Google Ventures’ Kevin Rose on what makes a great startup team

DON DODGE: Hello, everyone. I’m Don Dodge, and this
is Google Root Access. Today I’m with Kevin Rose, and
we’re here at Google Ventures. And Toaster the Wonder
Dog is here– KEVIN ROSE: Wandering around. DON DODGE: He’ll probably
jump in at some point. Kevin, you’ve been an
entrepreneur, an angel investor, and now a VC. How’s the transition, and what
do you like about being a VC? KEVIN ROSE: I think the biggest
thing for me is just the exposure to a whole wide
range of companies that you wouldn’t have as an angel. When you have multiple partners
bringing in deals to look at, you get exposure to
different categories, like whether it’s health care
investments or hardware investments, or just things that
are outside of my normal comfortable zone of
consumer internet. And it’s a lot of fun to see all
these different start-ups and just to get to
meet more people. DON DODGE: So as an angel
investor, you make all those decisions yourself. You’re sort of on your own. How do you step outside the
comfort zone and invest in places where you don’t
have that experience? KEVIN ROSE: Well I think that
for me, I always try to stay focused on what I’m
good at, which I believe is consumer internet. I come from a consumer internet
background as far as building those types
of companies. So if you take a look at my
investments, it tends to be web-based or mobile-based
products that I would use. So I’d say 95% of the time, the
investments that I make are because I have a personal
connection to that product, and I use it on a daily basis. And so for me, it’s just trying
to stay within that while, at the same time, seeing
these other investments and learn from the partners
and understand how they evaluate companies and how that
differs from how I do it. DON DODGE: So which
comes first? Is it that you use the product
first and get engaged with it, or you meet the entrepreneur and
then you use the product and then you invest? How does that happen? KEVIN ROSE: Well, I think that
it really depends on what stage you hear about
the company. Oftentimes it’ll be
about the idea. So and so is building this idea
for whatever it may be, a new dating service or a new
take on this or that. And if the idea catches your
attention, and it sounds like something exciting, then you’ll
try and connect up with the meeting with the
entrepreneur. I’ve had it happen to me the
flip side of that as well, where you meet an entrepreneur,
and you sit down with them, and you talk product,
and you realize that the idea that they’re currently
working on might not be the one that they win with,
but at some point in time, this person’s going to
do amazing things. So it really depends
on the situation. DON DODGE: So it’s all
about the team. Every investor that I talk to
says they make their decisions based on the team, the
product, the market. So how do you go through that
prioritization of when you’re making an investment? What do you do? KEVIN ROSE: Yeah, I think that
for me it has to come down to does the person have a vision
for somehow impacting, disrupting, or changing the
world in a big way. And I think that I’ve met a lot
of entrepreneurs that have the technical chops. They can go, they can
scale websites. They understand agile
developments. They have no problem getting
ideas out there and iterating on them. But they might not have the true
product instincts that I think you need to build
something great. And so for me, I always look
for, typically, someone on the founding team has to have
a strong product vision. And that’s important. So what that means is that I’ve
seen a handful of really strong teams that will create
alternatives to existing sites today. Like I saw an idea for an
alternative version of Pinterest that very much looked
like Pinterest, felt like Pinterest, but
it was applied to a different vertical. And the problem I have with
something like that is that these people aren’t going
to be innovating. They’re just copying someone
else with a slightly different take on it. And oftentimes those businesses
really don’t succeed, because they’re just
trying to keep feature parity with someone out there that is
really doing the innovation. And so I think innovation, a
strong product team, is the most important thing. DON DODGE: I had an investor
ask me this morning, as a matter of fact, about Drew
Houston and Dropbox. And I remember in 2007, I was at
the Y Combinator Demo Day, and there were hundreds of
investors there, very prominent investors. And we all passed, because– well, in my case it was because
Microsoft was doing things in that area, and there
were a bunch of other companies that were doing it,
so it just didn’t seem that different or interesting
to me. Yet here we are five years
