Breaking The Mold With David Hornik
Establishing Your Personal Board of Directors
Breaking the Mold with Hunter Walk
Furnageddon: The Full Stack Attack on Home Furnishings
[Internal Memo] Thoughts on Commerce

Breaking The Mold With David Hornik


There’s an old adage that if you want to get something done, find the busiest person you know to take on the task. David Hornik is the embodiment of that manta.

I first met David a year and a half ago as part of my journey with the Kauffman Fellows. He was so insightful that our group unabashedly asked him to spend an additional two hours answering questions a month later (the only time we did this in our program’s history). He obliged. As a young investor learning and growing in the industry, it’s almost unfathomable to me what David has accomplished – but moreso how much he’s able to give back in spite of the constraints on his time. David’s reputation as a giver – he’s been nicknamed the “Robinhood of VC” – is so prolific that he was profiled for an entire chapter by Adam Grant in his bestseller Give and Take.

His personality shines in our interview. In fact, behind the scenes, I actually tried to end the interview several times – to which David objected, requesting that I push deeper. My sincerest appreciation to David for his time, and I hope all readers (entrepreneurs and VCs) are able to benefit from his poignant insights.

Ezra: Thanks David for doing this. You are a man of the people. Let’s start – you built a reputation as an ultra-nice, transparent, likable guy in an era where Venture Capital was rather opaque. But as VCs now fight for the moniker of most “founder friendly” and are no longer chair tossing curmudgeons, do you still find niceness an effective strategy for winning the hearts and minds of entrepreneurs? Or are you become surly just to differentiate? 

David: I can tell you with great certainty, that I have never thrown a chair. I don’t think I will start any time soon.

First, thanks for the kind words about my reputation. I am hopeful that it is well-earned. I firmly believe that startups are the byproduct of incredibly hard working and thoughtful entrepreneurs, really great markets, and some luck. My role is to support those entrepreneurs in any way that I can — certainly with money, but also with all sorts of support (recruiting, fundraising, publicity, strategy, etc.). So it isn’t really about being a nice guy. It is about being a supportive guy. It is about understanding that we are all in this together and doing everything I can to be on your side and help you build something big and great. Are there others who view the venture business this way? Sure. There are some folks out there. There are a lot more pretending they do than the ones who actually do. But there are others who are truly entrepreneur first. I’m glad that there are more of them these days. Those are the VCs I want to work with.

Ezra: Those are the VCs I want to work with too! But here’s the thing…I once heard Bill Gurley say “Whenever you hear a VC speak, know that she is speaking to the entrepreneur she hasn’t met yet” – namely, recognize that investors are always marketing themselves. Do you agree with that? How do you – either as a fellow investor or as an entrepreneur – discern who is genuine and who is transactional? I’ve made a lot of mistakes in my first four years, so are your instincts better than mine or it simply a matter of experience/existing relationships?

David: I do think that good VCs understand that they need to market themselves. Some VCs have taller tales to tell than others. But it is awfully hard to be what you aren’t over an extended period of time. So one of the best ways to tell if a VC is full of shit is to spend a bunch of time with him or her. The more time you spend with them, the clearer the picture you will get of how they view the world. It is exactly the same way with entrepreneurs. When an entrepreneur is pitching a VC, she is putting her best foot forward. If you are excited about the deal, spend some more time with the entrepreneur — you will either grow to like that entrepreneur more or less. If it is less, move on quickly. If it is more, then it is worth doing some more work.

So if you’ve spent time with a VC and find yourself liking them more, what work do you do next? Reference checks. And lots of them. There is no better way to know what it is like to work with someone than to actually speak with someone who has worked with that person. VCs are really easy to reference. We list our portfolios on our websites. Look at the companies in which we’ve invested and call those entrepreneurs. See what they are like to work with. I make it even easier for entrepreneurs I’m interested in working with. I give them a list of all the founders and CEOs I’ve worked with over the last 15 years. All of them. And I encourage them to call the folks I’ve worked with. Because you can fake it when you meet someone for an hour. But you can’t fake it for 11 years (which is how long I’ve been working with Splunk so far — I’m still on the board) or 14 years (which is how long I worked with Ebates before it was sold for a billion dollars to Rakuten) or 15 years (which is how long I’ve been working with Rene Lacerte across two companies so far).

There are lots of great venture capitalists out there. You just need to do your homework to find out who they really are.

Ezra: Great thoughts, thanks. You know, when I first discovered you David, you were something of a prolific blogger. Now you’re something of a non-existent blogger, with a stellar 3 posts in the past 24 months. What on earth happened? And is it indicative of something larger, more fundamental in either your own personality or the venture ecosystem?

David: I suppose my lack of blogging is mostly about being too busy. When I started VentureBlog, I was new to the world of venture capital and had a lot of time on my hands. There were no other VC bloggers at that time, so everything I thought about made a good blog post. These days there are lots of VC bloggers and not a lot of new stuff being discussed. That said, I really should write more. I have been contemplating a series of posts about the things I’ve learned in my first 15 years in the venture business. So don’t give up hope. Keep your eyes on VentureBlog.

