A few years ago I replaced all of the decades-old windows in our home with new ones. The entire process was horrible. I used home service lead-gen and recommendation-review sites to identify a half-dozen installers to set up initial in-person consultation appointments. Only half of them even showed up. For those who did, I was offered a set of confusing options with opaque pricing without any relative understanding of the quality of the service or the product itself. After finally making a selection, the installation took longer the one-day quoted plan and we were left overnight with gaping hole in our house! To top it off, there was a dispute about the final cost given the scope of work. Eventually everything was completed and resolved, but not after an extremely frustrating and delayed process. In a world of consumer-centric on-demand services, it didn’t seem like it should be this way.
Meanwhile, Eric Horndahl and Brian Waldman had been germinating a startup idea to address this consumer home renovation problem for a while now. Over a year ago Eric and I were chatting at a NextView-organized entrepreneur event where he shared the concept of what has now become Renoviso. It immediately clicked with me as a consumer when I detailed the above narrative, and he shared that my experience wasn’t unusual, nor was it exclusive to just window replacements.
Renoviso is a service empowering consumers to complete home renovation projects through a transparent and easy e-commerce model. The company offers easy online configuration ordering with transparent pricing for premium products, short in-home consultation to confirm measurements and details before commitment, and no-hassle professional installation. Renoviso has established direct relationships with both product manufacturers and high-quality installers to enable a seamless experience for the end-consumer.
Today Renoviso is announcing their $1.4M Seed round of financing led by NextView Ventures, where I will be joining the Board of Directors. We’re joined in the round by RRE, BOSS Syndicates, NextGen, and awesome strategic angels like Niraj Shah (CEO of Wayfair) and Fabrice Grinda.
The rationale behind our investment isn’t built upon my one lone VC customer experience. Rather, the foundation is based on our experience with labor marketplace investments like Paintzen and TaskRabbit, as well as our long-held thesis about high-consideration e-commerce. I’ve blogged before about the latter:
People are now buying things online which take more than a few (dozen) minutes of reflection. And not surprisingly, the most salient reasons that these items are given more consideration are that the cost are higher, they often take up more space in a person’s life/house, and they’re experienced over a longer duration. In many cases, there were already cases of these types of products already being purchased online, but given a new wave of innovation and greater acceptance, I think we’re at an inflection point where an increasing number of high-ticket, larger, enduring goods will be bought on the web.
Selling high-consideration goods online is not just about publishing a web product catalog with features, specs, and reviews. It’s about helping foster consumers though a rich buying experience… The innovation happening in this space now is centered around the way vendors present, inform, and consummate a sale.
Home renovation is perhaps the ultimate high-consideration purchase, both because it affects an individual’s life so directly and also because the purchase price can be very meaningful. This means that if a startup can address the category with an effective solution, the rewards can be absolutely massive. Historically and even recently, the online category has been filled with lead-generation & advertising models, but those only effectively direct consumers to installation providers to experience the same set of problems… Renoviso actually takes care of the whole process for the consumer.
Eric and Brian are the perfect duo to make this company a success. Both are online marketing gurus with a rich background in multi-category customer acquisition at BuyerZone, TripAdvisor, and Cayan. As I mentioned, I’ve known Eric for a while now, but in diligencing this investment I conducted a number of background references on both of them and heard superlative phrases like “I don’t think can give higher recommendation to anybody,” “fiercely hard working,” and “so hungry… I’d highly highly bet on him.” It’s hard to argue with endorsements like those.
Windows are just the beginning for Renoviso. I am looking forward to the day not too far from now when I personally can use the service to install a new fence or add hardwood floors to our den. But I am more excited about when there will be thousands of customers joining the existing ones who are ecstatic about a home renovation experience which is stress-free.
Tales become legends about founders of exceptionally transformative companies who truly struggled to get any investors’ attention early on. These rejection emails to the founder of Airbnb represent just one of the most recent example of this familiar theme.
If a startup were obvious, then everybody would be doing it. And it wouldn’t be an opportunity.
