Redefining Venture: Investing in What Others Miss - Charles Hudson - Founder @ Precursor Ventures

I look for people who at least once stepped off the yellow brick road. At some point they did something that was like not easy or hard. Starting a company is an adventure. You are going to learn a lot about yourself and if you want a safe, easy experience, do not start a company. A lot of what we're looking for is evidence that this person embraces uncertainty and that like being in an ambiguous environment isn't something that's going to scare this person off.

Charles, welcome to the show.

Thanks so much for having me.

So for our listeners who don't know you, I like to start every episode and just ask my guests to please take a few minutes and can you just introduce yourself and your firm to help us get grounded in who you are and what you do?

Sure. So I'm Charles Hudson. I'm the founder and managing partner of Precursor ventures. We're a 10 year old pre seed and seed stage venture firm based in San Francisco, California. I started the firm after two other stints in venture. So Brendan My first stint in venture was actually with In Q Tel, the CIA's venture capital group. So I worked there right out of college and had a really amazing time getting my feet wet in venture and then took a bit of a break and went and worked in industry. So worked at Google, worked for a handful of venture backed startups, started a few of my own and then joined a firm that was then called softech which has since rebranded to Uncork as the first non founding partner there and was a partner at Uncork for five years and at unqork we had an amazing run while I was there. Invested in a bunch of great companies, Poshmark, Postmates, Fitbit and a number of others that I hope nacon would someday go public and really enjoyed my time there. And while I was there with Jeff, Andy and the team experienced a ton of growth and one day looked around and said, you know, when I first got to unqork, the thing I liked most was the angel investing style of seed. So this is think circa 2010 when sort of institutional seed was really coming into its own. A lot of what we were doing felt like institutional angel investing. We were backing people at the idea stage before they really built much with relatively small checks and with a relatively large portfolio. And as often as the case in venture, the more successful you are, the bigger funds you raise and also the more concentrated that portfolio tends to get. And I said I think it's time for me to go out and create a fund where we can do something that feels like classic venture capital, betting on people at the earliest stage, but with one twist. A lot of the people I met at Uncork, where I had the most success, were people who were outside of my network. They weren't people I knew from before, and they were really early. And I said, maybe we can scale that thesis and build the fund. That's a much friendlier front door to people who don't have the same level of access in the Valley.

I love that. And there's a lot of parallels there between some of the topics that we've discussed on past episodes of the distribution. But before we get into the thesis and kind of how the, you know, the magic is made, if you will, in terms of how you invest, let's talk a little bit about, you know, your background. We were chatting before the show. You grew up in Michigan, but did you grow up in a, you know, in a family where, you know, venture capital was. Was a thing? Did you know, how did you think about entrepreneurship? Maybe give us the quick backstory there.

Yeah, I grew up in Michigan, so I was born just outside of Detroit in the northern suburbs. So I grew up in Southfield, Michigan, for those of you who are familiar with the metro Detroit area. And, you know, I didn't even know what an entrepreneur was. My dad worked in the auto industry. He worked in the auto industry his entire career. He worked for two firms, and that was it. And my mom was an attorney who eventually left and started her own law firm. But if you ask my mom, are you an entrepreneur? She would say, no. She'd say, I started a business in law, and I had uncles and relatives who also started their own businesses. But none of them described themselves as entrepreneurs. They were just people who started businesses. And coming from suburban Detroit, I thought the only jobs available were, you know, lawyer, doctor, or auto industry. That was my world. And then I moved to Northern California. But even if I think about my own childhood, I had a paper route when I was in middle school. And then in high school, I ran a landscaping business where I did yard work for a bunch of people in my neighborhood. I did your classic. I was that kid who sold candy to the other kids at school. In elementary school, I realized, like, I'd always had this interest in, like, being my own boss and having my own business. But I would have never self. I didn't realize that was a job or a career until I came out to Silicon Valley for school when I went to Stanford.

So how did you get from, you know, Michigan, the suburbs of Detroit To Stanford. Kind of what brought you out to California? And, you know, what were you hoping? What were you hoping to learn? Did you choose? You know, obviously Stanford's a prestigious school, but was part of your goal because you wanted to get into tech? What did that journey look like?

