20 VC Running Lerer Hippeau Ventures Like A Startup with Eric Hippeau, Managing Partner @ Lerer Hippeau Ventures

In this insightful episode of the 20 minutes VC, host Harry Stebbings interviews venture capital heavyweight Eric Hippo, Managing Partner at Lerer Hippo Ventures and former CEO of The Huffington Post. Hippo shares his journey from leading Ziff Davis and witnessing the early days of Yahoo, to his tenure at SoftBank Capital, and ultimately co-founding Lerer Hippo Ventures. He discusses the importance of big ideas, right timing, and the entrepreneur's background in successful pitches. Emphasizing New York's collaborative seed investment environment, Hippo also touches on Lerer Hippo's strategy of seed-first, New York-focused investments and their hands-on approach in supporting startups. Additionally, he provides his perspective on the evolving media landscape, the potential of the Drone Racing League, and the importance of adapting to the digital shift in advertising dollars.

• Eric Hippeau is a managing partner at Lerer Hippeau Ventures.
• He has a background as the CEO of the Huffington Post and a special partner at SoftBank Capital.
• Hippeau was also the chairman and CEO of Ziff Davis, a major media company in the technology sector.
• He serves on the board of various companies, including BuzzFeed and Starwood Hotels and Resorts.
• The data and analysis for the podcast episode were provided by Mattermark.

"Our guest today is a managing partner at Lerer Hippeau Ventures. He is the chairman of Rebel Mouse and co-founder of now this media. Previously he was the CEO of the Huffington Post and a special partner at SoftBank Capital, where he served as managing partner."

This quote introduces Eric Hippeau and his various roles in the tech and media industries, highlighting his extensive experience and influence.

• In the 1990s, Hippeau was the CEO of Ziff Davis, which published major computer magazines.
• Ziff Davis publications included PC Magazine, Computer Shopper, and PC Week, and they organized large trade shows like Comdex.
• Hippeau emphasizes that Ziff Davis was in the tech business, not just the media business.

"So not to go too far back in the 1990s I was the CEO of a company called Ziff Davis and we published all the big computer magazines."

This quote provides a snapshot of Hippeau's role at Ziff Davis and the company's focus on technology publications.

• Ziff Davis was sold to a private equity firm and then to SoftBank of Japan.
• Hippeau was part of the team that was about to invest in Yahoo before SoftBank became involved.
• SoftBank subsequently owned a third of Yahoo at its IPO and started Yahoo Japan.
• Hippeau joined the board of Yahoo and stayed for 15 years.
• The deal flow for SoftBank's investments came from Ziff Davis's central position in the tech industry.
• Hippeau eventually joined SoftBank Capital as an investor and opened its New York office.

"When SoftBank bought Ziff Davis, we at Ziff Davis were about to make an investment in Yahoo, just kind of as the second institutional investor... And eventually SoftBank started its own VC funds and then we sold the business in the late 1990s. And I joined SoftBank Capital as an investor and opened the New York office."

This quote describes the transition from Ziff Davis to SoftBank, highlighting the strategic investments made and Hippeau's role in the process.

• Hippeau discusses the commonalities between being a venture capitalist and an operator.
• Both roles require business experience, strategic thinking, and the ability to grow a business.
• Lerer Hippeau Ventures' team consists of individuals with operating backgrounds, which is beneficial for supporting their investments.
• The main difference between the two roles is the time horizon, as venture capitalists take a longer view due to the time it takes to invest and see returns.

"Obviously what's common is that when you back a company, you're backing a business that's information and having business experience and having the experience of growing a business and hiring people and strategizing on the business. And all of these kind of skills are really important when you invest."

This quote explains the skills and experiences that are common to both venture capitalists and operators, emphasizing the value of an operating background in venture capital.

• Businesses must be run with a long-term perspective.
• Strategic planning typically spans one to three years ahead, not 5-10 years, depending on the company's maturity.

"Most businesses, you have to run them for the long term. But depending on where they are in their maturity, you're not strategizing 5-10 years ahead, you're strategizing one to three years ahead."

