The Hustle Stage - Interview with Tom Willerer of Venrock

Well, thanks, Tom. Thanks so much for coming. Today we have Tom Willerer, partner at Venrock. Welcome.

Thanks for having me. I'm excited.

Yeah. Well, so I think before we dive in, we would just love to learn a little bit about your background. What were you doing before? You're a relatively new partner here at Venrock, right?

That's right. Yeah, I've been here 6 months. So, I'm a newbie. I joked for a while that I was just trying to figure out where the bathrooms were, but I think now after 6 months, that joke is over.

You figured it out.

I figured it out, yeah. So, yeah, I joined Venrock in November of last year. Prior to that, I had spent 4 years as Chief Product Officer at Coursera. I joined Coursera as employee 50, and was really brought in to build out and scale the product management and design teams. And then, you know, over the course of time, was given additional responsibilities for engineering, operations, analytics. It was roughly 60% of the company, and well over 100% beyond what I actually knew what I was doing, which was a ton of fun. So, that was Coursera. We grew from 50 to 300. We grew revenue almost 100 times during my tenure. We worked on culture. We worked on culture again, because our first pass at it was wrong. We just sort of bolted together Google and Netflix things that we liked, and it wasn't really us. We didn't really get to the essence of it. Hiring, product, there wasn't a piece of the business model, the strategy, what we're doing. So, it was just like one of those amazing experiences with a company, and it was like I was very lucky and fortunate to have joined when I did, to have seen the growth that we saw. So, that was amazing. Prior to that, I spent 6 years at Netflix. When I started at Netflix, we were a quaint, DVD-by-mail, US-only business.

Oh, yep.

With big aspirations to be global streaming, and we didn't yet have the aspirations to have originals, but definitely global and streaming. Those were, you know, over the internet was our thing. And when I left, I was VP of Product, and we were global streaming and originals, and now we're just 1,000 times more of all of those things than when I left in 2013. And then prior to that, I spent 7 years in digital advertising. So, all in all, 17 years of operating experience, now turned to the good side of venture. And I say good side because the thing that really attracted me to venture was sort of baked into my DNA when I would lead teams, was wanting to be helpful for my team leaders. So, I'd have a team, I'd have some leaders, we'd set some goals and strategies, and then I would want to empower them to really achieve their goals.

Mm-hmm.

And really help them accomplish their goals. And I look at working with entrepreneurs as an extension of that. It's like, at its best, I think what venture capital can do is be helpful to lots of entrepreneurs doing really interesting things in the world. And that's what really excited me about venture, was just that, that piece of it. The other things were, I think with this you get to— like, I would often joke with my wife, I'm like, gosh, I kind of wish I could have 3 jobs.

Mm-hmm.

Because the job I have is fun, that job sounds interesting too, and there's, you know, so, and in venture you kind of get to have multiple jobs.

Mm-hmm.

You don't have to just pick, you get to do multiple things. So I liked that. And then the third was I had someone very early on when I was exploring doing venture say, you know, if you like being in startup mode, you're gonna love being a VC.

Mm-hmm.

And it kind of clicked with me, which is when you're An entrepreneur, your whole goal is to become a big company.

Right.

When you're a venture capitalist, you're always going to try to find the small companies.

Yeah.

Over and over and over again. And I thought like, yeah, that sounds like a lot of fun.

Yep. Okay, well great. And so actually, I think that's a good segue into, you know, you were, you were an operator, now you're a VC. While you're here, what kinds of things are you looking at? Are you looking at edtech? Is that exciting to you? I mean, now that you know all the nitty-gritties, having been an operator, is that like Does that actually— is that actually a turnoff? How do you think about that, and how do you kind of bring your operating experience when you look at deals?

Yeah, good question. In terms of what I'm looking for, I'm fairly, right now, thesis agnostic. I'm stage-specific, so I want to look at things in seed to B. Probably A would be sweet spot, and then some bigger— the bigger seed rounds, and then Bs. So, we want to, as a firm, go very early. And then our sort of philosophy, which I've adopted and I think is great, is really think different and be early. So, what I want to do is find entrepreneurs where it's non-consensus what they're doing.

Okay.

And, you know, develop a point of view that I think that actually is something that's going to win. People don't see it yet, and bet on them. And I think that's a lot of fun. So, now, specifically, like, what— that's like, okay, that's all good and well, but it's a little abstract. So, I am looking at a lot of things in education.

