As the Managing Partner of Upfront Ventures, Mark Suster has helped Los Angeles, where he and Upfront are based, reach the national stage when it comes to venture capital. The landscape was totally different 20 years ago and Mark/Upfront is a big reason why.
After two successful exits as a founder, Mark joined Upfront in 2007. Since then Mark has become one of VCs most prominent venture capitalists. The main reason being his savvy business decisions, but he’s also always been ahead of the game when it comes to social media.
Between his blog (www.bothsidesofthetable.com) and Twitter, he has always made his presence known by sharing fantastic insights into the world of venture capital.
During today’s chat we discuss what has changed in venture over the last decade and where it’s moving forward, Mark’s take on how VCs should think about branding and social media, and how to balance politics and business.
MPD: Thanks for being on.
Mark Suster: [00:02:27] Thank you for having me. I'm excited to be here. All
MPD: [00:02:31] right. Uh, first let's start off with the high level. Would you mind telling us a little bit about upfront?
Mark Suster: [00:02:36] Sure. So up-front ventures is a, as it sounds venture capital fund we're based in Los Angeles. Um, we are actually not that new of a venture firm.
We've been around for 25 years, if you can believe it. And, uh, we've been investing, we invest about 40 to 45% of our dollars in Southern California from Santa Barbara to San Diego. But most of that is in Los Angeles. As you can imagine. Um, but I like to tell people we're not a regional VC, so less than half our dollars go to LA, which means that the majority of our investing is outside of this region.
Uh, we invest at the seed in a stage to give people perspective on what that means today, because they know these are moving targets as rounds and dollars seem to be going up. Our median first check Mark is a three and a half million dollars. Okay. And so we're taking what I like to say. We're not stuck.
That's a weighted
MPD: [00:03:33] average with seed and series a or that's, that's gotta be more your series
Mark Suster: [00:03:37] eight deals. Yeah. So immediate media, just being exactly, as you would imagine from the statistics definition, we do equal number below equal number above in terms of dollar size. Um, but you'll find that most of our rounds are three to $4 million.
We don't define them anymore. Let me tell you what I think has changed. How about F. Pose the first question and answer the first question what's changed Mark about venture capital is. That I used to be able to wait nine months to kind of follow a company's trajectory and then do what I would consider to be an a round, which would be about $4 million.
Now I have to make a decision really early on whether I want to go on a long-term journey with this entrepreneur. I'm still writing that same three to $4 million check, but the difference between me and a seed only from, because I would call that a seed check. The difference between me and a seed only firm is that when you go to raise your next round, I will write another 4 million.
So we'll end up around 700 and I have to $8 million after your a round, but we are not stock pickers. So I'm not trying to do 50 to a hundred different investments. We are a company builders. So we join your board, help you, uh, recruit team with pride facing communication, product strategy, and then hopefully attracting downside capital.
MPD: [00:05:05] Can I just clarify something in there before we move on? So you're talking about putting three to 4 million bucks in the first investment, and then the second, if you do the seed and the a, do you continue to do more than pro-rata. Uh, in subsequent rounds, are you a lifecycle fund or are you just at early stage?
You'll do those first two rounds heavily. So be very
Mark Suster: [00:05:23] involved thereafter to be clear, there were a lifecycle fund. So in our biggest deals, we have $65 million invested. So we also have grown funds. So we've will lean in, uh, as your company becomes bigger with respect to just being specific, we will either do less than prorata.
Prorata or super prorata depending on what the situation warrants. Sometimes we do. I like to write more than prorata, but that opportunity is not available to us. Uh, sometimes it doesn't make sense and sometimes companies, frankly, just aren't ready for their follow-on rounds. So what really is helpful about upfront is if we're in for a penny we're in for a pound, if we wrote the three and a half million dollar check metaphorically, Um, and if it's taking longer and we still believe in you and the product we're willing to write the next check, whether the market is totally ready or not, we will do check sizes, the smallest half a million dollars.
If the situation warrants and our first ever our biggest ever out of the gate, we wrote a 27 million.
MPD: [00:06:30] That's a huge first check. Is that it was that a later round, or that was an early company that you felt needed a lot of capital.
Mark Suster: [00:06:37] It was a later round that is now a tremendously successful and growing business in the sustainability space.
That's called insect, like the word insect, but with a Y on the front and what they do, Mark, just very briefly as they use, uh, robotics and control systems to grow worms at industrial scale, with the express intent of creating sustainable fish farms.
MPD: [00:07:06] Hmm. Very interesting.
Mark Suster: [00:07:08] I love that. So, yeah. And it's now, well, they do good.
It's booked hundreds of millions of revenue now. And, uh, the company was started in France. Uh, and we'll hopefully I, I think very soon be in North America.
MPD: [00:07:23] Wonderful. Okay. So let's, uh, let's touch on that for a second. Do you have a geographical focus? Is it mainly U S only U S was France an exception or.
How does it?
Mark Suster: [00:07:32] So, so we do, uh, as I mentioned, 40 to 45% of our investing in Southern California, um, we do about 25% of our dollars in the San Francisco Bay area. So let's say we're about 60% California. Uh, I'd say the pro we will, we invest nationally. We have deals in Seattle and Chicago. We've invested in Baltimore, Las Vegas.
Uh, we've invested in Texas. No problem. I'd say one additional unique thing about us is that we're very interested in cross border between Europe and the United States. So the founder of upfront a colleague of mine, I've worked with him for 21 years is Eve system. And as you might guess, he's from France.
