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We scale differently, we scale vertically. And what that means is we don’t invest in that many companies. So the accelerator does about 20 companies a year, you know, plenty times less than what YC or Pixar does. But instead of just writing one check, we’ll write 4, 5, 6 checks into the same company over the next two, three years.
Jay Clouse 0:21
The startup investment landscape is changing. and world class companies are being built outside of Silicon Valley. We find them, talk with them, and discuss the upside of investing in them. Welcome to Upside.
Hello, hello, hello, and welcome to the Upside podcast. The first podcast finding upside outside of Silicon Valley. I’m Jay Clouse, and I’m accompanied by my co host, Mr. Soon to finally be married himself. Eric Hornung.
Eric Hornung 1:00
How many times have we use the marriage nickname on this podcast? I think I’ve been engaged almost as long as this podcast has been around.
Jay Clouse 1:07
Yeah. Well, you know, I have a rule that I will only use the same nickname once every couple of months. And yeah, you’ve you’ve been engaged for a long time. How long have you been engaged?
Eric Hornung 1:16
July 17 2019, I believe is the day or 16th, 17th, 18th. I think it’s the 17th I think I think I nailed that.
Jay Clouse 1:26
Mallory and I have been getting some heat for not yet having a date for our wedding and being engaged out for five months. People think that’s weird.
Eric Hornung 1:36
When you get engaged listeners, if you ever get engaged, if you are engaged, if you have been engaged, you may or may not know this, but the second that you propose, there is no question that anyone asks you other than do you have a date? It is constant.
Jay Clouse 1:51
Why is that? Are they? Are they nosy? Are they supportive? They want to come to the wedding. Is it just like this social script that now we have in our heads as to when I hear X I respond Y. X is I’m engaged Y is do you have a date yet? What is it? What is it with people.
Eric Hornung 2:07
It’s probably some layer of social conditioning. But I think people also just want to envision the wedding. And they know, this is what a summer wedding looks like. If you give them a summer date. This is what a winter wedding looks like. And there’s a canned response to each of those as well. Oh, summer wedding, that’s going to be beautiful. Are you doing it outside? Oh, winter wedding. Those are gorgeous. You know, like, oh, fall wedding, beautiful weather, spring wedding, oh, new season, like, you know, there’s just like, I feel like there’s a second layer to that question, which gives you a visual imagery, once you have the date of what the weddings going to be like.
Jay Clouse 2:41
The line of questioning feels a little bit similar to the line of questioning after you tell someone that you’ve gone into contract on a home. And I’m going to be the cynical person to say that I think a lot of times people are playing comparison, and they want to be excited for you. But they also want to know that their wedding was better.
Eric Hornung 2:57
Hmm. Maybe I might depend on the age of the person. Because some people are older when they asked you and just want to genuinely be happy about a wedding. And maybe that’s a bad comparison on age. But that’s probably true. And I liked the comparison to the home because the amount of people who asked me for my address of my new home, oh yeah, higher, much higher than I thought it would be.
Jay Clouse 3:21
They’re going straight to Zillow. They’re saying, Let me see this house. Let me see the value of this house. I got to know.
Eric Hornung 3:26
Jay Clouse 3:27
Engagements, buy houses. These are just natural stages that people take when they’re trying to live the one life they have to live the best way that they can.
Eric Hornung 3:35
And if you want to live the one life you have the best way you can like Jay and I are getting engaged, buying houses. You can go check out our friends at Ethos Wealth Management, go to upside.fm/ethos Ethos to learn more.
Jay Clouse 3:53
Well, Eric, in your personal life, you may no longer be flying solo. But for this interview today, you are flying solo, I’m afraid. Talking to our new friend William Hsu.
Eric Hornung 4:04
I always get a little nervous going into an interview without you Jay.
Jay Clouse 4:07
Will is the founding partner of the Santa Monica based fund Mucker Capital way back in the day, we spoke with Monique Villa who is an investor at Mucker capital. And Will is the co founder and partner. He started his career as a founder creating BuildPoint, a provider of workflow management solutions for the commercial construction industry. Not long after graduating from Stanford. And previous to Mucker Capital. He was the SVP and Chief Product Officer of AT&T Interactive. So pretty crazy backstory here, Eric, and I’m jealous. I’m not gonna spend some time chatting with you. And we’ll tell me more a little bit more about it.
Eric Hornung 4:44
I feel like Mucker made the news not too long ago with the acquisition of Honey and how early they were in. I think that was like a $4 billion acquisition or something crazy. But Jay, I got a question for you. I gotta advocate for the listener here. This is a California VC. What are we doing with them on the podcast?
