In this episode of "20 minutes VC" with host Harry Stebbings, tech luminary and LinkedIn co-founder Reid Hoffman discusses his journey from academia to Silicon Valley, where he became a pivotal figure at PayPal and LinkedIn, and later a partner at Greylock. Hoffman shares insights into his investment philosophy, highlighting the significance of building trust and maintaining relationships in the venture world. He reflects on his successful bet on Airbnb, his missed opportunity with Stripe, and emphasizes the importance of continual learning and adapting in the fast-paced tech industry. Hoffman also touches on his future plans, which include generating content to share his extensive knowledge on tech investing, board dynamics, and strategies for a technology-forward society.
"This is the 20 minutes VC with me, Harry Stebbings, and I'm so excited for the episode today."
This quote introduces the podcast and the host, setting the stage for the episode.
"And speaking of beautiful products there. And honestly cutting the crap, there are a few products I truly could not live without and use ten plus times a day."
This quote reflects the host's personal endorsement of the products being advertised, suggesting their importance in his daily routine.
"Well, so I was originally thinking I was going to be an academic... and that the academic path was very challenging for doing that... And so I said, okay, I'll go build software, because software will have that way of having that evolution in humanity and so forth."
This quote explains Hoffman's transition from academia to software entrepreneurship as a means to achieve societal impact.
"So if you had asked me as a young person, are you a leader? The answer would have been no... It's more like I want to ride in and solve particular problems... And so that's how I think of the kind of leadership thing."
This quote reflects Hoffman's self-perception as a non-traditional leader focused on problem-solving rather than seeking formal authority.
"The thing that I do take very seriously is that when your words have impact, you have to choose your words... I think one of the really important things in leadership goes all the way back to Socrates, which is to pay a lot of attention to knowing what you don't know."
This quote underscores the importance of mindful communication and self-awareness in leadership.
"But sometimes you're like, well, I know this about this, but not that. And so you have to bring that self-knowledge about what you know into how definitively speak."
This quote emphasizes the need for board members to be aware of their knowledge limits and to communicate accordingly.
"I will ask a question like, well, what do you think about this possible plan or this line of action?"
Reed Hoffman illustrates how asking questions rather than giving directives can be a more effective way to contribute to board discussions.
"Everyone should think about their life as the entrepreneurship themselves."
Reed Hoffman shares his philosophy that individuals should approach their lives with an entrepreneurial mindset, fostering continuous growth and adaptation.
"You can't fix many of your weaknesses. You can fix maybe one or two."
Reed Hoffman points out the practical limits of self-improvement, suggesting a focus on strengths rather than trying to fix all weaknesses.
"Play to my strengths and I should adjust my working circumstances to my weaknesses."
Reed Hoffman advises on leveraging one's strengths while making adjustments to mitigate the impact of weaknesses, such as hiring complementary team members.
"Building upon trust and the way of thinking about it in the business world is like a parallel to brand management."
Reed Hoffman draws a comparison between the process of building trust and managing a brand, emphasizing the importance of every interaction in the process.
"Trust is an extremely important part of life, an extremely important part of work."
Reed Hoffman underscores the significance of trust in both personal and professional contexts and the need to be deliberate in building it.
"The fundamentals of trust the same, which is the fundamental of trust, is one angle of trust is kind of where a person sees you kind of doing what you say."
Reed Hoffman discusses the universal principle of trust, which involves meeting commitments and being transparent about one's actions.
"You have to go the extra mile in venture to communicating and doing stuff because you don't have that intermediate check in."
Reed Hoffman highlights the need for extra effort in communication within venture capital due to the less frequent interactions compared to startups.
"I now no longer allow a third party to be the voice of an entrepreneur and their vision and what they're doing unless it's a highly trusted third party."
Reed Hoffman reflects on a lesson learned from his initial reaction to Airbnb, emphasizing the value of hearing directly from entrepreneurs.
"It's a disastrous kind of social circumstance. It has all the risks that renting a room has, but even less privacy and all the rest."
Reed Hoffman shares his initial concerns about Airbnb's business model, which he later realized were based on a misunderstanding of the company's concept.
"2 minutes into their pitch, I was like, oh, my gosh, this is amazing. You guys are onto something absolutely brilliant here. I'm going to make you an offer to invest."
Harry quickly recognized the potential of the entrepreneurs' pitch and decided to invest, demonstrating his ability to spot brilliance early on.
"And so we did that. I think we were talking on a Saturday. I brought them in on a Monday to pitch the partnership."
Harry acted swiftly to bring the entrepreneurs in to pitch the partnership, reflecting his proactive approach to investment opportunities.
"David turned to me and said, look, every venture capitalist has to have a deal that they crater and it is a disastrous amount of work, and that doesn't work in order to learn, and Airbnb can be yours."
