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17. KEN Howery
Business Administration (BSBA)
Colegio de Dagupan
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KEN HOWERY (Founders Fund: PayPal, Facebook, SpaceX, ZocDoc) Managing partner at Founders Fund Founders Fund Website They invest in smart people solving difficult problems, often difficult scientific or engineering problems. They have 2 primary and related interests:
Finding ways to support technological development (technology is the fundamental driver of growth in the industrialized world).
Earning outstanding returns for our investors. The best companies create their own sectors. As a general matter, the most promising companies (at least from our perspective as investors) tend to share a few characteristics:
They are not popular (popular investments tend to be pricey).
They are difficult to assess (this contributes to their lack of popularity).
They have technology risk, but not insurmountable technology risk.
If they succeed, their technology will be extraordinarily valuable. They said that their purpose as venture capitalists is to earn an attractive return by funding positive transformation. Companies pursuing transformational ideas are somewhat likelier to succeed in them than less ambitious companies. A company with a readily obtainable goal (checkers, for the iPhone!) lacks a technological barrier to entry because, of course, the original problem was easy. And their end markets are typically quite limited, meaning that they may not achieve the scale necessary for exit. They believed that the brightest and most creative problem solvers seek the hardest and most interesting problems, and gathering the best technical talent is obviously a major competitive advantage. Has led or co-led investments in a number of companies at Founders Fund including Facebook and Quantcast. Co-founder and the 1st CFO of PayPal. While in PayPal, he helped in raising over $200 million in private financing, worked on public offerings and assisted the company’s $1 billion sale to eBay Member of the research and trading teams at Clarium Capital Management *a global macro hedge fund based in San Franciso that specializes in early stage ventures. It offers its services to pooled investment vehicles. It also caters to individuals, pension and profit sharing plans, trusts, estates, charitable organizations, funds of funds, corporations, partnerships, and business entities. It manages separate client focused equity and fixed income portfolios. The firm invests in the public equity, fixed income, and hedging markets across the globe. Also, a member at Thiel Capital Management (a partner of Peter Thiel in his private venture investing) *a venture capital investment firm based in San Francisco, California. The firm prefers to invest in seed-stage, early-stage, and later-stage companies. The firm seeks to invest in healthcare sectors in the United States. Has lectured on entrepreneurship at Stanford and Harvard Business School and has helped students develop business models at UC Berkeley and UT Austin's McCombs School of Business. a member of the World Economic Forum's Technology Pioneers Selection Committee For more than 50 years, the Forum has engaged global Partners to drive significant impact – creating historic initiatives, industry breakthroughs, economic solutions and tens of thousands of projects and collaborations – improving the state of the world. The World Economic Forum evaluates all candidates against the community’s selection criteria:
Innovation – truly innovative in bringing to market technology with an effective business model; considered a technology leader in its field.
Impact – has the potential to make a substantial long-term impact on business and society.
Growth company – less than 10 years old from company inception; be an independent, privately held company.
Leadership – visionary leadership with the ability to drive the company to success, and be able to contribute time and expertise to the Forum’s work.
Funding – Has received a solid amount of funding yet earlier in their start-up phase.
Valuation – Less than $1 billion One of the Top 10 Venture Capitalists under 35
KEY POINTS
Important insights into what attracted him to join the founding team at PayPal Key characteristics that made PayPal so successful What he saw in Mark Zuckerberg and his team to make his 1st venture investment in Facebook Fundamental success drivers for consumer internet companies Why entrepreneurs should go after ambitious and risky ideas? Why do start-ups fail? Lack of proper team construction – having the wrong team would lead to company’s failure. Because the team can’t communicate or work well together.
The most important factor is to either work with or invest in the best people possible. PayPal – what he liked about the company is the impressive team. Max Levchin, as the CFO and co- founder of the company, was considered by Ken as one of the best programmers he met. Thiel Capital International – he considered Peter Thiel as one of the smartest people he met during his 4 years on campus at Stanford. Thiel’s successful track record was extremely important in his investment decision. All about PayPal First, it was composed of him, Peter and Max. Then, they recruited Luke Nosek (the one he works with at Founders Fund) and two other engineers. The company was 1st called Field Link which was doing Palm Pilot encryption (*tracked contacts, notes, to-dos and events, all synchronized to your desktop computer using the included cradle.). That is much different to what PayPal is today.
- The point is to raise enough money to get started and bring talented people to start working on building a company, and this can lead to a success. Key lessons for Entrepreneurs – lessons that can help entrepreneurs to be successful Recruit for talents, not experience – they recruit smartest people in their network and assumed that they would be able to figure it out. Having experience didn’t matter, they could even lead to recruiting the wrong people.
