Actually, It’s Better If Some VCs Hate Your Idea (According To Greylock’s Hoffman And Sze)

Actually, It’s Better If Some VCs Hate Your Idea (According To Greylock’s Hoffman And Sze)

ANTHONY HA

posted 8 hours ago

In addition to announcing a new $1 billion fund, while onstage today at Disrupt SF, Reid Hoffman and David Sze of Greylock Partners talked about how they actually choose the startups they back. In fact, Sze said the firm conducted a study of partners’ voting patterns and decided to change the process by which it decides on investments. He didn’t go into too many details about those changes, but apparently the team observed that when everyone thought backing a company was a bad idea, it was indeed a bad idea. More surprisingly, if all the partners loved the startup, “the returns turned out to be very mediocre.” The problem, Sze suggested, is that those ideas are probably “too easy.”The investments that resulted in the biggest returns? Those were “the ones in the middle, where there’s a lot of debate and it’s not completely clear.” In those cases, Sze and Hoffman said they’re looking for something to tip the firm in the startup’s direction, like passion and experience.

These results tied into a broader point that Hoffman made, that “almost every great investment has a contrarian check.” In other words, the best investments are the ones where “a lot of people will think that’s a bad investment but you will think that’s a good investment.” A good example is LinkedIn — when Greylock backed the professional social network, Hoffman (who co-founded the company) said it was dwarfed by other social networking sites.

One of the other panel topics was Greylock’s interest in backing in enterprise startups. That’s something Sze discussed in our post about the new fund, and he started to reiterate those points on-stage — except that interviewer (and TechCrunch founder) Michael Arrington made it clear that he wasn’t all that interested in the topic.

Arrington has expressed his boredom with enterprise startups before. Today, he acknowledged that many of the best investments at his firm CrunchFund are enterprise startups, but he said that when his partner Patrick Gallagher proposes investing in these companies (“He loves this crap”), Arrington replies, “I’ll agree to invest if we can stop talking about this.”

 

Greylock’s Smooth Operators Will Invest $1 Billion 14th Fund In The “Many Any’s”

JOSH CONSTINE

posted 10 hours ago

Running a great company is a lot different than starting one, and some lessons can only be learned from experience. If you’re a founder, you could stumble by yourself until you figure it out. Or you could call Greylock. By stacking its partner ranks with veteran operators, the firm has made a name for itself over almost 50 years, and today announces its $1 billion 14th fund.

Partner and board member extraordinaire David Sze tells me this fund comes from Greylock’s “most prestigious set of LPs yet”, and also features the smallest number of total LPs yet thanks to long relationships with some of the world’s top endowments. On-stage at TechCrunch Disrupt SF, Sze told the crowd how he’s excited to run Greylock first fund since it moved entirely to the west coast.

The $1 billion fund will focus on early stage startups like its last fund where 120 of the 140 or so investments were in seed or A rounds. Still, Greylock will consider some Series B rounds and “invest selectively” in late-stage growth rounds. Sze said on stage that Greylock has invested about half of its$1 billion 13th fund that closed in 2011. You can watch the video of the Greylock guys chatting with Michael Arrington below.

Partner and LinkedIn Founder Reid Hoffman tells me that Greylock identity stems from a team of “product oriented folks who have been company builders themselves.”  Sze told Michael Arrington on stage that Greylock seeks partners with a combination of “analytics and instinct” that can continue its tradition of seeing gold where others see garbage, like with Airbnb. Those ideals are embodied by several new partners who’ve come aboard since it’s last fund including John Lilly, Josh Elman, and Simon Rothman on the consumer side;  Joseph Ansanelli and Jerry Chen on the enterprise side; and operators Jeff Markowitz, Dan Portillo, and Tom Frangione.

ogether, they’ll be looking for startups that espouse two huge trends in technology startups:

The Many Any’s – An anywhere, anytime, anyhow Internet is emerging thanks to mobile devices and innovative marketplaces. Suddenly, you can get on-demand taxis, places to sleep, and professional services from wherever you are. The rise of the “Many Any” startups is partly why Greylock has pledged to invest $100 million in new marketplaces.

The Enterprise Cloud – ”Companies and their employees will no longer need to be a slave to technology. Instead, they will have tech serve them” thanks to the cloud, writes Sze. He tells me there is $140 billion of IT spend up for grabs, and Greylock is looking for companies building enterprise products with a great user experience and that explore new bottom up distribution models along with traditional sales.

In exchange for equity, Sze and Hoffman told me backstage that startups don’t just get money, they get foresight and know-how. How do you know when to raise your hiring standards or fire someone? How do you juice your consumer startup’s virality or build an enterprise sales team? Greylock is designed to answer these questions and spot pitfalls to keep their portfolio companies growing.

Sze and Hoffman admits that there’s a need for venture firms to offer executive recruiting, design assistance, and other specific services but it’s help navigating the day-to-day that makes Greylock special. Sze concludes that for entrepreneurs, Greylock is an ally beause “it’s a really lonely journey. If you can go there with people who have perspective that can make the tough decisions on what excellence is but also have the humility to know it’s really your journey, then that’s a good combination.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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