Mark Suster

2x Entrepreneur turned VC and General Partner at LA-based Upfront Ventures

THIS CHAT HAPPENED ON August 25, 2015

Discussion

Mark Suster@msuster · Upfront
I run a VC firm. I used to run software startups. That's me. I love AMAs because I know what it was like when I had nobody for whom to ask the hards question or the questions I considered stupid. No question is dumb. No question is out of bounds. I'll answer anything. I was an entrepreneur for 10 years. It was hard to get access to VCs. AMAs are great for transparency and I'm grateful to Product Hunt for this opportunity.
Sydney Liu@sydney_liu_sl · Co-Founder of Commaful.com
Hey Mark! Everybody wants a piece of your time. People cold email you, people make intros to you, you get tweeted at, people comment on your blog, etc. You’ve also been known to give people who are relatively unknown or don’t already have a huge network in tech the opportunity to build great businesses. What helps you differentiate the signal from the noise? When somebody you don’t know contacts you, what do you look for that tells you: "This person may be worth spending some time with."
Mark Suster@msuster · Upfront
@sydney_liu_sl Thank you. Very kind. Honestly, Sydney, sometimes it's luck. I had dinner 5 years ago and sat next to a young entrepreneur named Brian Li. We struck up a conversation. I could have ended that night. But he's been politely persistent with me over the years. We have similar interest in food (especially Asian) and so we try to grab meals together from time-to-time. In fact, we're having dinner tonight! Another time Raj Suri - who had been commenting on my blog (the best place to start an online relationship with me - asked for 15 minutes of advice. So I knew he had spent time on my blog so I agreed. We had a 45 minute call. I really like him as a person. He was smart and thoughtful. So over the years we've carved out time for each other. There is no "one size fits all" but there are two stories for you. Mostly it's: likability + polite persistence + smart / interesting points-of-view + time.
Ryan Hoover@rrhoover · Founder, Product Hunt
Excited to have you on PH LIVE, Mark. I enjoyed visiting LA and chatting with you about startups and Product Hunt a few months ago:
There's been a lot of discussion (for the past year but especially in the past few weeks) about inflated startup valuations and the venture market drying (see @bgurley's tweetstorm from last week). What are your thoughts on this and what advise would you give to startups seeking funding in the next ~year?
Mark Suster@msuster · Upfront
@rrhoover great question. thanks for asking. I hope you don't mind a couple of links to my blog but I just wrote about this topic this morning and yesterday http://www.bothsidesofthetable.c... http://www.bothsidesofthetable.c... with more context but in short - keep burn as low as you can but certainly "cut to scale" for your cash balance - start raising early - expect it to take longer (at all stages but especially later stages) - have the confidence to go for investors and price you want but the wisdom to accept a lower price or lessor target investor if the round is too slow. Capital matters more than maximizing price
@msuster thank you Mark. What do you mean by starting to raise early? Do you mean early in the firm's life or earlier than you would presumably need?
Paul Robert Cary@prcary · CEO, Findie | www.findie.me
@livmkk In my experience, both. It really is exactly how other entrepreneurs say, you need more than you thought, sooner than you thought. :)
@paulrobertcary thanks Paul. I've heard many people saying that it is better to raise investor money as late as possible, in order to increase the startup's bargaining power (ie higher valuation, more favorable term sheet). Do you think it's wrong?
Paul Robert Cary@prcary · CEO, Findie | www.findie.me
@livmkk Magari ne parliamo tramite Twitter :) I think it all really depends on your individual circumstances. I put my own money into my current startup, then progressively linked up with people who saw the vision turning into reality and we settled on a valuation based purely on some market sizing conjectures and belief based on my ability to get things done. Now we're looking at "proper" seed stage money and we could have used it now instead of 2 months from now when we'll get it. So I would rather have had the capital now at a lower valuation and get on a better trajectory, because the product is pretty much ready.
Erik Torenberg@eriktorenberg · Former Product Hunt
Hey Mark, Thank you for joining us! Because we've read so much of your work, gonna ask some hard Q's: You have so much to be proud of, but what's something you're _not_ proud of and what did you learn from it?
Mark Suster@msuster · Upfront
@eriktorenberg Every time I lose my temper I'm not proud. I can sometimes be a "hot head" and I always regret it 10 minutes afterward. I've learned over the years to try and not react immediately when I'm angry and that's helped a lot. But sometimes I can't help myself. So ... every now and again I feed the trolls on Twitter and shouldn't :)
KRISHNA DEVENDA@kkdevenda
@msuster I read a story few days back. Its moral said, "Never react, always respond". Maybe this help you as well. :)
Mark Suster@msuster · Upfront
@kkdevenda good one. thanks!
Faraaz Ahmed@faraazahmed
What do you and Upfront look for in seed stage consumer startups? How much or what sort of traction do these types of companies need to show you?
