20VC Why VC Is A Game of Maximising Serendipity, How VCs Can Characterise Their Approach To Working & Product Lessons from Jack Dorsey & Sonos' John MacFarlane with Kevin Thau, General Partner @ Spark Capital

In the 2018 kickoff episode of "20 Minutes VC," host Harry Stebings interviews Kevin Thau, General Partner at Spark Capital, discussing his journey from an early employee at Twitter and Openwave to his current role in venture capital. Thau emphasizes the importance of being founder-driven in investments, focusing on consumer brands, and the power of contrarian thinking in challenging industry dogmas. He also highlights the significance of brand persona, timing in market entry, and the potential of new consumer brands emerging through platforms like Instagram. Thau's approach is informed by his extensive operational experience, allowing him to act as an embedded resource for startups. Additionally, the episode touches on the value of diversity in the VC ecosystem and the evolving nature of computing interfaces, as illustrated by Thau's investment in Control Labs, a company developing brain-machine interfaces. Throughout the conversation, Stebings also promotes partnerships with Naturebox and Lisa, aligning with the new year's focus on health.

• Spark Capital is recognized as one of the best performing funds of the last decade.
• Kevin Thau, a general partner at Spark Capital, has led investments in companies such as Medium, Lola, Control Labs, Aura, and Haven.
• Before joining Spark, Thau worked at Twitter, where he witnessed its growth from less than 20 employees to over a million users.
• Thau's early career included being the seventh employee at software.com, which became Openwave, contributing to the development of the first mobile browser and services.

"And I'm thrilled to welcome Kevin Thau, general partner at Spark Capital, one of the best performing funds of the last decade, with portfolio including the likes of Twitter, Slack, Oculus, Medium, Postmates, Cruise."

This quote introduces Kevin Thau and highlights Spark Capital's successful investment portfolio, setting the stage for his expertise in venture capital and technology startups.

• Kevin Thau grew up in Silicon Valley, influenced by his entrepreneur father and the startup culture.
• He was drawn to startups and venture capital from a young age, deciding to pursue this path after college in 1995.
• Thau's connection to Spark Capital began through his involvement with Buzzwire, one of Spark's early investments.
• His relationship with Spark Capital grew during his tenure at Twitter, leading to his eventual role as a general partner at Spark in San Francisco.

"So how I got into venture, so I've been aware of it. And then I had been part of a company called Buzzwire, that one of Spark's first investments, and Bijean Sabe was our investor and on the board. And so I got to know him."

This quote explains how Thau's early experiences with startups and venture capital, specifically through Buzzwire and its investor Bijean Sabe, led to his deeper involvement with Spark Capital.

• Thau considers his time at Twitter as an incredible opportunity to be part of a platform that significantly impacted global information distribution.
• A major lesson from Twitter's rapid growth was the challenge of maintaining focus and prioritization due to the diverse use of the product by a vast audience.
• Thau suggests that abundant resources can sometimes lead to a lack of discipline in decision-making, highlighting the importance of constraints for effective prioritization.

"I think one of the challenges of hyperscaling company, especially Twitter, when you have a product that is used by so many people in so many different ways, focus and prioritization becomes a big challenge."

This quote emphasizes the difficulty of managing a rapidly scaling company like Twitter, where the broad application of the product can complicate focus and prioritization.

• Thau expresses a preference for product roadmaps that have a long-term arc, rather than focusing solely on immediate functionality.
• He values the directional approach to product development, considering market trends and the future trajectory over a span of three to five years.
• Thau appreciates entrepreneurs who think about the long-term direction of their products and how they will evolve.

"I personally gravitate towards the product roadmap style of a long arc. I like thinking less in the balancing like the immediate term. Here's all the function features functionality we need right now versus where are we trying to go with this product over a three, five year timeline..."

This quote captures Thau's philosophy on product development, emphasizing the importance of having a long-term vision for the product roadmap beyond immediate needs.

• Thau has had the opportunity to work with some of the most prominent product visionaries in the tech industry.
• His experiences have given him insights into how successful entrepreneurs conceptualize and execute their product roadmap visions.

No verbatim quote provided for this section in the transcript.## Visionary Product Development

• Visionaries identify market pain points and opportunities, creating products before the market emerges.
• John McFarland, founder of Sonos, exemplified this by developing an internet-connected speaker before the prevalence of streaming services.
• Sonos was founded in 2003, ahead of its time, as digital music streaming was not yet mainstream.

"And I think he's a perfect example of someone who sees a pain in a market segment and opportunity and creates a product well before the market was there."

This quote highlights John McFarland's ability to foresee a market need and develop a product in anticipation of future demand, exemplifying visionary product development.