Ezra: Quite the cliffhanger – I’m sure many fans will now be refreshing religiously. Given the saturation of blogging, if you were a young person entering the venture scene today, what would be your strategy for making a mark and standing out – besides the requisites of being transparent, make winning investments, good follow through, etc: Apprentice a lot and say little? Be funny and silly? Do something scandalous for the free Gawker PR? Pick up skateboarding and become a Vine star? 

David: Wow. This is the million dollar question. Or, if things go well, it is the billion dollar question. How does anyone differentiate his or herself in the venture business? In some ways I got a little lucky and hopped into blogging early. And then I started podcasting early as well. I’ve been a little more consistent in recording VentureCast these days than I have been in writing VentureBlog. And then I decided that the world needed another conference, so 9 years ago I created a conference called The Lobby. It has been going strong ever since. In fact, I now have a digital media Lobby conference and an enterprise version of the conference as well. So should a new VC jump into blogging or podcasting or creating a conference? Probably not. If you want to really differentiate yourself, you’ll need to come up with something new. Maybe you’ll write a novel making fun of the venture business. Maybe you’ll create a series of online classes that reach millions of people. Maybe you’ll get a television show. Maybe you’ll just be an amazing networker. Who knows? The key is to use some medium to share your passion for startups and make clear to entrepreneurs what makes you different. You may be able to do that in a rap album. You may be able to do that in a picture book. Whatever it takes to connect with entrepreneurs and get them excited about telling you what they’re working on next.

Ezra: A few weeks ago you announced a large investment in MassDrop, a community platform for enthusiasts of a wide variety of interests. It’s actually quite apropos, and reflective of your entire track record: in addition to MassDrop you’re also on the boards of vastly different companies ranging from Splunk to Stumbleupon to, just to name a few. At the same time, over the past few years the VC world has become far more specialized – with firms such as Emergence Capital, IA Ventures, ForeRunner – many firms now also boast partners with deep domain specific knowledge. Simply put: you are a generalist living in a specialist’s world. So how do you do it? How do you compete? Do entrepreneurs value your generalist lens? Or, is the question fundamentally wrong – that you are an absolute expert at building growth companies, or asking the right questions, irrespective of your expertise in any specific field.

David: There are all sorts of ways to be a VC. I’m not sure which one is best. I am sure which one is best for me. I like lots of different businesses. On the one hand, I think consumer businesses are amazing. They naturally appeal to VCs because we are consumers. So we think to ourselves, “that is awesome. I’d use that.” And that can create excitement around a business. On the other hand, I have also had the good fortune to work with spectacular enterprise teams and seen what it looks like when that works. I funded Splunk when three founders and a great idea. Eleven years later I still sit on the board and it is a multi-billion dollar company and there are 1,500 or so employees. It is hard to not get excited about that. I am sure that there are VCs out there who can share valuable insights because of their focus on a particular space. But I think that most of what I do as a VC is broadly generalizable across companies. My job is to help make entrepreneurs successful and that is something that requires experience and perspective and patience and faith, but doesn’t necessary require a particular industry specialization. I suppose it is possible that after 20 years working with startups across the spectrum, I have become an expert in both enterprise and consumer businesses. But I think it is more likely that I have become an expert at being helpful — I am happy to help the entrepreneurs with whom I work recruit great people, raise capital, develop growth strategies, connect with partners, get good press, not fight with each other, design great t-shirts, motivate their troupes, judge Halloween competitions, and a million other things. There is no one qualification for the venture business and there is no one approach that guarantees success. So I’m just making it up as I go along.

Ezra: A year or two ago I heard you say that August was “notorious” for losing an extra $500k-$1M on deals for routinely going one bridge too far. You added that overall, it was worth it, because it built genuine long-term authenticity and trust with founders. But I have to wonder if that’s a bit too easy… a fitting strategy for such a “nice” guy. Further, a multi-decade, very successful GP recently advised me that funds “live and die by the quality of their follow on investment.” Do you agree with that? How do you balance and juxtapose those two interests? Or, is it simply that you’ve done the math and $20M worth of failed extensions is a palatable “marketing” (or testimonial) expense for a $450M fund?

David: I suppose the good news is that we have a pretty small number of companies that fail outright. So most of the time we aren’t really losing another million dollars. Most of the time, we are supporting great entrepreneurs and helping them to find a good home for their businesses when they aren’t working. But it is certainly the case that we do, on occasion, invest an additional million dollars when we could have cut off the investment earlier. I don’t think it is really marketing dollars. I think it is more about supporting your entrepreneurs while they are still fighting the good fight. And some of the time that money makes all the difference in the world. Some of the time, companies are able to get to profitability on that last million dollars or find the right acquirer, or get to some better outcome. And in those instances, we’ve made a great economic decision, not just a great relationship decision.

As for follow on investments, whoever told you that funds live and die based upon the quality of their follow on investments has an odd view of the stuff that’s important from where I sit. That isn’t to say that follow on isn’t important. It certainly can be. But it is so much more important to find great companies and invest in them in the first place then to figure out how much to invest in a follow on round. That said, we own a big percentage of three of our most promising companies right now because we invested in those companies early and then led subsequent financings as well. If those companies are successful, we will reap the benefits of having been early investors and then having doubled down on those businesses. But the more important financings will certainly have been the initial financings, even if the subsequent ones ultimately drive real value as well.