later, and Dropbox is worth billions of dollars. So what do you think we
all missed there? Or did you see Dropbox
back then? KEVIN ROSE: Yeah, I saw
Dropbox back then. Like you, I wasn’t terribly
excited about it. I don’t know that you– time will tell whether or not
you actually missed or not. Maybe you did hit dead on. And the issue I think that we
all had is that we knew that at some point in time, the
big players would make a move into the space. And they did. They just now recently– Google’s launched
Google Drive. What’s that going to
mean for Dropbox? Maybe you made the right call. I think that one of the things
that Drew was very good at is he was able to quickly
launch a product and get that early traction. And so he has the base
of users now. He is the big player
in this base. But I do believe that as others
with iCloud and you name it enter into this shared
cloud-based storage, it’s just going to be a war
to the bottom. Everyone’s going to condense
the pricing down. And whoever has the largest
volume and has a scale will be able to get the most attractive
pricing and ultimately win. And I think that it’s going
to be a tough road for him going forward. Nothing to knock him as an
entrepreneur, because he’s done amazing things
and obviously built a great company. But I would not want
to be in his shoes. I think it’s going to be a tough
battle over the next couple years. One I did miss on, though, to
your point about just missing investments in general,
Pinterest. Pinterest was one that they gave
me a term sheet, and then I had the option to invest
in a $5 million cap. And I said no to it. There were two or three other
players in the space. There was no clear winner. If you meet Ben as an
entrepreneur, he’s clearly a really brilliant guy, but he’s
more of a deep thinker and not necessarily a big, outgoing,
exciting– he doesn’t get you pumped up
about what he’s doing. He’s just very thoughtful
about what he’s doing. And so I had left the
meeting thinking, smart guy, cool product. Didn’t know how quickly he was
going to continue to innovate on the product. Didn’t know if there
was a clear winner. And so I just passed on it. DON DODGE: And it’s probably
something you don’t use every day. KEVIN ROSE: It’s not something
I use every day. DON DODGE: So that’s the
key right there. If it’s your personally excited
about it, and you see the value, and you want to
use it, then that puts you over the edge. KEVIN ROSE: Right. Oh, absolutely. I’d used it a few times,
thought it was OK. My feedback to him, I had some
general product feedback around repinning and things
of that nature. And you’re always going
to miss deals. It’s just going to happen. You’ll always be able
to look back. But think about how many
deals you say no to. I say no to so many deals. I would say out of 100 deals
that I see, I probably say yes to maybe one of them. It’s going to happen. You’re bound to have a
couple in there that you’re going to miss. DON DODGE: So I tell
entrepreneurs that VCs say no 99% of the time,
and so do you. And they said, what? And I said, you probably have a
stock portfolio, might have five stocks in it and maybe
three or four mutual funds. There are over 5,000 stocks. So by picking five, you
said no to 99.99% of the stocks out there. So when I tell them that they
sort of say, oh, OK. I get it. So you’re going to pass. KEVIN ROSE: I say something
very similar. And I oftentimes use the
Pinterest example. It’s like, I’m not always going
to be– just don’t take me saying no as like, oh,
god, this person that– I remember when I was raising
money in the past, I had a couple investors, like
venture capitalists that I was a fan of. And they just didn’t
quite get it. And you walk away from those
meetings and you just feel really frustrated. And you’re like, gosh, man, I
really would have liked to have that stamp, that seal
of approval from this person who I respect. But it’s just how it goes. Not everyone is always going to
get your vision on day one. DON DODGE: So how
do you say no? That’s one of the hardest things
to do as an investor. Because by nature, we’re
very optimistic people. We want to see things
happen, and we want to help build companies. But we have to say no. So how do you say no? KEVIN ROSE: Well, it
really depends on– oftentimes I do share with them
that for me, personally, it has to do with would I use
the product every single day. And if I don’t see it applying
to me, I might think– and also the scale
of the business. I don’t want to do an investment
in something that I think is going to
be a $25 million to $50 million business. I’m looking for the next
Facebook, the next Pinterest, the next big, multi-billion
dollar business. And it’s not to say there
aren’t a bunch of great companies in there. But if I want to see a return