• Timing is crucial in product success; being ahead of the trend is beneficial, but being too early can be risky.
• Openwave created the first mobile browser, but the market for mobile data arrived much later, leading to a boom and bust for the company.
• Vertically integrated products have a better chance of success in early markets, providing a complete solution to consumers.

"It's a tricky needle to thread where you want to be ahead of the trend, but not too far ahead of the trend."

This quote emphasizes the delicate balance required in market timing to ensure a product meets the market at the right moment.

• Belief in an early market necessitates offering a complete product to consumers.
• Openwave's reliance on hardware manufacturers for mobile browsing contrasts with BlackBerry's integrated approach, which proved more effective.

"I think because if you're a believer in an early market, you have to give people the whole product."

The quote suggests that success in early markets may depend on providing an all-encompassing product that doesn't require additional integration by consumers.

• Kevin Thau's experience in various startup roles informs his approach to VC, acting as an extension of the portfolio companies' teams.
• The transition involves leveraging operational experience to guide decision-making in portfolio companies.

"I try to think of myself as an extension of their team, think of myself as an embedded resource that's helping them think through all these decisions, just like I did when I."

This quote reflects Kevin Thau's hands-on approach to venture capital, utilizing his comprehensive startup experience to support portfolio companies.

• Different venture capitalists have varying approaches: thesis-driven versus founder-driven.
• Kevin Thau's founder-driven approach leans on his ability to judge people and talent.
• Bijean's advice to Kevin included three questions to guide investment decisions: love for the product, willingness to work for the company, and belief in the product's appeal to others.

"Bijean had a good thing for me when I was first getting into the business, I said, how do you do this job? And he said, I have three questions I ask myself."

The quote outlines the foundational questions that guide Kevin Thau's investment decisions, highlighting the importance of personal conviction in a product and its team.

• The shift from startup to VC presents challenges in time management and creating opportunities.
• Venture capitalists must balance networking, research, and strategic thinking.
• Determining which companies to meet and invest in is part of the learning curve in VC.

"The biggest challenge for me is just how do you spend your time? I mean, we're in the business of manufacturing serendipity, and that's very unclear to me how you do that."

This quote conveys the uncertainty in venture capital work, particularly in how to effectively allocate time to generate valuable opportunities and insights.## Proactive Approach to Opportunities

• Harry Stebbings discusses his preference for a proactive approach in seeking new startups.
• Emphasizes the importance of control in choosing who to talk to and what to talk about.
• Prefers reaching out to entrepreneurs cold after researching interesting startups.

"I like the idea of hunting quite a bit. Reading or consuming information about where there might be new, interesting startups and then digging in and then just reaching out cold."

The quote illustrates Harry's strategy of actively seeking out startups rather than waiting for opportunities to come to him, highlighting his preference for maintaining control over his engagements.

• Kevin Thau believes great consumer brands are built on a multitude of small details.
• Identifies descriptive language, aesthetics, colors, design details, imagery, and product experience as key elements.
• Uses Twitter as an example of a strong consumer brand persona, contrasting it with Facebook.

"It's like 1000 little things that make your brand. Everything from the descriptive language to the aesthetics and the colors and all the little design details make your brand."

This quote emphasizes that a brand is not defined by a single characteristic but by a cumulative effect of numerous small details working together.

• Kevin Thau agrees with Kirsten Green's perspective that brands are akin to personalities.
• Looks for uniqueness in how companies talk about their products and services.
• Cites Yeti coolers and GoPro as examples of brands with strong, unique identities.

"I think people's personalities are multifaceted and people have a lot of different characteristics that create their personality."

Kevin Thau's quote reflects his view that, like human personalities, brands are complex and multifaceted, contributing to their uniqueness and appeal.

• Kevin Thau acknowledges the difficulty of succeeding in consumer electronics within venture capital.
• Suggests that betting on consumer market adoption is inherently challenging.
• Compares the difficulty with B2B companies that have recurring revenue and enterprise clients.

"Consumer electronics, anything in consumer is very, very hard because you're betting on a big market adoption."

The quote highlights the high-risk nature of consumer electronics ventures due to the reliance on mass market adoption.

• Kevin Thau considers a strong brand as a sustainable competitive advantage and a form of intellectual property.
• Uses Nike as an example of a brand that contributes to the company's longevity and success.

"It would be hard to say that Nike's brand isn't part of their sustainability."

Kevin Thau's quote suggests that a well-established brand, such as Nike's, plays a significant role in ensuring a company's enduring presence in the market.

• Kevin Thau sees Amazon as a powerful distribution channel but not as effective in building brands.
• Believes Instagram is a superior tool for brand building.
• Looks for the crafted image and content on a brand's Instagram to gauge its effectiveness.

"I don't know that I believe that Amazon does a great job of helping build brands. I don't see brands getting built on top of Amazon."

