1Mby1M Virtual Accelerator Investor Forum: With Dave Hornik of August 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 Dave Hornik, August Capital was recorded in December 2014. 

Dave Hornik, General Partner, August Capital, as some of you may know, shocked the industry years ago by being the first VC to start blogging. His peers were aghast! Well, clearly, he saw something before everybody else, and today, many VCs blog, Tweet, and do all sorts of other things to engage in social media, now a dominant force in the industry. He discusses a number of points, of which, I want to particularly draw your attention to his views on the subject of Freemium.

Sramana Mitra: I have this memory of almost 10 years ago when you were blogging.

Dave Hornik: It’s true. I was actually the very first venture capital who has a blog. It’s now more than a decade ago. I have to admit I’ve slowed down pretty dramatically. I get on these airplane flights and think, “I should really write something.” I’ve written it all. I should just point to things I’ve written in the past.

Sramana Mitra: We’re talking about a time when venture capitalists were these rarified species that would not talk to anybody. You cannot imagine how revolutionary this step that Dave took was.

Dave Hornik: Yes, it was considered crazy. People were like, “This is a blackbox. Don’t tell people what we’re doing.” I was sitting in the blackbox thinking, “There’s nothing much to see in here.”

Sramana Mitra: You’ve been around. It seems like deja vu again. What is your read of the industry? What is your investment thesis? What are you thinking right now?

Dave Hornik: It’s funny. Everything that changes is back to where we started before. What’s new right now is that the markets are really great and people are making a lot of money. The only problem is the things that are great started seven years ago. Only if you were investing in amazing companies seven years ago do you now get to take them public and have people see that there’s a huge opportunity.

Here at August Capital, we take the same view always – great entrepreneurs build great businesses. We look for people who are working on things that have the capacity to make a big change whatever that may be. We were the first investors in a company called Atheros when there was no such thing as WiFi. Atheros built a WiFi chip and created the standards that then allowed us to carry our laptops around the house without having a wire.

Incredibly transformative, but when we funded the company, it was a science project. That’s true of all sorts of companies where we’ve invested early with entrepreneurs who have big ideas. My partner Howard Hartenbaum was the first investor in Skype when they were just writing the business plan and thinking about peer to peer communications.

Another partner was an early investor in a company called Zulily, which is a children’s clothing store. It’s an amazing company but the bigger point was how do you get directed to the moms and grandmas who are really the ones engaged in the buying of these great products. How do you get them excited on a daily basis? That went from zero to a billion dollars faster than any company that we have backed before.

The world is faster today, which is amazing and exciting. It still requires you to build a business that’s doing something great. There are no tricks and we are not looking for tricks. We’re looking for great people who are building businesses that solve real problems today and will create value as a result.

Sramana Mitra: Double-click down on that a bit for us. Share some thoughts that are maybe sector-specific. What are some pointers to areas where you are seeing those kinds of opportunities now? Where are the new opportunities?

Dave Hornik: The short answer is, I don’t know, and I don’t think I’ll ever know. I think the venture investors who know what the answer is are either doing it really wrong or they’re wrong. If they actually know, they should start those companies. There’s way more money to be made being Mark Zuckerberg than it is being someone funding Mark Zuckerberg. If you know what the answer is, then feel free, and go build the company. Otherwise, you’re just full of it.

I hear a thousand pitches in any given year. I receive a thousand plans in any given year. They are really varied. There’s someone who’s working on a cloud service to solve an HR problem. Then there’s someone who’s building a consumer experience to bring 3D VR to your face. Another company is solving a payroll problem. There’s another company that’s figuring out how to deal with cement manufacturers.

There’s no circumstance in which I sit down on January 1st and say, “We need to fund a company that’s going to remove wires from laptop computers so we can check our emails in the bathroom.” No one woke up to hear that Atheros got started and said, “That’s the opportunity.”

When these professors came to our office and said, “RF technology has changed to the point where we can move data through the air with sufficient efficiency that we can get rid of wires.” We said, “Is that even possible?” I don’t think it’s the job of venture investors to say that these opportunities exist. It is our job to have a broad view of the world and meet with amazing entrepreneurs who tell us what they are passionate about.

This segment is part 1 in the series : 1Mby1M Virtual Accelerator Investor Forum: With Dave Hornik of August Capital
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