Jay Clouse 5:00
Well, they are California based. They’re based in Los Angeles, and they invest in Southern California and other similarly underfunded ecosystems outside of Silicon Valley. That is their focus. They in fact invested in TribeBest. Tribevest is going through MuckerLab. And when we had Travis on the show, he just had really glowing positive things to say about his experience working with Mucker and Will. And so we thought, you know what, that checks the boxes for us.
Eric Hornung 5:28
If this checks the boxes for you, dear listener, you can reach out to us @upsideFM on Twitter, or send us something a little longer at email@example.com. And we will get to that interview with just me, no Jay, right after this.
Jay Clouse 5:47
Eric, we got to make some big changes to how we do operations here at Upside.
Eric Hornung 5:51
This feels like an intervention Jay.
Jay Clouse 5:53
It’s a bit of an intervention. I have to give you some tough love. We’ve had some calendar problems over the last couple weeks.
Eric Hornung 5:58
I’ve had some calendar problems, you don’t have to throw the third person on this.
Jay Clouse 6:01
I do like to take the blame for you. But this one is on you. And Eric, I think we have found a solution to our calendar and scheduling problems.
Eric Hornung 6:09
But there are 101 scheduling tools out there Jay that can help you avoid the awkward dance of finding time to meet.
Jay Clouse 6:15
But this tool is by far and away the best one I’ve seen and I have looked at a lot of scheduling tools. And I’m talking about SavvyCal.
Eric Hornung 6:23
SavvyCal makes it a collaborative effort allowing you to personalize links and allow recipients to overlay their own calendar on top of yours.
Jay Clouse 6:32
It’s going to make booking guests for Upside and even just one on one conversations a complete breeze. You got to see what this looks like. You got to see how it works. Because you’re going to ask why wasn’t it always this easy?
Eric Hornung 6:41
You can sign up for a free account at SavvyCal.com/upside. That’s SavvyCal.com/upside and when you are ready to test out a paid plan, use the code Upside to get your first month free.
Alright, Will, welcome to the podcast.
Thanks, Eric. I’m excited to be here. I think this might be like my second or third try at podcasting. So I’m relatively early in the state.
Most of our guests on Upside are actually pretty early. Actually 60% of them have never been on a podcast or featured in a news article before.
William Hsu 7:26
Eric Hornung 7:26
So, you’re hopefully in good hands here.
Yeah, no, I’m like I was telling you a little bit earlier hoping for the post production magic to make me sound like George Clooney and smart as on Mike Moritz.
On ups, I’d like to start with a background of the guest. So can you tell us take us on a quick rocketship through your history?
William Hsu 7:47
Sure. There are times it takes me about half an hour to just talk about my history. But this time, I’ll try to be as fast as I can. But feel free to cut me out. I was born in Taiwan and immigrated to the US when I was 10. I learned English here, you’re kind of growing up. Luckily for me, Taiwan was very much of a tech city or tech, if you will. Yeah. My father was the tech industry. And the city I ended up learning at was San Jose, actually, this town called Saratoga moving to San Jose Cupertino. So I grew up biking around all the Apple buildings and going to Best Buy and fries, we just went out of business actually shed a tear that day, kind of building my own computers. So kind of computers has been part of my life since like, literally, the day I started speaking English. And for me, the tech industry was in this thing that wasn’t like 30, intangible and aspirational, it was actually part of my daily life. So going on the path that I’m in is really just a continuation of both the legacy of my family, as well as kind of just the immersive nature of how much brought up. I was supposed to follow my father’s footsteps and study industrial engineering and go manage factories and make widgets. And being the rebel Taiwanese kid that I was I ended up on the software side of the world. So I went to Stanford in ’98. And put them then in the middle of the .com bubble. I worked for about 10 months at an investment bank in Palo Alto, helping companies like Amazon commerce one I think I did like 10, IPOs in 10 months, going public. I was an engineer so I barely knew how to work especially like if you ask me about MATLAB or SaaS I can program but like a spreadsheet was like, oh, like this is half a programming language what’s going on? So I was actually a terrible banker. One of the things I was really bad at which I’d never knew was a disability was that I could not see different fonts on the same page to me, they all look the same. And I don’t mess a bank presentation super important. So I came up with his presentations that have like an Arial and Times New Roman and New Courier all on the same page, and it just freaked everybody out. And I just couldn’t see it. I literally could not see the difference. Like there’s such a thing a font blindness, that That’s probably me. So be very blunt. I was a terrible as a banking analyst. But I was also a bit naive and aggressive and somewhat aspirational. So 20 to 10 months into my first job, I quit there some bank and started my own internet company, I went