for my LPs and investors and everyone involved, I want to
get those big, big hits. So oftentimes I’ll take a look
at a business, and I’ll say, this is going to be an amazing
lifestyle business. You’ll be able to pay yourself
six figures. It’s going to be awesome. But it’s a 10-person company. Go run it. And if it’s your passion and
you’re passionate about it and you love it, have fun with it. Enjoy it. Build it into something great. It doesn’t have to be a
billion-dollar business. But that’s just not the type
of investing that I go for. And so sometimes it’s just
explaining that. Other times it’s explaining that
I don’t see myself using it every single day. But I’m just not their target
demographic, so I wouldn’t make an investment. And then oftentimes it has
to do with how much free time you have. There’s only so much
time in the day to spend with these companies. And I want to make sure that
when I do investments, I will be super excited to spend as
much as possible to help these companies out. And if there’s not that really
good connection there, then it’s better just to pass. DON DODGE: So a lot of
entrepreneurs pick their investors based on how they can
help them and add value. So what are some of the ways
that you can help companies that you invest in? KEVIN ROSE: Oftentimes I sit
down with companies. And even before talking about
making an investment, I want to see if there’s a good
product sync there. So I would say that my strengths
lie in product, when it comes to helping define UI,
UX for whether it’s web or mobile or you name it;
guerrilla marketing– I love trying to figure out
really sticky, useful ways that companies can get the word
out there with spending very few marketing dollars. And so oftentimes if there’s
something I really like, I’ll see a product, I’ll play with
it, I’ll take notes, I’ll write down a page full of
little, subtle questions I have about the product. And the I’ll sit down with the
entrepreneur and say, hey, obviously you know
I’m an investor. Let’s talk about the product
first and foremost. And we sit down, and we discuss
all the different points about what they’re
trying to create, what’s working, what’s not. And you’ll see if there’s a good
connection and synergy between you and the
entrepreneur. And if they like some of the
advice that you’re throwing out there, then– that’s kind of what happened
with Pinterest. I sat down with Ben, and
we did a product brainstorming session. I threw out some ideas that he
actually ended up implementing into the product later. And so he thought there was
a connection there, and we decided to work together. I didn’t end up making an
investment, but we worked together on the product. So that’s how I like to approach
it, I think, is to see if there’s that connection
and if we have a good working relationship. Because after all, it really is
a partnership that you’re entering in with this person. It’s like a multi-year marriage
that you’re creating with another entrepreneur. DON DODGE: So from a Google
Ventures perspective, now you’re a part of a bigger
organization that has more assets. What are some of the ways that
Google Ventures adds value to companies or helps them? KEVIN ROSE: This is an
easy one for me. Because I took money from
Google Ventures. You made the investment
to Google Venture when I was at Milk. And I remember you saying,
hey, you should check out Google Ventures. They really offer something
unique and different. And really hadn’t seen behind
the scenes what Google Ventures was all about. Typically, you think about big,
more strategic venture funds that come out of big
corporations, like AOL Ventures or Nokia’s Venture
arm or you name it. And you think, oh that’s just a
side pool of money that they try and make investments to
further their own brand. Google Ventures being an
independent, standalone venture capital firm that just
happens to have Google as the single LP is very unique in that
we can make investments in things that are even
competitive with Google. And I think that Google believes
that when we go out and make investments into
technology companies and they flourish, it’s just better
for Google overall. More people using computers and
search and devices and the web is a better thing
for Google. And so that was exciting to
see, that there was that church and state that was
happening between Google Ventures and Google. But the other piece of it being
the components that had been built out inside of
Google Ventures from a recruiting standpoint, from a
design standpoint, scaling– you look at the firepower that
Google Ventures has to bring to the table. So if you’re having issues with
recruiting, we have three full-time recruiters that go out
there and help place real people into companies. That was one of the biggest
