About Steve Anderson
Steve Anderson, founder of Baseline Ventures, has been active as a seed-stage investor and commentator on startup financing. In a series of interviews from 2011 to 2012, Anderson discussed his investment philosophy, which he described as focusing on companies that could achieve exits around $100 million, a size he argued was often overlooked by traditional venture capital firms. He stated that he started Baseline Ventures after struggling to raise seed funding for his own company, and that his model aimed to allow entrepreneurs to sell smaller stakes in their companies. Anderson noted that he had invested in over 70 companies, with 18 having exited and only three having closed down, and that he had raised a $100 million fund, which he said took four weeks to raise compared to nine months for his initial $10 million fund.
Anderson discussed several of his notable investments, including Instagram, Weebly, and Heroku. Regarding Instagram, he said he invested in Kevin Systrom when the product was a location-based blogging platform called Bourbon, and that he helped recruit co-founder Mike Krieger. He described the eventual Instagram product as a "pruning" of features rather than a pivot)Skip. Anderson also discussed the concept of "signaling risk," where large venture capital firms write small seed checks and then decline to follow on, which he said can make it harder for entrepreneurs to raise subsequent funding. He expressed confidence in Twitter's ability to monetize, stating he had not sold any shares since investing in 2007, and said he was looking at both consumer and enterprise technology opportunities.
Source: AI-verified profile updated from Steve Anderson's recent appearances.
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Transcript (17 segments)
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Steve Anderson0:10
Figure out how I was going to get it funded, because I didn't want to raise a lot of capital and I also didn't think I had a billion dollar idea. I thought maybe I had a hundred million dollar idea, and so therefore I knew nobody on Sand Hill Road would give me the time of day. Too small for them, too small. The VC math won't work if you have those types of exit. And so I felt like, okay, why isn't somebody aligned with the idea of seed investing with that type of exit? Because I thought if it happened to me, I would be completely excited as an entrepreneur, and I can't figure out why there wouldn't be an investor who would be as excited, right? Except for maybe an individual investor. So I thought either because it's a bad idea, or because the time has come because the costs are so much cheaper now. Again, this was six years ago, this is before AWS.
People, institutional investors, individuals, and they all told me no. So I've been down this path of how hard it is to raise capital, but I kept with it. I believed in what I was trying to do and eventually was able to scrape $10 million together in 2006 and started putting the money to work. And that's what I do exactly.
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Interviewer1:31
And so you're now managing how much?
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Steve Anderson1:34
Well, last summer I raised $100 million, which of course six years ago was a twinkle in my eye. And I've had that would be my fifth and sixth funds. So the nice thing is that every fund I've done, even through the fifth fund, is all after this Instagram and ExactTarget and their belief in me.
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Interviewer2:10
What's a typical investment size for you?
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Steve Anderson2:12
It hasn't really changed a lot since I started. The $100 million breaks down into two parts, but when I started, I was investing between $200,000 and $500,000. And that's still probably the same. If I think about the averages, it's crept up a little bit, but on average we'll call today $500,000, up from $250,000.
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Interviewer2:33
And this is just you? You are the fund?
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Steve Anderson2:36
I am the fund, yes.
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Interviewer2:37
You have staff? There are no other partners?
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Steve Anderson2:39
I have a very, very good admin who helps me manage my time now.
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Interviewer2:44
So you now hold how many investments in how many companies?
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Steve Anderson2:47
I think over the life of my investing career, I've invested in probably over 70, of which 18 have exited and only three have closed.
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Interviewer3:11
For sure. I mean, there are the prices ebb and flow, and have since I've started the business. In 2007 prices went up, in 2008 they went down, in 2010 they crept up again. But that's part of the free market system, right? So I get to decide if I meet a great team if I want to invest at the market clearing price or not. And that's to me the beauty of this end of the marketplace.
Is it in fact easier to be an entrepreneur than it was five years ago, 10 years ago?
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Steve Anderson3:45
Oh, I think it is because 10 years ago you needed $5 million to start a website, and today you need essentially $70 to get an AWS account. Everybody learns to code, then they can go create their own anything on the side, whether it's an app, a website, a company, or what have you. So the ability to attract capital around any of those ideas is much easier than it was when I started, and it's far easier by an order of magnitude than it was even 10 years ago.
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Interviewer4:28
So is there one that got away? Is there one deal that as you've been, I'm sure triage is a big part of your job, right? Trying to figure out what to look at. But is there one that you just hit yourself in the head and go, I can't believe I didn't do that one?
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Steve Anderson4:46
Well, if I did that I'd probably knock myself out because in this business, if you're in it long enough, you have a long list of things that you wish you could have done or would have done. I don't beat myself up because I made the decision when I did at the time that I did, based on a set of facts. And then if I've missed it, I try to learn from that, say what did I not see in that thing. So the list is long and distinguished.