out with a few of my friends from the bank and from Stanford, and we raised $55 million in less than 12 months, on a deck with nothing. And at the time, I thought I was like the smartest guy on Sand Hill Road. Likewise, everybody’s throwing money at me. But looking back, it has very little to do with welders or more what he looks like. I think everybody thought I was Jerry Yang’s little brother, like a Taiwanese immigrant from Stanford. So therefore, like, yeah, like, Yahoo just made people a couple billion dollars each. So why wouldn’t Will turned out I was 1/100 of one area and was so I was a terrible entrepreneur, I didn’t know how to actually build a company, I knew how to build a product, I didn’t how to build a company. Looking back, then I was also investing and no point I started up out of feet, we had about 700 employees, 400 of them was sales people. We have offices across the US, I think 40 different offices, and we were selling a product that we gave away for free. Think about your unit economics, like it was probably losing probably $100,000 per customer. So we were scaling really fast. But the business was completely upside down. And we just relied on fundraising, which I was really good at, to continue to kind of build the business. Turns out, it’s much more important to get money from your customers to get money for VCs. Lesson number one. And therefore, when the market crashed in 2001, the VCs look around the room and said, holy shit, there’s no way we can fly more, again, more money anymore. And we really need to get some gray haired white guys into the room and turn this something around. So I was told to never show up to the office ever again, in a single meeting. And I think the statue.
Eric Hornung 11:18
Were those exact words.
Yes. Yeah. Like, be the chairman, we’re going to take away the shares that you have, we’re going to recap the company. And you know, don’t come back, you’re going to be a distraction to the team. Being I think this permission to I think the statute of limitation has done so in the rebellious young kind of pissed off way. The only thing I could think of to get back at my my investors was to steal the Aeron chair that had at the office, put it in the back of my sedan, and just drove away with it. And then that was that was me adult point. That was that was the breakout, you know, sometimes you you need a momentous moment, there was my lunch here, it was both an example of the access of the internet.com boom, I was as well as the permanence of an iconic permanence of something that came from that era. Like it’s both a representation of something amazing and great. Also something that’s like, completely irrational and exuberant. And I still have that you’re on share. It’s, it’s where my little daughter sits and do her homework every day.
How much of the experiences you had at BuildPoint do you rely on when you’re talking with founders today at at Mucker.
Two things or rely on. One from experience side. All the things not to do. I can identify him right away, right. But some people say, Well, I’m the founder of doordash. And therefore, like, I can help you build a great company. And that’s great. And that’s that, you know, people should do that, my pitches up. I was a terrible baseball player. So I know how not to hit the ball. So don’t follow my example. My my job is to try to help people, we use the options that’s in front of them, right? I don’t tell him to go ABC and D, I tell him C & D, don’t do that. I’ve done that before. Stay away from C & D, pick A or B, I don’t care, but not C & D. And then the other thing is, I totally understand how intoxicating being an entrepreneur is and what fundraising feels like and the fact that people report to you at the CEO title. And if you’re in your little own bubble, by looking at the world globally, you’re not using you think you’re the king of the hill, without realizing that your hill is actually just a little pile of dirt. And you really need to stay a lot more grounded and really understand the customer and build a business step by step. In the sea of your startup has not it’s not even close to being a CEO of GE right? Like that’s on a completely different planet. Don’t you dare think that you have made something up and drink your own Kool Aid and think you’re amazing. You’re not, the hill can disappear overnight and you’d be the CEO of nothing. CEO of nothing is no better than being an enough like, be No, stay at home dad. Right? Like there’s no difference. Yeah, you gotta you gotta build something amazing. First. And then the title, the accolades, all that stuff is, is only only matters when you actually build something special.
So I think a lot of people would say that you’ve built something special at Mucker, I want to take us back to when you were co founding it in 2011. A lot of people who’ve had bad experiences with VCs don’t go out and then decide to be a VC. What was that decision like?
William Hsu 15:28
To be honest, being in a VC was the last thing on the list of things I want to do before I die. To be honest, I have some great investors that I truly still respect today. And I have some that I would not even cross the same side of the street with, and the at the beginning of Mucker then. So right before my career, I was at this company called AT&T that you might have heard of a.
Eric Hornung 15:51
Small little company.