This quote emphasizes the importance of long-term planning in business while recognizing that the depth of strategic foresight is contingent upon the company's stage of development.

• Transitioning from an operator to a venture capitalist (VC) requires patience.
• VCs must accept they are minority shareholders and cannot directly run the business.
• Advice given to entrepreneurs may not always be followed.

"But you do have to learn how to be somewhat more patient. You also have to remind yourself that you're a minority shareholder, you're not running the business."

Eric Hippeau discusses the need for patience and the understanding of a VC's role as an advisor, not a manager, within the companies they invest in.

• The level of influence a VC has depends on the entrepreneur and other stakeholders.
• Strong beliefs about a business decision should be presented convincingly without being overbearing.
• Founders and CEOs have ultimate authority over their company's direction.

"You're really trying to be convincing, but you can't be overbearing, because ultimately the founders and the CEO are the ultimate authority, and the company will depend on their own ability to guide the company."

Eric Hippeau highlights the balance VCs must strike between offering advice and respecting the autonomy of the company's leadership.

• Eric Hippeau doubts returning to an operator role after transitioning to VC.
• The recent closure of a fifth fund signifies commitment to the current path.
• Satisfaction with current work life suggests a low likelihood of role reversal.

"It would be shocking to me if I went back to being an operator."

This quote reflects Eric Hippeau's contentment with his current role as a VC and his commitment to it, making a return to an operational role unlikely.

• LHv is run with a startup mentality, starting with a small fund and gradually building the team.
• The company's growth involved careful team building and culture development.
• LHv's approach involves hands-on involvement, akin to a startup environment.

"Yeah, we treat it very much like a startup and here everyone does everything like a good startup should do."

Eric Hippeau describes how LHv emulates startup culture internally, with a lean beginning and a collaborative, hands-on approach to growth and operations.

• LHv's success is attributed to a consistent and simple investment strategy.
• The focus is on seed investments and primarily investing in New York-based companies.
• Maintaining a clear strategy and local focus has been integral to brand building.
• Offering support and advice to entrepreneurs has been a significant part of LHv's brand.

"We are seed investors first and we're New York investors first. So our first investment is always at the seed level. We keep money in reserves so that we can follow on and that's a very important component of our portfolio construction."

Eric Hippeau explains the fundamental investment strategy that has contributed to LHv's success, emphasizing their role as seed investors and their commitment to supporting local New York startups.

• LHv provides two levels of support: a technology platform with common services and a private communication layer for portfolio companies.
• Each company is paired with a partner and associate for a bespoke plan to assist with various business needs.
• Support ranges from introductions and branding to pricing and organizational structure.

"We have a bespoke plan for every company with a to do list that the company would like us to help them with."

This quote conveys the tailored support LHv offers to its portfolio companies, ensuring that the unique needs of each startup are met through dedicated assistance from LHv's team.

• Seed first investors focus on companies at a similar development stage, either about to or just entering the market.
• The initial steps for a company's first year of development are generally well-known and not mysterious.
• Active involvement is key to helping companies reach the metrics needed for a Series A funding round with a top-tier VC firm.

"You have to remember that because we're seed first investors, all of our companies are in the same point of development."

This quote emphasizes the specific focus of seed first investors on companies that are at the same early stage, streamlining the guidance process.

• Challenges vary by sector; for SaaS businesses, sizing the market and targeting large customers is crucial.
• Capturing key customers in SaaS can significantly increase a company's valuation.
• Startups may find it difficult to sell to large companies, but it's a necessary step for growth.

"So if you're a SaaS business, being able to correctly size your market opportunity... is invariably an exercise that every SaaS company has to go through."

This quote highlights the importance of market sizing for SaaS startups and the common challenge of securing large, influential customers to enhance valuation.

• The seed investment stage is broad in terms of check size, ranging from $100,000 to over $2 million.
• The New York seed ecosystem is characterized by collaboration, co-investment, and a lack of ego-driven decisions.
• Seed investors in New York generally work well together and prioritize investing in the best companies.

"People, by and large, work well together and really like each other."