My partner Lee likes to talk about successful fundraising as “finding the believers, not convincing the skeptics.” When I think to the best performing companies in our NextView portfolio, the investment process was driven by (at least) one of the three of us who became a true believer. It wasn’t obvious. In fact, some of these investments were initially not unanimous in perspective and perhaps controversial decisions internally. That’s not to say that all of our strong portfolio companies were nonconsensus among the three of us – quite the opposite. But looking back upon reflection, they were almost all nononsensus within the venture community.
Instead, we had a unique insight that drove our conviction. A long-standing relationship with a founder and her ability to execute. A deep understanding in a particular market landscape. A lesson from another portfolio company situation which “rhymed” that could extend to another situation. A stronger appreciation of the primary distribution method’s effectiveness. Or perhaps a simple recognition of the market need that others don’t see. Even the “hot” companies which seem perhaps obvious given traction or a star experienced founder sometimes have pricing that’s driven up to being “crazy”… consensus then becomes that “the VCs overpaid.” Consensus internally, nonconsensus externally. That’s what my partners and I at NextView are striving for.
(Note: we have an explicit internal cultural “ethos” rule that once we decide to make an investment as a team, together we collectively fully own it and work tirelessly 110% for all of our portfolio companies.)
Entrepreneurs (rightfully) lament that VCs follow a herd mentality. It’s true. It’s easier to, and human nature to, unconsciously shape your thinking with heavy influence from your peers. VCs are people and are subject to the same conformity bias that social psychologists identified decades ago. The proverbial “me too” VC-funded companies in any category du jour are a reflection of that fact.
But with the recognition of this natural tendency comes the ability to overcome it. My partner Rob talks about “getting beneath the surface” in “truth seeking” diligence. We deliberately ask ourselves, “What do we recognize or understand about this investment that others do not?”
The truth comes out in looking at our own NextView portfolio. Why would consumers ever want a new calendar app when there’s already one installed on their phone? Exceptional product execution fundamentally changes its utility. Why would moms ever dress their kids in somebody else’s used clothes? Great selection of like-new condition items at lower-prices. Why would developers ever turn over their entire source code to a third-party? Ensuring security and efficiency.
The flip side of seeking nonconsensus is not doing it for its own sake. Nonconsensus is perhaps necessary to invest in a transformative company, but it certainly isn’t sufficient – you also have to be right in your thesis. Mike Maples has talked a lot about this framework; so has Peter Thiel in his Venn diagram that opportunity is the overlap of “seems like a bad idea” and “is a good idea”; and Chris Dixon’s continuing meme about “the next big thing will start out looking like a toy.”
Last week I shared the pitch about our latest (to be announced) investment to another VC. The human in me naturally wanted him to say, “Wow! That’s a unicorn in the making.” Instead, he just forced a grin and noted it was “kind of interesting” while citing the meaningful challenges ahead. It’s certainly a nonconsensus bet… but I believe that I know something he doesn’t. Now we just have to wait half a decade or more and see if I’m right.
Today, I’m thrilled to publicly announce NextView’s Talent Exchange, a program helping both top talent and NextView-backed startups connect with each other more easily, beginning with Boston companies (which make up just over half our portfolio).
Below, I’ll quickly explain the genesis of this initiative and share a few more key details.
One of my first mentors in venture capital explained to me that the key role of a VC is to “aggregate talent.” Nothing is more important than seeking out extremely talented individuals and connecting them with other similarly talented and driven individuals. To me, the whole VC job is about bringing together great people since, together, they will inevitably and collectively do something great.
At NextView Ventures, we’re hyper-focused on the seed stage, and since starting the firm, we’ve heard repeatedly and consistently from founders that a primary challenge they face during that stage is hiring. And their feedback isn’t about hiring in general, nor is about hiring senior executives. Rather, we’ve heard time and again just how difficult it is to find exceptional operators — those all-important “doers” that are integral to making things really happen — a senior front-end engineer, a tactical online acquisition marketer, a phenomenal designer, and so on.
These great people are in our network. Even more of them are within our network’s network. And we know many top individuals exist outside a circle even that wide. But to date, only on an ad hoc basis over the past few years could we connect them to our portfolio. When we thought there may be a match, my partners and I would introduce someone who we knew was looking for a new job straight to a portfolio company. But it seemed like it wasn’t enough. We could be doing more. And we could add more value not only to our portfolio startups but to the candidates themselves, helping them land startup jobs they love.