Okay.

I think education is a trillion-dollar market, and there's so much innovation that can happen. I saw it firsthand with Coursera. Like, 70% of Coursera's users were out of the US, and we took the, the what was locked up behind these university, you know, walls, uh, for so long and made it accessible to people.

Mm-hmm.

And I just think the ability to, uh, give access to that can really change lives.

Mm-hmm.

So that sort of put a thread in, in my investing thesis, which is I like to find companies that I think can not only be really big from a revenue and business perspective but also really impactful to people's lives.

Mm-hmm.

And I don't think those always have to be trade-offs.

Uh-huh.

I think there's lots where they come together, and I think those are really interesting companies to me. Um, so yes, education I'm definitely looking at. Uh, consumer broadly, uh, especially consumer where it's direct monetization. I've— I, I have a lot of experience with subscriptions from Netflix. I implemented subscriptions with Coursera.

Uh-huh.

Subscription business models, like, kind of regardless of sector, I understand really well. So, uh, I wanted— I'm definitely looking at a lot of those. Marketplaces are particularly interesting to me. There's another one where I feel like you can sort of specialize in how a business works without specializing in a sector, you know. So I'm looking at a B2B marketplace and a B2C marketplace, and the sort of framework for what makes them successful is very similar.

Mm-hmm.

Uh, so I like that. Workplace productivity, and then like future of, future of the workplace, I think is really fascinating to me. Coursera dabbled in this a bit where all of our education, what we found was like the people that were having the biggest impact from what we were doing were those that were career-oriented learners. They wanted to get a job.

Yeah.

So that put us on a trajectory of like, what's the right content? What are the right things that help people get into jobs? So I've done a lot of thinking there, and I think there's a lot of interesting innovations to come in that area.

Mm-hmm.

So, that's, that's sort of some of the things I think about and I look for. In terms of like ramping up into this, you know, and being an operator moving into venture, someone had described this very early on to me as, you know, venture, there's 4 stages to it. You have to see a lot of things, you have to decide on the things that you see, then you have to win them, because many of them are gonna be competitive, and And then you become a partner.

Uh-huh.

And I thought, like, okay, that makes sense. There's 4 different things, and I only know how to do the last one.

Yep.

I can be a partner, and that's about it. You know, I don't know how to— where do you go to see stuff?

Right, yeah.

Is there a conference? You know, is there a mailing list I should get on? And I asked everyone, like, where do you go to see stuff? And, you know, someone would say, well, I have a really deep network, so I don't have, like, I don't talk to thousands of people. I just talk to 10, and it's really deep. And then someone else would be like, I have a really shallow network. I go talk to everyone. And someone else would say, oh, it's— All my deal flow is from referrals from entrepreneurs. And someone else would say, well, I go and make relationships with all the great other, you know, investors, and we co-invest together. So there was like no single formula, and everyone— and even their approaches were contradictory to each other. So that piece felt very mysterious to me. Deciding, I thought, well, I've been a product person, I can decide stuff.

Have you done a deal yet?

No.

Okay.

So we will come back to the deciding because I think that's sort of fascinating. And I think I was a little arrogant thinking I can— I got that one. So there's a little foreshadowing. Winning, I didn't— I just like, I don't know what to do to win other than just be myself, be aggressive, and kind of hustle. And obviously partnering, I thought like, I know how to do that.

Mm-hmm.

So now I'm like seeing stuff you can kind of— if you're like, if you hustle, if you're helpful, and you're not like a creep, Uh-huh. Um, you can see a lot of stuff.

Yep.

And I've taken the, the notion of partnering and just brought that all the way forward.

Yep.

So I'm just like, look, I don't, I don't have— what I have is my experiences, and I will be free help to as many people as want it.

Mm-hmm.

And that will open up a lot of doors.

Mm-hmm.

Um, and actually, I find that super fun.

Mm-hmm.

So I'm sort of like, wow, they're paying me to just go help startups right now.

Yep.

That's amazing and super fun. So that part has been easier. Deciding is impossibly hard. And now that I'm in it, I've talked to a whole bunch of people and they're like, yeah, you're right, it is impossibly hard. But no one really said that coming in. Um, and it's impossibly hard because the stage of investing that we're doing, there's just not enough— in the stage of investing you do, there's not enough data. You can't analyze your way into it. Actually, you'd probably analyze your way out of everything.

