ANGEL: Venrock’s Bryan Roberts on 25 years in VC, hitting wins early, avoiding bad habits | E1665 | Summary and Q&A

TL;DR

In this podcast episode, angel investor Jason Calacanis interviews Brian Roberts, a long-time investor at Fenrock, who shares insights and lessons learned from investing during the dot-com bubble, Web 2.0 era, and the recent boom-bust cycle of 2022.

Key Insights

• ⌛ Times of stress and difficulty reveal the true character of entrepreneurs and investors.
• 🍄 Fun size, or the size of a fund, can impact the quality of investing and decision-making.
• 🚱 The transition from non-consensus to consensus indicates the potential for success in a market.
• 💪 Founders should prioritize building strong relationships and seeking helpful investors.
• 🍉 The ability to adapt and learn from market cycles is essential for long-term success.

Transcript

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Questions & Answers

Q: How did the dot-com bubble and subsequent events impact your investing career?

The dot-com bubble was a chaotic and uncertain time, but it taught me the importance of being adaptable and learning from difficult market conditions. It also reinforced the value of long-term relationships with entrepreneurs.

Q: What are the key qualities you look for in founders and companies?

I prioritize founders who are focused on the long-term and have a strong sense of mission and purpose. I also value individuals who are willing to debate and argue important issues, as it shows their dedication to finding the best solutions.

Q: How has the venture capital industry changed in terms of diligence and decision-making?

Diligence has become less valued in recent years, as there is often pressure to close deals quickly. However, taking the time to thoroughly understand a company and its market is crucial for long-term success.

Q: What are the challenges of investing in consensus vs. non-consensus ideas?

Investing in non-consensus ideas can be uncomfortable and requires tolerance for ambiguity and uncertainty. However, the greatest successes often come from ventures that challenge the status quo and offer unique solutions.

Summary

In this episode, Jason interviews Brian Roberts, a GP at Venrock who has been investing for over 25 years. They discuss the investor-founder relationship and the importance of long-term thinking and diligence in the investing process.

Questions & Answers

Q: Why is it important to interview investors who have invested through three cycles?

Each boom-bust cycle in the market offers valuable lessons and insights. By talking to investors who have experienced multiple cycles, we can learn from their experiences and apply those lessons to the current cycle.

Q: How do investors like Brian Roberts navigate the investor-founder relationship?

Roberts emphasizes the importance of building a strong relationship with the entrepreneurial leaders he invests in. He finds it intellectually interesting to work with founders who are trying to do something the world thinks they can't do. The key to a successful investor-founder relationship is mutual trust and a shared vision.

Q: What are the most important keys to success for early-stage investors?

Roberts believes that it takes 10 years to do anything of consequence in the investing world. He emphasizes the importance of being helpful to entrepreneurs, even if you haven't invested in their company. The currency of the venture capital business is being helpful, and building a reputation for being helpful can lead to more investment opportunities.

Q: How has the investing landscape changed since the dot-com bubble?

Roberts explains that the dot-com bubble and subsequent market corrections taught investors valuable lessons. One lesson learned was the importance of going through times of stress and difficulty, as that is when you truly learn about the character and decision-making abilities of individuals. He also touches on the bad habits that emerged during the bubble, such as large fund sizes and lower investment standards.

Q: How has diligence in the investing process changed over time?

With more capital available in the market and companies staying private for longer, diligence has become a less valued practice. However, Roberts believes that diligence is crucial in order to truly understand a company and make informed investment decisions. He emphasizes the importance of taking the time to build relationships with entrepreneurs and thoroughly evaluate investment opportunities.

Q: How do investors navigate the challenge of working with strong-minded and sometimes difficult founders?

Roberts acknowledges that the best founders are often low-level disagreeable and constantly seeking out what’s wrong in order to improve their businesses. In working with such founders, the key is to understand their long-term thinking and ability to debate important issues. A strong investor-founder relationship requires mutual understanding, trust, and the ability to have productive arguments and discussions.

Q: What is Brian Roberts' approach to long-term thinking and creating optionality for startups?

Roberts believes in nailing the product before scaling it, and making decisions based on what the product will look like in 10 years rather than next year. He emphasizes the importance of focusing on profitability and unit economics, rather than just growth at all costs. By creating optionality and valuing their time, startups can avoid being painted into a corner and set themselves up for long-term success.

Q: How has the landscape of venture capital changed in terms of governance?

Roberts acknowledges that governance was less valued during the dot-com bubble, but he believes it is an important aspect of investing. Good governance provides structure and accountability, and allows both investors and entrepreneurs to make informed decisions. It is crucial to have transparent board meetings and projections in order to align interests and drive the success of the company.

Q: How have the expectations of founders and investors changed over time?

Founders and investors now face increased pressure to show growth and deliver returns due to the abundance of capital in the market. This has led to a focus on short-term results and an obsession with raising money, rather than building sustainable businesses. The challenge is to balance the desire for growth with the need for profitability and long-term thinking.

Q: How does Brian Roberts approach the diligence process and evaluating investment opportunities?

Roberts believes in taking the time to thoroughly understand a company and build relationships with founders. He sees diligence as a way to assess the fit between his own thinking and the entrepreneur's vision, as well as to identify potential risks and opportunities. By being diligent, he can make informed investment decisions and ensure that he is making a positive impact on the companies he invests in.

Takeaways

These interviews with investors who have experienced multiple boom-bust cycles offer valuable insights for both entrepreneurs and capital allocators. Some key takeaways include the importance of building strong investor-founder relationships based on trust and mutual vision, the need for long-term thinking and optionality in startups, and the value of thorough diligence in the investing process. It is essential for both founders and investors to focus on sustainable growth and profitability, rather than short-term metrics. Good governance and transparent communication are also crucial for aligning interests and driving the success of companies. Overall, these interviews provide valuable lessons and perspectives for navigating the ever-changing world of investing.

Summary & Key Takeaways

• Brian Roberts has been investing at Fenrock for over 25 years and shares his experience of investing during three distinct cycles: the dot-com bubble, the Web 2.0 period, and the recent market downturn of 2022.

• During these cycles, Roberts emphasizes the importance of the investor-founder relationship, the need to focus on long-term decision making, the value of having options as a startup, and the significance of being non-consensus in a competitive market.

• He highlights the challenges faced by venture capitalists during market downturns and the lessons learned from previous cycles, including the need for diligence, careful capital allocation, and the ability to adapt to changing market conditions.