Ezra: I also heard you say maybe a year ago that you should only invest in an entrepreneur or team that you’d want to be friends with and that you’d in fact de-prioritize an otherwise healthy, growing, business if you weren’t extremely passionate about the team. I’ve taken that advice to heart and it’s helped me a lot in my filter. Where I’ve personally struggled is falling in love with “people” that I think are extraordinary – deep domain experts, thoughtful, self-aware, intellectually curious – but where its unclear if they have the founding skills or acumen to build a great company…perhaps they weren’t able to communicate a clear go-to-market vision or have really unreasonable growth or hiring expectations, whatever it might be. I always find myself stuck in that spot. What’s your approach? Do you err on the side of backing people that you “click” with and that have a really unique approach to a market? Do you try and convince them to find external help? Do you wait and see while building the relationship? Or it case specific and you’ve taken many approaches?

David: It is an old trope but I stand by it — it is all about the people. Great entrepreneurs build great companies. There are some surprising exceptions to the rule. But, for the most part, amazing businesses are built by people with whom you would love to work. That is a rule I do not break. People, People, People.

But here’s the thing. I back a very small fraction of the entrepreneurs with whom I meet. And I definitely do not back all of the entrepreneurs I like. I don’t even back all of the entrepreneurs I love. I back great entrepreneurs with whom I’m excited to work, but only if think they will build a great business. And great businesses are hard to build. They require you to be smart and thoughtful and a good sales person and have a great idea, etc. etc. But more than anything else, a great business requires a great market. And great markets are hard to find. Most businesses are too small for a traditional venture fund. Some have too much competition. Some are not likely defensible in the long run. Some have sales cycles that are too long. All of these issues add up to either a great market or a less than great market and it is very hard to build a big business on a less than great market.

So what do I look at when investing — people, people, markets, people. Great people and a great market will build an amazing business. It is the killer combination. And it is stunningly rare.

Ezra: Do you think you would you re-write any of your prior answer if you were a pre-seed/seed investor as opposed to primarily a Series A/B investor?

David: Absolutely. I would probably answer all of them differently. The angel business is very different from being a Series A investor. You have different information at the time of investing. You likely have a smaller fund. You will have different resources when it comes time to doing follow on investments. And when it comes time to supporting your investments in good times and in bad times you will have different resources as well. The one thing that I suspect would be pretty consistent is that it is all about the people. People, People, Markets, People!

Ezra: Looking at your investment history, the vast vast majority of your investments have been in the Bay Area. It probably doesn’t come as a surprise that as an investor with Chicago Ventures I have to believe that I can drive meaningful returns from my perch in the Midwest or else I’d find a different job. But I might well wrong be wrong, so best to find out know I suppose! SO: What’s your take on the future of outperforming startup companies from a geographic perspective? Do you expect to focus the large majority of your attention on the Bay Area for the foreseeable future? If so, do you buy that the potential for greatness is not incumbent to one geographic region? Or, do you view the Bay Area as an exponentially compounding flywheel – with the compounding knowledge of its accomplished founders & advisors cultivating an increasing delta between the Valley and everywhere else in the world?

David: Good news — no need to move or find a new profession. I think there will be amazing business all around the world. In fact, we’ve invested in some great businesses in the Chicago area. The founders of Avant Credit are some of the best entrepreneurs with whom we’ve ever worked. They are building an incredible business. As a firm, we’ve backed a number of companies throughout the county (New York, DC, Texas, Washington, etc.) and throughout the world (Germany, Israel, Canada, etc.). We back amazing entrepreneurs wherever they are. In fact, there are real advantages to company building outside of the Bay Area — easier recruiting, lower costs, etc.

So why are nearly all of the companies in which I’ve invested in the Bay Area. In part because of proximity. I am necessarily going to hear about a lot more local businesses than those outside of the Bay Area. In part because of resources. The Bay Area has an astonishing entrepreneurial ecosystem. There are a huge number of founders, funders and friends within a 50 mile radius. It is hard to understate the value of a near limitless pool of advisors, investors and support inn close proximity. It doesn’t make it impossible to create and scale a business elsewhere in the country, but it certainly makes it easier in the Bay Area.

Ezra: As we come to close, I want to ask about your support network. The startup world is not an easy industry – I daresay it’s at its most cutthroat in history and seemingly playing for the biggest stakes (and biggest payoffs) in history. The stresses on family, emotions and psyche for all players in the ecosystem should not be understated. And as investors, though we might be spared from the pressure of having to directly lay off employees, we’re affected as de facto therapists – juggling dozens of high intensity issues across the portfolio. So while you’ve been profiled as a prolific giver, we don’t know much about your support and mentorship networks. And I’m fascinated because you’re always expressing positivity, confidence and humility. So how do you do it & who helps you? Is your family a big part of that? Do you still lean on early mentors in your career? Your partners? Friends completely outside the ecosystem?