William Hsu 15:52
Yeah, like, you know, not a 100 billion evaluation 100 billion in revenue. Right? Now, you might not have the 100 billion evaluation, or trillion dollar valuation software companies. But as far as the size of the company, and the operation of the business and revenue was gigantic. And I was an executive at a tiny part of the tiny division within the company, kind of seeing the how the entire piece works. I learned a lot, my two and a half years there, but I think I was mid 30s at the time. And I was like, you know, like, this can be the rest of my life. Because lots of people at the company at AT&T really view it as like, Okay, I’m going to take the next 20 years and try to make my way to CEO of AT&T, by the time I’m 60. I’d like to be at a beach somewhere and playing with my grandkids at 60. I don’t want to be trying to run a public company and getting yelled at by the press. That’s not my goal in life. So I was actually leaving AT&T and trying to kind of come up with an idea to start a company again, like I wanted to go on my comeback tour, if you will, right, I want to write all the wrongs of point of mine, certainly I did so many things wrong. And in some ways, I tell people, I destroyed $50 million dollars in value. Right? So it’s time in my life to build that value back pay my debt to society and the economy. My my partner at the time, Eric, oh, he was he was like, I used to work for Eric at eBay, he came down to LA he was doing VC work in the Bay Area. And he’s one convinced me that starting a fund is the same as starting a company, it’s really about taking an opportunity and seeing a problem in the marketplace come up with a better product. And for better or for worse, he was very convincing, and I bought it that I can be a different type of VC. And we can be a different type of firm. And in the market that we’re in at the time only in Southern California, there’s a huge gap for what we can provide and what we can give. And we can provide a ton of value and charge much less and provide a lot more outcomes for our customers who are entrepreneurs. I think that Ethos is part of whom Mucker is A that we are a startup though we are a company, we’re not a fund fund is our business model, and B Eric and I. And now Omar, we’re entrepreneurs, first and foremost, we’re building a business. And then our founders, entrepreneurs, they are our customers, and we offer a product to them. And then we charge them a price. And they need to receive enough value for that price for them to continue to be our customer. And so that we kept the right retention and the right metrics and right NPS score, I have like we run marker like a business and we believe entrepreneurs are customers.
Eric Hornung 18:38
There’s this kind of debate in VC on who is the customer kind of like there is an academia is it the entrepreneur, is it the LP, so if customers are the L or if your customers are founders and entrepreneurs, what’s the LP in this company metaphor.
William Hsu 18:57
The LPs are the investors, just like a company by and value starts with the customer, the value is given up by the customer to the company and eventually accrues to the investor. And I see that the same way. So for right, we need to provide enough value to our customers so that they give us value back by a small percentage of the value that we give to the customer back. If I charge $100,000 a year for my software, I better provide at least a million dollar was the value to my customer. Like if I give $100,000 or to a company I better I better give million dollar worth of value. Right? And then eventually value flow through the cap table or in this case fund to our investors but very much it has to start with the company and the entrepreneur. That’s where everything is created. Right like money has no intrinsic value and it doesn’t accrue especially in a deflationary world. Not only value is created through hard work and innovation and disruption.
Eric Hornung 20:01
How did you decide on what your first product offering was going to be as Mucker.
William Hsu 20:07
Offers product offering was an accelator. That was our product. I like to think that both people asked me that question. My first answer is, we came up with that product because we’re good at it. Right? Me and my partner, Erik has the network in the Bay Area to help entrepreneurs was going to meeting entrepreneur they need to meet and meeting investors they want to meet, we have built enough product and companies in our lifetime to kind of provide that advice. So there’s a lot of product founder fit than market founder fit and who we are, and building an accelerator. The other thing that actually happened is that we were forced to be an accelerator, Erik and I started Mucker with a million dollars of our money, plus a little bit of fun for the family. We are a million dollar fund. And like they’re like, engineers at Google that makes more in one month than I then we have like total as a fund. So we were forced to go as early as we can, and provide as much value outside of the capital that we have as we can, because we literally have no money. So we’re painted into a corner. So when you’re painting the corner, you have to do what you’re best at. And that’s all we’re best at. Like if you’re 5’7, and you want to play football and an NFL like you better be Julian Edelman, you’re not going to be tarryall once, and we’ll take the hits and we’ll we’ll we’ll find those creases. And we’ll play that we’ll get our hands dirty. And that’s what we’re forced to do. I think we’re good at
Eric Hornung 21:33
How has that. And maybe a point of clarification here is MuckerLab. That first accelerator or is MuckerLab an evolution.
William Hsu 21:42
MuckerLab is the first first iteration of Mucker. There wasn’t Mucker Capital yet. We were purely doing in 2011. We were to a purely an accelerator. And at the time writing $20,000 checks, just like Y Combinator. So a million dollar is a lot like $20,000 checks. It’s not much money if you’re writing $100,000 checks. So we were all that’s all we could do. Right $20,000 checks and roll our sleeves and make sure that we add as much value as we can to the work and our network rather than to our capital.
