Responding to a popular request, we are now sharing transcripts of our investor podcast interviews in this new series. The following interview with William Hsu of Mucker Capital was recorded in January 2018.
William Hsu is the Co-founder and Partner at Mucker Capital, a Los Angeles-based fund that invests largely outside Silicon Valley and follows a more fundamentals oriented approach.
Sramana Mitra: Tell us about the fund. How big is the fund? Tell us about your own background. Let’s get to know each other and let’s introduce your to our audience.
William Hsu: We are a $55 million seed-stage venture fund based in Los Angeles. We invest anywhere between 15 to 20 companies a year. We invest at the very early stages. We can invest anywhere from a two guys and a piece of napkin as high as millions of dollars in annual revenue. We are about 50% consumer and 50% enterprise.
We actually invest typically not in the Valley. About 50% of our portfolio is in Southern California. The other 50% is across the United States. I was born in Taiwan and immigrated to the US when I was 10 years old. I spent most of my life in the Bay Area and went to school at Stanford as an engineer. I graduated in the beginnings of the dot-com era around 1998. Like all the naive internet kids at that time, I raised close to $55 million to start a company that focused on building SaaS for the commercial construction industry.
Then the market crashed in 2001. I had to be replaced. My VCs fired me and had people with gray hair to run the company. I went to business school for a couple of years and started my career over again. I eventually ended up working at AT&T as a SVP, Chief Product Officer for a division at AT&T.
In 2011, I left AT&T thinking I was going to start an internet company again. Instead, I went with my partner to forming a venture capital firm. Five years later, we are on our fourth fund. We have about 75 portfolio companies to date.
Sramana Mitra: Let’s talk about the current portfolio. What have you invested in? How do you decide what to invest in? I’d like to understand your thought process. As you talk about the highlights of your current portfolio, give us some window into why you chose to invest in that particular company. How did it evolve? If you had any notable exits, you can discuss that as well.
William Hsu: Some of our portfolio companies include companies like Trunk Club and Task Rabbit. There’s Surf Air which his pretty well known in California. There’s Service Titan, which is a large company in the construction industry. We have a company called Honey which is in e-commerce.
How do we think about making an investment? The criteria we look for are teams that are nimble and agile. They must have the ability to experiment and understand the data that’s coming from the market and quickly pivot. For that, the iteration velocity is super important to us because we invest so early in the founding cycle.
Typically, whatever the original hypothesis of the company is would probably be wrong. That’s okay as long as the entrepreneurs are light on their feet and can iterate out again. We look for teams that are not only fully functional but also have a product person and potentially a go-to market person.
We look for teams that are very low on burn so they can have as much time as they need. The faster you could run and the faster you can run, the more likely you can create success. We look for that in the very beginning because we’re so early in the investment cycle.