1Mby1M Virtual Accelerator Investor Forum: With William Hsu of Mucker Capital (Part 2)

Sramana Mitra: Can you take us through a couple of case studies. Let’s say Trunk Club and Task Rabbit. At what stage did they come to you? Did they have to pivot out of their original hypothesis? How did that evolution flow from your side?

William Hsu: It’s probably more helpful to talk about companies that are newer. Task Rabbit and Trunk Club are seven to eight years old now. A lot of the newer methodologies weren’t really employed back then. There’s a company called Honey. It has over a hundred employees now and is doing tens of millions of dollars in monthly revenue. It’s doing really well. It took them about a year and a half to two years to really find their footing. >>>

1Mby1M Virtual Accelerator Investor Forum: With William Hsu of Mucker Capital (Part 1)

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. >>>

8 Investors Discuss Pre-Seed, Post-Seed, and Series A Financing via the Virtual Accelerator Investor Forum

What is the difference between pre-seed, post-seed and pre-Series A? This is not so simple anymore to understand. For entrepreneurs who are seeking financing for the first time, it’s not easy to understand where they fit in.

There is a lot of competition to get into some of the deals for Series A (and Series B). If you look at the numbers, there are 50,000 to 70,000 seed stage investments a year versus 1,200 to 1,500 Series A investments. Clearly there is a lot of companies in that pool that are not getting to Series A. Only a percentage of those are really the hot companies. The hot companies, by definition, are few and far between, which is why there is such a competition. There are a lot of companies in the middle.

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1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 5)

Sramana Mitra: How do you parse unicorn mania?

Mackey Craven: By unicorn mania, do you mean the number of companies that have billion-dollar plus valuations that are still private?

Sramana Mitra: A lot of things. There’s unicorn mania in that there’s so much capital. There is a rush to fund these later stage companies and overfund these later stage companies. Last year, we did an extensive coverage of a phenomenon. It’s a unicorn mania negative phenomenon called Death by Overfunding. These were very good companies. >>>

1Mby1M Virtual Accelerator Investor Forum: With John Frankel of ff Venture Capital (Part 5)

Sramana Mitra: Unicorn mania started to rationalize a little bit in 2016. This year, it has stabilized. But there is still a huge amount of late stage capital out there. Traditional VCs have raised very large funds. As a seed investor, you could get buried under later stage liquidation preferences if valuations run up like that. How do you protect yourself?

John Frankel: When valuations run up, you’re fine. It’s when valuations stall or run back that you have issues.

Sramana Mitra: Both happen. Once valuation runs up, it stalls because fundamentals don’t deliver to valuation. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 4)

Sramana Mitra: There’s another dynamic, which is a lot of these seed stage investors who are working in the very early stages are exiting into those kinds of mega rounds that come in Series B and C. That is a very healthy trend because I think these two segments are different. It could take a long time to traverse the full spectrum from friends and family all the way to something that is actually scaling at a significant pace. You can’t have small funds taking positions all the way through.

I also have some mixed feelings about this over investment in the seed and post-seed stages. In many of these cases, these companies don’t have either the velocity or the TAM to be venture-funded companies, but the entrepreneurs are setting themselves up with expectations that they’re going to be venture-funded companies. 

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1Mby1M Virtual Accelerator Investor Forum: With John Frankel of ff Venture Capital (Part 4)

Sramana Mitra: I’m going to ask you a few trend questions. How do you process the current investment climate where capital is moving further and further upstream? How does a seed investor mitigate the Series A gap? The number of seed investments that are happening have gone up but the Series A number has stayed steady. How do you parse this trend?

John Frankel: There’re a lot of data points out there. It’s easy to string them together into a story. The thing to understand is once a venture capitalist invests, probably two-thirds of their portfolio goes nowhere. One third gets written off. One third, they get their capital back. The last third is where the returns are. >>>

1Mby1M Virtual Accelerator Investor Forum: With Mackey Craven of OpenView Venture Partners (Part 3)

Sramana Mitra: You’ve been investing for a while. Let’s look at your 2017 deal flow. Give us some flavor of what trends you are seeing. How many deals do you see in a year? How many do you invest in? What are the highlights of the trends in that deal flow? Let’s just focus on 2017 just because we’ve just finished that time and it gives us a snapshot of what’s contemporary.

Mackey Craven: As a firm, we speak with roughly 5,000 companies and invest in five. We make concentrated investments that we think have the opportunity to be large and enduring. 2017 was no different. However, given the number of businesses and entrepreneurs that we speak with, one of the more interesting trends that we saw last year is directly related to the previous question around geography. >>>