Jeremy: Jeff is the member of the Forbes Midas List, one of the top 100 dealmakers in tech. Did you also know he grew up in France? He’s invested in over 200 startups and has over $300 million under management. He has a Masters in Computer Science and he doesn’t call it a day unless he’s logged 15,000 steps on his fitness tracker, of which many of those steps were taking during this recording. He’s been called ‘The Chainsaw’ by his co-workers. Yet, his childhood dream was to be… well, it’s a surprise and you’ll soon find out. Let’s rewind back to you Jeff, when you were growing up in France. You had a number of experiences that shaped you into becoming who you are. It would be really interesting to hear more about that. When you were growing up, was it interaction that you had with your parents or just outside with your peers or something else that really shaped you to become who you are today?
Jeff: So I have an interesting non-answer to that question, which is more what I may have become but I didn’t. At the age of 12, I really wanted to become a chef. I wanted to go into cooking school and become a chef because I really loved cooking. We went to see the counselors at school. They looked at my grades and they said, “What the hell are you doing here? You’re top of the class. You’re a straight-A student in Math, Physics, German, and everything. Why would you go to cooking school?” I said, “Because I’m interested in learning how to become a professional chef.” They said, “No way, nah. Go back to Math and Physics.” So like any kid from my generation, I basically did Math, Physics, German as a first language, English as a second language, Latin as a third language, and ended up in engineering school and did computer science.
Jeremy: One could make the argument that many aspects in business are similar to cooking. Having said that, I was just curious whether that early interest in culinary arts had played itself out in your personal life since then.
Jeff: It’s a great question. I love good food. I have a sweet tooth. My favorite place in the world is a spot on Rue Guisarde in Paris. I was lucky to be there two weeks ago. So that still plays a big part in what I do and who I am. I love hosting people, going to restaurants. One of my side passions is wine as well. It’s definitely played in what I’ve become on the side. I also like cooking. My wife really enjoys the fact that I’m happy to cook for the family over the weekend. I think that has played, not really so much a role of who I am and what I’ve become, but it’s certainly one of my passions.
Jeremy: Was there an experience in the last five to ten years either with a startup or somewhere else in your professional life that you think has informed the way you go about your day-to-day today?
Jeff: There are so many. I think you learn more from your mistakes than from your successes. The thing that I still consider myself a total idiot for till this day is to have passed on the LinkedIn investment opportunity which I had in 2003 – 2004 when Reid raised his series A from a Sequoia partner. He invited 13 angels and I was invited as well to be the 14th. I was really excited about LinkedIn. I was in the race for the first person would have 50 connections on LinkedIn. One day, Reid said, “Hey, can you chill and not spam everyone with LinkedIn invites? People are complaining.” It was really amusing when you think about it. After discussions with Sequoia, those guys were obviously smarter than I am and said “Hey, let’s just build the network and not try to build the business.” I was very concerned about that because those were the days when social networking didn’t really mean anything and building a business was really important to raise [inaudible 05:49]. I said, “Hey, I really don’t want to say no to Reid so I’m not going to reply to the email. If he asks me again, I will invest. Otherwise, I will politely pass by default.” That was really ridiculous because every, single pass I’ve made since then, whether it’s not taking a meeting with AirBnb, not investing in Uber, not paying attention to Pinterest ,had a good reason. But as far as LinkedIn is concerned, I just chickened. Once you have a chance to work with one of the very best entrepreneurs of all time, the fact that there may be a couple of issues with the opportunity, your conviction has to help you get over it.
Jeremy: That makes sense. Would you think now, when you evaluate a new investment, that you apply different principles to evaluating it or not?
Jeff: I think the filters that we use are still pretty much the same. Holistically, founder, market opportunity, and product/service, that we look into. I think that we consider a bunch of other things because we’ve done 203 investments since the beginning. So we’ve seen 200 startups play out under our eyes. A bunch of them were successful but a bunch of them were also utter failures. We try and detect potential, emerging patterns that failed us in the past, whether it was a hardware company and the team doesn’t have any manufacturing experience and is not even aware of the challenges they have ahead of them to try and build the product they have decided to conceive.. The notion that founders don’t know what they don’t know is typically a deal killer. There are several different things. The problem is patterns can be dangerous. It can lead you to know early on where if you dig a little bit more in trying to avoid to much pattern matching, you might actually discover that the issue isn’t there. So you really have to be mindful, the way you apply your filters. The challenge is there is so much time we can spend on any opportunity. So we continue making terrible mistakes by investing in the wrong companies and passing on the right ones.