David: Ezra, this is such a good question. No one really thinks about the psychological challenges of the world of entrepreneurship. It is MUCH harder on entrepreneurs themselves. I know many entrepreneurs who find themselves depressed, isolated, feeling deeply inadequate. It is very clear that being a CEO is a lonely job. I recommend to all of my portfolio CEOs that they should either join a CEO group (there are lots of great ones out there) or hire a CEO coach. At least that way you will be able to discuss the challenges you are facing with someone who understands what you are going through. As far as VCs go, I wouldn’t say that there are similar groups. I don’t know of any CEO group equivalent for VCs, but it would probably be a good idea. I do spend a reasonable amount of time chatting with other VCs. And my conference — The Lobby — is an opportunity for VCs to get together and chat about the challenges of the markets, etc. But I think we VCs would be well served by a better support structure. I suppose other than looking to my friends who are VCs, I mostly turn to my wife Pamela. She is sometimes a sympathetic ear, sometimes a kick in the pants, and always a very good advisor. But, truthfully, I’m so grateful to be a VC and work with such an amazing group of talented entrepreneurs. I guess I’m just not a worrier. That’s not really my nature.


Establishing Your Personal Board of Directors

One of the best pieces of advice I received when I moved into the venture world was to surround myself with a group of mentors who wanted to help me, believed in me, and would act as a sounding board as I grew in the industry. It’s a concept I believe is based on the Jim Collins article “Looking Out for Number One,” and was heavily emphasized during my two years as a Kauffman Fellow.

Except it’s not so easy.

Whether you are of the opinion that venture is an apprenticeship business open to anyone or disagree and believe it’s better served by operators transitioning into investors, there is no doubt that both profiles must have mentors to caution against mistakes, provide context for decisions, and provide guidance in planning for the future.

But the thing is: great, learned, wise people are, well, busy. And I, Ezra Galston, am, well, kinda normal. Further, four years ago, I had no existing relationships in the venture world, and I barely knew any really successful entrepreneurs.

There’s an ancient Jewish proverb found in the two millennia old book Ethics of Our Fathers that advises, seemingly offhandedly, “make for yourself a teacher.” The nuance of that odd language – “make” – is that mentors don’t fall into your lap. While there may well be altruistic people out there who take protégés under their wing for no reason other than their own big heart, that’s not the norm for most of us (at least I’ve rarely been the beneficiary of that). Most of us have to be proactive – and actively chase down our own Board of Directors.

But there’s one other nuance worth mentioning. When you “make” your own circle of mentors, you are optimizing for one goal: learning. And the truth is, someone greater, more experienced than you doesn’t ever need to view themselves as an altruistic, charitable mentor in order to “teach” you. In principle, as long as you have an open line of communication to someone who respects you and to whom you wish to learn from, you really need no level of formal relationship at all. All you need to do is prompt and then listen.

And that’s me (and most of us). There are a few people in my life who I’d imagine are aware that I consider them mentors (I’ve never asked). But there are a far greater number who I personally believe have no idea. I speak to them 3-4 times per year, they (hopefully) consider me thoughtful, and are willing to share their experiences with me.

More, the majority of the people I’m describing, I initially met via cold e-mail. I think e-mail is extraordinary. And most people utilize it extraordinarily poorly. I put a lot of effort into my cold e-mails: research, humor, relevance – and that’s worked. I have deep appreciation for the people who’ve been willing to build a relationship with me based on written text (I’d note them here but I don’t want to embarrass anyone…or flood their inbox). It’s probably representative of the fact I love to write. People who like to sing or be funny or be sardonic or whatever it might be should find an outlet for those qualities to connect with the people they look up to. There’s no one way to “make” a mentor – there’s only being true to yourself.

I think this is more important than ever, especially as both VC and entrepreneurship go through its biggest boom in a decade. I have enormous respect for my teammates and managing directors. And I continue to learn a lot from all of them – in fact, we learn together. But as a startup MicroVC fund ourselves, there is no one on my team with, for example, 20 years of venture experience. Many entrepreneurs – even those with institutional backing – have taken that money from investors who themselves (like me) have been in the industry for less than five years. That’s OK, it’s just a mathematical reality as the industry expands, but its also a situation that demands taking responsibility into your own hands – proactively “making” your own mentorship circle to increase your odds of success. Lots of people talk, but it’s incumbent on each of us to choose who we want to listen to.

I think all of us have some small piece inside us, always fantasizing that some angel will drop out of the sky, help us, believe in us and make us better. But there’s a reason the world doesn’t work that way. Becoming great requires hard work, effort and deep thoughtfulness – if it came easy, it frankly wouldn’t make any sense.

Breaking the Mold with Hunter Walk


For the past couple of years, this blog has been about me and my journey at Chicago Ventures. But the truth is that almost any good (or bad) idea represents a convergence of a lot of learning and inputs along the way. In my four years in the venture industry, I’ve worked diligently to study more experienced investors and entrepreneurs alike – and I felt this blog deserved an outlet to highlight some of the individuals I learn from, both directly and indirectly. “Breaking The Mold” is a new project to reflect that (you’ll see the link in the nav bar) and I’m honored to have Hunter Walk, co-founder of Homebrew as the first guest. In a mere three years, he has become one of the most referenced voices in the early stage venture ecosystem and his blog, has been extremely influential on my approach to venture. He’s also active on Twitter and can be followed @HunterWalk. My deepest gratitude to Hunter for participating and a special thanks to our mutual friend Jonathan Triest for setting up the interview.