In short, we felt our own process — and the process we’ve seen across the industry — was broken.
We started with one question: “What if, instead of relying on happenstance, we proactively tried to identify top talent both inside and outside our network who are excited about joining startups or finding their next adventure?” This led to us asking, “What if we deliberately operated our firm to have a true pulse on the hiring plans of both our portfolio companies and exceptional operators in town? And what if we could then confidentially and personally connect both sides in a way that benefitted each?”
For candidates, we believed we could create a better experience than empty, forgotten job boards on VC websites or generic search engines full of company names that lack real context or feel over-sold by a company’s description of itself.
For our startups, we knew we could help them source better and move faster. We could connect them with talented individuals that automatically come with a positive referral and light context upfront, rather than requiring them to reach out and sort through noisy application pools just to decide whether to put a candidate into their “real” process.
And, above all else, we knew this program could feel more human than other existing solutions. While many job boards or VC programs surface information, they then leave it to candidates or companies to reach out cold, perhaps by dropping a name the other side might know. We felt we should be more helpful than that, and so we’ve built a few features into this program, not least of which steps outside our tech-happy world to involve a customized, personal intro between both sides. That human touch has proved invaluable to all involved. Warm intros are how people begin most of their valuable relationships. Why should hiring be any different, especially given how crucial it is to building a startup?
Out of those questions and those beliefs, the idea for the NextView Talent Exchange was born. Since January, led by our VP of Platform Jay Acunzo, we’ve been in a beta period, quietly testing our project with half of our portfolio based in Boston. We focused on solving the problems above and were thrilled with the early success. In a few short months, we’ve surfaced dozens of qualified candidates for our portfolio startups (many of whom they wouldn’t have met otherwise). But most importantly, we’ve already witnessed the most result: real hires made. That’s the goal, and it’s happening.
Our Talent Exchange isn’t meant to replace any of the recruiting technology or processes used by startups, nor should it be viewed as an alternative to some later-stage VC firms’ in-house recruiters. Instead, we’ve encouraged our founders to view this as just one additional way we as a firm can help founders get their companies off to the best possible start. That is NextView’s overall mission, and that is the reason we exist and partner with exceptional entrepreneurs.
So, we’re taking the covers off of the program this week to raise awareness of what we’re doing within our own extended personal networks as people begin to think about their next thing. Additionally, we’re hoping this starts a broader conversation about what we as venture investors can be doing to systematically help startups succeed in their hiring.
Just like my mentor’s advice, our Talent Exchange is beginning to bring together more and more exceptional people, and I’m excited to see what they do next.
A couple weeks ago my colleague Dimitri Dadiomov published a post on NextView’s “View From Seed” blog which answered the question “Should we take Harvard MBAs Seriously as Startup Founders?” The (obvious) answer of “yes” he supported with comprehensive research about the entrepreneurial activity coming out of Harvard’s business school.
We knew that it was formidable, but the sheer number of founders, companies founded, dollars raised, and (early) exits from HBS founders over the past six years impressed us. From the group, over 260 founders have launched around 90 startups, raising more than $2.5B in capital. Notable names like BirchBox, Blue Apron, Cloudflare, and Rent the Runway were launched by these MBA grads. Successful exits include Wildfire (to Google for $350M), Behance (to Adobe, $150M), and RentJuice (a NextView-backed company co-founded by David Vivero, to Zillow for $40M). It wasn’t a complete surprise to my partners and me at NextView, though, as in addition to our RentJuice investment, we have backed a number of other Harvard MBAs who started companies straight out of school including InsightSquared (co-founded by Fred Shilmover, raising $27M to date) and ThredUp (co-founded by James Reinhart and Chris Homer, raising $50M to date).
But what was surprising, at least initially, was the apparent downturn in the graph after a peak of activity in 2011. Has something gone wrong in the past couple years?
