Coffee brew, political takes, and shop talk with Hunter Walk of Homebrew
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Hunter Walk is a generalist seed investor and the cofounder of the venture capital firm Homebrew. His five-question written interview blog posts were a small inspiration for how I got started doing these chats a few years ago.
I caught up with him to get his quick takes and the latest thinking on a range of topics, from coffee and politics to venture, startups and media.
Sar: What’s your at-home coffee setup? Can a sufficiently good setup replace going to coffee shops? What do you wish more people knew about coffee?
Hunter: Oh man, you’re gonna get me going. Ok, so I’d call myself a passionate but not dogmatic fan of coffee. I once asked a ‘Third Wave Coffee’ OG if he had 100 points to allocate to (i) quality of beans, (ii) style of prep, and (iii) freshness of brew, how would he distribute them? His answer was basically something like 85 beans, 10 prep, 5 freshness (assuming we’re talking within a few hours, kept warm). You can’t mess up good beans too badly if you’re competent, but fancy equipment won’t make bad beans better.
So, as a result, my home setup is pretty chill. I’ve got an Oxo machine for batch brewing and acamaster for single-cup drip. A Baratza Virtuoso+ to grind and some good high-quality paper filters. Don’t forget to descale your machine and clean your grinder periodically. East Fork coffee mugs. I try to rotate my beans, but my favorite roasters include Onyx, Ritual, Passenger, Methodical, Cat & Cloud. I like my drip coffee black.
I don’t see home brew as a replacement for coffee shops, as I frequent those for espresso drinks, grabbing a drip before a walk and talk, or an outdoor reading session.
As for what I wish people knew? It amazes me that folks complain about paying $5-6 for a great cup of drip (it starts with a fair price paid to farmers for high-quality beans) well-prepared by nice people at a beautiful cafe. This is the real cost of agriculture, hospitality, and local retail!
Sar: What’s been brewing in your brain lately?
Hunter: I see what you did there! Trying to figure out post-midterm elections where I want to gear up my involvement again heading into 2024. Besides some check-writing, I’ve mostly taken the last two years off from working with/on political groups. The period leading to the 2020 election was pretty intense; after having the chance to be officially unofficial support to the Biden digital team, I needed a break. But it’s time to put these hands to work again.
Sar: If you were an influential Senator, what would you pursue and stake your reputation for making changes nationally that would impact the startup ecosystem?
Hunter: Wait, I thought we were friends - why are you forcing me into national politics?!!!? If I found myself in this role, with the ability to make real change and a focus on the startup ecosystem, the first project I’d tackle would be immigration. The fact we make it so hard for talented and skilled people to relocate and stay in our country drives me nuts. ‘Stealing’ the smartest people from across the world should be a bipartisan goal!!!
Sar: Yep, it’s frustrating that both parties haven’t done much about the immigration system. Let’s talk about one of tech twitter’s favorite political topics ie, San Francisco. While I think some people overplay the “SF is a dysfunctional city with absurd local politics,” I believe there’s more truth to it than not. What’s top of mind when you think about SF these days? What are the top problems you think are holding back SF? Do you have any high-conviction policy proposals?
Hunter: Cities, in general, are wonderfully dysfunctional, or at least ebb and flow in their administration. San Francisco is no better and sometimes worse than the average city. I’ve lived here since 1998, so consider me a local, if not a native. As a city, we’ve continually kicked a few cans down the road instead of making tough decisions and have historically been saved by our cumulative advantages (a desirable, beautiful, diverse city) and the tax base of the tech boom. But that sponge is dry, and it’s time to make the calls. If San Francisco wants to be a growing global beacon, it needs to solve the cost of living, starting with housing. There’s no way to do this without increasing density, which should include a variety of higher buildings, support for more multifamily homes, and other experiments with community living that balance personal privacy with shared spaces.
It would also seem that our division of power between the Mayor and the District Supervisors slows a lot of aggressive decision-making and change. It feels like we’re at a suboptimal point on the decentralized < > centralized power continuum.
Sar: Okay, we are done with politics now. Let’s talk tech! What have been your strongly held beliefs about Silicon Valley broadly over the past decade that have been challenged the most in 2022?