Mark Suster@msuster · Upfront
@faraazahmed at "seed stage" our bet is mostly on the team and wanting to work with them over the long term. We don't do many seed investments so we tend to be as selective at this stage as at our A round but writing smaller checks. Traction always helps but I"m not sure it's required
Jeffrey Doucet@jeffrey_doucet · CEO, www.careerlaunch.io
I am currently raising a seed round for my ed-tech startup, and I wanted to ask you: how much emphasis should I place on revenue/cost projections. People ask me for them, but other than projecting revenue and market share goals, everything else seems to be a guessing game with little value. How much do you value cost projections?
Mark Suster@msuster · Upfront
@jeffrey_doucet early stage I care more about costs than revenue because revenue is tiny and often unpredictable whereas costs tell me how you plan to build your business. But what I'm really evaluating is (70%) the quality and ideas and capabilities of the team and (30%) how much I believe in the market opportunity
Shahed Khan@_shahedk · Founder @ Loom. Prev @ Upfront VC
Hey Mark ;) One of my favorite blog posts by you is "How the Hell Do I Prioritize Work, Blog & Find Balance" (http://www.bothsidesofthetable.c...) What did you teach yourself early on in your career to remove most/all distractions while focusing on the current task at hand? How has that changed overtime? And what advice do you have for others today -- that will help them be most productive?
Mark Suster@msuster · Upfront
@_shahedk I have ADD - which I talk about openly http://www.bothsidesofthetable.c... - and which makes focus for extreme periods of time difficult, but ... People with ADD can actually focus really well on tasks in which they are interested in. And that's something many don't know. We're easily bothered by "shiny objects" so when I REALLY need to concentrate I shut down Twitter, I turn off my mobile, I close all my browser tabs, I don't read email and I put myself somewhere quiet where I can't be disturbed. Also. I tend to work really well late at night so I allow myself once / week to stay up until 3am if I have stuff to get done. It drives my wife nuts (she worries about my health) but it really helps me get ahead. If you're a morning person try locking yourself in a room in the morning and cranking work but DON'T open your email until you're done with that session. Finally, I have a friend who rented a cheap apartment on the outskirts of LA that his company uses for this purpose. Their senior execs go their individually a few times a month when they need to focus, be creative and/or crank on work. I like that.
Eric Willis@erictwillis · Working on something new
@msuster Hello Mark, Thanks for doing this AMA. Yesterday, you wrote a blog post about the stock market correction and how that could impact venture financing. I know you mentioned that your post could be misinterpreted as being "bearish". I know that we can't predict what will happen, but what is your gut feeling on the market? Do you really think winter is coming and there are some fundamental economic indicators (outside of potential triggers that the Fed could set up next month) that would lead one to believe that the "good times are over"?
Mark Suster@msuster · Upfront
@erictwillis ok. truthfully i'm long-term a bit bearish but hate saying so publicly. If you read The Accidental Superpower you'll see the demographics in this country will go through a 15-year period of difficulty because we have about 25% fewer Gen-Xers than we do have Baby Boomers, who are living longer and who didn't save enough. We live in a "geriocracy" where older people vote for their economic interest and are well organized. So we'll have lots to pay and a smaller tax base. We have a dysfunctional government that can't deal with this in a rational way. So until the "Echo Boomers" are fully in the work force and Gen-Xers retiring the fundamentals scare me. Plus, Boomers will be downsizing meaning: selling expensive housing (reducing demand, increasing supply) and selling stock holdings for retirement dollars. So this all concerns me and we know that China will go through its own issues. I'm long term hugely optimistic on tech because it will solve problems and disrupt markets. But I think we in the industry tend to over-estimate our own sense of "value"
Erik Torenberg@eriktorenberg · Former Product Hunt
@msuster What's the biggest thing you've changed your mind about in the last year or so?
Mark Suster@msuster · Upfront
@eriktorenberg I was slow to see the value of SnapChat. I was wrong and am fully bought it.
Mark Suster@msuster · Upfront
@msuster All - I have to go now as I have back-to-back calls. I'm sorry if I didn't get to your question. I'm very happy to come back and do this again soon. Thank you!
Sameer Noorani@sameernoorani · CEO, Roomvine
@msuster Thanks for the insights!
Paul Robert Cary@prcary · CEO, Findie | www.findie.me
@msuster Thank you Mark - it's been enlightening as always.
Vikram@j4uvikram · Associate, Nirvana
@msuster Hi Mark you have been investing big time in Content & probably have seen the MCN story playing out well. What do you think is the future of content from here? Also in Emerging countries where monetisation is a problem, how could sustainable business models be created?
Mark Suster@msuster · Upfront
@j4uvikram I never believed in the concept of an "MCN" or a "YouTube network" so I get pigeon holed on my personal views. Look - Americans watch 5.3 hours of TV per day and that hasn't changed in decades. But the type of content and the way we watch it is changing dramatically particularly for young folks. So I'm very long video startups. It will disrupt the $150bn spent in the US (pay TV + ads) and will do the same globally (where TV patterns of consumption are actually similar to the US). International monetization is always a problem but if your local cost base is lower you can afford to sell media at cheaper rates. Or partner with people who can. Also, tons of international distribution opportunities.
Vikram@j4uvikram · Associate, Nirvana
@msuster Thanks! Agree on video consumption moving from TV to handheld devices. But in markets such as India an interesting dynamic is evolving where the aggregation play is being strongly fought by incumbents whereas creator networks are being strongly contested by disruptors. Still making sense of unit economics at scale seems to be a far stretch.