So we do a lot of cross border with France. He's from Leo and he's still a full-time partner. Um, I, myself lived and worked in Europe for 11 years. Um, so I've been doing cross border with the UK. I have a partner who invests in video game sector. So he's done some cross border with Finland and we've been doing cross border with Israel and innovation around Israel overlapped in the United States for a long time as well.
MPD: [00:08:37] What's great. So can you give us a rundown on the current assets under management and that's AUM, if you hear that acronym folks who are less familiar with it going through this. Yeah.
Mark Suster: [00:08:45] So you guys manage it's North of $2 billion.
MPD: [00:08:48] Okay. And how much is in your active fund for early stage or growth? Are those pooled together or do you have two separate
Mark Suster: [00:08:54] vehicles?
We have two, two separate funds. We try to keep our hay funds between three to 400 million. Yeah. And then growth is just the F it becomes appropriate. If we hit a growth stage, it allows us to lean into our winners with more capital, which we think is a benefit both to our LPs, the people that invest in our funds and to entrepreneurs as they need more capital.
Right. How large is the growth fund? Well, we have several growth funds. So we also have several hundreds of millions of dollars in growth funds. And that allows us, as I mentioned to lean into winners, examples being bird. So we've been a very active investor in every bird round. If you look at ring the security doorbell company, we did the seed round.
We did the seed round. We were in the very first round, but we did the aid, the B, the C, the D, and the E round. We did the round right before Amazon bought them. Uh, with our growth bond, um, we've been able to invest in goat, the sneakerhead platform. We were the seed round of goat, but we've been able to invest in all the rounds of goat, including in their growth rounds.
So, um, it allows us to follow the entrepreneurs, start to finish.
MPD: [00:10:04] I love it. I love it. Uh, for the folks listening for entrepreneurs and our LPs, you've touched on a little bit of this in terms of the hands-on operating support. Why should they choose upfront? Maybe you can answer the question twice first for entrepreneurs.
Mark Suster: [00:10:20] Yeah. So if you're an entrepreneur, I think if you're looking for capital that gives you money and leaves you alone and just lets you get on with your job, we're probably not the best fit. We view. And I viewed this when I was an entrepreneur as the best capital as being a sparring partner. Think of it as a coach in the stands who can see the whole field.
And in fact has the time because we're not playing the game every day to see multiple fields and therefore bring experiences to you, but like a coach in the stance, it has to be. Uh, our perspective that you're the one on the field making the hard calls, because it's easy from the stands to think, Oh, I know what to do, but really you only know what to do when you're on the field.
So we like to be a strong sparring partner, and then we need to step back and say, you got to make the hard calls. I'm here to bring perspective, but to let you make the hard calls and that's kind of how we view up front. So you should take us if you want someone super active in your, you know, side of the court.
MPD: [00:11:24] How does that scale for you guys? As I think about the volume of deals you're doing, um, it feels like one of the, the ongoing constraints in venture is
Mark Suster: [00:11:34] boards. It doesn't scale. We're not, we don't seem to scale. I just want to be clear. So I think there's two models that work in venture, and I'm not going to say one is superior to the others, but I want to describe the two models.
Mark model one is I have, I have a wide aperture. I want to do a lot of deals and I don't necessarily want a super active role in each now to be really good at that. You have to have a wide aperture and you have to be really good at harvesting downstream investors from you. So if I'm a seed investor, I have to have really good respect and trust and relationship with a and B investors because.
They will represent me on the board and a factor. They will be representing the interests of shareholders on the board. And, uh, so if I can attract great down, down stream investors, you don't have to play that active role. And I have a wide aperture. I probably don't own as much of the company. And frankly, I don't have quite the insights into how well is the company doing, because I'm not there at board level doing the day-to-day.
That's not the model we pursue, but I actually think it's a very successful model and venture. What we pursue is about two deals per partner per year. That's it. That's all we do. And so we don't, we're not scattered gun, you know, we're really looking for, I always tell people, we look for three things. One is the perception of product market fit.
I used to look for product market fit, but the true definition in my mind, a product market fit is when customers are really pulling your product out of your hands. And you're just filling orders. I can't invest at that stage because now that's the stage where people are giving you a 50 or a hundred million.
So I have to believe that product market fit will come. And partly what we're analyzing is unit economics, like, do we believe at a unit level, this is going to make fundamentally more sense than what exists in the market. The second thing I'm judging is founder market fit. Why are you doing this? Do you understand the industry better than we think almost anyone else we've met?
Do we have unique insights? Do you have unique insights into where things are heading? Because whatever the industry is doing today is not what it'll be doing tomorrow, but the third thing matters a lot to me, Mark, which is founder upfront fit. Are you the of, of entrepreneur that we want to go on a tenure journey with?
And are we the kind of investors you want to go on a 10 year journey with? Cause we go into every situation, expecting it to be a 10 year journey. And not everyone is like copacetic with how we work in vice-a-versa and that's okay. Like, sometimes we're happy just to be friendly with people, but not be their investors, but those are the three things.
MPD: [00:14:15] So when you say two deals per year per partner, how many partners do you have?
Mark Suster: [00:14:19] Seven invest check partners. Seven full-time investment. Okay. So you guys are doing
MPD: [00:14:23] 10 to 15 deals a year. Does that sound about right? That's it. Okay, great. Yeah, I think, I think the construct you're describing is the. Was the one that's been around longer, the more traditional to a couple of checks per partner go deeper.