Eric Hornung 22:17
How has MuckerLab evolved over the last decade?
William Hsu 22:21
Yeah, so I’m certainly hopeful Mucker is today from outside, it doesn’t look much like who we are we’re 10 years ago. And that’s good. We improved and gone thicker because we’ve been successful. But the ethos of what MuckerLab is, is who we are every day. And that means a few things, it means that we we go if, okay, so about who we are now, right? Remember million dollars 10 years ago, today, we have over $250 million in nominal current fund, we write checks anywhere from 150k in the accelerator, which we still run today, all the way up to $5 million closer to kind of only series a round, we have an office in LA, where I’m standing out right now with an office in Nashville and office in Austin. And we’ll have more offices across the US about 60% of portfolio in the last two years is actually outside of California. And then we barely have any, to any deals in the Bay Area. We have completely kind of forsaken our past as kind of barrier kits, and are really embraced as the source of like hand to hand combat when it comes to building companies. So we are a venture fund in the truest sense of the world, we write large checks into companies and we invest all the way to a couple million dollars in recurring revenue, if you’re a SaaS company, right? So, but how we work with companies, what we expect from our founders is still the same. When we write a $5 million check. We treat it like an accelerator investment, right? Like on my expertise is not just like building a company zero to three. It’s also how do you get to three to four? How to build the VP of sales? How to find the right sales compensation structure, how to kind of go to market motion? What is the handoff between the the SDR versus a buy? Or how do you build a branding campaign and run a scaled Facebook that right like all the stuff that we’ve done, when we have to do for our accelerator companies we will do for our even later stage investments. And this speaks to kind of the ethos of the firm and even the new partner we added, right? Two years ago, Omar Hamoui joined the firm as the third partner of Mucker Capital, almost here and not because he used to be appointed as a lawyer. I don’t give a fuck about oops.
Eric Hornung 24:41
It okay you can swear.
William Hsu 24:41
Yeah, I don’t give a fuck about Sequoia in the context of the brand. Certainly the most amazing venture fund and this must work to be like that. I like this an aspirational aspect of what I do when I looked at that, but as far as the brands concerned, I don’t really care right that home. I used to work at Sequoia what I really cared about was Almost from LA, and he built up initially in LA before moving to the Bay Area that he has this ethos of, I’m going to bootstrap my first startup, right. And somewhere along the way, I found so much success that Sequoia was forced to invest in me. And then one of the most iconic entrepreneurs in kind of this current boom, Michael, they’re kind of web 2.0 dot com 2.0. Right? If you really think about it, Mark, kind of kickstart this mobile revolution, where everybody’s making a ton of money. So it is about his founder background, his operating background, and really fuzzy souls that matches exactly to who we are. And that’s one, we’re so excited to have him here. And two years later, he talk on face just like us. And although he doesn’t score like me, so that’s good.
Eric Hornung 25:49
Take me back to that ethos. You mentioned, we treat every investment like it’s an accelerator investment. When I think about accelerators, I think that they are operationally intensive for the staff that is running them. How do you think about balancing scale, you know, your 250 million, now you’re making more and more investments, with the need to like provide that operational level of support?
William Hsu 26:15
Yeah, I think this is one way that we’re different from other accelerators, Techstar, YC, which have kind of perfected the model and made a lot of money for their LPs, the way that it scales horizontally, right. YC says, everybody comes with a barrier, come to the capital of innovation and become one of us, right? And then Techstar goes, we’ll go to you, innovations diffusing, and we’ll go to you and help you build your company or wherever you are. by either case, they work with something like 500 companies a year. And that’s how they deploy their billions or hundreds of million dollars of capital. YC, most people don’t know or don’t care to know who’s you know, a billion and a half inch on now. And that’s how they scale they scale horizontally. We scale differently, we scale vertically. And what that means is we don’t invest in that many companies. So the celebrator does about 20 companies a year, you know, 20 times less than what YC or Pixar does, but instead of just writing one check, we’ll write 4, 5, 6 checks into the same company over the next two, three years, I see we see them grow. So for us to be successful, it’s not, we need to have 90%, if not 95%, of our accelerator investments get to the next stage and the stage for that. So we’re gonna put more and more money to work. It’s critically important, we want to make an investment every company works out. Otherwise, we just don’t have enough, you know, bets on the roulette table, if you will, to actually survive. So we can’t play roulette, we actually have to rig the game and cheat and actually helped entrepreneurs and help companies become more successful. If you’re YC and YCombinator, YCombinator and TechStars. Certainly, they add a lot of value. But in the end of the day, their math is the top 10% of the companies become unicorns, they make a lot of money for the investors in themselves. For us, that ratio has been much, much much higher. But that’s great, because that’s I used those two, right? We don’t want to treat entrepreneurs like a number, or a percentage, I want to treat every entrepreneur like this is his only company and my only company. Entrepreneurs don’t have four companies that running at any given time, this company needs to work. And I want him to work no matter what. And this is why so many companies often stay with us, I’ll say on average about a year. So it’s not a three month program. And then we have to celebrate companies I’ve been working with since 2017 they haven’t gone to the next step. It’s not a proud thing to say that my god this company has been accelerator for for years, but it is set to set like as long as entrepreneurs not giving up we’re not going to give up either. Like there’s no such thing as like okay, now that you didn’t find product market fit off to the next cohort goodbye. Like we are still here fighting the good fight and getting our hands dirty and rolling in the dirt and trying to get out from from the mind to get to some sort of excite velocity and help you get there.
