Welcome to the Lindsay Hadley podcast show, where weekly I interview some of the world's most inspiring people from business, philanthropy, and entertainment. I love collecting humans, and these are some of my favorites I found along the way. This podcast has been brought to us by Capal Financial Network. Do you need help with the next steps of your financial plan? Think Capita. Capita is a financial network built around you. They have a team of financial advisers, CPAs, estate attorneys, Medicare providers, and Social Security experts to help you accomplish your financial goals. Call or schedule a complimentary consultation at 801-566-58, or visit their website at capalfinancialnetwork.com. You can also check out their financial education podcast, The Financial Call, available on Apple, Google, Spotify, and YouTube. Hi, welcome to the Lindsay Hadley podcast show. Today I have a new friend, somebody I'm just blown away reading his bio, Mr. David Hornick, who is one of the leading venture capitalists in the world. I mean, when I look at what he's accomplished, it's mind-blowing. His background is incredibly eclectic, just from an educational perspective, being able to tout some of the most impressive Ivy League schools. But I think more than anything, it was the quality of the different degrees: a BA at Stanford in computer music, which I'm dying to hear about; a criminology certificate from Cambridge; and then a JD from Harvard Law. I mean, if you couldn't be more of an achiever, I don't know what else you could be, David. But it's so exciting to talk to you today about your background, both with August Capital and your new venture, which is Lobby Capital. I just want to say thank you so much for coming on the show. Thank you for being here.
No, thank you. You know, it's funny. I talk to students a lot. I teach now a ton, and I often talk with them about this idea that there's a difference between a golden resume and a fulfilling life. I can remember very clearly along the way at some point when I broke from only trying to build the next great resume point. It isn't to say I did something crazy or terrible, it was just that there are always paths where you could say this is the thing that's the most celebrated, so you should do that thing. And you should, for sure, if it's the thing that makes you happy. But if it turns out that that's not the thing that makes you happy, you should probably do the thing that makes you happy, not the thing that looks best on your resume. I know that sounds disingenuous having gone to all these places, but I do believe that.
I love it. Actually, this is a great segue to make my first question. Your bio mentions you have four children and a puppy named Teddy, which may not be a puppy anymore depending on when the bio was written, and a wife named Pamela. You live in Palo Alto, and it talks a little bit about your philanthropic work. But I know for me, as somebody who has by no means accomplished what you have, David, but just being a general person who struggled with the addiction of external validation and healing from that in my forties midlife crisis trying to turn this crap around, I think ultimately the one thing that just grounds me and roots me more than anything is my cute dog, my beautiful children, my amazing husband, and then nature and the quality, yummy humans in my life that are my best, most favorite people. I just think it's so sweet because hearing somebody who has accomplished what you have is just so impressive. Why don't we start with that? What are the things that get you up in the day, bring you the most joy, make you feel most compassionate, most in tune, maybe spiritually aligned?
Well, it's funny. I will say that for sure, children are grounding. My oldest is now 29, and he very much likes to tell me all the things I'm doing wrong, so yes, very humbling. He's a very lovely young man. It's funny, he just got engaged to his boyfriend of many years, who's super lovely. I went to see the US Open with his boyfriend, and his boyfriend said, 'Listening to the two of you argue is like listening to Julian argue with himself.' I'm sure for my wife, it's like listening to me argue with Julian is like listening to me argue with myself. So there's something very grounding about the fact that ultimately these little people turn into bigger people and then independent adults who have their own thoughts. It is simultaneously fantastic and feels great, and infuriating when they tell you you're an idiot.
Oh my gosh, I love it. It's a mixed bag. Well, I love pure humility and being open to the fact that maybe I'm more like this person than I first noticed. Tell me a little bit about your story, David. What got you into venture capital? First of all, computer music. Let's go back to computer music. Talk to me a little bit about that. I don't think I've literally ever heard that term. Is this just showing my ignorance here? I'm a music producer, I've just never heard that term before.
