QC#50: Kevin Hartz, Co-Founder & General Partner A*, Chairman & Co-Founder Eventbrite

It's so important in these times to realize, like if a market collapses, if the economy turns down, you're out there as a builder, as a startup, starting with little to zero market share. If you probably look at a market share on launch, it is effectively zero. And even if a gigantic market collapses and from 100 billion goes to 50 billion, you still have these massive markets. And so kind of staying true and persevering through this period is critically important.

All right, everyone, welcome back to quick coffee. So exciting to be back. We're having our 50th episode, which is incredible for many, many reasons. And today we're here with Kevin Hartz, co founder and general partner at Astar and chairman and co founder at Eventbrite. And it's great to have you. Thank you so much for being here today.

Well, Felix, really a pleasure. Thank you. Patrick as well.

I mean, the other day we were chatting about the early days of Xoom and Eventbrite and it's just been an incredible journey. It's been really, really inspiring to listen to your story. Could you take us back to that time and tell us the story of how it all started, where it all began?

Absolutely. It's. It was an exciting time and I do have to say this feels like an exciting time. I think it was a year ago in San Francisco. I had maybe commented on X that it felt like we were maybe in the decline and fall of San Francisco. I was not extremely optimistic despite the green shoots of AI and the exodus of founders coming back to town in this gold rush town. And then 12 months later, it's pretty incredible. And we're doing this also in the wake of the really 21 sort of tech crash. And I see that. I was just in Zurich about three weeks ago and I see that happening in Europe as well. We have some investments at a star over in Europe and some phenomenal founders and some phenomenal products. We were just talking about Daniel Ek and you were telling me how he uses or how they analyze and understand the usage and adoption of pods to a level that is just remarkable. And that is just no surprise. It's coming from Daniel. He's an incredible person. I met him when he was just getting started. But let me go back way, way back to the late 90s, believe it or not. I wasn't five years old. I was a older. I had been in the valley and had been enthralled with tech, had just come off a modest acquisition of my first company and had a little bit of a personal balance sheet, meaning I didn't have to run out and get a job. I had enough cash to think about and plan for something next. When Peter Thiel, who I got to know at Sanford, he was a law student, I was an undergrad, we were in student politics, came out to the valley with that amazing premonition of his, of understanding that there was in this land of great tectonic change from the earthquake sense, there was also a revolution in it, in a tectonic action in technology. And the Mark Andreessen Mosaic browser had given way to a rising boom. Peter came back out to the Bay Area quickly, met up at a talk he gave at Stanford with Max Levchin. The two co founded what became PayPal, the relevance for that for Zoom, my second company, Xoom, the money remittance company you may be familiar out there in Europe with wise transferwise. At the time we were up and running, but a money remittance business, we initially focused on US consumers sending money back to their families overseas. And then the second company, Eventbrite, a ticketing company. But back to this magical meeting with Peter and Max, PayPal was formed. And I by no means want to take away the massive contribution of the incredible team there. And we all know the fable of just the true fable of the incredible talent of Reid Hoffman of Roloff Botha, Jeremy Stoppeman of Keith Robois. I hope I don't leave anyone out. David Sacks. You just keep going. And of course merged and that brought Elon Musk. And this is really the lead in to how these two companies that I founded, Zoom and Eventbrite, got started. It was because Peter and the crew created this first mass adopted inflexible payments platform. This is of course in the days before Stripe. And as they were growing, they found their initial market and traction amongst marketplace merchants, particularly on ebay. And it grew at such a fast pace, it was just absolutely astounding. But they had just a heavy, heavy concentration in this marketplace of ebay. And the CEO at the time, Meg Whitman, was really, in their view, kind of could determine their fate and turn them off in kind of a binary manner overnight. And they wanted to diversify the business. And that was fortuitous. Now back to my story. Had been a seed investor in PayPal, made what's always the best thing to do in seed investing is invest in the people. And having known Peter and then getting to know Max, this was phenomenal talent. It wasn't the idea because the initial idea actually changed dramatically. It was initially, what was it? Security in Spark tokens. VPNs for early mobile devices. And I won't bore with the long story of how it transformed into PayPal but it did the product, you know, the core product that we know today and it was magical. And that again with that team, that's how you solve great problems, is with remarkable teams that do great, great things. So the business was booming, but all on the ebay platform. And having the insight of seeing this as investor in advising, I saw this as a platform to build a top in a way to diversify PayPal off of eBay. They had even created a term called non ebay volume. And so how do you get GMV gross merchandise value that is happening or merchants that are using this off of ebay? And I recall the conversation with Peter and a conversation with Roloff