Hunter: I don’t over-romanticize the history of Silicon Valley - at least from the 80s onward; financial opportunity always sat alongside a love of innovation and technology. But more recently, it has started to feel like it’s primarily about the money. “Skin in the game” has transformed into pumping and hyping your investments. “Everyone can be an investor,” and the liquid crypto markets have pushed speculation to the forefront. It’s even more disingenuous when you wrap financial gain in faux ideals.
Sar: You have been investing for a decade now. What’s an inside baseball conventional wisdom about venture mechanics (portfolio construction, size of fund, ownership, price, liquidity, reserves, etc.) that you constantly debate?
Hunter: Well, what’s most important in my view is that a firm’s choices along these decisions produce a logically consistent strategy that matches their brand, check size, stage, and so on. People really get themselves into trouble when they view each aspect as a single optimization or design a model that doesn’t match their reality.
Historically when Homebrew had a 10-15% ownership target at the seed, we debated always aiming for the higher end of that range (when available to us) and being willing to take dilution earlier in successive rounds vs. the lower end and put more towards a reserves strategy.
On stuff like a deal valuation for the seed stage, my POV is kinda that it doesn’t really matter per deal but matters hugely per fund. If you love an opportunity, you can almost always talk yourself into the upside and why pay more for this startup. However, if you do that too often, you end up with too few companies in the portfolio and no reserves to defend your positions.
Sar: What did you strongly believe about being a great investor in your first five years that you now look back on as naïveté and actively advise emerging managers to be cautious of?
Hunter: My goal was never to be a ‘great investor’ - it was to be proud of the founders we had the opportunity to back and support them to build companies that matched the boldness of vision they had in their heads. I figured if we did this often enough and selected teams working on problems that were inherently going to be valuable if solved, we’d make money. ‘Great investor’ was a potential downstream outcome for working with people we enjoyed being in business with.
Perhaps because we were already in our 30s when we started Homebrew, and we both had some investing experience (Satya as a VC, me as an angel), there wasn’t anything that I was radically naive about, but I continue to stress to emerging managers that you should never forget you’re an investment manager. That aspect - making decisions about portfolio construction, follow-on, reserve models, which LPs you want, when to sell, etc. - is always part of your job, even if it’s not necessarily what gets you most excited about the venture. When it seems like all companies are winning and everything will be huge, you can get sloppy about this side of the job. That’s one reason why as part of Screendoor, our investment vehicle to back emerging managers from underrepresented populations, we want to provide coaching alongside a check. To help new VCs access some advice and best practices on this stuff.
Sar: Can you share how you assess whether the problem would be inherently valuable if solved at the earliest stage? My gut says you would miss out on wacky ideas that don’t go after well-defined problems and over-index on deterministic business-centric problems using that framework. What do you think?
Hunter: Well, I’ll tell you it’s not just by asking, ‘What’s the TAM?’ It’s hard for me to respond directly to this question unless you give me an example of a company that wasn’t solving a valuable problem that turned out, without pivoting, to be valuable. And if the example is purely in the consumer social space, I’m willing to concede that in those cases ‘value’ can often be expressed via increased personal connection/community, self-worth, and so on. It should also be said that we don’t often invest in spaces like pre-launch consumer social, gaming, and so on.
Sar: Yep, I had the consumer social apps in mind! You mentioned your involvement with Screendoor. How has it influenced your perspective on the lack of diversity in your industry?
Hunter: The continued appreciation that the fact I ‘looked the part’ helped me in so many professional situations. And being able to reach out easily to so many senior VCs during the early years of Homebrew with basic questions about certain situations we were encountering for the first time. So we wanted to help solve these two with Screendoor. A community of managers, by definition, doesn’t look like our industry currently does, and a space to ask questions of us [the founding VC advisors] who were 10-15 years ahead of them.
Sar: In their first six months of founding their companies, is there any standard advice for founders that Homebrew has found to stand the test of time as broadly applicable and true? I ask this because it’s easy to find many counterexamples to every strongly held prescriptive advice.
Hunter: Look, I basically think running a startup is 80% best practices and 20% best practices for you. So often, the first few years are deciding where just to do an excellent version of an existing playbook vs. reinvent/tweak the playbook based upon your product, GTM, and culture.
