Tom Huseby knows a thing or two about investing in startups. After all, the former wireless executive now is affiliated with three venture capital firms — including the mega-fund Oak Investment Partners and the Seattle early-stage investor Voyager Capital.
I’ve interviewed Huseby countless times over the years, and I’ve always found him to be a straightshooter. Even better, he’s just downright funny.
So, when Huseby took the stage today for a panel on venture capital financing at the World Financial Symposiums in Seattle, I was sure to make sure the recorder was going. Huseby didn’t disappoint, drawing applause for his remarks about immigrant entrepreneurs and a few laughs when he discussed why bad ideas are like dead horses. Throughout his remarks, Huseby shared some powerful advice on the sometimes prickly relationship between entrepreneurs and investors.
We’ll have more from the venture capital panel later, including some interesting remarks from Ignition’s Cam Myhrvold and Madrona’s Len Jordon on the state of venture capital in Seattle. Of course, Huseby has some opinions on that too.
But, for now, just soak in some of the homespun wisdom of Seattle’s most quotable venture capitalist. Take it away Tom!
On why he loves entrepreneurs: “It is great to have a roomful of entrepreneurs. You guys are what make this world go round. You are what make this country great, particularly those of you who came here from some other country to start a company. Welcome! We really need that.”
On the importance of persistence: “One of the things I sell to entrepreneurs is that the ‘I-give-up-gene’ has apparently been missing (from me).”
On why simply hanging around longer than most matters: ”The must-be-present-to-win requirement for exits is always overlooked. It is amazing. If you get a good company with a good idea and you hang around long enough, you will probably have a win. And the art is: How do you do that? So, all of you who think you are going to be in and out (of a company) in three or four years — it is going to be eight. It’s going to be eight, if it is fast. And you better have a team and backers that will know that.”
On why he likes talking to startups in the early-stage: “I generally want to talk to people at a very, very early-stage. There are people in this room that I’ve been talking to for a year — and I still haven’t made a move. If I do make a move, it’s typically with my body. I will sign up as an advisor. I will sign up sometimes as a chairman. And then I will start going looking for money for you.”
On the importance of picking an idea in a big market: “You can tweak the product. You can tweak the management team. You can’t tweak the market…. A good idea to me is, a really interesting market proposition with a great way to approach it. And that combination can then be destroyed by an idiotic approach by the management team. I mean, really, you guys have a lot of power. You can actually turn anyone of us off in the first meeting or in subsequent meetings. But to turn us on you better have a good idea, and that’s a very clever idea to address a big and growing market need.”
On how startups need to delicately navigate next to tech giants: ”I like to see what I call ‘winner take all Switzerland plays.’ It is a very rare opportunity for a startup to move in among the giants, and not get stepped on, and then become an absolutely necessary part of at least two or three companies’ puzzle. That requires a big market. Big companies don’t invest in little markets, so you better be finding a missing puzzle piece to a great big market opportunity that is really clever. And you need to be able to get there long enough on the path without having one of those guys decide to do it themselves.”
On the importance of pivoting as a business: “When I refer to the fact that anyone in this room can screw it up, I really meant that. Including me, incidentally. You can go in with a great idea and a great market approach, and talk about it the wrong way. You can even be the wrong person to execute…. All companies have to (pivot) at some point. The pivot is really perfected by practice. And people who have a track record of success, have, I guarantee you pivoted their company…. There are amazing pivots that go on, and that requires a management skill that is not to be trifled with. You could be sitting here, and have a really good idea … and you might have the wrong management team. Market is not going to carry it all by itself.”
On why bad ideas are like dead horses: “It usually is that the dog just won’t hunt. I mean, you don’t want to admit it. There is a wonderful thing I read years ago about Americans’ uses of dead horses in management. Someone can probably Google it and find it. I am relying on long-distant memory of this, but a standard approach is that we tie two dead horses together to see if they will run faster. And that’s the merger option when things aren’t working. Or we change the jockey on the dead horse. That’s firing the sales guy. There are about 30 things you can do with dead horses. But usually, it is just a dead horse. It is amazing. It is usually because that the idea just wasn’t that good.”
On focusing on the business, not the exit: “Exit isn’t a risk. If you’ve done the rest right, someone is going to want you.”
On making sure you raise enough money: “By the time little companies get funded, their first dollar, they are convinced that they can make it on their first nickel. And you usually can’t.”
On what rubs him wrong with entrepreneurs: “I usually get turned off way before (an entrepreneur) can tell me something is (going) wrong…. You are too late to the market with a bad idea, and you are arrogant about it. I really can’t stand people who are so convinced that they are on the right path that they won’t listen. And, even worse, they are so convinced they are on the right path, and you get that way early. And, it is not that they don’t want to listen. You don’t want to listen. And that is a key litmus test: Do I want to listen to you? Am I curious about what you are about to say? It is an incredibly important ingredient. Actually, there are just two things you have to do to pass that barrier: One, is have something interesting to say, and the other is to actually convey it in a way that sounds like you just found a jewel. You just stumbled on something really exciting, that you are not totally convinced that it is the only way to go. If you are that arrogant and sure about yourself in the beginning, you will never be able to admit that it was a dead horse, and let’s go ride another one. Early on, come in with a good idea. And then come in with a way that makes me want to listen to it, and that’s a two-way conversation. My gosh, let’s talk about it. ”