This quote describes the collaborative nature of the New York seed investing community, emphasizing the positive relationships among investors.

• A great pitch should showcase a big, original idea that addresses a large market and is enabled by current technology.
• Timing is critical; launching too early or too late can lead to failure or a lack of differentiation.
• Investors want to understand the entrepreneur's background and why they are the right person to execute the idea.
• The best pitches are simple, straightforward, and supplemented by data in the appendix rather than overwhelming the main presentation.

"The very best pitches to me are pitches that are relatively simple. Go right to the point, don't try to shower you with too much data."

This quote emphasizes the effectiveness of simplicity and clarity in pitches, suggesting that data should support rather than dominate the presentation.

• Long-form journalism has always been a niche due to its high cost and the extensive time required for production.
• Despite changes in the media landscape, there is still an audience for long-form journalism, now potentially larger due to online platforms.
• Long-form journalism will likely never be the most popular form, but it remains a worthwhile investment for its dedicated audience.

"No, I don't believe so. First of all, I don't think that long form journalism ever had a large audience because it's always been expensive."

This quote conveys the speaker's belief that long-form journalism has not declined significantly because it has always catered to a smaller, more specialized audience.

• Ad dollars are not disappearing; they are shifting from TV to digital platforms.
• Media companies with a video strategy are benefiting from this shift.
• Advertisers are reallocating funds to digital as TV audiences decline.

"No, they're not disappearing. They are growing. They're coming from tv."

This quote emphasizes the transition of advertising dollars from traditional television to digital mediums, highlighting the growth opportunities for digital content.

• Buzzfeed's growth is attributed to its longstanding presence and viral content strategies.
• Jonah Peretti's expertise in virality and content sharing pre-dates Buzzfeed.
• Buzzfeed's use of technology, original content, and multi-platform presence contributes to its success.

"So it's not a flash in the pan phenomenon."

This quote signifies that Buzzfeed's success is not a temporary trend but the result of years of strategic development and understanding of content virality.

• Yahoo is not beyond saving but requires better management.
• Yahoo has valuable assets, including stakes in Alibaba and Yahoo Japan.
• The company should focus on selling itself to maximize the potential of its assets.

"No, Yahoo is not game over. Yahoo probably needs to sell itself to people who can manage it better."

This quote suggests that Yahoo still has potential if it undergoes strategic management changes, including possibly selling the company to leverage its assets more effectively.

• Eric Hippeau's favorite book is "The Lord of the Rings" for its fantasy elements.

"Probably the Lord of the Rings because it was a fantastic fantasy."

The quote reveals Eric Hippeau's personal preference for fantasy literature, specifically "The Lord of the Rings."

• Eric Hippeau respects many top-tier VC firms, including Sequoia, Andreessen, Benchmark, Greycroft, and General Catalyst.
• These firms are admired for their track records and unique operating styles.

"All the top tier vcs are really great firms."

This quote acknowledges the high level of respect for various top venture capital firms, appreciating their success and distinctive approaches to investment.

• Eric Hippeau reads "Strictly VC" and Dan Primack's work regularly.
• He also follows Business Insider, Recode, and TechCrunch.

"I read strictly VC. And Dan Primitz."

This quote lists some of the key resources Eric Hippeau utilizes to stay informed about the venture capital and technology industries.

• The Drone Racing League investment was based on criteria such as the idea, popularity of drones, timing, and the entrepreneur's background.
• Drones are anticipated to be a popular holiday gift, indicating market potential.
• The league's visual appeal and live streaming capabilities are attractive.

"We said yes. Let me go through our criteria. Fantastic idea."

This quote explains the rationale behind the investment in the Drone Racing League, highlighting the decision-making process based on specific investment criteria.

• Host Harry Stebings expresses gratitude to Eric Hippeau for his insights.
• Listeners are encouraged to subscribe to the newsletter and try Loyalty Bay's product.
• A free ebook on conversion rate optimization is available in the show notes.

"What a fantastic episode that was with Eric. He's a personal hero of mine, so that was very special for me."

This quote conveys the host's admiration for the guest and the value of the insights shared during the episode.