Botha who was at the time, at the time they went public in 2002, February 2002, Roelof was just 26 years old and became a newly public company CFO. I think it was the youngest CFO of all time. But the two of them we spoke and they had urged and had seen this old world duopoly of MoneyGram and even worse Western Union. These horrible remittance players in this space that were charging high fees and extraordinarily high fees, usurious fees and also really just kind of an offline, hard to move online brand. We launched the business, you know, by working with David Sachs who is funny enough heading up product, of course and he is a brilliant, brilliant product person. Let's see if we can get him on quick coffee. Sometimes I think he likes to just do his own pod, not visit others but you know, we'll see. But David was excited to build out an API and we became, you know, we were the first. My business partner, Alan Braverman and I as a two person duo launched on the PayPal platform, a remittance business in, you know, all the way back in 2000, end of 2002, 2003, with no licenses. We made an argument that PayPal was our the license money transfer and covered the regulations and we just got the service live. Surprisingly, before I talk about the results of that, we had also launched a number of other payment services. We were just hacking together and building on the API and seeing what took. And the reason simply was a thesis, a broad thesis was that it was there's certainly auctions and commerce and goods are an area that will evolve online and is emerging online, but what others will and it'll be ubiquitous. And now it seems dramatically silly, but at that time in the early 2000s, in the shadow of the dot com collapse, there was so much pessimism and I think I would just pause to say it's so important in these times to realize if a market collapses, if the economy turns down, you're out there as a builder, as a startup, starting with little to zero market share. If you probably look at a market share on launch field is effectively zero. And even if a gigantic market collapses and from 100 billion goes to 50 billion, you still have these massive markets. And so kind of staying true and persevering through this period is critically important. You know, I mentioned that we launched the business, took off, we were surprised PayPal was acquired by ebay. Peter then, as in an early investment, invested half a million dollars. I think it was a 5 million pre, it might have been lower. And sometime later, less than a year later, Roloff came in. Now having gone over to Sequoia Capital, Roelof now runs the Sequoia Capital organization in addition to continuing to invest. And he invested in our business in the fall of 2003. I think we closed around the holiday time of 2003. The business flourished. So as we saw this thesis that payments online was going to be large and grand, we saw that there could be other things to build. I had moved into the board role from the CEO position at Zoom and then started Eventbrite, a online ticketing company with Julia, my wife, and Renaud Visage, who most of the year was based in Paris. So big win for Team France and Europe there. That was a very exciting ride. We loved and adored this notion of ubiquity of payments. And payments were something that again was mostly affiliated with physical goods, shipping, flat screen monitors and the like. And really tickets, if you consider it. And actually David Sachs had pointed this out to me one day, he called them kind of a virtual good. You know, there's no shipping, there's no having to send back a physical package. And also if you think about a ticket, it's a perishable good, meaning it could be worth a lot one day. And then once the event happens, as soon as that event is completed, it's not worth anything. So it's almost like a fish that, you know, you don't want to keep around too long. So perishable. And all these drive a strong sense of urgency for our creators on Eventbrite, the event creators to publish and promote and really sell their events out. And when we built, we built from a mindset of how can we help our event creators do that. How can we get them and get the word of these great live experiences out that were happening all around the world in all different categories and shapes and sizes. We really built a universal platform for this. And we found that in doing that, through SEO, for example, you could publish an event and that event would be indexed very highly. So much so that we had a lot of Google classes on how to use AdWords and the like that were hosted on Eventbrite, and they would appear higher than the organic in the organic results and search than Google's organization's own official inside classes on this. And we furthermore found that we made a free event. So if an event didn't have a fee on it, if the event creator wasn't charging, we didn't take our small percentage of it. We took nothing in. The creator paid nothing. And so free events were free. So it effectively, the paid events effectively subsidized the free. But they also created this amazing flywheel of growth where we have millions and tens of millions and millions of events on the platform that drive more indexable content, but then more content shareable on social, and more content that can be emailed out, texted out through all the different services and mechanisms that we had. And interestingly, as creators promoted their events, they were promoting the eventbrite brand and the reach was incredible. We had virtually no direct spend, unlike traditional ticketing and so on, that spends all this money on CAC and delivers a poor product. We could deliver an exemplary service with incredible net promoter score, and both the creators and consumers of those events just absolutely loved it.