I feel like the higher volume less involved is more of a manifestation. The last 15, 20 years as capital requirements have come down. Right. When I first started the industry, uh, the firm I was at was doing the same thing that you're describing. I think it's not uncommon for folks listening. Um, okay. Very, very helpful.
How do you manage, uh, one of the things that's come up, I had Ian Siglo on here recently. Uh, and we spent a little bit of time talking about their dynamic between their early stage fund and their growth fund, where there's different incentives. You know, how many early stage deals does it take to move the needle for the growth team?
Right. There's, it's a weird management dynamic as a VC. How do you think about the incentive alignment, getting all the parties to play together? Do you have different people managing the different vehicles at the same people? How do you think about it?
Mark Suster: [00:15:25] Uh, it's a very good question. It's a question I spent a lot of time thinking about, and it's a question I've spent a lot of time, uh, trying to inform LPs my views.
So here's how we do it. We have seven full-time investment partners. We only do see it in that we don't spend our time looking at growth deals. Um, so we're cDNA investors in the end. I did not bring on a separate team to do growth. And I'm going to explain that to you in a second. Um, one choice that some funds make is co-mingling into a single fund.
Let's say it's a $700 million fund or a billion dollar fund. And you do all your checks from the same fund. There's an inherent advantage to that, which is your LPs then are in every deal. That's great. That's fine. And everyone within your team and organization is incentivized and monetize in the same way.
The downside to it. Is a million or 2 million or $3 million check don't move the needle. It's just really hard to kind of drive the kind of returns that you need. So what I see firms often doing there is they'll write two to $3 million checks, really as options. And what they're really hoping is that eventually they cast wide enough net that they can write a 50 or $75 million check.
Cause that's what they need to really move the needle. So it becomes an option, the core business. Yes. And, uh, I, I, again, I don't fly any of these firms and I can't say that's the wrong model. It's not the model we chose. I care about. The $3 million check. I care about a five person organization that has big dreams in its eyes and is building at the foundation of my first four investments.
I sold one of them for 670 million and we own just under 20% of it. I, uh, one of them went, sadly, went bankrupt. Uh, the other two, which I did in 2009, I'm still on the board. They're still private. One is worth about 800 million. The other's worth about 650 million. And in each case we own more than 25% of the company.
Because I invested in the earliest round, I was on the board when it was an idea, not even customers and revenue, and I have invested in every round, uh, subsequent to that. And, uh, for me, that's what I mean 10 year plus journey. That's now, you know, what is that 11 year journeys on those two different cases.
So I just want to finish, I'm sorry, Mark, to be long-winded but this one thought. Which is, um, if you have a different growth team, that team truly is making independent decisions and looking for brand new deals to Groton hunt and do, which is good in its own. Right. Um, but it may have some conflict with the AA fund.
They may have different objectives. We don't do that. Our growth fund, 70% of the dollars go to existing portfolio companies. So in our industry, it's often called an opportunity fund. We've chosen to call it. Yeah, we've chosen to call it our early growth fund. So our goal posts are 100 million to $500 million valuations in existing companies.
In which somebody else leads the round and sets the price. I tend to write 10 to $15 million checks, maybe 20 into, around in which I'm the minority. So it might be 50 75, a hundred million, $200 million round. And I'm the minority of that round. We still do independent due diligence. We still have to underwrite the investment.
We still have to decide whether or not we're going to get, we believe we still need to get a five X return on that investment. So we don't do it in every company, but what it allows me to do is keep all seven investors focus just on cDNA, which is what we want to do on, which is what we're.
MPD: [00:19:07] So you're an early stage firm who takes the opportunity to VIG their upside with follow on capital.
Exactly. As other firms out there, which they'll have two business models, right. They'll have the early guys and they'll have the growth firm and they're completely autonomous in what they're investing in. So for the folks listening. Growth, uh, typical growth fund we'll invest in anything that it matches the stage and opportunity fund is specifically focused on doing follow on from an earlier fund
Mark Suster: [00:19:34] clear we can do up to 30% of our investments and Denovo new companies.
And we will look, we just don't spend all our time focused on, on that activity.
MPD: [00:19:46] Thank you. I think that gives people some helpful context about the firm, and I think that's a good baseline for informing the rest of our conversation. So thank you for going through all that. Sure. I want to take a moment and talk a bit about LA.
Um, geography is an important theme at the moment, particularly with the pandemic and remote work, uh, LA has been a major part of your story and your journey. Uh, it's my hometown, but I'm a new Yorker now. Uh, and you've got a hash long LA on your painted on your office and it's on the first page of your website, above the fold.
Um, can you talk to me a little bit about, um, what you've seen happen in LA, how that's, uh, transforming now, uh, perspective on geography and I'll, I'll, I'll dive in and poke some holes and cause some trouble as we go through
Mark Suster: [00:20:33] this. So I love New York also, um, and really sad. This is the first year I haven't spent considerable amounts of time in New York.
I'm usually there six to eight times a year. Uh, I'm not from Los Angeles. Originally. Anyone who follows me on Twitter knows that I was born in Philadelphia at lifelong Eagles fan, but I actually was raised in Northern California. So I'm kind of this may launch of different nationalities and cultures. My father grew up in South America, as we have discussed.