That's because you're not old. Okay, thanks. So, my life has been a very lucky one. I grew up with parents who were extraordinarily supportive of whatever I did. I was a dyslexic kid who was kind of a challenge in some regards, and so my parents were like, 'Well, look at whatever engages him and supports him, we're going to be excited about.' Music was that thing for me in a lot of regards. So I got to pursue music, but my father was a computer scientist. We always had computers in the house. So when, in the 1980s, music became all about synthesizers, I became obsessed with synthesizers. I ended up convincing my teeny little school in New Hampshire that they needed to buy a synthesizer. I convinced the computer music lab at Stanford to buy an interface that would allow you to connect the synthesizer to the computer. Then you could play stuff on the computer and it would be recorded, or play stuff on the keyboard and it would be recorded on the computer and play it back, and then you could play something over it. It was just an amazing technology at the time. We've come a billion miles further since then, but this was the early days. I became obsessed. I thought it was an astonishing thing. I had the very good luck of getting into Stanford, and Stanford had this place called CCRMA, the Center for Computer Research in Music and Acoustics, which was their computer music lab. The guy who ran it invented the synthesizer that really changed the sound of 80s pop music forever. I just started spending a bunch of time up there because it was amazing and fun and engaging. Eventually, I was like, 'Well, I've taken more classes in this than I've taken in anything else,' so I invented my own degree in computer music. There was no such degree at the time. It was amazing.
Incredible, David. I love this. It's such a blast from the past thinking about synthesized music and thinking about you being an advocate. So from very young, you were a resourceful young man. You were like, 'Hey, I need this thing, I can't afford it, let me get the school to buy it so I can utilize the utility of this thing.' That's so great. So then later, into criminology. Why such a big leap?
I was a kid who was sort of argumentative, 'I'm going to convince you of this thing.' This is why I'm being punished by my own children. I always assumed I would be a lawyer, and I always assumed that I would be a litigator of some sort. So I thought, 'Look, if I'm going to go to law school, I should practice criminal law. I should represent defendants, be a public defender, and try and make the planet a fairer planet.' So I thought, 'I'll go to law school, so I should study criminology first to understand the nature of punishment and all of this stuff.' It was really just an opportunity to go hang out in London and hang out in Cambridge, England, and that was amazing. Then I went off to law school, still thinking I was going to be a public defender. I took this amazing course to learn how to be a public defender. We went off to a neighborhood in Boston called Roxbury, where we represented a bunch of folks who had been accused of various mostly petty crimes. I didn't like it. I thought it was important, I felt like the people who were doing the work were doing good work, and I wanted to be helpful to these folks. To a person, they had very challenging childhoods and lives that were leading up to the things they had done. But in the end, I was just not a good enough human to step out of myself and say, 'This is important, so it doesn't matter that you're not loving this, your clients, and the process.' So I stepped away and said, 'You know what, I guess I'm not going to be a public defender.'
You know what, I just want to challenge your language because you said 'I wasn't a good enough human.' I love that you're giving credit to those who do, but I do think each of us has a call in our lives, right? On a spiritual level, if it's not life-giving to you, you probably wouldn't be as good at it even though you probably were very good because you're brilliant. When you don't love something and it doesn't fulfill you and it's not a virtuous cycle, it just doesn't generally edify. So I think in the end, you made the right choice, and now you're able to give in all these other ways. So fast forward, you go to law and you end up in venture capital. What got you into that world?
Well, I was a litigator in New York for a little while, representing big corporations. It was super fun. I had amazing people who I worked with; they were astonishingly smart and engaged, but it wasn't that fulfilling in the grand scheme of things. I moved back to Silicon Valley because it was the beginning of the internet era. Again, my dad had been a startup guy, a computer scientist. I was like, 'Well, I guess I'll go there, I'll start representing startups, and eventually I'll become an in-house counsel.' I was balancing little kids at the time; I had a couple of little kids, ultimately four. So I thought this would be the better work-life balance. I'll represent companies, I'll find my way into a company. It turned out that was 100% wrong. It turned out that I got back to the Bay Area, I started representing these little companies. I didn't really know much about startups or startup law, but the second I did, I realized, 'Oh my goodness, these are very smart, excited, engaged technologists who have thought of some way to solve a problem that someone hasn't thought of before, and they want to make the planet better in some regard through technology.' I'm their lawyer, trying to help them raise money, hire people, engage in contracts and distribution, all these things. It was so amazing to me. I was so energized. It was very clear that I had found the thing that was unimaginably energizing and fun to me. I thought the people with whom I was working were terrific. They were doing it for the right reasons, doing amazing stuff. So I became 100% addicted. I worked harder than I'd ever worked. I stopped sleeping. I was working all night in between being at home with little kids. It was just amazing. Somewhere along the way, I met a lot of venture capitalists. I was kind of a loudmouth, so I would say what I thought about the business, not just about the law. One of those people, an incredible venture investor named Dave Marquardt, was in one of those board meetings. After the board meeting, he said to me, 'You know, David, have you ever thought about the venture capital business?' My answer was, 'Yes, I have. I'm very excited.' It was a long set of conversations. Finally, after a bunch of months of him talking with people I'd worked with, he and his partners said, 'Look, this is a hard business. Lawyers are not the best at it in the world, but we really like you. If you'd like to join us, we'd be happy to see how you are as a venture investor.' I said, 'Well, I can't think of anything I'd be more excited about.' I was at the time a member of the New York Bar, the California Bar, the Washington DC Bar. I withdrew from all of them and said, 'Great, I'm an investor now, I'm not a lawyer.' I burned the bridges, and suddenly I was a VC. That was 24 years ago, so far so good. We'll see how the next 24 go, but it's been a pretty amazing run.