Yeah, I find this founding story so incredibly interesting where we're chatting the other day, you actually mentioned that when you did the exit from Zoom, and I remember this being close to a billion dollar exit, you were saying you had still underestimated the market. What was that kind of underestimation that you had there? And how do you think about it today from a founder's perspective?

Well, that's a great question, Patrick. There's something that is mentioned, or I've mentioned perseverance and keeping going. And I wouldn't say, you know, we were giving up, but we had gone public with Zoom, the money remittance business, in 2013 on the NASDAQ and, you know, saw good performance and, you know, PayPal came calling, seeing a way to expand their business into this attractive market. And the, and we were made, we made, we made a great offer and sold the business for just over a billion dollars at that, that point. And, you know, it was at that Time the I had handed the ranges to John Koons and he's just an amazing, excellent operator and steadfast and he's stayed, he's stayed on. He's just retired or he's just moved on in, in April this year from PayPal and has, has done a phenomenal job. But we thought this would be great to be part of the larger organization and, and move that direction. But the, you know, really, the industry was really in its, its infancy. The remittance online industry world is so large and you know, you now see companies that at the time were very small but agile startups like Remitly or Transferwise, now, you know, five $10 billion public companies doing quite well and growing quite fast with a long Runway ahead. And so I think the cautionary tale is not to be sour grapes and say what if? But really whatever you work in and you know, these things can keep growing, but just keep at it and keep going.

Super interesting. And it's so fascinating, of course, I mean, this exit then enabled you to start with first investments and you've had done investments before that already. And now fast forward today you're running a star. And I find the name very interesting because it actually reminds me of a class I took at MIT for the optimization algorithms and I saw a star kind of going to that, finding the optimal path. What's your vision for a star? Where do you want to take the firm and kind of what's the future looking like?

Well, I really abhor when I am considered a VC or venture capitalist. It just, I feel like a builder and you know, a. We want to really help and work with this next generation of great founders. And estar. The name derives. It's a kind of shout out to this algorithm developed in the late 60s, a kind of shout out to computer science and Stanford University. But yes, it is the optimal path to the truth. And that's what we look to arrive upon and we want to work with that next generation of founders. And I've had the good fortune of being able to do that over the years. Whether early on at PayPal as they were just getting started in two people, or whether it was Airbnb with Brian, Nate and Joe at the seat, or whether, whether it was Ben Silverman at Pinterest at the seed or Ramp at the seed or many others. It's been so exciting and great to be involved.

Yeah.

Now if you imagine there is a very competitive round, you find yourself kind of talking to the founders the day before they want to make the decision what do you tell them and the founders community here on Quick Coffee, what would you tell them to convince them to go with you as an investor, to go with a star as one of their investors in the round?

Well, if we're enamored with the founder and really want to work with them, I'll tell them. I'll destroy them if they don't. I'm just kidding. We don't say that. No, we, you know, I think like, I think there's just a chemistry that's important. And so I would also say I hate, I detest the notion of sales. And in, you know, in the world of investing sales, you know, just is, I just find it inauthentic versus developing a relationship and finding, you know, what is the right, who would be the right partner. And if, you know, those were cases where we do make an offer, we think it will be the right partner. We always, you know, found that that has, you know, been us and if a founder were not to choose us then, you know, we have no animosity and we wish them well and you know, we hope that that that's probably because that partner is better suited.

I mean your portfolio is incredible. When we looked at ASTAR website for the first time, I think there was barely a company that was not mentioned. I mean, you know, there are tons of great companies and I think that is also, I mean at the end of the day investing into companies is being good at, is basically being really great in spotting the right founders. Truly looking at specific characteristics. And I'm wondering what is it that you look at, you know, considering an investment? If you look at the founding teams, what are some, some of the characteristics that really stand out when you do it, when you do an investment?