Jeremy: It’s interesting what you were saying about Reid from LinkedIn asking you to invest and you passing on that opportunity. I was working in the same incubator as the guys from Instagram. Kevin and his co-founder were sitting almost next to me.
Jeff: On the Pier.
Jeremy: It was the Dogpatch Labs. Ryan Spoon had graciously put that together. We had a number of amazing companies that started there. Among all the incredible companies including TaskRabbit and [inaudible 09:23] and a lot of other companies that had successful exits, Instagram was the one most overlooked. I specifically remember that myself and some of my colleagues, we walked up to Kevin and asked him what he was working on. The answer was, “We’re working on a photo app.” Everyone in the incubator said “Good luck with that.” Two or three months later, it was clear that he was not just onto something, but that it was going to explode in growth. The other thing that was interesting about seeing them interact- Kevin himself and his co-founder – is that they were actually the team that spoke the most to each other. They were constantly communicating. Everyone else had their heads down and was working. The assumption was that these two guys were not working at all because they were talking to each other all the time. In retrospect, what you learn is that actually, that level of communication and that level of constant collaboration was probably one of the ingredients in their success among many others. It was definitely interesting, seeing that evolve.
Jeff: And he was a very successful pivot from Bourbon to Instagram. So I was early on the app. Those were the days when I was still paying attention to social media, social networking and so forth. I tried literally everything to get and audience with Kevin, including showing up unannounced to his office. By then, it had moved to South Park in the old Twitter office. I showed up and I was active on the app, and they knew who I was. I saw Mike and I said, “Can I get five minutes of your time? I really want to pitch you to let me invest in the company’s next round, whatever it is.” Mike went up and Kevin was on the phone with his accountant or something. He basically said no. So I never got my audience and I never got to invest.
Jeremy: I saw that happen to a number of investors, even when they were in their original incubator. Kevin and Mike had both reached a point where they were able to say no to lots of investors. For listeners who are not familiar with what you referenced earlier as Bourbon, it was a gaming platform that was very unsuccessful in terms of their expectations. They were able to take one piece of that. They noticed that users were sharing photos and they were able to have that become Instagram today. What’s so interesting there is they could have easily stopped and called it a failure at the end of that original version of Instagram, which was a totally different product. But it’s impressive to see what they were able to do there. Jeff, I’m curious in terms of the biggest mistakes that you think investors make, whether they’re investing in very early stage companies or later stage companies. What do you think are the top one or two mistakes that you’ve seen investors make? Do you have an example or story around those mistakes that helps illustrate what they are?
Jeff: There are so many we could do. It would be a two-hour podcast on that. The ones that are really the most well known to me and potentially the most challenging for founders is when the VC thinks that they can understand the business or operate better than the team. They don’t listen and try and provide point of views, advice and perspective. But they tell the entrepreneur what to do and how to do it. Sometimes, you have challenging situations where you have to be a bit more pointed and forceful to make sure that the founder/founders or the team will listen to you. But it’s not your job as an investor to run the company, to make decisions, to drive decisions. You’re here as the coach. It’s the coach of the godfather which are the two analogies which [inaudible 14:54]. Every time you feel that the investor is trying to take over, that becomes dangerous. I won’t name names, I won’t give examples. But there’s basically a blacklist of investors who behaved that way that they will never work just because of that.
Jeremy: That is part of the element of venture capital at a later stage. It’s that the investors are constrained. They’re bored and they’re investors in a way that requires very large outcomes, billion dollar exits or nothing. So they pressure an entrepreneur into doing anything to achieve that outcome, even if it’s not in the best interest of an entrepreneur or a company. It’s something that where the venture investor is essentially operating out of the constraints that he or she has. I think it’s so much the responsibility of the entrepreneur whether it made sense to take that funding around if they’re aware of the potential consequences in terms of that specific element I just described. Have you seen that play out in a specific way? Did you see a company that you thought was headed in the right direction but the company curtailed into a different direction, based on what we just talked about?
Jeff: I’ve definitely see this play out a few times. Fortunately not that many times. You never know what the company would have become if everyone hadn’t listened to the VC who had a very strong voice, personality and so on. But the way to avoid that as much as possible is for founders to take time and really call a bunch of entrepreneurs who have worked with the VC that they’re about to work with. Both people have positive outcomes with them, but also people who had failures. Typically, the bad manners of a VC will show up during dark times. Most often, VCs – and [inaudible 17:27] to be honest do that as well – will give you references with founders where things are just really doing well, but never hesitate to ask for a reference to a failure. The good news is with Crunchbase and all the databases, you can track outcomes, the names of the founders, and get introductions. So it’s worth your time to figure out whether you’re going to spend a bunch of years with someone you can actually work with. You can’t divorce your VCs.