David, tell me how many funds now have you done? How many rounds?
Well, when I joined the firm, it was called August Capital. When I joined, we were investing August 3. This was in June of 2000. We invested August 3, 4, 5, 6, 7, that's five funds. When we finished investing August 7, my partner Eric and I said, 'Do we want to raise August 8, or do we want to think differently about this?' We decided to change it up a little bit, rebrand the firm after this conference I had been running called The Lobby. So after August 7, we raised Lobby 1. That was my sixth fund. We're currently raising Lobby 2, so that would be my seventh venture fund over 24 years.
Amazing. So David, what are you looking for? I'm sure we've got a lot of listeners that have made bets in venture capital or do private equity, sometimes they're early angel investors. What is it you look for? I know that's really complicated. You probably have a thesis in your fund. What are the core kind of quadrant things that you look for where you're like, 'Hey, these are the sweet spot of how I decide to bet and invest'?
Well, I'll tell you this: I don't have a thesis. I genuinely do not believe that a thesis is a good idea, to tell you the truth. If VCs knew what the future would bring, they should go be founders, right? Would you rather be a VC or would you rather be Mark Zuckerberg? Maybe you'd rather be a VC, but it's a different business. My view is that I have a very specific view that is not shared by some and is not considered correct. That is this: I think the venture business is a relationship business. This is about building strong relationships with amazing humans. There are others who believe the venture business is a transaction business, that it's about doing deals. 'Oh, I bought these shares and the shares are worth more now, and I'm going to sell these shares.' That's not how I do this business. My view of the venture business is that amazing humans in the right place at the right time, having thought about the things they're excited about and the problems they're trying to solve, can on occasion come up with astonishing ideas where, if they have the economic support and the business support, can build a transformative business. I'm looking for those people. I have the capital to help them, but lots of people have the capital. I have the time, the engagement, the history, and at this point some expertise to help them understand what things will accelerate their business, how they will be able to create something transformative, big, and exciting. Every so often that happens, and when it does, it's complete magic. The byproduct of that turns out to be a lot of money. That's good because my job is to turn money into more money, but the way I do it is to work with astonishing people who are trying to solve real problems.
I love when you talk about the people. My mentor, a gentleman named Joe Rich, he listens to my podcast, I talk about him regularly. He was one of the greatest options traders who ever lived. At the peak of his career, he was trading at like $2 trillion a year. After he sold his company, the federal government wouldn't let him sell it internationally to a Japanese privately owned company because it was a federal threat since it was moving so much money. He ended up selling it to Bank of America. It was called the Chicago Research and Trading firm. After he liquidated, he had access to some great analysts, and he decided to put his public portfolio together. He decided to not do it based on any verticals, no thesis, not the trajectories of these businesses, nothing. He did it based on the character of the CEO, David. These are qualitative things that in clusters become quantitative. How do they treat their spouse? What kind of corporate social responsibility? What kind of HR process do they have? Do they keep their word? Are they on time? How do they treat the secretary? These are data points that come together. They found that only about 1% of these 2600 publicly traded companies had CEOs of character, quote unquote. What's really cool is that when they bet on them, it outperformed the S&P and the Dow by 30% over time. It ended up being this really fun thing you hope to be true, that the good guys are the winners. So I love what you said about the people. Do you at least pick a vertical? Are you SaaS? Are you retail?