challenges we had at Milk, was finding high-quality engineers
to join the team. And just those different
resources, then you look at the partners. And these aren’t just partners
that have graduated with an MBA and don’t have any
real-world experience. We have co-founder of Android,
co-founder of Excite. You’ve got some real people
that have created some amazing things. And so before I even joined
Google and when I was at Milk, and I realized all the value
that they could bring, it was a no-brainer to open
up with the round. We actually had closed our round
and we went back and opened it back up just to
let Google Ventures in. DON DODGE: Yeah, I remember. Thank you. Most start-ups say that hiring
people is a huge problem, and design. Even very prominent start-ups,
names I won’t mention, came to me and said, we need help
finding designers. We need some design help. Those happen to be the two
things that Google Ventures focuses on, not by
coincidence. KEVIN ROSE: Yeah. It makes sense. I think high-quality designers
are the new high-quality engineers. It’s like the hard thing
to come by now. I think the bar has really been
raised, partly due to Apple’s success. And the attention to detail
that they put on design I think require a level of fit and
finish and polish that we hadn’t seen before. The fact that when people
install mobile applications, oftentimes they give it one
shot, and if they don’t like it, and if you remove an
application, the hurdle to get that person to then go back
to the app store, find the application again, reinstall
it, and try it again is so high. So you have to really put a lot
of extra time and thought into your design in making not
only beautiful and elegant apps, but also easy-to-use
apps. DON DODGE: So that user
experience, that first-time experience with the app
can make or break it. KEVIN ROSE: Oh, absolutely. Back in the Web 2.0 days, you’d
roll something out there as quickly as possible. Users were very forgiving, and
you’d polish it on the fly. You’d roll in updates every
month, two months, and it was OK if certain things weren’t
fully thought out. And I think that in the
app world, that’s a little bit different. DON DODGE: So I say today, it
has never been easier to start a company, but it’s never been
harder to build a business. And what I mean by that is it’s
cheap to start a company. You can do it pretty quickly. Yet getting the user traction
and getting a revenue model, building a business is much,
much harder, because there’s so much competition. Have you found any ways that– you mentioned guerrilla
marketing and helping things go viral. Are there any secrets there,
or is it just keep trying things until it works? KEVIN ROSE: Well, it really
depends on the app, but ultimately it comes down in
to how can you turn your customers into true
brand advocates for what you’re doing. And sometimes there are tricky
ways to do that. Other times there are ways that
you can make it seem as part of the utility. On Instagram, one of the ways
that they spread so quickly is they created all these easy
hooks into all the various social networks. And people thought, oh, I want
to share this beautiful photo out with my friends
and family. So of course I’m going to tweet
it, Facebook it, Tumblr it, you name it. And I think that just thinking
about what those hooks might be for your own product
is really important. I saw a product the other day
that had these really clever quotes throughout the experience
that were kind of catchy and cool. And it had a little
bird next to it. And you could just tap it, and
it would make this beautiful animation occur where it would
tweet out that quote and then put a little hashtag
to the game. And the quotes kind of didn’t
make sense, but it was cool in that way. You wanted to tweet up these
weird funky sounding quotes, and you were on the inside. And it maybe gave you this
feeling of being in on the know, on something cool that
not many people knew about. And so you go and visit the
hashtag, and there’s just thousands of people tweeting
these really funky, weird little quotes about the game
to try and hook you in. That was a very creative way of
tying in social to get some distribution. I think it really– obviously
it’s on a product-by-product basis. I worked with Fab, with Jason
over there, on ways in which you encourage users to come in
with monetary incentives, whether it’s $10 off, whether
it’s three friends buy this item and you get it for free,
trying out those different ways and seeing which ones are
going to bring in real lifelong customers into
your product. It’s just understanding which
different levers you have to pull to be able to get that
customer and get them to be that advocate, I think is
an important thing. DON DODGE: So you see hundreds