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Jeff, if you were talking to an earlier version of you decades ago, would you recommend a specific thing for that earlier version of Jeff to learn? Are there one, two, or three things? Second of all, would you say there are specific actions that you have to take, meaning that there are specific things you have to do in the process of becoming an angel investor, in the process of learning and mastering the craft of investing in early stage tech companies?
Jeff: The only thing I would say is say yes to LinkedIn and don’t say no to Uber.
Jeremy: Okay, outside of the missed opportunities with LinkedIn and Uber, you mentioned that you became a venture capitalist when you were 33 years old and that initially, it was a failure. That being said, much of what allowed for your long-term success has been your operating experience, of having actually been in an operating role like a CTO at a tech company or other roles. So it sounds like one of the things you may have told your younger self is to develop and learn from that operating experience.
Jeff: I think spending some time on the bench and having operating mastery, understanding a lot of facets of a business is really useful to know what you’re doing. So my concern is always, what’s the right time to become a VC? It’s great to be on the younger side because you can really grasp the technology and you understand consumer trends better and so forth. But then, can you really help with a facet of operating experiences where you’ve gone through good times and dark times? It’s always this fine balance. It used to be that you really become a VC until you were in your late 40s. Now, people are becoming VCs as partners in their late 20s. I think that could be challenging from just the operating support side of our job.
Jeremy: What’s something you believe in as an investor that most people disagree with?
Jeff: Eleven years ago when I thought it was interesting to put together a $15 million fund because there was a thing that was happening at the early stage, people mocked me, thinking it was a small fund that didn’t make any sense. Those were some of the comments when I launched fund [inaudible 23:05]. Now with 600 micro VC funds, it was not a bad idea at all. I think by now, the playbook of financing, I would say, has been shared pretty widely because unlike the previous generation of VCs, the craft was really being kept as some kind of a dark secret. The first generation of VC bloggers, Fred, Brad, [inaudible 23:43], myself, back in 2004 – 2005 really removed those clouds and this mystery from the VC world by just blogging about what we were doing. So I don’t know that there is anything major that we believe no one else does. I think there is always a set of sectors or trends that you believe in and others don’t. In this business, you can only make a lot of money if you’re a contrarian and make one bet that goes against premature one –
Jeremy: What are you contrarian about right now?
Jeff: I’m very skeptical about crypto. I haven’t done any crypto. I’m skeptical about Blockchain. I do believe that something’s going to come out of it but certainly, most of the dollars which are all spent in ICOs will be completely wasted. I’m playing that market on the sidelines.
Jeremy: I could argue right now that that’s actually because of the decline of crypto at the current moment. We’re seeing a majority of the investors being very careful with crypto in a way that back in December and January, they were not. In that sense, I would argue that it’s actually something being more widely embraced, this notion that a lot of crypto is not where the money is at.
Jeff: But that’s been our position since the beginning. I don’t believe in [inaudible 25:35] market. So best of luck to all my friends who poured hundreds of millions of dollars in Lime and Bird and whatever. But I think it’s going to end up in a disaster unless the companies are acquired by [inaudible 25:55], which is always possible. But that’s a momentum play, not a long term sustainable industry play. So we’ll see.
Jeremy: Makes sense.
Jeff: We don’t pursue fashionable trends. FitBit was our first investment in hardware back in 2008 when no one was investing in hardware. It was so hard to get this funded but it worked out for people involved. But most of the market just ignored the opportunity. It’s a good example of an opportunity that played out eight years later.
Jeremy: What’s crazy is that you get a chance to use it on a personal basis in addition to on a professional basis.
Jeff: Exactly. I have my FitBit at my wrist as we speak.
Jeremy: Do you believe in the idea that most investments should be something that you either personally understand, something you see yourself using in some way? Or do you ascribe by a theory that as long as it’s an interesting market and product, you’re still up for investing in it?
Jeff: It’s more of the latter. FitBit definitely spoke to me because at the time, I decided to do a diet and I also became gluten-free around the same time because I discovered I was addicted to gluten. I lost a bunch of weight and started to do a lot more exercise. Having a FitBit helped me get to 10,000 steps per day which was my goal then. Now, it is 15,000. FitBit helps me keep track of my sleeping patterns and definitely see an impact of having deeper REM sleep. I wish I had a way to influence my sleep patterns and look at neurostimulation as a way to do that. I wish we have an investment in this space but they don’t. work on sleep patterns.
