You are listening to the Shoreshot Entrepreneur, a podcast where founders with ambitious ideas, venture capital investors, and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision.
Welcome to the Shoreshot Entrepreneur. My guest today is Mark Suster, partner at Upfront Ventures. He's going to talk about his investments in startups, how he transitioned from being an entrepreneur to an investor, what he looks for in entrepreneurs now as an investor, and his views on the industry, the changing trends. Mark, welcome to the Shoreshot Entrepreneur.
Thanks for having me, Gopy. I appreciate it.
Tell us about yourself starting with your childhood.
My childhood, yeah. I was born in Philadelphia. So anyone who follows me on Twitter, my handle is msuster, notices that occasionally I'll talk about Philadelphia sports because I was actually born in Philadelphia to an immigrant father. He moved to the United States for medical school. My entire family rooted for Philly sports teams, but I actually grew up in Northern California in what I affectionately call the Midwest of California, which is Sacramento.
Yes, the capital. I grew up and I was in high school in the 1980s, from 82 to 86. And while today it's really common to be a software programmer, it was not so common in high school in the 80s. But I actually was a programmer in the 1980s. I had programming jobs all throughout college. I worked in a software store and I had a programming job in the career center at UC San Diego. When I graduated, my first job out of college was as a software programmer.
So you were an early geek that embraced technology.
Somehow I was, but I was this weird kind of geek, Kopi. I was also incredibly social. In high school, I started my own businesses. I had both a t-shirt business, which was my legal business, and I had keg parties, which was my less than legal business. In college, I was social chairman of my fraternity, eventually president of my fraternity. I learned a lot of leadership things through actually having to run a group of men who didn't actually want to pay and didn't want to do work, and I had to get them to pay and organize and do things together. So I was very social. But what I think it is about computers is my brain is wired for problem solving. I like solving problems. That's what the outlet for computers was for me.
I see that the streak of entrepreneurship started quite early while you were still in school, and it continued on later. How did the early days with software development shape your thinking about technology?
I'd say to young people these days, I often tell them that there are two skill sets you should get when you're youngish in your career. One is learn to program. You don't have to be the best programmer. You don't even have to have a career in programming. But if you want to be able to have vision for how to work within a technology company or within a company that leverages technology, if you don't have any tangible sense of the craft, if you can't play with the clay, I just think it's really hard to get your head around how to be an effective leader. The second thing I tell people is get sales experience because the older you get, the less likely it is that you're going to go into sales as your job. But everything you do involves sales. Whether it's raising capital, whether it's hiring people, whether it's doing business development, or one day selling your company, those are the foundations that I think are critical to building a successful career today. There are others, but early in people's careers, that's what I tell people to do. My first job, I learned how to program. I learned how to lead teams. I learned how to sell to clients because we had to actually sell work. I think that set me up for later becoming an entrepreneur.
That's interesting that you say sales is important early in the journey of a career. Isn't building more important? The art of creating things?
I don't think so. I think that would be what a typical engineer would think or a typical product person would think. At the end of the day, if you build great stuff and no one buys it, you don't have a successful business. If you go out and try to sell stuff and the stuff you're selling isn't high quality, you can sell stuff, but you're never going to do anything valuable. It's the juxtaposition of being able to build something that's truly valuable and interesting and then being able to sell and persuade people that they should be using it that builds big businesses.
I am sold. I started out as a builder and I do feel the need to have that skill for selling now that I'm in the business world. How did your journey evolve to become an entrepreneur? The official entrepreneur legal businesses that you started later in your life, Build Online and Koral, they got acquired.
Yeah. I had been a software developer. I then got an MBA at the University of Chicago. I started doing strategic advisory work. So I would work with large telecommunication companies, large technology companies, advising them on how to set up internet business operations. This was 1995, 96, 97, before the internet was a big thing. I just happened to have been technical and have business skills at a time when the internet took off. So I was able to help them figure out what kind of offerings would resonate in the market. Eventually, I decided that I really should go do this for myself. In 1999, I quit my job, gave up a well-paid salary, and started my own company from scratch. I co-founded it with a friend of mine from business school. It was originally his idea for the market that we would target. I joined as founding CEO and went out and raised capital and was off to the races.
With that, we come to the dramatic turn in your career where you became an investor. You joined Upfront Ventures as a partner. Why is venture capital interesting to you?