and hundreds of start-ups every year. What kinds of things are
exciting you now, that look interesting? KEVIN ROSE: I believe that– the thing that I’m fascinated
on recently that hasn’t yet hit– well there’s a couple things. I’m actually getting
ready to write a TechCrunch post about this. But there’s a couple things. One, I believe that we
haven’t seen the end of new social networks. And I think that we have defined
a very loose, kind of tastemaker-like following
graph. So you have celebrities that
have these millions of people that they don’t know that are
following their accounts. It’s like a one-to-many blast. You have business relationships
which are defined via LinkedIn. You have personal relationships
with services like Path and Facebook
and things like that. And then I believe the one that
we haven’t tapped into yet is the neighborhood graph. And I think that the fact that
we still don’t really know who our neighbors are– I’m in San Francisco, and I
couldn’t tell you who lives to my right and to my left. I see them every once
in a while. I may wave to them, but I have
no idea who they are. I have no way to communicate
with them. I have no way to tell them
about alerts that are happening in the neighborhood. I have no way to potentially
engage with commerce with them, meaning selling off
garage-sale style items in real time. I think that we will define the
neighborhood graph, and it will turn into something pretty
unique and great. I’ve seen some companies making
some headway in this. I think
is the one that has the most traction. I’ve been tracking
that company. I believe that we’re in the
very early days of the quantified self. And so I think devices like
the Nike FuelBand, the Fitbits, even Google Glass,
things of that nature where you can track and use technology
to enhance physical performance and things
of that nature. I think Nike’s making
some really– Nike’s CEO was quoted a year ago
talking about how the last 10 years were about style and
design and the next 10 years for Nike are going to
be about technology. A couple days ago they announced
a shoe that will tell you at the end of playing
basketball how many inches you jumped in total and what
your highest jump was. I think that devices in general
are going to come online for the first time,
whether it be apparel, whether it be my microwave. There’s a lot of technology that
we live with that isn’t yet connected to the
backbone, isn’t connected to the internet– devices that aren’t talking
to each other. I think Nest is a great example
of Google Ventures portfolio company that is doing
great things in bringing the thermostat online
for the first time. I think that there’s just so
many other potential places that you can apply that
type of technology. So that’s some of the stuff that
I just keep top of the mind and track as it occurs. DON DODGE: At South by Southwest
this year, location seemed to be the thing. So there was Highlight and
Plansy and echoecho and many other applications that
were all about– mobile applications that would
allow you to find where your friends were, or where people
with like interests were located near you when they
came into proximity. It was hot during South by
Southwest, and now I’m not hearing so much about it. Is that an area that you think
is interesting, or [INAUDIBLE]? KEVIN ROSE: I don’t
like that area. I made an investment in
foursquare several years ago and Gowalla several
years ago, but I haven’t touched it since. I think that there’s
check-in fatigue. I think the automatic matching
of people based on interests is– I don’t know that I’m ever– again, I could totally be wrong
here, but personally, I’m never in that mode. I feel like the best
applications and services just enhance a natural instinct
that’s already there. And I don’t feel like I’ve ever
had the natural urge to go off and try and find people
with similar interests. I don’t know that just because
someone is standing across the street waiting in a brunch line
and also likes web design that I would want to randomly
walk up to that person. DON DODGE: Or green
tea or whatever. KEVIN ROSE: Yeah. I don’t know that– maybe in the dating
world, but I just can’t see that applying– it’s a tough space. I see what they’re going for,
but I’ve never used a service where I’ve thought, oh my
gosh, this is so great. For a mobile service to really
be successful in my eyes, it has to be something that I want
to pull out and use two to three times per day. If I don’t want to take my phone
out of my pocket and use it two to three times per day,
I’m most likely not going to invest in it if it has to do
with social or mobile. And I don’t know that Highlight
or any of these other services have really
turned me on enough to where I want to make that happen. DON DODGE: So you trust
