that that's the key barrier is just that time investment that a lot of partners don't have.

This quote explains the intricacies of VC recruitment, emphasizing the importance of cultural fit and the time investment required in the apprenticeship model of VC firms.

• The conversation shifts to the topic of integrating new partners and transitioning out more seasoned ones.
• Max Gazor acknowledges the challenge due to the enjoyable nature of venture work.
• He explains that the process varies by firm and that the unique role of venture capital makes the discussion ongoing.

Well, it's a topical discussion because it varies by firm. I'd say that in general, venture is a job that people really enjoy and cherish. And so I can see it from both ends, I can see why folks want to stick around, right, and continue the job because it's such a fun job. And at the other end, I can see why folks want to break in because it is a tremendous opportunity and a really unique role. So I think the discussion of kind of sunsetting folks and bringing in new folks is always going to exist as long as venture exists, just because of the nature of the role. And I think how unique it is.

Max Gazor reflects on the dynamics of partner transitions within VC firms, considering the desirability of the role and the individual firm's approaches to change.

• Max Gazor's experience with Oracle and Cisco informed his approach to evaluating startups.
• He learned the significance of company culture and founder dynamics from M&A perspectives.
• The importance of geography and collaborative work environments are also highlighted as key considerations for buyers and venture capitalists.

Yeah, so when I was at, I started my career at Oracle and then later at Cisco. And in both companies I served in a corporate development type function where I worked on M A. And I got to meet lots and lots and lots of startups, many of them in different stages of looking for a buyer, some of them at the final month of their life, and some in a much stronger position. But I think what I learned from that is a few things. One is I learned how important culture is and just in general, and how buyers look at that kind of thing. And it's really informed my view in terms of how I see teams and companies come together at the formation stage. What I've noticed is that the culture and the dynamic of founders really influences the entire life of the company, all the way from formation to exit. And it's hard to fake it. And so what I'd often see in my role at Cisco is meeting teams that either were slightly dysfunctional or had a varying view on how the team should form and continue, et cetera. I'd say that's carried with me, certainly. I'd also say that, like I mentioned, geography is important, making sure that folks are kind of in the same room to the extent possible, and working well and collaboratively. Those are the types of important things that buyers look for, and it's really not emphasized enough. I would say.

Max Gazor shares insights from his corporate development experiences, emphasizing the impact of culture, founder dynamics, and geographic considerations on the success and evaluation of startups.## Building Conviction in Venture Capital

• Identifying the potential in startups is challenging due to the volume of companies and the need to make impactful investment decisions.
• The key to building conviction is spending time with founders to understand their motivations, backgrounds, and life stories.
• Early-stage venture capital is considered a people business, where the personality and character of founders are critical.
• Technical founders who have defied odds and shown persistence and resilience are highly valued.

"I'd say for me, again, it's different for every investor, but for me, it's really spending time with the founders and really understanding what motivates them."

This quote emphasizes the importance of personal interaction with founders to gauge their passion and drive, which is crucial for early-stage investment decisions.

• Different investors prioritize different traits in founders, such as humility and having a "chip on the shoulder."
• Integrity is highlighted as a black-and-white, non-negotiable trait for founders.
• The ability to recruit and lead a team effectively is considered a hallmark of a great founder.

"I'd look for high integrity founders that take care of their team, that really empathize and are compassionate with their co-founders."

The quote underlines the importance of integrity in founders, suggesting that it influences how they treat their team and co-founders, and ultimately contributes to their success.

• Reserves are allocated early on for companies, and sticking with this allocation is preferred to support companies through various phases.
• Patience and understanding are key when dealing with the ups and downs of startup growth.
• The aim is to support companies until they reach significant valuation increases.

"We try to make sure that we're supporting the companies through the ups and the downs."

This quote implies a long-term commitment to the companies invested in, highlighting the importance of consistent support throughout the startup's journey.

• The competitive nature of early-stage startups has led to increased benchmarks for series A funding and larger seed rounds.
• Founders may need to extend their runway to 24 months due to the competitive climate.
• Frugality and resourcefulness in managing burn rates are preferred qualities in founders.

"So I prefer companies and founders that manage to keep burn low to be resourceful to kind of live a frugal and efficient lifestyle versus those that raise lots and lots of money in the seed round and kind of live a little bit richer."

This quote reveals a preference for founders who can operate efficiently with limited resources, suggesting that this trait is valuable for long-term sustainability.

• Frugality does not conflict with the venture capital ethos of aggressive growth.
• Efficiently reaching product-market fit is important before scaling up spending on customer acquisition and expansion.
• In certain "land grab" markets, aggressive hiring and spending may be appropriate, but generally, resourcefulness is preferred.

