20VC Why You Have To Be A Good Long Term Actor To Succeed in VC & How Owning An Esports Team Could Be A $Bn Outcome with Clinton Foy, General Partner @ Crosscut Ventures

Summary Notes


In this engaging episode of "20 Minutes VC," host Harry Stebbings interviews Clinton Foy, a General Partner at Crosscut Ventures and former COO of Square Enix. Foy shares his unconventional journey from law and corporate operations to venture capital, emphasizing the importance of empathy and relationships in the VC industry. He discusses the challenges of deal flow, the long feedback loop in VC, and how being lean and involved is more rewarding. Foy also delves into the future of esports, drawing parallels with traditional sports and predicting significant growth due to its young, engaged audience and potential for billion-dollar outcomes. He highlights the role of publishers and the integration of VR and AR as key factors in esports' evolution. Foy's passion for innovation and gaming is evident as he also touches on his involvement with the Immortals esports team and his excitement for a new VR streaming investment.

Summary Notes

Introduction to Clinton Foy and Crosscut Ventures

  • Clinton Foy is a general partner at Crosscut Ventures, a leading VC fund in Los Angeles.
  • Prior to Crosscut, he was COO at Square Enix, a major video game publisher, where he managed significant franchises and grew revenues substantially.
  • Clinton's background includes practicing law with clients like Microsoft, Sony, and Yahoo.
  • The podcast host, Harry Stebbings, endorses Luma, a Wi-Fi system, before introducing Clinton.

"So joining me in the hot seat today, we're joined by Clinton Foy. Now, Clinton is a general partner at Crosscut Ventures, one of LA's leading VC funds, and prior to joining Crosscut, Clinton was COO at Square Enix, a $2 billion video game publisher..."

This quote introduces Clinton Foy and his professional background, highlighting his experience in the gaming industry and legal field.

Clinton's Transition from Square Enix to VC

  • Clinton describes his transition to venture capital as unconventional, having "failed" into the role.
  • His experience at Square Enix involved working with creative teams on major gaming franchises.
  • The trigger for his shift was an attempt to invest in Oculus Rift, where he experienced the power of VCs.
  • This led to networking with VCs and an extended interview process with Crosscut Ventures.

"I failed to the role of being a vc... Through that failure that I really started networking more with vcs and understanding their role in the ecosystem, the startup ecosystem."

Clinton explains how his attempt and failure to invest in Oculus Rift led him to explore the venture capital ecosystem and ultimately transition into it.

Operational Experience Impacting VC Role

  • Clinton believes that VCs with operational or founding experience have strong empathy and compassion for entrepreneurs.
  • His operational background provides insights into the challenges of scaling a business and is valuable when communicating with founders.

"I do think that the vcs who I've met, who've had operational roles and also founding roles with companies have strong empathy, and not just empathy, but true compassion for the struggle of being an entrepreneur and a founder and working in large companies."

This quote emphasizes the importance of operational experience in understanding and empathizing with the entrepreneurial journey, which Clinton finds beneficial in his VC role.

Surprises in Transitioning to VC

  • The transition to VC was surprising in terms of the sheer volume of deals reviewed and the rigorous selection process.
  • Clinton notes the difficulty in managing the "fire hose" of deal flow and the time commitment required to invest in a small fraction of opportunities.
  • The long-term feedback loop in VC is a significant difference from the operational world, affecting the pace and rewards of the work.

"What's harder, one of the biggest surprises is the deal flow and just the fire hose of information that you're subjected to on a daily basis... To get to that ten to twelve, the number of meetings, the amount of time that you spend."

Clinton shares his surprise at the volume of deal flow and the intensive process involved in selecting a few investments from thousands of possibilities.## Adjustments in Professional Roles

  • Clinton Foy discusses the transition from a large corporation to a venture capital firm.
  • Emphasizes the contrast between the abundance of resources at a large company and the lean nature of a VC firm.
  • Highlights the personal satisfaction of being closer to the work and entrepreneurs.

"I think it's becoming leaner and meaner in many ways. Going from company that does $2 billion a year in revenue, you have massive staff and hierarchies. I had two executive assistants at Square Enix who worked with travel and scheduling and any need that you had. And now we split one executive assistant between four managing directors."

The quote explains the shift from having ample support staff at a large company to sharing resources among several directors at a VC firm, illustrating the lean approach in the VC industry.