your own instincts. KEVIN ROSE: For sure. DON DODGE: And it goes back to
if you use it every day and you get excited about it, then
you probably [INAUDIBLE]. KEVIN ROSE: Yeah, absolutely. DON DODGE: How does a first-time
entrepreneur, a new entrepreneur, get to you or
get to Google Ventures? How do they get on
the radar screen? KEVIN ROSE: I think that there’s
a handful of different events that we put together. We have the start-up lab. You’ll hear about various
different Google Ventures meet-ups and parties and
things like that. There’s also reaching out. Oftentimes there’s two or three
degrees of separation– it happens every single day. I’ll have a friend that knows
a friend that forwards me a deck to check out. Or I’m out there. If there’s something really
cool, I can’t tell you– oftentimes I’ll just go through
my Twitter @ replies. And someone will be like, hey,
I’m starting this new thing. Here’s a link to it. Check it out. Sure, I’ll click on it and
see what it’s all about. So I’m always scouring the net
looking for different things. I’ve gotten recommendations
that have come through AngelList, through friends,
through random people who see me in an elevator. You name it, they’ve come in. But then again, some of the
partners are obviously extremely busy at
Google Ventures. And if you’re not finding
traction in finding your way in, look through all the
different associates that are on the Google Ventures
website. They are constantly scouring
and looking for the next thing. So that might be an easier
way to get in. DON DODGE: So you said you
recently invested in Rally, which I think you found
through AngelList. I invested in a company called
Space Monkey that I saw at the launch conference. So conferences, people referring
companies to you, AngelList, those are the
traditional ways– KEVIN ROSE: Yeah, absolutely. I’ll be going to TechCrunch
Disrupt and doing some judging there. And so I’ll be checking out all
the different companies that are there. Every single time I walk through
the demo halls there, somebody grabs me and shows
me something cool. It’s a very casual thing. I can’t tell you the number of
different channels that I’ve gotten, from even– I have a stack of letters
over there. I didn’t even know
I had mail– DON DODGE: Paper letters? KEVIN ROSE: Paper letters. I had no idea that I even got
mail at Google, and then I found this little fat little
thing, and there’s paper letters of somebody trying to
pitch their company, like different various start-ups. DON DODGE: Interesting KEVIN ROSE: It’s old-school,
but it might work. Who knows. DON DODGE: Interesting. Well, Kevin, thank
you very much. This has been a great
conversation. And I hope we can do
it again soon. KEVIN ROSE: Cool. Thanks for having me.

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10 thoughts on “Google Ventures’ Kevin Rose on what makes a great startup team

  1. I particularly love the condescending cop out of "if you want to build it into something you love and it's not about the money that's great. Do that. That's just not the type of investor I am" Thanks Einstein. VC words to live by.

  2. Kevin Rose is high up in my respected entrepreneurs list because he actually knows what he's talking about, and he's had enough success and experience to make good decisions. Plus he's willing to share his knowledge. I see tons of crazy comments about Kevin Rose, that are completely inaccurate.

  3. I personally enjoy the questions Kevin asks in particular on

    The mature Conversations he conducts with other Ceos yields great value and applicable concepts to anyone who really wants to make it. I don't care if you like Kevin Rose or not! When Kevin Rose asked questions, you shut your pie holes and pay attention and you might learn something!

  4. biggest challenge is finding partners and staff (recruiting) 15:30 hiring people and designers are the two most difficult and important.. "high quality designers are the new high quality engineers" "the bar has been raised by apple, etc for web-based consumer apps.. Users used to be really forgiving, in the app world it needs to be more polished. so much competition to get traction..
    ..secrets to guerilla marketing..ultimately it comes down to get your customers to become brand advocates."

  5. i feel like the best applications and services just enhance an 'instinct or urge' that's already there..
    "it has to be something I'd want to use 2-3 times a day, everyday."

  6. Kevin mentions here "what is missing" from 20.48 going to a "Local social network" being a huge field to fill on our social relations map. Actually, we started coding such a thing after 1,5 years of R&D. You can see our campaign at indiegogo as "Local Terra" and on some blogs here and there.

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