Um, and you know, he's what you might call it. He was what you might call a duty now. Uh, so a Jewish, Latino never heard that term. Yeah. To Tino. I first got that from Eric Garcetti, the mayor of Los Angeles who turned me on to that term. Uh, Eric has also, you know, um, and so, uh, what's unique about LA. So first of all, I want to point out that obviously it's the second largest city in America.
That affords it a lot of things. So, number one is we have large populations of people who can trial your products. Uh, we have incredibly diverse backgrounds and nationalities here for many countries. We are the second most important city outside of their country. So if you look at Mexico city, that's obviously the largest city in Mexico, but if Los Angeles was part of Mexico again, Uh, we would be the second largest city in Mexico with 5 million, uh, Mexican Americans here, but that's true of many different countries.
One just being example, Korea. We have the largest population of Koreans outside of.
MPD: [00:22:08] Okay, interesting. So that I would assume that's a lot of Asian countries that that comment is
Mark Suster: [00:22:13] about. It's true that it's, uh, the case for a lot of Asian countries, but we have an incredibly big Persian community here. We have incredibly big Israeli population here.
So I mean, it's really Asia plus, you know, there are other places around the world where people have been very attracted to Los Angeles, but the other things that I like to tell people about LA, so we actually graduate more engineers in greater Los Angeles than anywhere else in the country. We have more top 25, uh, uh, education universities for engineering than anywhere else in the country.
In greater Los Angeles, we have what we consider the top science oriented program in the country. You could argue is at MIT, but, uh, Caltech is based there and Caltech, academically, uh, ranks in the tops of the United States. Now we are the place that designed a rocket that put a person on the moon. Uh, it was done at JPL, a jet propulsion laboratory affiliated with Caltech.
And so when people think Elon Musk, they've always thought Silicon Valley, but Elon Musk. Until recently lived in LA. I mean, some people say he lives in Austin now. I don't really know, but, um, but, uh, space X is in LA. Like a lot of people don't know that space X is in LA, so we've always done hard sciences, uh, USC as amongst the best robotics programs in the country.
UC Santa Barbara has amongst the best material sciences program in the country. Uh, UC San Diego a little bit further afield, but that's my Alma mater has amongst the best engineering programs, but certainly the best in wireless Qualcomm was started by a professor at UCS D uh, Erwin Jacobs. So there's a lot in our community.
It's deeply technical. Obviously a lot of people think about us for entertainment, but I want to say one last thing, which is in a world in which. Influencers, let's say your sports or you're in media or you're in government, uh, or you're um, a famous actor or a musician. We know that what's changed in the last six to 10 years is the ability for creators to go direct to audience without being intermediate.
And in that world, people who have a voice and who also understand technology become incredibly important and powerful. And most of those people originate or a preponderance of those people originate and live in LA. And that's another thing that's made LA very attractive lately.
MPD: [00:24:42] Okay. Um, I wonder to switch gears for a second.
I feel like the market in venture has changed a tremendous amount in the last 30 years, and it's quite an obvious statement. Uh, one of the things that's been most obvious to me and I think most palpable to everybody. Is it's transitioned away from a world where the VCs really were held all the power we held, they held all the chips, right?
You had these ivory tower firms, you were lucky to get a meeting. And the capital was concentrated in a few firms and the boom came around. Popularized tech popularized, the industry capital flows in, and the game's a lot more competitive. Now you've got VCs focusing on ways they can differentiate by adding value to platforms.
You had VCs, Voke is focusing on how they can brand themselves and market themselves. How important is social media and branding to your business? Now?
Mark Suster: [00:25:36] I think, uh, building a brand is critical to being a venture capitalist because at the end of the day, money is fungible. You can get money from a lot of sources.
How you choose to build your brand is up to you. And there are different ways to build a brand they're incredibly successful investors who have fantastic brands who are not big social media people. Um, I give this talk Mark a lot to, um, young VCs, and I always said to them, first of all, you need to pick a platform where you can be successful, which isn't already crowded.
So, um, when I started blogging, I keep a blog. I think, you know, both sides of the table. There weren't a lot of bloggers who were prolific and I was putting out four or five, six posts a week at, at the time. Uh, so it was kind of easier. Um, I was early to Twitter and putting out a lot of content on Twitter.
I was early to YouTube. I had a YouTube channel before anyone had a YouTube channel and I put out, um, a show every single week for an hour. Um, I only discovered what podcasting was, is because when I would travel, people would say, Oh, I've been listening to you for years. I said, what do you mean listening to me?
I said, Oh yeah, I just downloaded on a podcast. And I listened on the subway. And I'm like, God, I had no idea. I thought everyone was watching video. Um, and so I've been experimenting with different media types for years. I then decided to do as a random experience, uh, experiment in the early days of Snapchat to start producing Snapchat content.
And I called them snap storms. And the reason was, is my target audience was young entrepreneurs. Most of them are 18 to 28 and they were all on Snapchat. And guess what? None of my competition was on Snapchat. So, you know, if you like, yeah, if you logged onto a BC on Slack, Snapchat, they were sharing with you their private jet flight to go to the Premera exclusive launch of a Hamilton in New York, or they were skiing in the Alps.
And I was like this boring gray hair, white guy. Kind of saying, well, let me tell you how to hire your co-founder. Let me tell you how to structure an offline business advice. Yes. And people laughed at it because like the rest of their Snapchat, uh, stream probably was people going to parties and doing fun things and then boring guy.