Eric Hornung 29:17
How patient can you be like if someone if it was a MailChimp style 17 years story? Could you guys sit there and let them be in an accelerator for eight nine years as they iterated their way to figuring out how something worked?
William Hsu 29:32
For sure we could but you know, if a MailChimp at some point found product market fit by and got to profitability by then if I’m still in their face as much as I am now. I’m kind of annoying. That’s a nuisance, right? So yes, I have companies that never raised venture capital after MuckerLab and now is doing you know, $5-6 million in they ARR some point in the way about a year two years in, they found product market fit the company’s really profitable and has all the resources they need to scale, I’ll take a step back. Right? Like, if the company is still struggling to get product market fit, and it’s five years in, I will still be there. for better for worse, oftentimes, entrepreneurs have already given up by that. So it’s not a very common use case. But as entrepreneurs still hasn’t given up in the company has some product market fit that is generating enough revenue to breakeven, we just haven’t found exceed velocity, for sure. We’re still there. We’re not going to give up.
Eric Hornung 30:31
How do you think about pre selection screening for that kind of grit that not give up? bidness? How do you guys actually make a decision on, we’re all in on this person idea, whatever it is,
William Hsu 30:45
Two things. First, we tried to talk to the founders about their story and how they got here. And the adversity they face in their lives, right. And we’re looking for failure, we’re looking for persistence, we’re not looking for privilege, we’re not looking for presumed excellence, logos, or you work or you went to school. Second thing, we give entrepreneurs homework during the due diligence process, and we want to see how they react to us giving them work. So an entrepreneur is like what, like, I’m just asking for money, I’m asking for more work, and they disappear, or they fight back. So much, winners take a cloud leap, but doesn’t execute as fast as we’d like them to, or doesn’t, doesn’t have the right intellectual curiosity and honesty to actually look at the data and make a different decision than they presumed about their business. And then the last thing is, I call it a kind of expectation outcome, when people expect you to be amazing, excellent and smart. And they tell it to your face, you become that person. So we treat entrepreneurs like they’re that quick, full, and amazing. And, and smart. And more often than not, they are, and they become that person. Right? Like, I believe that they care about much more than the mistake. And if you if you tell people that they are, who they can become, they will become that person. And I very much believe in the greater good of humankind, and that we have capacity for, for for excellence. So instead of presuming kind of guilt, and kind of lack of skills, we we just move forward. And eventually they get it and the environment of marker of our founders of the Office of our brand. It really just attracts that type of people first.
Eric Hornung 32:36
When founders are saying no to Mucker, you issue a term sheet, you’re like you’re Are you pass this process, you hit these three buckets, we’re excited about it. Founder says no. Why? What’s the most likely reason?
William Hsu 32:48
People say no to us all the time. I know lots of VCs don’t want to, like they want to say like, we’re just like Harvard, and our yield is 99.999%. We give a term sheet. Everybody says yes, because we’re so amazing. Oh my god, people say no to us all the time. All the time. I’ll say like, maybe 30 40% of time they say no to us. And that’s okay. Right? Like, if you’re a company, and you’re trying to sell your product to someone, if 30% of time people say yes, you’re freakin amazing. starting a company is like playing baseball hit a 300. It’s fucking all stars. Right? And that’s the way we view it. Right? Like people say no to us all the time. The reason they say no typically is because we’re very, very expensive. We don’t want to compete on price. We don’t want people to think that we come here for money, and this is the cheapest money available. We want people to walk into the relationship knowing that they sacrifice pacifies a lot to get here, and therefore they have to invest a lot to make this relationship work. Like I want people that like I don’t know, gave up going to Harvard in order to attend, you know, the local community college because they you know, they maybe have a family issue that they have to deal with. Right? And therefore, they will make your work and they will not take the sacrifice for not. So yes, we are very expensive. When it comes to the equity. We ask for an amount of dollars a week best. We asked for entrepreneurs upfront for a very heavy involvement in our in the way that we work with lots of entrepreneurs, like wait a minute, it’s my fourth time starting a company I don’t need I don’t need you in my face, telling me to look at this number and that number. That’s not entrepreneurs, we don’t need to invest in them. They don’t need us for sure. So they should say no to us, too.