Ezra: When I look across the VC ecosystem I typically see a lot of hungry, smart, ambitious people. That’s to be expected. What’s unexpected is when someone is clearly having more fun, and being more playful than the rest of the pack – and I feel like that’s you. Between Twitter, your blog, panels, you seem to just roll along loving your job, your fund, your partners and frankly, it seems, life. Have you always been this way? Is it more of a digital caricature of yourself? And how do you think your unique ability to communicate that playfulness has affected others desire to partner with you?

Hunter: I’m like a mullet – fun outside, seething churning jealous rage on the inside. Ok, now that I’ve admitted my neurosis to the world… I guess the healthiest thing for me came about 15 years ago during grad school when I decided to not separate “personal Hunter” and “professional Hunter.” So I commit fully to projects I care about and don’t worry about hiding any part of who I am.

With Homebrew in particular there’s a joy which comes from learning a new profession in public, working hard in service of founders we’ve backed and ultimately trying to exceed expectations for a very clear set of outcomes. The last ten years have seen a tremendous amount of transparency brought to startup building; I’d like to try and help do the same for the investment side. There’s no bs in being a new fund – you just gotta work. So you also need to go 0 to 100 real quick if someone isn’t treating one of our founders fairly or turn owhen humor isn’t appropriate to the situation.

Ezra: Thanks Hunter. Underneath it all, it seems like you’re really an old soul of sorts. It’s hard to miss in your bio that you spent nearly a decade at Google – in an era of 2 years and out job switchers, that’s certainly an anomaly. I saw you once note: “finish your work. What I mean is: Don’t just evaluate every job by the question ‘am I learning as much now as I was in Day One.’ I see many people leave jobs prematurely because they’ve optimized for what they think is skill acquisition.” How did that approach help you? Is it a mantra you held early on or was it a realization in stages? And does it impact the way you evaluate founders or teams?

Hunter: I tend to believe it takes 3-5 years to actually build and scale a product. And that as a product leader you are trying to go from Point A to Point B (or B to C, etc) before it’s time for the next lead to bring their new vision for the next big bet. That’s why my 12 years of product experience is chunked as; the first three years of virtual world Second Life; three years on AdSense; and six at YouTube (of which 4.5 were a leadership role). In each one I felt there was a natural start and end point for what I wanted to accomplish — and that finish point was tied to product milestones not just my own personal needs.

The way this mentality has impacted my investing is even at the seed stage, when a founding team is raising just 12-18 months of capital, I ask “why do you want to work on this problem for 10 years?” As in, let’s assume this is successful enough to be around for a while, is this problem big enough to take that long to solve? Do you want to commit yourself to that? Because that’s what taking venture money means.

Ezra: That’s a good segue. Let’s talk due diligence. You once described the process by which your Homebrew institutional LPs researched you and Satya as: “DO DILIGENCE” – meaning they dug deeply into your backgrounds and your personalities. Maybe I’ve missed it, but I haven’t seen you break down your own approach to diligence. Besides the questions you mentioned above, what is your due diligence process like? Do you go to a company’s office? Take the team to dinner? Take the CEO’s mom to dinner? Call their college roommate? Do you have a checklist or is it more aligning on vision?

Hunter: Great question! In fact, i’ve been tumbling a blog post around in my head about diligence at seed stage. Obviously when you are familiar already with a founder(s) and/or a market, it makes the process easier but rarely do you get both of those together in the same opportunity. I see seed stage diligence as “the minimum amount of information you need to get conviction about the people you’re backing, you’re ability to work well with them towards shared goals and validating the minimum number of assumptions/hypotheses about their vision that, if team is incorrect, would prove fatal, or severely limiting, to their success.” It’s not about answering every unknown. Or making the founders jump through a dozen hoops. Or becoming an expert in their market.

I was a history major in undergrad while an editor on my college paper, and I find diligence to be very similar. You’re using primary source material and analysis to try and construct a narrative. I love learning about a new person or new industry. It’s fascinating. I always do diligence hoping not just to make the investment but be able to hit the ground running because I better understand the founders and what makes them tick (offsheet references baby!).

Ezra: Look forward to that blog! You know, in a mere 2.5 years, you and Satya have made quite the names for yourselves in the seed world. That would be impressive in its own right, but is compounded by your doing so in an era marked by an unprecedented level of noise, aka number of seed/microVC funds launching (Samir Kaji recently pegged that # around 250 active seed funds, up 500% from 2011). So I gotta ask: when you launched the fund, what was your gameplan as you opened for business? And looking back, what worked really really well? Any spots where you called an audible, where you and Satya realized you’d misjudged what it would take to win?

Hunter: Ultimately we’ll be judged by our financial returns, not our retweets, but we’ve been fortunate to be well-received by founders and co-investors. Satya and I did outline three goals for our first two years: 1) Get Homebrew operations up and running, 2) Close awareness gap between ourselves and our friends’ funds that have been around for a longer time and 3) Overdeliver against our commitments to founders. #3 is the most important – ultimately what founders say to other founders about us will determine the quality of companies we have the chance to work with.

If indeed we’ve been able to cut through the noise, I don’t think there’s a single reason. It wasn’t a cold start because we’ve been working in the industry for a while. We have a clear true north for Homebrew – be the type of fund we would have wanted to take money from by being their partners of conviction for their first few years. And we’ve been lucky enough to back some companies out of the gate which have generated early heat.