I always think that when you're young, there's nothing more exciting than creating your own company, building something, selling something, growing revenue, hiring a team, and trying to change something in the market that doesn't exist and that you think you can do a good job. I did that for many years, in fact almost a decade across two companies. But then I realized at some point, if I could use a sports analogy for a moment, Kopi, like let's take basketball. At some point you realize that the skills of the game change. Maybe three-point shots become really important, and you didn't grow up a three-point shooter. Or maybe you just realized that there's younger, more nimble people who run a little bit faster, jump a little bit higher, wake up a little bit earlier to shoot hoops. And you realize that the skills that you acquired playing the game are really good for mentoring younger people in the game. You can get as much enjoyment out of helping 10 teams and trying to give them advice and experiences that you learn as you can from building your own. So I just hit a moment in my career, my life, where that's what I wanted to do. I wanted to work with young founders. It doesn't have to be young in age, but earlier in their journey and help them get over some hurdles and not make the mistakes that I made and really help them get to the next level. I find fulfillment in that role as coach and mentor necessarily more than being a player.
Why is that exciting? I'm really curious to double-click on this because this gets to the crux of you as a VC. Why is it exciting that you like working with entrepreneurs at very early stages when there's so much chaos in their head about how they want to build a business? They haven't figured out a lot of things. There's so much uncertainty. That stage is not easy to meet someone and build a partnership. But you do that on a consistent basis. You've done it for like 15 plus years.
If you think about the journey of any tech company from coming up with an idea, figuring out what the features and functions should be, getting it built, raising capital, hiring a team, figuring out pricing and go to market, figuring out how to make sure the world knows you exist, and then growing and scaling the business and raising downstream capital, that's my journey. That's what I enjoy doing. That's what I've done since high school. When businesses get bigger and let's say you're doing a hundred million in revenue, 500 million in revenue, the skill sets needed to run that company and the skill sets needed for board members actually change. That job I think is incredibly well suited for, let's say, maybe someone who's been at a big company as an operator, maybe been an investment banker, maybe deeply analytical and wanting to crawl through financial statements. It's a different skill set. So when I have companies that get that big, I'm really looking for a different kind of person to join the board with me because I know what my skill sets are and I know what skill sets I have missing. So I really look to package them on the board. But where my heart and soul is, is in the 'let's figure out your product, your market, what products we should build, how we should price, how we create a defensive moat.' And I enjoy that part of the journey. It's just frankly also what my skill sets are better at. And that's also a time when you can build real meaningful relationships with the founders because you're catching them at a time when they're building the vision for the first time.
Well, I hope to, but I think you can build relationship with founders at any stage because when they become a hundred million dollar company, they still need your help. It's just that a different kind of person is more useful and more helpful at that stage. What happens in that first meeting? What do you ask entrepreneurs? What do you look for?
What I really want to understand is what unique insights do you have that other people don't have? What do you believe about a market that other people don't believe? What products do you believe you can actually build? If you built this, why would it be better as a user experience for the people who are ultimately going to use your product? And how are you going to make something that's defensible? I don't require you to have a completed product or to be in market or to have data, but you have to bring something to the table. I'm looking for people who have unique insights that other people don't have or unique experiences that other people don't have because I think that's what it takes to be successful.
Unique insights on the market, description of how the product works and why it's necessary for the world, who would buy this and how do you build a moat. These are all kind of standard questions that many VCs ask. If we were to draw a thread across many founders that you've worked with in the past, is there a common theme, certain types of characteristics that gel well with you? There are founders that you like to work with. Is there a pattern?
I'd say so. Number one, authenticity. Why are you doing this? Did you just think this was a money-making opportunity or do you have some passion in the space that matters to me? Somebody who's obsessive. It takes a strangely driven, obsessive person to build a startup from nothing to something valuable, and I'm looking for that. I'm looking for someone who's detail-oriented. Someone who understands the competition, understands who came before you, has done the work, has done the research. I'm looking for someone with a bias towards action rather than analysis. The characteristic of what it takes to make a good entrepreneur is somebody who every time you meet them has already moved the ball forward more than you expected them to. There are two tells that I have for startup founders of whether you're going to succeed. Number one is your cadence and ability to hire talent. Number two is your cadence and ability to ship software code. And those are my two biggest tells. If you're someone who's always talking about who you're going to hire but actually not hiring them, or if you're someone who's constantly saying what you're going to build but can't show me evidence that you made progress, I think you're much less likely to succeed. So I have a bias towards action. I'm looking for people who are persuasive. I think fundamentally, Gopy, no startup should really exist, and you've got to persuade people to join you who shouldn't join you, to fund you who shouldn't fund you, to take the risk of doing a business development deal with you when you might not exist in six months. You've got to convince the press to want to write about you. You've got to convince people to let you get on stage and talk and amplify your company. And all of those things that are unreasonable, that people shouldn't be able to do. It's just that ability to persuade other people where the people who are thinking about joining your mission think to themselves, 'If I don't join this person, I'm always going to regret it.'
We're getting to the core of this bias for action. Execution is far more important than just having ideas. Can you give an example of an entrepreneur that you met and you saw that early in the discussion that there was a very strong bias for action and they were able to ship code much more successfully than in many other companies?