Oh yeah, there's always something wrong with the company. Yes.

Um, so I found like deciding is Surprisingly more emotional than rational.

Uh-huh.

You have to fall in love, and then kind of trick yourself, or rationalize the rest of it, you know, into it. So, that piece has been really interesting to me. And then winning, I think the thesis around, like, a lot of entrepreneurs view traditional investors as finance people. I don't think that's Right. You know, I think a lot of them are great operators too, um, and strategically gifted, but entrepreneurs just blanket see them as finance people. I'm okay with that. That helps me because they don't see me that way. They see me as an operator. I'm like, that's really helpful, and that helps differentiate, you know, what I'm going to offer versus someone else.

Yeah.

So I found that piece to be really helpful.

Well, I think, frankly speaking, your background is still relatively unusual for the industry. I mean, there, there are a lot of Non-operators in VC.

Yep.

So I think that's great.

Yep.

Actually, you know, one thing that I'd wanted to ask you about, and I'll just ask you right now, is, um, you know, how, how do you, or how do you think you get conviction around a company? You talk about, oh, you got to fall in love with this company, and maybe you can't quite explain it, but what are some of the things that get you excited about particular types of companies or founders?

I'll describe this a couple different ways. So, I've been talking about conviction as like a tank of conviction that gets filled up. And, you know, you start with and you're like, wow, my conviction— the tank of conviction is very high.

It's full.

And then you start to do diligence. And then I talk to my smart partners and they ask me smart questions. And it's like the tank either goes up, stays the same, or gets lower.

Okay.

And you have to sort of build up that conviction level to be over the 50% at least mark. Or else you're just not gonna get there.

Uh-huh.

Because you're gonna get overwhelmed by a bunch of smart questions about the company that are like, well, what about this? What about this? What about this? All the gotchas. That's why you have partners, is to ask those good questions. But I need to have my conviction level high enough to feel like, that might be a gotcha, but I disagree. Or, yeah, that's a risk, but it's a risk I'm gonna take, and I just go with it.

Mm-hmm.

So, so that's sort of, you know, like, At least a mental model that I've been using of like how high is my conviction level.

Do you sit on a deal for like days just trying to percolate whether that goes up or down?

Yeah, I have found definitely, definitely most of the time when I meet with an entrepreneur, I— well, first of all, it's like I very rarely— I don't think I've found one that I'm like an instant yes to.

Okay.

So like I haven't hit that stage yet. There's not one that I've been like, we met, 20 minutes later I was like, I'm in. That has not happened.

Okay.

I've had a lot that I'm an instant no to.

Yeah.

So there's a whole bunch you can just lop off.

Yep.

So that means most just sit in the middle.

Yep.

And most I'm like, that's, that's really cool. That's really interesting. And I have to sleep on it and I do have to write my— I have to write my thoughts down.

Okay.

Because if I don't write my thoughts down, I just get lazy and I shortcut everything. So I actually do try to I force myself to, to write thoughts down. That helps me be more coherent with feedback to the entrepreneur. Like, hey, here's what I think. I might be wrong, but I at least have to tell you what I think.

Yeah.

So that's really helpful. And then, like, what I look for are probably pretty basic, like, what is the market? Do I think this is a large enough market for a return that's going to be good for a fund of our size?

Sure.

Which is, that's going to be dependent on each venture capital firm and how much money they've raised. It's going to be different.

Yep.

But I have to think about that. Like, roughly, I'm like, can you get to $100 million in revenue?

Yeah.

Is sort of what I'm thinking about.

Right.

So, that's the market. And then, a part of the market is also like, and who are the players in the market, and what are the dynamics? You know, is it a dusty old market where You know, like Craigslist-style things are still in vogue, or is it a highly competitive market that people keep building things in? And, and, and so like that, that's a piece of it too.

Mm-hmm.

Um, I then think about execution, you know, and that wrapped into that is like the team and the people. But are these people ones that I think are gonna run through the wall to make this happen, and have they demonstrated that they've done that?

Mm-hmm.

So what kind of execution do they have? And then the third piece of that stool is really around strategic power. You know, I don't expect a company that's been around for, you know, less than 2 or 3 years to have like Apple-style strategic moats.

Sure.

But I at least want to believe that they could be there.

Okay.