One thing I do want to address – the “250 active seed funds.” I don’t believe seed funding has been commoditized and the majority of those funds are very different than Homebrew. Of those 250, how many will lead a seed round with a meaningful check, even before other investors have committed? How many of those 250 have the capital to continue supporting their companies beyond the seed round? How many of those 250 are comprised of two partners with meaningful operating experience, including most recently running product teams for Twitter and YouTube? How many of those 250 take money out of their pocket to hire a Head of Talent and a trusted set of advisors with whom we share carry in the fund? And so on. This doesn’t mean Homebrew is right for every founder and there are certainly other seed funds who we think are wonderful investors, but I generally care about a single question: are we getting better each month at being great backers of seed stage entrepreneurs. I don’t worry about much else.

Ezra: Thanks Hunter, definitely a thoughtful approach we can all learn from. I feel like we’re nearing the end here…maybe a couple more questions if you’re not too bored. One thing that’s been bugging me late at night: when you Google yourself, do you ever curse Torii Hunter for getting so many walks and surging up the page ranks, or even the state of Tennessee for its upper middle class neighborhood in your namesake? Or is that all part of the Hunter Walk master plan?

Hunter: Funny you should ask because in 2004 I wrote a post about baby naming in the age of search engines for the Google Blog. I’ve got pretty good PageRank for “hunter walk” and, even better, I’m usually able to get username “hunterwalk” on most services. That said, I do get Google News Alerts when “Tori ‘hunter walk’ off home run” occurs so I’m rooting for him to wrap up his career.

Ezra: Important to note that he does have 260k followers to your 100k so probably best to play nice with Torii, yknow? :)

So let’s wrap this up…Recently you’ve been pretty vocal that working dads/dads in tech are unfortunately being shut out of conversations around parenting, work/life balance, etc. #Microaggression. In that vein I figured we should close with a dad focused Q so you can show the world your daddy skills.

Hunter: Thanks for asking about me as a dad – it’s a topic i care a lot about. one thing i do want to clear up first: i definitely was not complaining about dads being shut out of the parenting conversation. Rather my POV is that we should be treating fathers and mothers in tech equally with regards to the type of questions we ask in the realms of parenting, work/life balance. Today the industry seems inclined to only ask women these sorts of questions, which is an unfair bias against women. Rather than solve that bias solely by not asking these questions at all, we should ask appropriate questions of both genders when it makes sense.

Now me as a dad. I have one kid – a funny, brave, strong and passionate 3.5 year old daughter. I love seeing the world through her eyes. I love knowing that my job isn’t to script her life but help her be the best version of what she can become. I love the idea of raising a strong girl and future woman who will know that any and every path is open to her. Every phase so far has had its wonders and its challenges. I expect that to continue and am thankful I’ve got a great wife alongside me. And I’m glad we’re through the Kaiyu phase and more into Peppa Pig these days.”


Furnageddon: The Full Stack Attack on Home Furnishings

As digital commerce has evolved over the past decade to penetrate nearly every element of our lives, one category has largely been left in the dust: furniture. But in the past twelve months disruption has accelerated exponentially – with the industry suddenly under a broad based assault from all key angles: manufacturing, delivery, assembly, and discovery.

A few months back, I noted that furniture was one of the remaining massive categories still struggling with finding a mass-market consumer fit online. In it I quoted a conversation I’d had with a well known venture capitalist –

“Similarly, [the investor] noted at the time, furniture – sofas, mattresses, tables, etc – were one of those categories that hadn’t been cracked by e-commerce. The unit economics made delivery expensive. And, like shoes, consumers wanted to try them on. Is it comfortable? Do the colors match up with room palette? What if, he proposed at the time, a furniture company offered the following value prop: We’ll show up at your home, for free, with ten different sofas of varying feels and colors, let you try them all out for free, and then just keep the one you want and send all the rest back for free?”

Under the legacy model, e-commerce furniture sales were simply a digital extension of traditional product purchasing and sampling. Further, the thinking continued, the legacy retailers were actually capable of avoiding disruption because of the complexity in the supply chain and delivery logistics that made it expensive, if not impossible, for startups to compete.

But this is all changing.

Furniture in a Millenial World:

To be fair, it’s still exceedingly early in the disruption cycle – two of the emerging brands, Campaign and Greycork for example, haven’t even begun shipping their product yet – but taking into account the strength of their pre-sales and the growing traction amongst other disrupters its hard to argue against there being a fundamental shift underway:


At Chicago Ventures, we’ve categorized the disruption from these new, vertically integrated brands into four categories: Delivery, Assembly, Price, and Design.