"It doesn't make sense to overspend or overhire until you get to that point."

The quote suggests a strategic approach to spending and hiring, emphasizing the importance of reaching product-market fit before scaling operations.

• Raising capital is considered the first step before pursuing aggressive growth.
• Leading indicators for growth include month-on-month growth, landing key accounts, and making strong engineering hires.
• Positive market validation is sought after before doubling down on investment.

"Those are all the types of leading indicators that we look for. When we see those, we'll take the company out to market to raise capital and hopefully get positive validation from the market."

This quote outlines the metrics and signs that signal readiness for a startup to seek additional capital and enter a phase of aggressive growth.

• Respect for the entrepreneur is paramount.
• CRV has a culture of humility, modesty, and low ego.
• Policies such as the no-phone policy during meetings reflect respect for entrepreneurs and professionalism.

"I think the most important thing that we've learned is the respect for the entrepreneur."

The quote captures the core lesson from CRV's long history, which is the deep respect for the role and importance of the entrepreneur in venture capital success.## Respect and Admiration for Entrepreneurs

• CRV places significant emphasis on respecting and admiring entrepreneurs.
• The firm operates collaboratively, with partners working together on projects.
• The economic model at CRV is designed to facilitate partner collaboration.

"lot of effort, but really show a lot of respect and admiration for entrepreneurs."

The quote highlights CRV's foundational approach to engaging with entrepreneurs, emphasizing respect and effort in their interactions.

"It's a very collaborative firm."

This quote underscores the cooperative nature of CRV, where collaboration among partners is a key aspect of their working model.

"So the economic model here is also aligned so that we can work well with each other and help each other out on projects, which is somewhat unique in venture."

The quote points out that CRV's economic model is structured to support and encourage partner collaboration, setting it apart in the venture capital industry.

• CRV must stay relevant despite the emergence of new fund managers and larger capital pools.
• The firm believes its portfolio and track record will speak for themselves.
• CRV competes on market terms and leverages its history and experience to differentiate itself.

"Absolutely. I think that over time we hope and we believe that our portfolio and the track record will speak for itself."

Max Gazor expresses confidence that CRV's history and successful investments will maintain the firm's relevance in the industry.

"But there's also a decades of history and experience that we can kind of bring to bear to help some of these companies that differentiates us and kind of puts us in a different category."

Max Gazor highlights CRV's long-standing experience as a distinguishing factor that adds value to their relationships with companies.

• CEOs often fail to seek help early enough, sometimes waiting until it's too late.
• CEOs should feel comfortable asking for help regularly.
• A functional and trust-based board can create a safe environment for CEOs to request assistance.
• Communication about the willingness to help should be established early on.

"In my opinion, this is one of the things that is not talked about enough."

Max Gazor believes the topic of CEOs seeking help from their board is not discussed sufficiently within the industry.

"So I think a CEO should ask for help all the time, right?"

Max Gazor advocates for CEOs to be proactive in seeking guidance and support, emphasizing the importance of continuous communication with their board.

• Boards are not always necessary in the very early stages of a company.
• Regular communication between investors and entrepreneurs is crucial.
• Formal board meetings become more valuable around the Series A funding stage.
• Early on, CEOs should focus on product and customer engagement rather than preparing board materials.

"I think that my general rule is that companies don't need boards at the very early stage."

Max Gazor suggests that formal boards are not essential for companies in their initial stages, advocating for a focus on core business activities.

"What I do think is an efficient use of time is having a regular communication cadence so that the investor and the entrepreneur are in sync."

Max Gazor emphasizes the importance of maintaining open and regular communication between investors and entrepreneurs as an alternative to formal board meetings in the early stages.

• Intimacy and efficiency are critical for early-stage boards.
• Building a relationship with the right investor is delicate and fundamental.
• Intimacy can be fostered through informal interactions, not just formal meetings.

"Intimacy, for sure."

Max Gazor agrees that intimacy is a key characteristic of successful early-stage boards, highlighting the importance of a close relationship between investors and entrepreneurs.

"That intimacy is so important, it's really fundamental to capture at an early stage."

Max Gazor reiterates the significance of establishing a strong, intimate relationship with investors early in the company's life.

• Entrepreneurs often overlook the tactic of building a powerful board.
• Utilizing an independent board seat can bring in valuable resources and networks.
• Establishing a customer advisory board can be beneficial for B2B companies.
• CEOs should leverage their position to attract influential individuals to support the company.

"I think one of the most overlooked tactics is often finding, building a very powerful board, right?"

Max Gazor identifies the underutilized strategy of assembling an influential board to support the CEO and the company's growth.