But what I did is I really was able to differentiate and it allowed me to work in a medium that is authentic to me. And that really worked well for me. So. You know, people who I think were early in good and podcasting. Obviously everyone talks about Harry Stebbings for 20 minute VC. Um, he did a very discrete format that wasn't that popular.
If you start a podcast today, as you know, cause you have a podcast it's pretty competitive. Like I get asked to speak, I don't know, five, six times a week now. And I say no to most of them. Uh, just cause there's so many podcasts, there's everyone wants you to speak. So I just think it's, it's a hard, medium to go after, but there's a lot of media types and do something that's authentic to you.
And frankly pick a subject that is authentic to you and that you can experiment with and you can become known for, and just go deep in one thing rather than being broad-based
MPD: [00:28:58] what's your go-to medium because I see you, uh, both blogging, tweeting. You're pretty active on a number of channels. What is your primary medium at this point?
Mark Suster: [00:29:08] I go in and out of different media types. So I, um, I was very early in Quora when Cora first launched and every day I would log in and respond to Cora. And I think it's really nice to be in a new platform because if you capture the growth of the platform, then you rise before your competition gets there.
So anyone who was in clubhouse early probably got disproportionate benefit from that. Anyone who was Inquirer early. Um, so right now I don't have one particular thing. I'm about to launch a whole new series, uh, and I'm going to launch it on Instagram. Okay. Interesting. And, uh, I'm doing it on Instagram because I want to play more with the medium, more than any other reason.
MPD: [00:29:53] Is there a, a headline or topic for the series? Is adventure advice you're going to hit? Well,
Mark Suster: [00:29:58] yes. So I am asking for a preview. I'm I'm ahead of myself. And if Carrie's listening, she's ready to kill me now, because I said that I wasn't going to tell anybody, but, um, I've outlined I've created an outline of what I think it takes to be successful as a private market investor.
And I'm going to put out snippets of content on what I think it takes to be successful as a private market investor. And I'm just going to put them out on a regular basis. It's going to be like sub three minutes per episode, and I'm going to break down the entire game of how I see it. It doesn't mean I'm right, but at least you have one person,
MPD: [00:30:38] but you, you, you're not just doing this.
You also blog, right? Yes. And your, your blog blogging style, uh, is very notable and its length. Yeah. Right. Uh, when I, when I first met you, I think we met 2009, 2010. Uh, I was blogging very actively at the time and I would do three, four paragraphs three times a week. And then you came onto the scene. A lot of VCs were blogging and you're doing five, six pages.
Why did you decide to do, uh, such long form content and how successful has that been for you
Mark Suster: [00:31:11] first? I should tell Carrie just texted me, said she's lessening and I'm in trouble. Um, so sounds good. You know, the, you know, saying if I had more time, I would've written a shorter letter, you know, whatever, I think it was Mark Twain or somebody who's smarter.
Yeah. Uh, so, um, part of it's that, which is, and I've been very public about this as I have add. So as a result, I have really bad editing skills. And I realize it's not coherent. It's extremely
MPD: [00:31:42] coherent.
Mark Suster: [00:31:43] It's just long. I appreciate it. But, um, what I would say is I bet editing skills. And if I, in a way I would be better to write shorter because I think more people would read it and it would be better, more digestible.
So if I had, I lacked two things, one is the skill to go back and edit. I never reread anything I write ever. So I publish and I move on. And the second thing is, uh, people with add, have something called an issue with impulse control. Impulse control is thought to action. I don't have a filter. Uh, so often I like I write it and I, I should say, you know what?
I should wait two days. Polish this a bit and then put it out. But Nope, I read it. I've written it it's 1245 at night. I don't give a fuck. It's going public. Boom. And has that changed in a little bit? Have
MPD: [00:32:38] you developed any more impulse control with time and maturity?
Mark Suster: [00:32:42] Uh, yes. And, uh, if you go to my blog, both sides of the table and you search for ABD, I've written several articles of how I have learned more about how the mind of someone with add works and how to channel it better.
I'm better at meetings than I used to be. Um, and I've developed some coping mechanisms, but in general, especially with publishing, I have a really hard time if I'm writing a controversial email, Which I try not to do very often, but if I'm writing a controversial email, I often try to hit save and not hit send, because I really just want to write an email and hit send.
And if I, in my instinct know that this might be controversial, I don't hit send anymore.
MPD: [00:33:30] Your approach to VC changed. Right? We talked about the social media standpoint. You've been doing that for a long time and it sounds like you change mediums, but you're always doing something. How has your approach to VC changed since you started.
Mark Suster: [00:33:41] Well, um, I don't think it's changed a tremendous amount. Um, I am still looking for the same thing I was looking for when I began. I'm looking for, uh, somebody that I believe possesses strong product knowledge and or technical knowledge so that if what we're building works, uh, they have a defensible mode.
So I always start with that as my lens, rightly or wrongly. I'm looking for people who I believe are driven. And I know it sounds cliche, but honestly, driven by tenure journeys, who aren't looking for a quick flip or a quick buck or a quick get-out. Um, I'm looking for people who want to go on a thoughtful journey.
Sometimes that manifests itself as a company that doesn't move up into the right. It takes three, four years to lay down some tracks. And I have had a lot of success in my career with companies that are overlooked by Silicon Valley initially, and then become quite large. And it's because I'm backing people who are building foundational technology that sometimes takes longer than the attention span of a venture capital fund.