Paul Robert Cary@prcary · CEO, Findie | www.findie.me
@j4uvikram Pretty soon India's middle class will be bigger than the entire population of Europe. And you have a whole generation of filmmakers who can't access Bollywood. So exciting!
Mike Lenz@lenztweet · Founder, www.TipYourself.com
@msuster What retention or other metric would indicate to you that a team has found product/market fit for a consumer internet app?
Mark Suster@msuster · Upfront
@lenztweet retention. cadence of adoption. virality. several signs can point to it. but to be p/m fit all of these need to be at scale
Mike Lenz@lenztweet · Founder, www.TipYourself.com
@msuster Thanks Mark
Sameer Noorani@sameernoorani · CEO, Roomvine
Hi @msuster There seem to be very few institutional VCs who truly do seed funding. It feels its all mostly different shades of growth funding with an increasing prerequisite of traction and engagement (making it feel more like a Series A). For some consumer products the reality its demand and physics can only be known after such a community is acquired (which requires capital) so they never make it out of their nest. Do you agree with this observation of reducing seed investment and if so, what do you think the effect on the ecosystem would be in the long term?
Mark Suster@msuster · Upfront
@sameernoorani More seed funds and angels have stepped in to fund early-stage companies. So as a result VCs are happy to cede that market and wait for traction. The funding is still there - just from different sources
Sameer Noorani@sameernoorani · CEO, Roomvine
@msuster Thanks. And pls do more AMAs.
mikedariano@mikedariano
Mark, what are 3 books in different domains that you often recommend?
Mark Suster@msuster · Upfront
@mikedariano well - more details on ProductHunt books. But ... 1) american pastoral is a must read for understanding the fabric of US entrepreneurism over the decades. It won the Pulitzer. 2) Accidental Superpower for understanding current world trends and how they may play out over next few decades. And a novel I always cherished was The Unbearable Lightness of Being. I'll throw in a bonus. Everybody should read the two-part graphic novel Maus by Spiegelman. It's the true story of the author's journey with his father through post-war, concentration camp angst for a Jewish family. It's unbelievably powerful and moving. Oh. And Unbroken! There's 5.
Corley@corleyh · COO @ Product Hunt
@msuster what is the one question that no one ever asks you, but you think they should ask?
Mark Suster@msuster · Upfront
@corleyh hmmm. hard one. i feel stumped. it seems I get asked everything. sorry! I did spend bit thinking about this. I got nothin'
Corley@corleyh · COO @ Product Hunt
@msuster np - I appreciate you thinking about the question. 😀
Eric Willis@erictwillis · Working on something new
@msuster Do you have your own Anti-Portfolio? Interested to know if you've passed on some investments that ended up being home runs.
Mark Suster@msuster · Upfront
@erictwillis Uber seed round
mikedariano@mikedariano
@erictwillis Did you hear @sacca talk with @tferriss? They went over some of their misses.
Eric Willis@erictwillis · Working on something new
@mikedariano I missed that one. Been meaning to catch it.
mikedariano@mikedariano
@erictwillis A few days late, but here's the notes for that episode http://thewaiterspad.com/2015/08...
Eric Willis@erictwillis · Working on something new
@mikedariano Thanks!!
Matt Wiseman@mattwiseman · Product guy ex-Google, YouTube
@msuster thanks for doing this AMA. You mentioned you are very long video startups, I'm also very excited about this space. Do you see any common issues / gaps across them that aren't being built?
Harry Stebbings@harrystebbings · Podcast Host @ The Twenty Minute VC
So looking forward to having you on www.thetwentyminutevc.com soon! My question is what personal trait do you think makes you uniquely positioned to succeed as a venture capitalist?
Nichole Elizabeth DeMeré@nikkielizdemere · Co-Founder PurposeBeyondProduct.com
@msuster Hi Mark! Thanks for doing an AMA. 1. What does the timeline look like for the ten years that you spent as an entrepreneur? 2. What lead you to become a VC? 3. What five books have changed your life and why?
Mark Suster@msuster · Upfront
@nikkielizdemere thanks for the question. I spent 6.5 years running BuildOnline and 2.5 on Koral. I stayed too long at my first company and not long enough at my second. I sold too late the first time and too early the second. I was going to start my next company when my VC (who backed both companies) asked if I wanted to join as a partner. I thought "why not? if it works I can stay a VC and if not I already know I can start another company." It turned out to be a great decision because I think at my age (47) I'm a better coach than player. I can't quite hit the jump shots or run as fast as I used to but I can use the wisdom I picked up to help others. 5 books ... check on my list on ProductHunt !! I put some there.
Johnny Zhu@zhujohnny
@msuster Hi Mark! Wondering if you have any anecdotes on how being in LA has helped you in VC.
Mark Suster@msuster · Upfront
@zhujohnny I don't have 80 other firms competing for the best deal. Thus I funded Maker Studios and did very well and predict similar successes at places like Mitu, Invoca, Vidme, uBeam and others. I can get into deals early and work closely with amazing teams.