- Good thing about people with no experience is that they are able to shift what they’re doing as the business models shift, and this is beneficial to a company. Launched quickly and iterated – we can’t achieve success in just one try. We need to try several ways or strategy in order to be successful. Just like in PayPal, they didn’t find the right business model until the 6th business model finally worked. It took them a while to launch their 1st product because they still need to get the perfect encryption. Their focus during that time was building a mobile payment solution on Palm Pilot. But, they ended up launching their Internet product before the Palm Pilot. Soon, they realized that it was a decade too early for their mobile payment solution, since nobody used it that time. Their internet product took off but they discontinued their Palm Pilot product. *The lesson is that we should not try to get something perfect because we might end up developing the wrong thing. Also,
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finding the right timing to do things is important in order to achieve success. Do not be greedy – they raised money whenever they had the opportunity. They were always like fundraising, which resulted to more dilution for everyone. This also applies in hiring. So, they gave generous stock-option to their employees so that they could attract the very best people. They believed that having a talented team was the difference between succeeding and failing. All about Facebook He considered that investing to FB was a pretty good bet. The company basically need money to buy servers. He found that every time a company needs money to buy servers, it is probably s great investment since it shows that company is growing quickly. FB had somewhere around 500,000 users when he invested. It was obviously pretty early, but for him it looked like they would hit a million users before long on their then-current trajectory. They were successful at locking up colleges where they had rolled out their service. The order in which they were rolling out their service was very strategic. If there was one college that had a competing product, Facebook would roll out at the colleges around that particular campus. The assumption was that enough students had friends from multiple colleges that if you got all the colleges around one particular campus to sign up, then eventually you could get the campus in the middle as well. The team was very methodical.
- The best investments are in companies that are fundamentally good, but that nobody thinks are good. This is applicable to FB, they are given the opportunity to invest. It was a combination of being a really good investment and the fact that nobody thought it was a good investment.
- A company that has been acquired is almost always at a huge disadvantage at continuing innovation. 2 key competitors of FB, Myspace and Bebo get acquired by big corporations, they usually stop innovating or they innovate a bit slower. One of the reasons is the transition out of the start-up management, or the start-up culture gets screwed up. *Having a strong sense of mission, which has to be a lot bigger than just about making money. A company that has a bigger purpose (ex: improve the people’s lives) attracts the best engineers. Best engineers get motivated by working on and solving very difficult engineering challenges. *Best employees like having a mission-driven company. it encourages people to work their hardest because working toward a bigger mission gets people motivated to get out of bed every morning than just getting up to make money. It also allows company to have a very long-term focus and have a very patient strategic plan. Key qualities to be successful as an entrepreneur Being a mission-driven person – just like in FB case (Zuckerberg), the mission allowing people to be more connected and open in a way they had not been possible before is what makes the company successful. High-quality team – it attracts smart people. Smart people are able to get other smart people respect them, as a result it enables them to recruit the right people for the company. Role of venture capital investors Back the best people and let them run the show – they don’t believe in the concept of adult supervision or second-guessing the team’s decision. Investors should be completely ready when help is need, or even just support or advise. Entrepreneurs make all the decisions. Investors will draw on everything that they have seen in their experiences and perspective if they think the entrepreneur is making a mistake. They share reason as to why they have an altered point of view. Things to consider before investing
The team – most important consideration. Having the right idea with the right timing *market time – if they see 2 companies pitch the same idea in one week, they will not invest, at that point it is too late. Many people are focused on this idea already, so it’s not good to invest in them. There is no easy way to determine the right or perfect market time, he assumed that if you are the only company doing something and nobody is using it, then we can conclude that it is way too early. If nobody is using the product you launched, it is too early, and you should iterate and find something else. Learn to listen to other, and be dogmatic at the same time – be somewhere in the middle of the continuum where you are dogmatic enough to start the company and flexible enough that once you see the data and recognize something is not working, you change direction as necessary. Good profile of a founder/CEO Genuine. Genuine leaders project their actual self for everyone to see and have a profound awareness of their values, aspirations, and goals. They can lead with confidence and convey their genuine passion and devotion when they are self-aware. The others will trust you more because of your genuineness. It's essential for fostering collaboration as well. Thoughtful. A thoughtful leader is one who thinks more deeply than the typical leader. The considerate leader often considers how her actions, behavior, and leadership affect those around her. Responsive. A responsive leader understands the always changing nature of business and is able to respond promptly to new difficulties and situations. Additionally, a proactive leader goes a step further by foreseeing problems and taking action to address them. How do you know that a start-up you invested in is off track and there is no more Plan B? If the business is unable to secure its next round of funding, you can usually, but not always, determine something is wrong. It's always a significant red signal if they can't persuade the "market" that the company is valuable. There may be exceptions, such as when they have recently changed their business models, when a significant transaction is about to occur, or when the market is shifting and no one is making investments. What is your thought process in deciding whether to shut down, sell, or keep funding your start-up? When it comes to selling a business, it is usually not the best moment to sell as long as the creator is still in charge and has more great ideas. If someone wants to sell for liquidity reasons, they have developed stock called Series FF stock, which allows founders to sell some of their shares, to get some cash and take liquidity pressure off of themselves so they can continue building the company if that is the decision that makes most sense. Zocdoc Through the use of a digital platform called Zocdoc, patients may rapidly schedule appointments online with the doctors of their choice. Millions of patients utilize Zocdoc's Marketplace each month to find a variety of healthcare providers who fit their criteria on their own. Since Zocdoc is not a healthcare provider, it does not endorse or refer patients to any specific medical professionals. Instead, Zocdoc's Marketplace is patient-initiated and patient-focused; it is made to provide patients the autonomy to choose their own healthcare. Patients can access the Zocdoc Marketplace for free and will continue to do so.
17. KEN Howery
Course: Business Administration (BSBA)
University: Colegio de Dagupan