Importance of Network and Relationships in VC

  • Clinton Foy describes the value of networks and relationships in the venture capital industry.
  • Stresses that long-term, genuine relationships are crucial for success in VC.
  • Points out that predatory behavior is unsustainable in the long-term VC market.

"I think you can be a short term predator, but to be a good vc, I think you have to be an excellent long term actor."

Clinton Foy argues that short-term predatory tactics are not viable for long-term success in VC, emphasizing the importance of being a good actor focused on the future.

Authentic Relationship Building

  • The authenticity of relationship building in VC is discussed.
  • Clinton Foy suggests that genuine interest in people leads to organic business relationships.
  • He observes that inauthentic individuals are quickly marginalized in the VC industry.

"I think a way of doing it authentically is you meet people you care about and that you genuinely want to meet, and it organically leads to doing deals and working with people who you want to do things with."

This quote reflects Clinton Foy's belief that authentic relationship building occurs when there is a genuine interest in the people one meets, leading to organic business opportunities.

VC Industry's Inefficiency and Disruption

  • Clinton Foy talks about the inefficiency of the VC industry and the potential for disruption.
  • He mentions Y Combinator as an example of a disruptive force in VC.
  • He reflects on the balance between the importance of relationships and the changing dynamics due to industry disruption.

"I think vcs through relationships, through various networks, through various expertise, they can win deals by being a nicer person, by being a more genuine person, by being a good friend, by being authentic, and by co investing with other great vcs, and by developing a relationship with those founders and entrepreneurs."

Clinton Foy highlights how VC deals can be won through non-financial means such as relationships and authenticity, in contrast to the public markets where the highest bidder typically wins.

Examples of Successful Relationship Builders

  • Clinton Foy identifies Fred Wilson and Brad Feld as exemplary figures in VC relationship building.
  • He notes their authentic and supportive approach to the VC community.
  • Mentions younger VCs who are following in the footsteps of these role models.

"And I just think that the relationship they built with each other and then with other vcs in this space is phenomenal."

The quote praises the relationship-building skills of Fred Wilson and Brad Feld, emphasizing their positive impact on the VC community.

Clinton Foy's Experience with Immortals

  • Clinton Foy briefly touches on his success in raising funds for the esports team, the Immortals.
  • He attributes this success to his ability to build relationships with VCs and angels.

No verbatim quote provided for this section in the transcript.## Founding and Growth of Immortals Esports Team

  • Clinton Foy was initially conflicted about founding Immortals while being a VC partner.
  • He discussed his passion for gaming and esports with his partners and LPs.
  • They raised $2 million from industry friends for the esports team, expecting it to be a side hobby.
  • Immortals evolved into a full-fledged startup with 30 employees, significant revenue, and major sponsors.

"So at first with Immortals, it was something that I was torn with. I struggled with the idea of saying, well, I think this is a great opportunity to found and raise money and start up this esports team. But at the same time, I love my job as being a VC and a partner at this fund."

Clinton Foy shares his initial hesitation to start Immortals due to his commitment as a VC partner.

"It turned into something much bigger than I ever thought it was going to be over this last year."

The quote highlights the unexpected growth and success of the Immortals esports team.

Potential of Esports as a Billion-Dollar Industry

  • Clinton Foy believes owning and operating an esports team could lead to a multi-hundred million or billion-dollar outcome.
  • He compares the current state of esports to the NBA in the early 1980s.
  • Esports is accelerating faster than traditional sports due to existing infrastructure like Twitch and YouTube.
  • The audience for esports is massive and largely untapped in terms of monetization.

"Potentially, I think the prize pool isn't in and of itself a billion dollar outcome, but I think owning and operating and growing an esports team and a franchise and a platform could potentially be a multi hundred million dollar or even a potential billion dollar outcome over time."

Clinton Foy suggests that while prize pools alone aren't enough for a billion-dollar outcome, the overall growth of an esports franchise could lead to such a valuation.

"That's where we are. And now they're multibillion dollar franchises. Except for with esports, I think it's accelerating much faster than traditional sports because the infrastructure is there now."

The quote compares the growth potential of esports franchises to the historical growth of NBA teams, emphasizing the acceleration due to current infrastructure.

Integration of Esports and Traditional Sports

  • Traditional sports teams are purchasing esports teams and franchises.
  • Some traditional sports may be declining due to an aging fan base and decreasing viewership.
  • Esports viewership is growing rapidly, driven by a younger demographic that consumes content via streaming platforms and mobile devices.
  • Clinton Foy believes esports may supplant some traditional sports, with VC investors taking interest.