I think for a lot of those that I would call frontial text or edge technology companies, it’s good that you have a personal affinity with it. But it’s not necessary. [inaudible 28:35], but I think it can be useful when it comes to consumer tech markets.
Jeremy: Let’s switch gears for a moment, Jeff. I’d be interested in hearing what was the most entertaining of off the cuff experience that you had, either in your professional experience as an investor or working with a startup, something that till this day still makes you laugh.
Jeff: I think I’d go back to the dinner I had with my team when I actually left my own startup. I was an operator. I was pretty good at doing turnarounds and my boss – that was after our acquisition by Reuters so that was my boss at Reuters – called me Jeff the Chainsaw. We were in this three star restaurant in Paris. We’re enjoying ourselves and there’s a maitre d’ coming with a big silver plate with a gift, all wrapped. I unwrapped it and essentially, it was a chainsaw. My boss was literally in tears because he thought it was so funny to offer this chainsaw in the middle of this three star restaurant. The look on all [inaudible 30:25] was priceless. It’s not related to [inaudible] many memories, but that is pretty amazing.
Jeremy: Did you guys a chance to capture it with a photo?
Jeff: No, because it was in 2000. We started having cell phones but picture quality was so bad. There was no Instagram.
Jeremy: Why did they call you The Chainsaw?
Jeff: Just because whenever I was heading something and it wasn’t working, I was cutting and firing people and doing what had to be done pretty efficiently. So for some reason, my boss came up with the nickname and it stayed. I mentioned it in laughing, in my VC job but no one calls me The Chainsaw.
Jeremy: Would you say you’ve evolved past that or it’s something that’s still who you are?
Jeff: We have to do what we have to do. We’ve had our own fair share of events where we had to let go of team members, we’ve had to either move aside or replace CEOs a few times. But we don’t really do a lot of that heavy lifting because when we invest in our early stage companies, it’s really to help them build up. If ever there’s a team that we look at that we don’t think is the right fit, we won’t start saying, “Oh, I like that founder but I don’t like that founder,” and so forth, we basically just [inaudible 32:23]. So the team that is in front of us is the team that we work with for two or three years. The number of times the funding CEO had to be replaced or let go during our seed investment is literally a few times over the past 14 years. Afterwards, as the companies ramp, sometimes funding CEOs ask us and we work with them to bring in a professional CEO who can scale the company.
But it’s not the heavy intervention kind of VC job that some of the mid-stage VCs will sometimes do. The [inaudible 33:19] can stay in the shadow.
Jeremy: I’m curious, what is one book in the last few years that you’d definitely read a second time?
Jeff: One thing which I don’t have time to do is read. I read a book for myself in literally years. It’s sad. That’s something I should take time to do. When I went to Paris couple of weeks ago, I took three books. I read none of them because I was just too busy with what we’re doing and trying to stay in touch. That’s something that I will eventually pick back up. My wife always suggests that I try and read audiobooks as opposed to books and I may actually do that on my commute from Palo Alto to San Francisco.
Jeremy: That’s the way that I consume or listen to written content these days. It’s a great way to do it on the go like you just described. What is one thing that you want to be known for when you look back on your life, Jeff?
Jeff: I think it’s the way I work and support entrepreneurs. Obviously, it’s always great to point out the successes and the great companies that we IPO’ed and sold for a bunch of millions and so forth. But it’s more this relationship that we create with entrepreneurs where they get support, value, and tough love and it’s a good summary of the way that we work with them. When Next Big Sound which was one of our companies that we invested in 2009 and we sold six or seven years later to Pandora. It wasn’t a huge outcome but it was great for everyone. The founder, Alex White, thanked me for having spent an hour with him on the phone every month, just giving him perspective advice and insight, challenging him, supporting him, but in a consistent way. I don’t know if it made a difference in the outcome, but I know it helped him look at his day-to-day challenges with a different perspective and a different eye. So that’s our job. Even though the bulk of our work is during the seed phase where companies are really super early, we stay involved in the companies until the very end. It’s our mandate to try and bring this sort of perspective that can really help them. Sometimes when they would just want external validation or just an outside point of view, that can be useful
Jeremy: How can listeners find out more about you and your work, Jeff?
Jeff: I’m Jeff on Twitter. To be honest, I’m laying low than I used to be. I think my role is helping our founders more on the one-on-one basis. I do [inaudible 36:58], which I really appreciate.
Jeremy: I just want to thank you for your time. I want to thank you for being on the show and it’s been a real pleasure speaking with you. Merci beaucoup, monsieur.
Jeff: Thank you so much for having me. Merci.
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