So, Brandon, I'm not going to lie, a big chunk of it was the weather. And so I was 18 and I was looking at all of these east coast schools, and I went and visited them and I thought they were really impressive. And I had an invitation to come visit Stanford. And I said, you know, I'm not going to move all the way across the country away from my family. That is just, like, not something we're going to do. And my parents said, you should at least go check the school out. You got in. It's probably worth understanding, like, what it would mean for you to go there. And I said, okay, that's fair. And I got here, and I have a cousin that lives in East Oakland. He came and picked me up from the airport and drove me down Palm Drive. And I looked around, I said, this, this could work. And like everybody who comes in Northern California for the first time, I brought only shorts and T shirts. And you can imagine how that turned out. But I just felt like the students at Stanford had a real positive energy and a really good. But little did I know that the Internet was happening all around us. I did not know anything about the tech industry. The only window I had into tech, and I don't think I really told this story anywhere. The high school I went to, we have one really famous alum, Scott McNeely, the co founder of Sun Microsystems. So when I was in high school, even in the early 90s, we had email and we had sun workstations all over campus. And that was the only thing I knew about tech. I didn't realize that was a whole business. I knew we had one guy who'd gone to my school who'd done pretty well. That was all I knew. And so I didn't come to Stanford realizing that I was stepping into the middle of Silicon Valley in the middle of the Internet. I just. I didn't realize what I was, like, getting myself into.

What did it feel like other than, you know, the sunny weather, the palm trees, you know, the good vibe from the people. But, like, what did that era, what did that period of time feel like when you're reflecting back on it?

You know, it's funny, I had friends who dropped out of school to do startups. And I remember thinking, like, what would my parents from Michigan think if I told them I worked really hard to get into Stanford? You guys made a lot of sacrifices for me to be here. And I'm dropping out to start a company. And the first time someone told me they were doing that, I was shocked. And then by the time the third person told me, I was like, oh, another one of these. And I think it just really did feel like in the mid-90s that this Internet thing was going to be a big deal. And it was weird because you'd have people. I had people in my dorm who were, like, working for startups, and they were nominally going to class and then dashing off after class to go work at some startup in downtown Palo Alto. You'd go to downtown Palo Alto. And there were people who were a year or two. I mean, the wild thing, there are people who were a year or two older than I was who are quote, unquote, executives at ebay and at these big tech companies. And you're just like, but you're 24, and no one knew anything about the Internet. And probably the funniest experience I had was I interned at Excitement and I started interviewing. I knew I wanted to go into investing because in high school, I worked at a brokerage. Back when those were physical brokerages, when those were a thing. There was a branch of Smith Barney in my. In Southfield, right over in Southfield Town Center. And this is. I can tell you the kind of a random story. I. Because of my yard work business, I was working on the side of the road one day, and this guy pulls up and he's like, oh, you do yard work? I'm like, yeah, I do yard work for people in the neighborhood. And he said, okay, like, where do you go to high school? I said, oh, I go to Cranbrook. And he said, well, great, let me give you my card. I'd love to have you come do some your work. And he worked at Smith Barney. So I call. His name is Mark Willis. He's, like, probably one of the most influential, like, early bosses I had. And I talked to him and he's like, well, what do you do? Well, you know, I do a little stock trading on the side in high school. I kind of like stocks. And he said, well, I'll make you a deal. After you do this yard work project, if you want to come work for me at Smith Barney, you can come work for me in the summer. And so I worked in his office, basically ordering sandwiches for the brokers and hanging out. But I also Got to do some stock research. And that really opened my eyes to investing. And I ended up working at Excite, and I was sure I was going to go into investing. So I was interviewing for like, portfolio, junior portfolio manager, asset management jobs. And these people would tell me, like, you could be our Internet wunderkind. I was like, guys, I was an intern at a tech company. They're like, but you know more about the inner workings of these tech companies than most people do. And it was just a magical time to be in Silicon Valley. There was so much enthusiasm and hope about the Internet, and it felt like everything in the Internet was going to happen immediately. And of course, it took much longer.

So I think there's some parallels and we can come back to that and we can talk about the current environment and exuberance around AI and other relevant topics. But before we do. So this is, you know, I think you graduated Stanford Undergrad in year 2000, if I'm not mistaken. And after graduation, what, you know, while all your friends were dropping out, did you. Were you working at Smith Barney? Did you go back to work there full time or kind of what, what happened once you graduated?