Great question, Felix. And that really is interesting notion that you know, as we're based in a star is based in, in California and there's all these interesting laws around what you can ask and not ask in an employee interview but in an investment, these things like what was your family like growing up? You know, where are you originally from? Like, like the, like what is your background? What kind of obstacles have you overcome? You, you can get much more detailed and really get to understand the motivations and drive of a founder. What makes them so competitive, so hungry that they're gonna run through walls and win at all costs and just never surrender where their intellect derived from. You know, how they think about the world in a non conventional and different way. That kind of harkens to that age old question that Peter Thiel posed. Is what do you see, what do you believe that others don't? A very important one because finding the best companies are always been the most unconventional ones. So these are the types of discussions that I prefer to have and really give me insights because we find, you know, people. If I just mentioned some of the companies like a. Max Levin was an immigrant who came over, I think, you know, in his at 13 or so from the Ukraine. He left with very little and you know, had worked a few jobs to put himself through uiuc. Incredibly brilliant. His mom believe is a researcher, is father was an artist musician and he was just this incredibly talented, creative and brilliant driven person that has been so incredible through all the businesses he's built, whether PayPal or a firm or many more.

When we were chatting the other day we spoke about Ramp. It's one of the companies that has, I think even for people, you know, as the as as end users, has amazed them with the product velocity and the speed that they've had. Now you, you've been an angel investor in Ramp and I wonder, you know, in the earliest days, what did you see in the company and in the founders that convinced you this is going to be an investment that I'm going to make and this is the company, it's going to work out well.

Ramp was one that many, you know, conventionally on the surface would not want to do. It seemed like the space had, there was all these different spend management platforms and Brex was out the gates and it seemed, you know, it appeared that Ramp was just like late to the market. But Eric and that founding team is absolutely phenomenal and the speed at which they move was like awe inspiring. It was one of those things that you just couldn't believe, you know, day after day or week after week, the progress they could make in such little time. And being able to see that major progress was incredible. And then as the project emerged, it was having been involved in payments, having seen how, you know, what we call the payment rails that we've all been building upon, the way that they wrangled those payment rails, they just kind of took them and twisted them up and built an app that wasn't kind of a reaction to the Rails, but did it the right way. First principles of how to build it and it's almost a work of art.

It's so interesting when you think about how quickly they have taken over a market that you would really otherwise think there were a lot of players already in that market. What do you think is possible for them as a company now? That they've grown so quickly and the user experience has become so much better. I remember when we were talking the other day, it was really that you said they took basically the payments infrastructure and they kind of wrestled it down and they rethought it from the beginning. So what are some things that you think are so unique about the company that they have this ability now to become incredibly big and incredibly meaningful in the marketplace?

Well they're just demonstrating that the sheer growth of their core business is phenomenal. The add on products are so interesting and growing incredibly fast. The customer love is off the charts. But then these strange things keep happening. Of course Eventbrite adopted it and compared all the others out there and had been on Amex and the like forever and you know, it's just night and day. Of course we use it at a star. Certainly we're a little biased. But then the other week I was with a friend who's at a well known firm. I'm not going to say his name because it relates to personal finance. And he told me he runs his family all uses Ramp. So they've turned it into their like family kind of consumer finance and management. And this is you know one of the most successful venture capitalists in the valley that is not involved in Ramp. He has like zero ownership of it or has not invested in the company. I just got my Ramp card for a family this afternoon so we're moving our whole family over. So that notion of just this continued march towards ubiquity is incredible.

I find that so interesting because there's really companies out there that would then target payment solutions for families. But then the moment you create a business where the flexibility of the product is so high then automatically your, your, your customers, your users will adopt you in other cases and your, your kind of total addressable market, you know, grows. And now they might actually have a family, you know a family product line starting out of that which is, which is super interesting. And one thing that I wonder about, you know we were talking about culture and culture. Company culture is something that we talk about a lot on Quick coffee. What do you think has to be created by the founders inside the company to create a culture that allows for this level of product innovation? What needs to be there from values and culture focus to allow the company to do this level of velocity and innovation on the product side?