Eric Hornung 34:34
We talked about Mucker back in 2011. We’re sitting here in 2021. What’s your kind of vision for Mucker? The company in 2031.
William Hsu 34:44
Ah, I don’t actually have much of a vision actually. I know this is the uncompany part of who we are. I don’t want to be Tiger Claw I don’t want to be Sequoia. The part of me that that has a lot of testosterone and wants get famous, it gets super rich, like, a part of me is gone, right? That’s, that’s the first kind of 25 years of my life. Well, 25 years of my career, right? Now, I want to wake up on a walk with great entrepreneurs on how to be successful, one step at a time, my my customers, their satisfaction, what we do for them, every single time we get that you’ll work itself out, I really feel like the VC is a services business, rather than a widget business. Our goal is 100% bought our customers and their satisfaction. And we get rewards from from their outcome. And they’re the kind of fulfillment of their dreams, right? Like, a good friend of mine is a doctor. And when we talk about our jobs, he he’s always talked about each and every patient, right? He doesn’t talk about the politics of the hospital, or when he’s going to get promoted to the head of the department. And it’s about a case I was working on and how hard it was. And in the end, he killed him. Or he still hasn’t figured out what’s wrong, and he’s trying really hard. But like, I want to get fulfillment from that I not from like, you know, lucker has X dollars under management, or I’m on the Mitel slurs or whatever other thing that gets me famous that kind of plastered all over the internet. I actually prefer myself not to be on the Internet at all. That sounds to me like a terrible existence and lots of hacking risk.
Eric Hornung 36:28
Well if there’s one core theme I’ve taken away from this conversation, it’s a relentless focus on the customer. And I think that was a thread throughout this and it’s something I will take away. This conversation has been awesome Will. If people want to learn more about you, or Mucker or MuckerLab, where should they go?
William Hsu 36:46
shoot me an email, William@muckercapital.com that email is on our website. Again, not like VCs, where he goes, Oh, we make only investments and referrals, or our best companies from referrals, our best company came out of nowhere. And even since the first day on Mucker, when we have MuckerLab.com, all three partners email was on the website. He said that as an email, we’ll for sure read it. If it is a coherent email now, like a two line email, hey, you I want money will definitely reply. So we will put in as much effort responding to you, as you wrote into that email. We very much believe that the level playing field is here. And we want to be part of the solution rather than part of the problem.
Eric Hornung 37:31
Jay, we need more stories.
Jay Clouse 37:33
We need them. The world needs these stories.
Eric Hornung 37:36
And the best way to tell stories of local business ecosystems is to join up with the Upside Podcast Network. Jay, what’s that?
Jay Clouse 37:45
The network is growing, we have three shows on the network. Now with Upside, When Pigs Fly and Lay of the Land. We are knee deep in Cleveland and Cincinnati now but we want to explore other cities more deeply as well.
Eric Hornung 37:58
Anywhere in the United States. If you are listening to this or you know someone who wants to launch a podcast exploring the local business economy, the local business ecosystem in that city, reach out to us at firstname.lastname@example.org. Let us know what city and what you’re thinking.
Jay Clouse 38:15
We’re a fun group of people to work with, we’ll help you structure a show that is ready for the airwaves. And honestly, we give you a ton of creative control. All we ask is that you tell really exciting stories in your local ecosystem. And we will help you do just that.
Eric Hornung 38:30
Nothing but Upside in this arrangement.
Jay Clouse 38:33
So send us an email email@example.com we’ll be talking to you soon.
All right, Eric, you just spoke to William Hsu, the co founder and partner of Mucker Capital. What stuck out to you from this interview.