MPD: [00:34:50] Okay. But I'm thinking more strategically is, you know, this, this game, you can tell the firms pretty quickly that are run by entrepreneurs versus people who've come up in the VC game or corporate before. Cause instead of just doing the check writing job, they're building operations, they're building companies.
You guys have the ventures, the upfront summit. I'd like to hear about that. How have you, how do you think about the business? Your approach to the business has evolved? Obviously you've got more capital. You've got more vehicles. You've got a bigger team. Uh, most media platforms every now
Mark Suster: [00:35:22] and then, thank you amongst the earliest fastest, sorry.
Amongst the newest fast growth company we have is called bevy. It's a software company based in Silicon Valley, started by Derek Anderson, the start, the founder of startup grind, uh, who I think the world of, and I had a conversation with them the other day, cause they just been so successful and growing so fast.
Uh, and I was asking him about where we could do better. What are we doing well, where could we do better? And he said to me, the most valuable person I've interacted with at upfront is Megan Hayley. And I don't think that's damning of Coby fuller. Who's the partner on his, uh, uh, you know, on his company or myself.
Who's known him for a decade or more, so much as it is a Testament to Megan Hayley. Megan runs our talent business. And what Derek said to me is in the early days, when I really needed help, the most, the thing I needed the most was helping recruiting and I needed not just helping, helping me recruit, but helping me think through what do I need at the time that I need it.
So what I've come to realize is how important leverage is for partners in a venture capital fund. I mean, I'm pretty decent at recruiting. I'm never going to be as good as Megan. Uh, I'm never gonna be as good cause she's dedicated to the craft. And, uh, I never going to have the time and focus because I'm spread across too many activities.
Um, so she's just been invaluable carry on marketing. So she doesn't, we don't spend a lot of time marketing up front to tell you the truth. Like I've never spent a dollar on like external marketing. We do earned media. Uh, so Carrie instead spends her time with CEOs and saying like, how can I help you think through how to position your brand, your company, your product, your founders, meet your important milestone.
So we're trying to add value that way. Uh, and adding to our staff that can be more valuable to the end companies.
MPD: [00:37:15] You mind going over the upfront summit
Mark Suster: [00:37:18] upfront summit? Uh, we we've run it for eight straight years. This is the one year we took a break for obvious reasons. Um, and what it started out was a way to try and showcase LA because I would talk to LPs the people that invest in VC funds.
And they were saying like, I don't know if LA is really a thing. And I thought, well, I need to get the LPs to come here. Once you come here, you're going to see it's a thing. How do I get LPs to come? I better invite all the VCs. And if I invite all the VCs, why would they come? Well, they're going to come if there's great founders.
Um, and if they can get access to LPs, So I worked really hard to bring that group. And I think it was a unique thing in so much as most VCs hog, their LP relationships and my view as well. I'll just open source all my relationships and let every VC come. And, you know, hopefully that will ultimately benefit us.
And what I found was that the more VCs who spent time in LA as part of the summit or other, a friend summit or otherwise, uh, the more they kept investing here and coming back here, the more they invested and came back here, the more LPs came to visit the more LPs, uh, left dollars here. So, you know, I, I then took it as a mission to try and help LA have more success because.
I am because I live here and want it to be successful and everyone here to be successful and be because the more success we see here, the more upfront ventures can be part of the success
MPD: [00:38:41] and rise with the tide. That's right. Yeah. Um, one of the things that I've noticed about you, uh, over the years as we known each other is we were talking about this before the conversation started.
Uh, you're obviously a very passionately political, and there are moments where you'll leverage your social media. To an end that you support the challenge. I find sometimes, uh, in, in looking at this as a person who was involved with the firm is how you draw the line between your personal social media and the brand of the firm, right?
Because if you're making statements about a particular policy or a particular politician or whatever it else might be, to a certain extent, people are going to say, well, up-front has, is aligned with this view, even if it's just Mark speaking. How do you think about navigating that? Is there some strategy or tactic?
Is it ever a bit in the ass? There have been a problem. Where do you draw the line with politics as a business professional?
Mark Suster: [00:39:41] It's tricky as the answer. I don't like to think of myself as publicly political, so much as publicly an advocate of policy that I care about. And I want to delineate with that. Um, I'd say my.
Public position on gay rights in 2008, when it wasn't popular. Um, I started speaking out about gay rights and it came from a dinner that I had where I was really disappointed in the voters of California who voted against, um, gay marriage. Uh, we had a proposition proposition eight, and as I was at a dinner in what I would have considered a safe space LA uh, with tech.
Plus media professionals and I won't name the media person, but let's say amongst the most beloved comedy movies of all time, I was with the writer and director. And, uh, he was, I said to him, gosh, it's, you know, um, you know, I was talking about the election and how happy I was that Obama won and what, uh, progress I felt that made for the country.
And he was for the other candidate. And I can understand why people voted for John McCain. I always respected John McCain. Uh, and then I said, well, we don't have to agree on that. At least we can agree that, uh, Sarah Palin's an idiot. And, uh, I was kind of joking. Well, not really. And, uh, then he said, then he said, well, I'm, I would much rather have Sarah Pailin as president the Barack Obama.