There are probably two things we stress to founders to a great degree than most other investors. First, this (seed) is a time for learning, not just getting to a set of milestones. We try to work with founders to frame their hypotheses and prioritize the experiments that will confirm or challenge their assumptions. If the seed round is getting from 0 to 1, what you’ve learned should make it *easier* to get from 1 to 10 (A round milestones).
The second is that your culture gets set very early and is difficult to refactor later. So be intentional about who you hire and your management practices. Your first 20 people on the team will fundamentally shape who you are and the next 100 people who join. Sometimes getting started on doing this correctly is as simple as “besides skill in the role, what are some attributes you want, and want to screen out, in the people you hire?”
A team that hires well and learns quickly in a structured fashion immediately increases its odds of success exponentially.
Sar: What was the last biz model or go-to-market you came across that caught you off guard?
Hunter: I’ve got two in the portfolio right now, both haven’t yet launched, so I’ll need to be a little bit vague.
One is a consumer product that requires almost zero new consumer behavior, but uses software to automagically take something people do today and make it much better. When you see people assuming that their current technology *should* do something, but it doesn’t, and then you start doing it for them, I think that’s a high-quality “mind-blown” experience that leads to word-of-mouth virality.
The other is a b2b startup with just a fantastic wedge use case. I love a good wedge! Most people are very busy, and they aren’t just going to adopt new tools that either don’t solve a big problem for them or deliver very quick time to value. This company delivers increased revenue to the business owner but saves time and repetitive work for the employee user (who is the champion that will make or break adoption). I love the split value prop in this case.
Sar: What problems or markets do you believe you have had a curse of knowledge in, and how do you go around that?
Hunter: When we started Homebrew 10 years ago, I got pitched a ton of video-related products because of my history at YouTube. In 95% of cases, I didn’t even take the first meeting - basically, I knew that I probably had a high probability of backing incrementally valuable companies in this space, but little chance of buying into something disruptive. I was just still too close to my operating days and saw the world through ‘YouTube Eyes.’ I didn’t try to fight through this phase; I just focused on other areas of interest.
Sar: What was the last controversial startup story you found the public discourse on most unproductive?
Hunter: Ugh, I’m just so tired of everything feeling super important and combative in our little part of the world. From parts of the press who are cynical to super thin-skinned founders, executives and investors, I find most of the discourse really unproductive.
I’m going to answer a different question: who do I think put themselves out there to create positive change in our industry? Ellen Pao, Susan Fowler, Ann Lai, and other women who have spoken out against sexism and harassment in our industry.
Sar: Okay, yes, that’s fair, and I agree. Are there any aspects of the startup ecosystem you think there isn’t sufficient memorable writing to point to outsiders looking to understand the tech culture?
Hunter: The two most important voices we don’t hear enough from are spouses of founders and early startup employees at companies that became generational successes. I don’t necessarily want books, but how you keep a relationship together during the challenge of starting a company, and the ‘here’s what it really felt like from the inside’ are important parts of our community and culture.
Sar: I love that! What dominant views do you believe people in tech media hold that they should try to stress test more?
Hunter: I really appreciate the reflections of tech journalists who have directly experienced entrepreneurship. Jessica Lessin from The Information comes to mind. She had a ton of credible reporting experience at the Journal before starting her own thing. Then about a year into The Information, she wrote a great ‘what I’ve learned’ type of post where she reflected on how being a founder/operator reshaped her previous defaults. For example, before, when she heard about a canceled product, she immediately assumed oh, this means the company is struggling and/or someone messed up. But then, as a CEO realized that you try things out; some work, some don’t, and pruning + focusing is really important.
Sar: What problems do you believe are not getting sufficient attention in terms of dollars and chatter?
Hunter: I don’t believe in compulsory voting, but I do believe healthy democracies work very hard to support voter participation. Our industry has started to do some work on using our product to encourage voter registration and turnout, but I’d like to see us go further as business leaders to support voter rights, early and absentee voting, and ultimately standardizing what are now state-level policies giving workers ample time off on election day to vote or volunteer their time at the polls.
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