Quite the contrary. Rather, as Dimitri noted, we’re at the beginning of the cycle for these recent classes. On the number of founders and companies:
- Some people are likely in stealth mode, and haven’t self-identified themselves currently as founders, which is merely a known bias in the study.
- Some alums will work a couple years prior to starting their companies, rather than doing so right out of school. These individuals and companies are just being started now or will be shortly, and will likely bring up the count for these years if looked retrospectively a couple years from now.
- The class of 2014 shows no sign of slowing down, at least when you see that 41 founders have already self-identified. It’s just one data point, but it certainly makes the classes of 2012, 2013, and 2014 feel anything but dormant.
On the metric of capital raised, the rationale for the smaller figures is the same as the two points above, coupled with a more important fact that earlier in a company’s life-cycle it’s almost by definition likely to have raised smaller amounts. Pursuing the underlying data, it’s as you’d expect that most of the rounds raised so far are Seeds and Series As, and many haven’t even raised any meaningful capital at all. And, of course, the larger growth rounds just haven’t happened yet since the startups aren’t mature enough to warrant 8-figure capital raises.
And therein lies the $1B investment opportunity: funding Harvard Business School startup founders from 2012-2014 and beyond.
Even if we remove 2011 as a potential outlier, that billion-dollar estimate is still a very resonable prediction. The dotted red line above shows the average amount of capital raised by HBS founders between 2008 and 2010: $416M per year. Take that as a proxy, and it’s fairly safe to project that the HBS classes from 2012 onwards will likely raise a $1B in venture capital over the next few years. It’s up to seed funds like ours at NextView Ventures to identify and work together with these entrepreneurs for the early capital raises and catalyzing their best possible start. And larger venture capital funds seeking to deploy meaningful capital should look no further… my fellow VCs, these 88 (recently graduated) HBS founders and their ventures are ripe opportunities for investment. The early exits from their predecessors are a strong leading indicator that’s they’re going to be very fruitful.
Conventional wisdom says that the best way to meet with a venture capitalist is to get a warm introduction. (While it’s a good rule of thumb, it’s not entirely true, which I’ve blogged about previously.)
However, there’s another way that I’ve seen entrepreneurs use mutual connections that’s even more impactful than a warm introduction: a proactive inbound reference. Rather than wait for a VC to ask for references later in the diligence process, savvy entrepreneurs have had people in our mutual network lob in an email or phone call as a vote of confidence and support. If a person is merely on a reference list after the first couple meetings, the standard expectation of course is that she is going to say good things about the entrepreneur. But a strong inbound reference from the same person can be even more productive. Inside our partnership here at NextView, we informally and affectionately refer to it as “playing the ground game.” When executed well, it can successfully get us to pay particular attention to and instill additional confidence in a Founder.
Tactical thoughts to having good ground game:
- The person lobbing in support needs to not only be a mutual connection, but rather be truly trusted by the VC… a much higher bar. Again, otherwise, there’s risk in having the opposite effect, from merely noise to a negative signal on how you judged the relationship’s effect.
- The inbound reference must say superlative things, not just positive ones. It’s a subtle, but impactful difference. “He’s good – I’ve worked with him” isn’t as effective. Because it’s going further than merely offering to be a reference, and instead they’re inbound, it’s incumbent that entrepreneurs absolutely believe that they’re going to be over-the-top good.
- One or two inbound calls of support can make a positive impression, but more than that can have the opposite effect. Too many can come off that an entrepreneur is trying too hard, signaling that there isn’t enough substance to their pitch itself to stand on its own.
- There’s an art to the timing of these calls and/or emails. The best strategy is a Goldilocks one timing: not too early (overwhelming) and not too late (less influential to outcome). This point is especially true if the inbound reference is directed towards another partner at the firm who isn’t the primary point person on the potential investment.
If, as an entrepreneur, you have more than one strong mutual connection with a VC, don’t overlook an arrow in your quiver which you may not have realized that you already have. Good ground game can be the subtle edge that pushes the financing process forward faster because an especially strong opinion from a trusted contact is a meaningful signal. But at the end of the day, it’s merely a minor tactic which shouldn’t distract from the fundamental key to a successful fundraising process – clearly communicating the opportunity of the business.