  • Delivery: Arguably the most important angle, as evidenced by Casper’s runaway traction, millennial consumers are looking for experiences that provide for both immediate delivery and frictionless ease of return. Traditional retailers have long lead times on larger pieces (8-12 weeks) and they arrive via a 3rd party trucking provider (who disappear shortly thereafter) making it extremely inconvenient to return a product. The new disrupters are getting product to a customer’s door from time to purchase, in under a week and sometimes as little as 24 hours. They are also using novel shipping/packaging methods to enable accessible and low-cost (or free) returns.
  • Price: Typically the most important variable for consumers, it’s also one of the hardest to clearly differentiate in furniture as every retailer offers differences in quality, style, etc. One thing’s for sure: IKEA is the low cost provider in the space and despite the arguably miserable experience, they still move a lot of product. The new disrupters, by building a direct b2c brand are able to discount heavily on price while maintaining similar margins by removing some of the supply chain layers.
  • Assembly: The current status quo is either long lead times wherein items come fully assembled OR shorter windows/in-store pickup (think IKEA) where consumers are responsible for arduous assembly and installation processes (my wife loves doing IKEA assembly but she’s gotta be in the 1%). The new disrupters, focused on building an anxiety-free product, offer large items that can be assembled in minutes without tools. The benefit to the simplicity is that they can also be disassembled in minutes for moving, or for easy packaging to return items.
  • Design: If you’ve been to the big box retailers – from Pottery Barn to Arhaus to Restoration – you know each has its own unique personality. But the new designers believe those pieces aren’t being imagined with a millennial purchaser in mind. The new disrupters are attacking home, apartment and workplace furnishings and trying to reimagine product that stays sensitive to personal devices, new work habits, etc.

For us, we view Delivery and Assembly as the two most intriguing and sustainable angles being attacked. Although our internal consumer surveying has shown that price is ultimately the #1 most important variable for buyers, we fear that given the healthy gross margins in the category (42.9% at Ikea, ~38.3% at Pottery Barn*) and de minimus return rates that incumbent retailers will quickly be able to adapt on price undercutting or free shipping/returns offers.

What appears hardest for legacy retailers to respond to are fundamental re-imaginations of the production line, product design, and supply chain that enable immediate gratification or emerging models of fractional ownership/sharing.


Outside of the millenial manufacturers, there’s an equal amount of momentum in the next generation of retail models. Right now, the process for actually purchasing a piece of furniture online is cluttered – as most product exists in an environment of millions of SKUs with minimal effective filters. And while the companies listed in the Pottery Barn graphic above are trying to reimagine the next generation of vertically integrated brands, that doesn’t solve the wider discovery problem for consumers.

The problem for consumers is that the increase in SKUs across all furniture categories has made shopping on the aggregators an utter nightmare. Comparing from vendor to vendor is also a time-consuming, high-friction experience. These are the reason that according to Greg Bettenlli the only signifcant growth driver at Wayfair is Joss & Main, their ultra-curated flash sales site.

Thus, the furniture category appears to be mirroring the quintessential e-commerce curve that I detailed earlier this year:

“Th[e] same catalog of infinite SKUs caused real pain for all but the most specific of product searches. This pain led to the birth of discovery- and push-curation focused platforms. On a macro level, the [present] move towards connection makes a lot of sense. Consumers are overwhelmed by email, social, and retargeted marketing, while at the same time flocking to platforms such as Uber and HotelTonight, whose focus is on constraining choice and cognitive noise.”


For example, we’ve witnesses this process play out in the fashion industry – first with discovery focused platforms (Gilt, Fab, Wish, RueLaLa) and now personalization experiences (TrunkClub, Stitchfix, Wantable). The following chart illustrates how the same dynamic is now emerging in the furniture world as well:


And yet in spite of the increasing focus on the sector, only about $20bn of the $160bn U.S. market for furniture and home accessories is being transacted online:


Put together, the category represents a tremendous opportunity for venture investors: demonstrable consumer pain points, broken processes and experience, and a market size well over a hundred billion dollars. Few of the companies noted have material traction or brand equity – but it’s the early innings; it’s one of the most exciting categories to watch in consumer internet and is poised for outsized growth.

At Chicago Ventures, we’re definitely looking for entrepreneurs focused on reimagining the furniture space. If you’re one of them, please reach out!


* This is blended and includes results from Williams-Sonoma and a number of other properties. As PB sales have increased, GM has contracted, implying their GM on their PB business is probably closer to 35% than 40%.

[Internal Memo] Thoughts on Commerce

A couple of weeks ago, after an active conversation around one of our investments, I threw together the below e-mail to my team here at Chicago Ventures. I’ve never done this before but I thought it would be interesting to put it out there on the blog. It’s important to note that my team definitely did not agree with everything I wrote which is fine (the most pushback I got was around “digital marketing is dead.”) I wrote it quickly and mostly shooting from the hip, but I think that’s reflective of a lot of offhand internal dialogue within venture firms.

I think both for founders looking to pitch investors and junior investors at firms, it’s important to ask the right questions to understand their internal fund biases and thoughts. One of the reasons I write notes like this – even if it’s a pain to read/respond to all my tl;dr stuff – is so that if any partner at our firm meets an entrepreneur touching on one of the bullets below, they’ll quickly reference our note & know where we stand.


Hi All,

Monday’s conversation around [portco] made me realize that it’s been a while since I’ve typed out some of my thinking around commerce & I thought it would be helpful to have a set of principles we’re thinking abt when looking at these businesses. I’ve broken this into three sections, each builds on the other.

I think it’s impt to have this conversation. Especially with [venture partner] attached to our fund, our deal flow & knowledge should enable us to punch beyond our weight class here. But we want to make smart bets.

Part 1: Paid Digital Marketing is a Dead End.

Google/FB are just a dead end. Every retailer just hits a wall on these channels. Zulily hit a wall at scale. Wayfair hit a wall at scale. But with increased competition in every vector, the wall is happening a lot earlier now. Traditional, brainless digital marketing is an expensive dead end = as we know, distribution is so so key. Two primers are:

– My article on VB: Moving Beyond Spam where I outline “Connected” commerce & the content commerce playbook.