David Z warned Harry that failure is a part of the learning process in venture capital, preparing him for potential setbacks.
"That learning mindset, I think is really important in venture, is really important in entrepreneurship, really important in partnerships, because you share learnings."
The quote underscores the value of a learning mindset in the venture industry, where sharing knowledge is key to success.
"And that's what I saw. And by the way, our venture bet is not about picking things that have a 90% chance of success. It's about picking things that have some more risk, but when they work, they're magical."
Harry explains that venture capital is about taking calculated risks on ideas that can be transformative, not just those with the highest likelihood of success.
"You have to think about that. You're always learning, right? And by the way, when you've learned something, don't treat learning as like it was bedded on the rock tablets."
Harry advises that learning should be an ongoing process and not treated as unchangeable truths, highlighting the dynamic nature of knowledge.
"I am year by year, a much better investor, a much better board member than I was the previous year."
This quote illustrates Harry's belief in personal growth and improvement through a commitment to learning.
"And so what you do is it goes back to that trying to trust building, like part of the discussion I have with entrepreneurs."
Harry emphasizes the role of trust-building in venture capital, particularly in setting expectations for the partnership.
"I will have to prioritize my time more here. I won't leave the ship. I will actually, in fact, just to set expectations, if we're in that troll thing, my time commitment will shrink some."
The quote reflects Harry's approach to managing his time commitment with ventures that face challenges, ensuring he maintains support without abandoning them.
"So Paul Graham, who was a founder of Y Combinator, dropped me an email saying, there's two Irish brothers, Patrick and John Collison, who are literally spectacular and they're going to be reinventing banking and that you should meet with."
Paul Graham's recommendation to meet with the Collison brothers highlighted their potential to Harry, showcasing the importance of trusted referrals in venture capital.
The study notes cover all key ideas and topics discussed in the transcript, providing a detailed and comprehensive overview suitable for exam preparation. Each theme is followed by relevant quotes and succinct explanations to clarify their significance.
"But one of the problems, and this is a little bit of know history can be a challenge, is that having know part of the five person executive team at PayPal through its dogfight existence of survival or death. I knew all of the landmines in the payment industry."
Harry Stebbings explains his hesitancy to invest due to his previous experience with PayPal's challenges in the payments industry.
"So they came to me and said, hey, we've got this deal which is you can invest a little bit amount of money on a very high. To my mind, I was wrong pre money valuation."
Harry Stebbings discusses being approached for an investment in Stripe, which he felt was overvalued at the time.
"I have regretted that call. But it's a little hard to say given what I knew about the payments industry of being brutally difficult and the fact that the risk reward on percentages, it's not clear to me that I actually made the wrong investment call."
Harry Stebbings expresses a nuanced view on his decision, balancing regret with the knowledge he had at the time.
"The reason why this classic 20% kind of venture, canon ownership is that actually, in fact, people did kind of studies about what happens on average exits, companies, average ipos and so forth."
Reed Hoffman explains the historical basis for the 20% ownership target in venture capital.
"So, for example, when I did the investment in Airbnb, I think it was like six or 7% ownership. And so it's much lower."
Reed Hoffman cites his investment in Airbnb as an example where lower ownership still led to significant returns.
"Venture capital should really be only on a maximum of, call it ten to twelve boards as a way of kind of working on them."
Reed Hoffman discusses the optimal number of board positions for venture capitalists to effectively contribute.
"We actually are running networks like we have a whole university recruiting program that we run for all of our portfolio."
Reed Hoffman explains how Greylock operates through a network approach, supporting all portfolio companies with recruiting and other needs.
"So the one thing that I think that I would love to add to the culture and some people haven't, like, for example, the, you know, all of Brian, Nate and Joe, is not only to think about the success of your individual product and the success of your business, but also where you fit within society."
Reed Hoffman emphasizes the need for entrepreneurs to consider their societal impact in addition to business success.
"But I'm also beginning, especially because of COVID time. And we're all sitting here through our video conferencing windows like we're doing this podcast is probably over the next couple years, I will be generating a bunch more kind of content."
Reed Hoffman outlines his plans to create content that shares his insights and experiences.
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The transcript features a promotion for Hello Sign, emphasizing its ease of use and legal validity.
"Affinity it's a home screen app for me, and not just me. It's the number one venture capital CRM."
Affinity is promoted as a top CRM tool for venture capitalists, used and loved by many in the industry.
"Zoom lets you connect and do business across town or around the world."
Zoom is promoted as a versatile communication platform that facilitates business interactions globally.
"I mean, a real bucket list item there ticked off for me with that interview with Reed."
Harry Stebbings shares his personal satisfaction in interviewing Reed Hoffman, marking it as a significant achievement.
"And I want to say huge thank you Tim, for taking the time to do it really did mean a lot to me."
Harry Stebbings offers thanks to Tim for the interview, indicating its personal importance to him.