Eric Hornung 38:55
Just a different structure, a different format, a different philosophy on doing venture, I feel like so often, especially at the early stage, you hear about venture firms going out investing in 30 companies out of the fund 10 of them return the capital, one of them’s a unicorn, that’s the math, that’s what you do. Good to go. That’s it. This was a little different. And I didn’t really understand it from doing my research. But the idea that once you’re in MuckerLab, we’re committed to you, no matter how long it takes, we’re going to make sure that you get your next raise, we’re going to figure it out. It was much more like the selection matters a lot. But then the commitment and follow through is much more accelerator like except for you’re not doing multiple cohorts. You’re just investing in that founder, you pick them and you’re going to make that’s going to work.
Jay Clouse 39:48
So that must mean they put a lot of weight on their decisions for who they bring in that accelerator in the first place. Because then they’re really tied to it and they’re making a huge commitment. Long term.
Eric Hornung 39:59
Yeah, exactly. There’s just a longer term commitment much, it was just a different vibe, I got a different vibe from that interview with Will that I have with most VCs generally as well, seemed like a very caring person. And I don’t know how to say that a different different way. It was just he was, he understood the founder journey. And he was, it seemed like from the interview just there for founders in all sorts of different aspects. So I was I was pretty blown away. And I think I even mentioned a couple times on the interview that it wasn’t what I was expecting. I know you haven’t had a chance to listen to this episode yet. So I’m excited for you to go back in here.
Jay Clouse 40:40
Sitting here as a founder, that would be a very attractive proposition to me, this, this idea that it’s not just a three month boot camp, it’s not just a sprint to demo day, and good luck, hope your your wings take off. To me as a founder, that sounds like a better opportunity to have somebody who is much more invested in my success. I mean, every VC is gonna tell you that they’re invested in your success, and financially, literally, they are. But for them to make that type of longer term commitment feels different and would be attractive. So I can see why that would lead to better deal flow, and potentially better outcomes because of that. But, man, it does sound like a big risk on the front end for Mucker. But they’ve certainly seen some success with companies like Honey that you pointed out in the beginning.
Eric Hornung 41:27
I would also say that our friend, mutual friend here in front of the podcast, Nick Potts, who is the founder of ScriptDrop, now founder of gift health, when he was launching his newest endeavor, gift health. He knew that we were connected to Mucker via Monique, but he wanted to see how if they lived up to what they preached. So he reached out to them cold. And they responded quickly, promptly, professionally, and actually ended up investing in his current round, which in the world of VC warm intros are so important. And to actually practice what you preach when it comes to cold emails. And they say they read everything and try to get back to you if they pass. I can’t imagine that inbox.
Jay Clouse 42:12
Wild. Cool story. Well, I’m excited to listen back through this interview, and for my own opinions. But do you think that this will be a trend that we see Eric, do you think that this will be the way that VC goes? Because this is the expectations founders will have or because this is what competition in the marketplace will dictate?
Eric Hornung 42:31
No, I think it’s too hard. I think that there may be funds that strive for it. But I don’t think a majority of funds will be able to do this. It’s predicated that the math behind it’s hard as well. Not only is the tactical application and execution hard, but the math behind the fund economics and how it works out is hard. So you need to be really good at both of those things. I don’t see that the VC going that way.
Jay Clouse 42:57
We’d love to hear your thoughts, dear listener, you can email us firstname.lastname@example.org or tweet at us @upsideFM let us know what you think about this model that Mucker Capital has with MuckerLab and everything they’re doing there would love to hear from you. And if there are other innovative venture firms like Mucker that you’d like to hear more about on the show? Let us know and we’ll try to get them on. Otherwise we’ll talk to you next week. That’s all for this week. Thanks for listening. We’d love to hear what you think about this episode. So tweet at us @upsideFM or email us Hello@upside.FM and let us know. You can learn more about us and browse our entire back catalogue of email@example.com. And if you love our show, please leave a review on Apple podcast that goes a long way in helping us bring high quality guests to the show.
Interview begins: 7:07
William Hsu is a founding partner at Mucker Capital. He started his career as a founder, creating BuildPoint, a provider of workflow management solutions for the commercial construction industry not long after graduating from Stanford.
Based in Los Angeles, Mucker invests in Seed and Series A rounds in Southern California and other underfunded ecosystems outside Silicon Valley.
MuckerLab works with only 10-20 companies per year in annual cohorts. No three month bootcamps. No demo days. Just heads-down business building for one year — or however long it takes to reach the next set of critical business milestones.
- Relying on one’s experience 13:13
- Working on a Comeback 15:08
- Who’s the Customer on VC? 18:38
- MuckerLab 21:33
- Scaling Vertically 25:49
- Mucker Environment 30:31
- Mucker being expensive 32:36
- Vision for Mucker 34:34
Mucker Capital was founded in 2011 and based in Santa Monica, California.
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