– Josh Hannah’s article on Pando: That’s a Nice $40M Biz You Have There

Part 2: Next Gen Commerce Companies Will Boast Unprecedented Leverage

A little under a month ago, an under the radar subscription cosmetics co called Ipsy raised $100M at a $900M valuation. Whatever, it’s 2015, crazy times, right? Except that Ipsy had only raised $3M to date. And had built from a $300k/mo run rate to $13M/mo RECURRING run rate in <3 years.

How the hell did they do that? Fortune profiles it here.

The answer: They leveraged Youtube & influencer networks better than anyone in the history of e-commerce.

I reached out to one of their backers. Here’s what that person told me –

“a few very clear cut things, and this is not a fluffy bubble valuation this is very real based on revenue.

(1) Few markets naturally support the QVC-on-youtube model, but cosmetics is one of them. CAC is low and LTV very high because Michelle Phan has a built-in and very engaged following.  Compare to Birchbox which has to rely on more traditional digital advertising channels.

(2) Ipsy’s CEO Marcelo is a content savant and didn’t just rely on Michelle’s clout, but also was able to create new cosmetics celebrities for various demographics and styles.  True talent in the team gained additional reach and consistency.

(3) The company was able to leverage negative working capital since they get paid up front.  This enables very fast growth fueled by internal cash flow, and clearer inventory planning.

(4) Ancillary revenues for Birchbox include upselling to full-size items, shifting into men’s products, etc.  Ipsy can flash sale, white label at 70% margins, etc. so has more attractive future potential as well.”

Imo, as the markets correct themselves, we need to be looking for opportunities with extraordinary operating leverage. Growth stage investors have seen the payback on late stage commerce rounds and the returns are flat because customer acquisition is high friction at that scale. When Birchbox has raised $75M and Ipsy $3M to get to the same run rate, the smart money will race to the higher leverage model.

Part 3: How We Identify Next Gen High Growth, Minimal Cash Businesses 

Here’s the checklist I’m using to identify these businesses. This is a work in progress & hopefully is always a living, breathing checklist that ebbs & flows with the times. I don’t know that our investments need to check every box, but it’s our rubric to judge against:

  1. Hacking New Platforms – Airbnb’s “hack” of Craigslist is fairly well known at this point & it’s what enabled them to build their early supply side liquidity. Ever since then, for the past 5 years, everyone has focused on similar Craigslist hacks. I don’t mind that, but CL is a lot diff now than it used to be. Youtube is also played out at this pt. We should be looking for companies that are hacking less targeted platforms. One of the things I like about [portco] is that they’re effectively hacking eBay enabling them to acquire customers for less than 1/5th the cost of their competitors. Other platforms I’m actively looking at to rip customers from are Nextdoor, Thumbtack, Airbnb/Homeaway, Massdrop, Alibaba, Kickstarter, etc etc. The platforms we want to look for must have (a) Transactional focus & (b) Some private messaging or e-mail scraping function. As the messengers (Line, Kik, Whatsapp, Messenger) also build out transactions these may develop into great opps for ripping customers.
  2. Negative Working Capital – I think this is more impt than 24 months ago as it’s a hedge both against capital markets tightening & drawn out fundraising processes. Of course it needs to be utilized with caution, but it can be an immense source of leverage.
  3. Scale Buster: This is one of those intangibles that is sort of hard to define. Brian has it at TrunkClub with his stylist model driving growth. The problem is: traditional customer acquisition is counterintuitive in that it actually gets MORE expensive with scale & you buy WORSE customers with lower LTVs. So how do you build a creative growth model that can predictably manufacture growth (like a marketing spend) without defaulting to traditional marketing channels. Honestly, I don’t know what this will look like. Maybe it’s some sort of brilliant referral model. Or some smart play on social selling. I don’t know, but this is one where we need to keep our eyes and ears open.
  4. Content Savvy – The more we see, the more I realize that a deep understanding of content marketing needs to be in the DNA of a team & not just bought. Even [portco] is really starting to hum because they’ve nailed a really good Facebook video content strategy that is really scaling. Here’s why we like it: (a) Very low cost because salaried (b) Scales without friction beyond traditional paid marketing spend. (c) Is shared heavily – a far more authentic play on social networks than traditional ad spend.
  5. Influencers – In the past 2 months, I have probably seen half a dozen businesses do $50k in GMV in Month 1 out of the gate. HOW? Just leveraging a core team member with established distribution/network. W/O this built in distribution, a startup can burn through $500k-1M+ EASY just trying to hit that $100k GMV month mark. We do NOT want to pay for that infrastructure & growth. We need it to be built in, especially if so many others have that advantage. My benchmark would be $20k+ in Month 1. [Edit: This can also come through a good PR strategy.]
  6. Margins – We need to be hawkish on gross margins. Greg Bettenelli at Upfront recommends 40% and I’m fine with that number. I think we should be comfortable at 20% with a clear path to 40%, with the understanding that we lose some capital leverage (but not a ton at the early stage). We also want the business to have an opportunity down the line to build a private label brand that can create blended margins in excess of 50%.

Feel free to add more, thanks.

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