Well it's simply what we love to see in what we have seen in all these great founders. The culture is a reflection of the founders values and ethos and they are the ones that, you know, like Tony from Doordash, who his family run, ran a restaurant, a very thin margin, highly competitive business. And he knew how to hustle and how to run things lean. And you had to do that in that really gritty kind of thinner margin world of delivery. And you can see how he prevailed in that culture prevails. And so you see like these characteristics of, of the founders that kind of amplify out into the culture and, and I think like from the outside it looks like these companies like kind of put up some kind of banner message or send out, you know, some kind of like, you know, like all company email to tell how to act and how to look and what to do. But it's really this like shared experience, you know, again emanating from the founders that, you know, really creates this amazing team of people of great talent and brilliance and hard work that do these amazing things.

Maybe as a little bit of a different question, I mean, I find it so incredible seeing you going through so many different phases. Everything from being a seed founder, you know, that is already a little bit of a time ago now to have been, have run, ran so many, you know, big companies and you know, have been backing so many incredible founders. When you think about the transition of a founder that is, you know, about to start a new company, transitioning rather into a leader or manager position, could you name some of the things that you had to learn the hard way? You know, when you think about this transitioning phase from being an early stage founder to a person that has a lot of responsibility out of a son.

Well, you know, having been through the adventure a couple times, it is, I kind of hearken it to being like going through a book in different chapters. And that first chapter is always, you know, the founding team is starting from an idea and it's a very creative time and it's very a time that one reminisces on later quite a bit. It's just a lot of fun, but it's also intense and a high degree of excitement. And then you start to add a few team members and there's the product market fit aspect. And as that happens, you're now ready to begin that scale depending on really the pull of the business. So each stage is like a chapter in a book. It's three to 10 and five or 10 employees, 10 to 50, 50 to 200 in the case of Eventbrite. Julia and I interviewed every single candidate up to, I believe it was our 200th employee. And a lot of that was back to that question around culture is that what's the best way for a culture to spread is for everyone to be together and experience it. So we would, we would meet these candidates and that was important, but it was more important to be in the debriefing room with other team members. If a group of engineers, if we're interviewing an engineer or growth or whatnot. And Julia or I could share kind of our values and what we see as important in candidates and do this over and over and over again. But back to that question. It is really exciting in leveling up is done through these accomplishments of bringing something innovative to market, serving customers, delighting customers, and then scaling. And the excitement is I love to learn. And kind of like the intellect, like the curiosity I have really gets satisfied when you grow because you are able to kind of extend and learn more and meet new people. So it's really a thrill. But I caution you not to rush it, not to kind of artificially create it. Because, you know, if I look back two years ago at 21, that's what we all did. We, you know, we did the thing, we found a company, we raised a seed round, but then being impatient and seeing everyone grow so quickly, raise a large Series A, but not yet have the basics in place to do that. And so the funding round became the determinant. And to be honest, investors want to put money into companies and gain more of your company. They want you to get more capital, they want to sell you cash. And you need to be a capital allocator. You need to be very, very careful of where, what money you take and where it goes. And driving an organization based on your raises versus the progress of the business is just the greatest cardinal sin.

I mean, it's just incredible to hear it from someone who's pretty much seen it all. I mean, as we are wrapping up, maybe a last super small question. What is a piece of content or a book that has recently inspired you at Quick Coffee? We like to think about inspiration quite a lot. And I think that's also one of the reasons we've started this format.

You know, I've been a voracious reader over the years, very much so. When I was in the CEO seat, I'm not now, and I missed that. And I think I've been actually really scratching that itch more, you know, with, you know, the people I've been interacting with. But also, you know, honestly, like the founders, sometimes 19 year old founders. People like Ethan, the CEO of Mock Industries, he's 19, he dropped out of MIT earlier this year, we were a part of his seed round at Asar in Mock. And, you know, just the way he thinks about the world, the way he thinks about his approach to defense tech, you know, is absolutely astounding. And that's the best thing about what I'm doing.

All right, we're going to wrap it up here. The show is of course called Quick Coffee, so we're usually keeping the episodes quick. We want to thank you so, so much, Kevin.

Thank you.

A fantastic episode for hosting us here in sf and we wish you all the best for Astar and your investments. Maybe last quick question. How can founders reach out? How can they connect with you and Astar?

Great email I probably shouldn't give myself, but I love iMessage so much. No offense to those on the Android side, which is probably half of Eastern Europe or more, but Kevin, Little tricky, but that Google thing should be able to find me as well.

Awesome. Thank you so much for having us.

Thank you, Patrick. Thank you, Felix.