I'm like, Oh, this isn't going to be a very good dinner. And then I said, okay. I said, look, people have different views on politicians. Let's not, let's not discuss that, but at least we can agree how terrible it is that California didn't vote for gay rights. And he said, thank God. And I'm like, Oh my God, what planet am I on?
And so we started to unpack the issue of why he was so against gay marriage. And it really just came down to one word homophobia and I'm a hundred percent heterosexual. And I just thought to myself, if, if approximately 10% of the population is gay and I don't know exactly, but I think that's roughly the math.
Um, then if they're the only people speaking, then 90% of the people aren't saying anything. And so I kind of thought they need advocates. And I think to myself as. I think it's a human issue, not a political issue. I think it's about equal rights. And so in 2008, I wrote an article in defense of gay rights.
And I had my wife who's much more liberal than I am to be clear and much more progressive on gay rights than I ever was. Um, saying, gosh, should you really write that? Should you really take a position when it's, you're a business person? And I said, I'm not taking a political position. I'm taking a human rights position.
And I felt somehow. I think raise the someone Jewish, knowing that there were people who spoke up against the oppression of my forefathers, who were being killed. For their religious beliefs. And I just thought, you know, someone has to say something. So I did, uh, and then over the years, you know, I was very, very early to talk about in defense of Colin Kaepernick.
Yes. I angered a lot of people by saying that I thought I had conversations with my children, where I had to explain how Muhammad Ali. Was ostracized for, uh, not believing in the Vietnam war and not wanting to fight in the war and being a conscientious objector, uh, and how he's vilified, how Martin Luther King was vilified.
And I said about Colin Kaepernick to my two young boys. I said, if you don't do something that gets noticed and starts a conversation, you will never change anything. And if you look at what Colin did, he didn't do something. He did something Gandhi ask, he did something silent. He did something to make a statement.
And he never said, I don't support the U S military or service people. He said, I'm not going to stand for the flag because I want to draw attention. To how African Americans and other people of color in our country are oppressed by the police state that exists in this country. And I said, you can agree or disagree.
I vehemently agree with Colin on that view, but you have to admire and respect the personal risks that he took, the economic risks that he took in the statement he made, not for himself as a rich man who could have made a lot more money. But as someone trying to defend his people. So I think in those terms, like in policy terms, who do I care about and who am I willing to stay?
MPD: [00:44:16] So bring that back to the business though, for a second, you decide you're going to write the post about gay rights. Do you run that by the partnership first now, do you throw it out? Yeah.
Mark Suster: [00:44:27] How do you think, I know I never got any backlash from folks. Yeah. I mean, I got backlash for smack talking to Dallas Cowboys.
Like, you know, it turns out I had no peace from Dallas and didn't like me shit talking to Cowboys, but, um, you know, Yeah, he, um, my point is, if something is mundane mean as like shit talking to Cowboys is in Eagles, spam pisses people off, you can imagine what talking about gay rights or, uh, Colin Kaepernick kneeling does.
Um, I try to be authentic to who I am and my belief system. Um, I try to attract partners who feel the same way about their points of view. I'm okay for people to have different points of view than I am. Uh I'm uh, I, I'm not okay. With people who believe that other people should have less rights, if you believe in voter suppression, if you believe that the current movement to try and limit the amount of votes in Georgia of black people and disenfranchised black people, which we know is happening today, if you fundamentally believe that that's the right outcome, we're probably not going to work together either as upfront or as an entrepreneur or as an LP in my fund.
You know, and that's okay. You know, I don't have to work with everybody.
MPD: [00:45:43] Is the rest of your firm share those values? I mean, it seems like if you're going to take that position where it may create a rift with business opportunities, that could be stressful unless the rest of the partnership
Mark Suster: [00:45:55] shares your values.
Well, let me start this way, which is, I think most tech startups should be as apolitical as possible. I don't believe in the zero, a political stance because these issues that we're talking about affect your employees. And so, you know, uh, if you really believe in women's rights and you really want to create more opportunities for women, uh, or people of color, or, you know, people of different sexual natures, um, You know, you've not only got to create internal policy, but then you've got to be an advocate for their rights.
Um, so there are certain human rights issues. I think everyone should embrace, but generally I don't believe startups should be political because they need to serve customers from, you know, all different backgrounds and beliefs. And I think it would be limiting as a VC. It's very different. I don't fund that many companies.
So if you are extremely partisan in a way that would, um, Alienate me, or I would feel like our value system isn't aligned. I'm probably not going to invest in you and Frank, the same is true in reverse. And so front about my belief system helps you select whether I'd be a good investor for you or not.
MPD: [00:47:09] But how about on the LP side? Because let's say that, you know, I'm sure your LP base at this point is strong and diversified. There's a lot of firms out there where they might have a single LP or an anchor LP that calls the shots and you have one. Part person, the partnership saying their personal views, something they're passionate about, and if it damages the business, it affects the other partners.
So at some point I'm, I'm always lost in where to draw the line or how people, some people navigate. Respecting their partners while respecting their
Mark Suster: [00:47:41] perspective. Well, you should, first of all, have a conversation with your partners and make sure that for the most part, people feel comfortable with you advocating for points of view.
If you think someone gets it wrong on a point of view, and, and they're very loud in public about that point of view, you should be able to have a private conversation internally to make the case of why you think that was wrong. And I try to allow space for those kinds of conversations, but I want to point out something Mark important, please.