So once I graduated, I think so much of life is weird serendipity. So my junior year, I was working in the coffee house at Stanford and somebody put up a flyer to work at a tech company called Excite. I, like, pulled the flyer down and emailed the guy and basically started working at Excite. It was awesome. I met so many amazing people when I worked at Excite. And towards the end of my internship, I met a woman and she said, hey, I've noticed your work. You seem to be doing a good job. What are you going to do after graduation? I said, well, I'm thinking about going to Goldman Sachs in New York. Very typical Stanford job. Or maybe doing management consulting here in San Francisco, also a very typical Stanford job. I also was thinking about joining what was then like a startup incubator studio, because I'd had Internet experience. They said, we'd love to have you. And she said, you know, my husband has this money from the CIA and he's been investing money on their behalf. Would you interview with him? Because I think you could work with him and it could be really fun for you if you're looking at these kind of finance jobs. And so I went and met with Gilman Louie, who was then the CEO and found managing partner of In Q Tel. And I really liked the job. And then I said, how am I going to explain to my parents that I'm going to go invest money for the Central Intelligence Agency. And my parents were immediately like, it's not what you think. It's probably a front for something that recruiting you to be a spy. They were not. It was actually an investment firm. And I looked at all the things on the table and I said, this Ink U Tel job is probably the only thing that will never come around again. I don't think I will get invited to be a part of something like this ever again. So I'm going to take it and I'm going to hope and pray that if this doesn't work out that the banking job, the consulting job, that those will still be around.

If I need. And I, I've. I never needed to go back to those things in Q tel turned out to be a really formative experience for me.

So before we move on it, it strikes me, you know, you're either really lucky, really smart, or as you said, you know, have put yourself in places where serendipity can happen. And selfishly, I, I think I was mentioning to you, I'm going to be guest lecturing at my alma mater, the University of Michigan, later this week and I'm trying to think about, you know, how do you tell the story or give advice to people who are in their college years, undergraduate in particular, about what career journey they may go on. And so if I kind of listen to what you're sharing, you know, the, you know, Mark asking you to do yard work and giving you a job and Gil, you know, the excite opportunity with the flyer in the coffee shop and then, you know, the opportunity to go work at Ink Util. These things all seem very random. But when you look back, I mean, how do you, how would you summarize or what advice would you give based on your own experiences to somebody who's like, man, I want to be like this guy, but he's, he would just seem lucky.

So it's so funny. So my sophomore year I was a part of this program at, at Stanford called Sophomore College, where as a sophomore you come back to campus early and you do these seminars. And I did a seminar on basically like the justice system. But part of the program is in the evening you have these really successful professors at Stanford come and tell you their career journey. And I'll never forget this. We had a professor who came and said, before I tell you my story, I want you all to remember one thing. And we're all like, what is. It's going to be some huge pearl of wisdom. He goes, your career will totally make sense when you tell it in reverse. And I was like, what do you mean? He goes, the dots will, they will connect after the fact, even if they don't connect in the moment. And so I really, like, always remember that quote. And the other thing I've always believed is if you take the most interesting opportunities that present themselves to you, you will have an interesting life. And there are a bunch of times where I could have done even getting into startups. I was working at Google and on the side I was running a conference and events business that put on this is kind of like 2000, mid 2000s. I was running a conference business on virtual goods and social games before the Apple App Store and microtransactions were well understood. And in running that business, I met a guy, Craig Sherman, who's a partner at Mirror Tech now. He was at the time running a company called Gaia. I invited him to speak at my conference. He said, we should have a cup of coffee. I said, that would be great. We had a cup of coffee at Red Rock Cafe down on, in Mountain View, down there on Castro Street. And Craig just said, would you ever come interview at my company? You should meet, you should meet Joe Herkin. He runs my sales team. He's like, candidly, you seem like if you have enough time to run this conference on the side, on the side during your job at Google, maybe you should, you know, think about something that will like, fully engage you. And I wasn't looking to leave Google, but I met the team at Gaia and I remember I told my parents, they're like, how do you leave Google in 2008? Like this or 2000? Like 2000? Like, this is crazy. This is like the golden era of Google. And I'm like, but guys, I, I have a feeling that working for this Craig guy is going to unlock something in my career that like, isn't happening here at Google. And my parents were baffled, Brandon, that I would leave. This is the Google's like peak volleyball, like, free lunch era. And like, it was like, it was good. It was maybe 25,000 people. When I left Google, like much smaller company.

I just felt like there was something I needed to learn that I was going to learn much faster working for a startup than I would continuing to be at Google. And I guess I've always been confident in my own ability to listen to what I need and to try to seek out opportunities that be interesting and to not worry about those opportunities being the most prestigious or necessarily the most well understood things.

I love that. That's great advice. I think we can all learn from that advice, so.