"The Philadelphia 76 ers just did. We're seeing this in Europe as well with soccer teams."

This quote indicates the trend of traditional sports teams investing in esports.

"If you look at, for instance, baseball, the average fan of baseball is about 54 years old and male and aging every year."

Clinton Foy points out the aging demographic of traditional sports like baseball, which contrasts with the younger esports audience.

Future Impact of VR and AR on Esports

  • Clinton Foy is bullish on VR and believes it will intersect with esports in the long term.
  • He anticipates that the hardware and software for VR in esports are still a few years away from maturity.

"I think long term, I think VR and AR will be in esports. I'm long term bullish on VR."

The quote shows Clinton Foy's belief in the eventual integration of VR and AR technologies into the esports industry.

"I just think that the intersection of VR and esports is still maybe, say, three to four years off."

Clinton Foy provides a timeline for when he expects VR to become a significant part of esports.## Esports and Technological Challenges

  • Latency issues are significant in the current state of esports, especially when considering the potential for VR integration.
  • Technological advancements are needed to prevent motion sickness when watching esports in VR.
  • Once these technological hurdles are overcome, VR could become the future standard for consuming esports content.

"Latency has really caught up with where esports is right now, just on a pc basis. There are certain things that have to happen technologically that don't exist now so that people can watch esports in VR and they won't get sick. That's a big issue."

The quote highlights the importance of overcoming technical barriers such as latency and motion sickness to enable the growth of VR in esports.

Influential Blogs and Newsletters

  • Harry Stebbings reads Fred Wilson and Brad Feld's blogs daily, indicating their influence in the tech and VC community.
  • Dean Takahashi of VentureBeat GamesBeat is also highly regarded for his work in the gaming industry.

"One other person who I read every day is Dean Takahashi from Venturebeat Gamesbeat. The work that he does is great."

This quote suggests that Dean Takahashi's work on VentureBeat GamesBeat is a valuable resource for insights into the gaming industry.

The Role of Publishers in Esports

  • The relationship between game publishers and the esports community is complex.
  • Publishers like Riot Games, Valve, and Activision Blizzard may not have anticipated the esports potential of their games.
  • The dynamic between publishers, professional teams, and distribution channels (e.g., Fox, ESPN, Twitch) is a significant challenge in esports.

"I think the single biggest challenge is how will the publishers act in this ecosystem?"

The quote emphasizes the uncertainty surrounding the role of game publishers in the evolving esports ecosystem.

Space Exploration and SpaceX

  • Harry Stebbings expresses a passion for space exploration and admiration for SpaceX's ambitious projects.
  • The vision of making humans a multiplanetary species is inspiring, especially to VCs involved in seemingly smaller ventures.

"If I can somehow get a few billion dollar exits, I'm going into space exploration and funding aerospace."

This quote conveys Harry Stebbings's personal aspiration to contribute to space exploration and his belief in SpaceX's potential.

Reading Preferences and Influential Books

  • Harry Stebbings has a diverse taste in literature, including science fiction, philosophy, and business.
  • He mentions Neil Stephenson, Peter Thiel's "Zero to One," Plato's "The Symposium," and "The Lord of the Rings" as influential works.

"I think Neil Stevenson is a favorite author and so I've read all of his books from Snow Crash to most recently seven eves, which is about space exploration."

The quote indicates that Neil Stephenson's work, particularly on space exploration, resonates with Harry Stebbings's interests.

Recent Investments and Strategic Choices

  • Crosscut's recent investments include the esports franchise Immortals, Arsenic TV, and an undisclosed VR and streaming company.
  • The decision to invest is driven by the potential of the esports market, innovative media platforms, and promising co-investors.

"We had three that closed just in the last three months. We actually have a small investment in immortals, the esports franchise. Also Arsenic TV, which is a next generation media platform."

This quote outlines Crosscut's recent investment activities and highlights their strategic focus on emerging markets and platforms.

Wi-Fi Technology and Home Networking

  • Luma is introduced as a sponsor, offering a surround Wi-Fi system that aims to improve speed, security, and control over home networks.
  • The system's mesh network and user-friendly app are designed to enhance the Wi-Fi experience for various activities simultaneously.

"Luma is the world's first ever surround Wi-Fi system that brings speed, security and control to your home Wi-Fi network."

The quote describes Luma's value proposition in creating a superior home Wi-Fi network experience.

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