When I think about raising money from LPs, one of the hardest things in sales and fundraising as a sale, raising money from a venture capitalist as a sale venture capitalist raising money from LPs is a sale you're selling. Ownership in an entity that they're going to have upside in and that you're taking their money and giving them upside in and giving them also governing, say in what you do going forward, but your selling a product and the product I'm selling as part of my fund.
And what I find is there's three rules of sales. You know, I always say, why buy anything? Why buy me? Why buy now? Why buy anything is, do you believe in the category of product I have. So for me as a venture capitalist, I have to say, do you believe in investing in illiquid assets, if you want all your investments to be things you can get out of in three or four years, you're investing in the wrong asset class because bencher your capital is tied up for seven to 12 years.
Um, so why buy anything? I've got to persuade you about my category. Why buy me is about differentiation. And to have differentiation, you need something called the USP unique sales proposition. Every VC creates his deck or her deck, and they put it out there and it says we're really good at evaluating deals and meeting entrepreneurs and knowing industries and all these things.
And everybody says that. So I think it's really important to have something unique. That's different about you. And if I pitched that to 20 LPs necessarily. Probably six or seven, we'll say that's not for me. So for example, if I say we're LA first forty-five percent of our deals are in LA. We believe in the long-term growth of the LA ecosystem.
Some people are going to say, I don't believe in that Silicon Valley funds are going to fly down and do the best deals, which isn't true, but that's their belief system. Um, but by seeing it. I lose six, but I might get two leaning in who say, I really want ally. And I think the same as to be said, let's say about gay rights, which is undoubtedly, some LPs are against gay marriage.
It has to be by because not a hundred percent of Americans are pro gay marriage. And if so someone's making that asset allocation decisions says to themselves, I'm not willing to invest in Mark because he's pro gay rights, which I would imagine some people who aren't pro gay rights would still want to invest in my fund, but let's say that that they chose not to.
But I imagine that there are probably some LPs who are saying, I'm looking for principled VCs who have a value system that aligns with mine, who also want to make a lot of money alongside me. And, and so at least you rise above the milk toast nature of the thousands of other people.
MPD: [00:50:57] So you lose some, but you gain some versus just being lost in the noise.
Mark Suster: [00:51:01] That's a much more cogent version of what I said.
MPD: [00:51:06] Thank you. Um, are you more of an entrepreneur or a VC? You you've been both entrepreneur. You wake up, you look in the mirror, this
Mark Suster: [00:51:13] guy's an entrepreneur. Okay. I, I miss it. I love it. I spend my time thinking about products. I spend my time thinking about how we can launch new initiatives that differentiate I'd like to tinker.
I love that side of the business. Um, I love thinking through staff and leadership and direction and positioning, pricing, how we beat the competition. I don't spend my time thinking about cap tables and legal agreements and all that stuff that said my responsibility is to run a fund. So I have a team internally that does things like pacing analysis and portfolio construction, and, you know, making sure we're allocating it across the right geographies and in the right industries.
And so I have a professional job to do that. I know how the industry works. I understand how cap tables and legal agreements and what's important and what the fight over. But at my, I love the innovation
MPD: [00:52:04] Mark. You mentioned earlier, you're 52 years old. I am even doing this for awhile. I have. Where are you going in the future?
What's the next 10 years look like for you?
Mark Suster: [00:52:13] Well, the next time years, I'm still gonna do what I'm doing today. I'm a venture capitalist. I'm going to stay at venture capitalists and I'm going to stay at upfront ventures and I will be doing this when I'm sick. Um, I have really enjoyed the VC to entrepreneur, mentorship and guidance, and where I've taken in my career in the last five years is more VC to VC.
Uh, mentorship and guidance. Um, so I put a lot of time in, at my firm of trying to impart the things that I did poorly or the things that I did well. And I did, uh, both things, um, into my partners in colleagues. Um, every year I do a writeup on areas that I think each of us could be better at myself included.
Um, I've spent a lot more time with emerging managers, helping them think through LPs portfolio, construction, pacing, you know, differentiation strategy. I try to do all of those things. Um, and I'm going to do more of the same. I become very interested in world history, especially the history of trade and innovation.
Um, I'm now reading about the city of a Rook and the original world city and why it thrived and why it fell apart. And. Uh, trying to look for clues of trade patterns. Like I finally understand why South Africa was conquered by the Dutch originally. And I understand why the Portuguese were in parts of India.
It never made sense to me. Portugal's here. India is here. Why the fuck are they in Goa? I don't get it. Why are the Dutch, you know, down in Cape town? That makes no sense to me. So I started reading a lot about global history of trade patterns, again, as a predictor of the future. So I'm very, very interested in Peter's a hands works.
He's written three books, uh, uh, the accidental superpower, the absent superpower, and disunited nations. They explain the world of the future of what's coming. And I buy into a lot of his philosophy and it's shaped our investment strategy. We're investing a lot more in sustainability companies like appeal science and insects.
Um, we're, I'm investing a lot in fire and starting to think about how global climate change is going to impact our society and therefore the flow of dollars into our ecosystem.
MPD: [00:54:32] Thank you for your time
Mark Suster: [00:54:32] today. Thank you, Mark. Appreciate
MPD: [00:54:34] it. Thanks for coming on.
Big, thanks to Mark for taking the time to join me on the podcast today has always delivered fantastic insights. If you liked what you heard, please hook us up with a like or a five-star review and feel free to share with a friend. You can find me on Twitter at MPD to hear more of my conversations with innovators.
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