The quote expresses skepticism regarding Amazon's role in brand development, suggesting that while it is a strong sales platform, it is not as conducive to brand creation as other tools like Instagram.

• Kevin Thau values Instagram for its ability to convey a brand's essence.
• Focuses on the content and language used on Instagram profiles rather than likes or followers.
• Mentions Lola's Instagram as an example of effective brand communication.

"It's become my kind of go to when I'm learning about a consumer product company, I go to their Instagram and I feel like you get the best sense of what this brand is all about."

This quote underscores Instagram's importance in Kevin Thau's evaluation process for consumer product companies, as it provides insights into a brand's identity.

• Kevin Thau is optimistic about the emergence of next-generation e-commerce brands.
• Cites changes in distribution and marketing avenues as pivotal factors for new brand creation.
• Believes the current moment is significant for the development of sustaining next-gen brands.

"I do think there's going to be this next gen of incredibly sustaining next gen brands."

The quote conveys Kevin Thau's belief that the evolving landscape of distribution and marketing is conducive to the rise of new, lasting e-commerce brands.## Customer Acquisition Costs (CAC) in Industry

• Companies Speaker B invested in manage CAC effectively, balancing paid and organic growth.
• Building Instagram audiences is a powerful marketing channel, both paid and organic.

I don't feel like their CAC is out of control. I think they can manage it and get so much combination of paid versus organic.

This quote highlights Speaker B's observation that the companies they have invested in are maintaining a sustainable balance between paid and organic customer acquisition methods.

• Speaker B's favorite book is "Moneyball" by Michael Lewis.
• The book is admired for challenging industry dogma and changing the game, applicable across various fields.

My favorite book is Michael Lewis Moneyball. Why? Just because I think it was fascinating story on how there's so much dogma in certain industries and people think a certain way and it takes someone that challenges that to kind of fundamentally change the game.

Speaker B appreciates "Moneyball" for its narrative on challenging established beliefs and practices, which they see as relevant beyond sports.

• Speaker B does not value the overemphasis on educational brand association.
• Believes that where one goes to school is overvalued by society.

I don't believe in the over obsession of where someone goes to school, that this brand association of where people go to college or in education is that important.

Speaker B expresses a contrarian view on the societal importance placed on educational institutions, suggesting it is overstated.

• Speaker B values contrarian thinking that challenges commonly accepted principles.
• Appreciation for companies that disrupt the status quo.

I think people who about all these things that are commonly accepted principles that it's lazy, this lazy thinking. I kind of really appreciate the contrarians who challenge the status quo.

The quote reveals Speaker B's disdain for complacent thinking and their admiration for those who question and disrupt widely accepted norms.

• Speaker B admires John McFarland for his contrarian stance on open standards during the early internet era.
• Believes in the growth potential of open interchange of technologies.

I'm such a John McFarland fanboy, having I worked for him for like eight years when I was in my early to mid twenty s.

Speaker B reflects on their admiration for John McFarland's contrarian approach to technology standards, which they witnessed firsthand.

• Speaker B wants to quit overthinking, which leads to analysis paralysis.
• Supports making decisions based on instinct after initial analysis.

Overthinking. That was on the list of that tweet. I retweeted overthinking for sure.

Speaker B identifies overthinking as a personal challenge they wish to overcome, emphasizing the need for decisive action.

• Speaker B desires more diversity in venture capital firms, boards, and teams.
• Views the trend towards diversity as beneficial for the ecosystem.

Diversity. I love the whole current topic of making all of these venture capital firms, boards, executive teams, employee based diverse.

This quote expresses Speaker B's enthusiasm for the increasing focus on diversity within the venture capital and startup communities.

• Speaker B's recent investment in Control Labs, a company working on brain-machine interfaces.
• Belief in the evolution of computing beyond traditional devices to more integrated experiences.

I do believe that computing is moving from trapped in these little boxes, either a phone or a computer, and computing is moving to everywhere.

Speaker B explains their investment decision based on the conviction that computing is becoming more ubiquitous and integrated into our environment.

• Naturebox offers an unlimited snacking program for offices, promoting healthy snacking.
• Emphasizes the importance of healthy snack options for employees.

Naturebox is the first ever unlimited snacking program for offices of all sizes.

Speaker A endorses Naturebox for providing a service that aligns with the new year focus on health and diet, highlighting it as a desirable office perk.

• Lisa provides a luxury foam mattress ordered online, with unique foam layers for comfort.
• Lisa donates one mattress for every ten sold, emphasizing social responsibility.

Lisa have done away with a terrible mattress showroom buying experience by creating this luxury premium foam mattress that's ordered completely online.

Speaker A promotes Lisa for revolutionizing the mattress buying experience, focusing on convenience and social impact.