"So thinking about how you leverage your position as a CEO to pull in other people of prominence in and around the company is something that I think is low hanging fruit that most entrepreneurs don't take advantage of."

Max Gazor advises CEOs to proactively engage prominent individuals to join their company's ecosystem, noting that many entrepreneurs neglect this opportunity.## Favorite Book

• Max Gazor's favorite book is "Old Man and the Sea" because it reminds him of the sea and the struggle associated with it.
• He finds the book beautiful and it resonates with his personal interest in fishing.

Yeah, I'm a fisherman and a fly fisherman. So my favorite book is old man in the sea, just because it reminds me of the sea and just kind of the struggle. I think it's a beautiful book.

This quote reflects Max Gazor's personal connection to fishing and the sea, explaining why "Old Man and the Sea" is his favorite book due to its thematic resonance with his hobbies.

• Max Gazor believes AWS is generally hurting enterprise venture opportunities.
• However, he also thinks that opportunities are shifting and will appear in other areas.

I think it is in general, but I think that the opportunities are shifting and will appear elsewhere.

Max Gazor acknowledges the disruptive impact of AWS on enterprise venture opportunities but suggests that this shift will lead to new opportunities elsewhere.

• Max Gazor's proudest moment involves recruiting an individual to a company that was later acquired by Microsoft.
• The individual's success, including affording a home and private schooling for her child, due to Max's recruitment, was particularly fulfilling.

And a couple of years later, the company was acquired for a lot of money by Microsoft, actually, and she did very well. So one of the proudest moments was just meeting up with her for coffee and kind of hearing firsthand the impact that that had on her life.

This quote highlights Max Gazor's sense of pride in having a positive, tangible impact on an individual's life through his professional actions, underscoring the personal fulfillment he derives from successful venture investments.

• Max Gazor believes AI will drive GDP growth over the next 30-40 years due to technology and automation.
• He compares the current state of AI to where cloud computing was a decade ago and anticipates a "tsunami of innovation."

I think if you look at the next 30 to 40 years and where GDP growth will come from, I think a lot of it will come from technology and automation.

This quote suggests Max Gazor's view on the significant role AI will play in future economic growth, driven by technology and automation advancements.

• AI affects all layers of the tech stack, including applications and infrastructure.
• Max Gazor sees a trend towards intelligent infrastructure and software that incorporates learning and data.

It's not just the applications, but it's the infrastructure as well. So intelligent infrastructure, kind of auto configuration, self healing networks, those are the types of things that I'm starting to see.

The quote indicates Max Gazor's observation of AI's broad impact across the technology sector, including advancements in intelligent infrastructure and software capabilities.

• Max Gazor enjoys Harry Stebbings' blog.

I like your blog, Harry.

Max Gazor expresses his preference for Harry Stebbings' blog, implying it provides content that he finds valuable or enjoyable.

• Max Gazor believes in the strategic advantage of keeping certain companies in stealth to maintain a technological and timing advantage.
• Achieving scarcity in emerging markets is important, and staying in stealth can prevent inspiring competitors.

I think there is some advantage to kind of keeping quiet where you feel that there's a timing advantage, where you don't want people to kind of take and run with a similar concept.

Max Gazor's quote emphasizes the competitive advantage of maintaining secrecy in certain ventures to protect technological advancements and market positioning.

• Max Gazor's most recent public investment is in Airtable, founded by Howie Liu.
• The investment was driven by the belief that Airtable could redefine productivity software by unbundling Excel and becoming a comprehensive collaboration platform.

I invested in airtable when it was three people. And really going back to the conviction and how we build conviction, I met Howie, I met the team, and I just fell in love with them and immediately, and knew that they're going to build a very, very big company.

This quote reveals Max Gazor's investment strategy based on early conviction in a team's potential, leading to his investment in Airtable due to its promising vision and leadership.

• Harry Stebbings expresses gratitude for having Max Gazor on the show and looks forward to featuring Howie Liu in an upcoming episode.
• Harry Stebbings also appreciates the support and contributions of the CRV team in past episodes.

So fantastic to have Max on the show there. And I do really want to say what a pleasure it's been to feature CRV in the past with SAR and Max today.

Harry Stebbings summarizes the positive experience of having Max Gazor on the podcast and the overall collaboration with the CRV team.

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• Pipedrive is recommended for sales CRM and pipeline management, with a focus on its visual interface and customization options.

WePay helps online platforms increase revenue through integrated payments processing... Pipedrive is the sales CRM and pipeline management software to use...

Harry Stebbings endorses WePay and Pipedrive as effective tools for their respective functions, emphasizing the advantages they offer to users.