And I at least want to see a path to how they could create some differentiation in the market.

Okay.

And the more I do see that, the more I get excited. And the more I don't see that, the more I don't get excited.

Yeah.

So those 3 broad buckets are kind of at the highest, highest level of the things that I'm looking for.

Okay, got it. Now, so presumably you've gotten close to a couple of companies. Let's say that you are really excited about a company, you've slept on it, you've written your notes, and you just still love this company. You take it to your partners, and what is the process here at Venrock? Like, how does a deal get done?

We're non-consensus.

Okay.

So we, we don't vote. We don't have a quorum. We don't do any of that. The 2 people that have been here for 20,000 years don't make the decisions.

Uh-huh.

Each person who's able to write a check can write a check, and it's about conviction. So, the idea is that each of us would have that sleepless night, and really own it to the point where it's like, that's ours. And so, the way that works is, I spend a bunch of time with the entrepreneur, I get conviction, I then bring them into the partnership. The partnership is going to, you know, hear the pitch from the entrepreneur. They're going to obviously get my deal memo, and then I— they'll give me a bunch of feedback.

Okay.

And that might be overwhelmingly positive, that might be overwhelmingly negative, and that might be, more likely, mixed.

Uh-huh, sure.

So then I'm then expected to take that feedback and do my thing with it, like, You know, honestly, being a partner, it's like I should have a response to them. You know, so it's like, hey, you, you would— you raised these 7 issues. Here's my response to each. And it could be, I disagree, here's why.

Yeah.

It might be, I agree with you, I think that is a material risk, but it's a risk worth taking, and here's why. Or it could be, you know, I think you're thinking about this wrong. You know, but just at least having some response is respectful, partner-y thing to do.

Yep. Okay.

But that's the way that we work. But then, you know, then if my tank of conviction is still high enough, then I just go do the deal.

And it doesn't matter the size of the deal? Like, you all still—

It doesn't. There's no, you know, if I were doing a $100 million deal, I think there would be, you know, more questions and conversation.

I'm sure.

Than if I'm doing a $500,000 deal. But no, there's no We are sort of, to a fault, lack of process.

Okay. So how does somebody approach you then? Like, how do you get in touch with either you or Ben Rock?

I don't feel like I'm hiding, so if it's hard to find me, I've done something wrong. I've had lots of people just send me emails. I've had lots of people reach out to me on LinkedIn. Like, there's been a whole bunch of different ways that people have found me and that I have taken meetings, even if it's a cold intro.

Oh, really? You do take—

I have done that, yeah.

Okay.

Um, I think it's much better to get a warm intro.

Sure. Okay.

So, if someone knew Elizabeth, and Elizabeth said, hey, you should really talk to these people, Tom, I'm probably 100% of the time gonna take that meeting.

Oh, so now you're suggesting everybody emails me.

Or people like you. Uh, no, but I think, you know, it sort of shows the, the, the execution level of an entrepreneur to say, like, how good are they at getting to me?

Yes. Yes.

Um, and have they gotten to me in a way that is gonna make it seem very credible? Either that's from another entrepreneur that I know, another, you know, venture capitalist that I know, or someone else in my network, whatever. Like, developing that is really useful, and I think it's really useful for me because it just signals, like, because you got to filter at some level, and like, and coming through a warm intro, I'm probably 100% of the time gonna take the meeting.

Mm-hmm. Interesting. So we've talked about almost all of the steps of the process. You know, the deal flow, you looking at it, kind of how you get conviction in winning, and then the last step, actually, how do you support your portfolio companies? And I realize you don't have one right now, but like, how does that work? Do you— or how are you thinking that it will work?

So I guess maybe one way to describe this is in contrast to other firms. So in other firms, they will have like big services arms. You know, they have a marketing team, they have a sales team that come in and help you help you operate, um, or at least help give you consultation on how to operate.

Mm-hmm.

Um, we have, uh, a woman here, Shara, who's amazing, and she does talent.

Mm-hmm.

So she works with a lot of our, uh, our portfolio CEOs and founders to help them hire the best people.

Mm-hmm.

Um, so we definitely do that. Outside of that, we have a PR and marketing team that does a lot of internal And will be helpful to our companies. But it's really, they're going to partner with me. So, at the end of the day, it's like, you're not partnering with Venrock because you're going to get this large services arm. You're partnering with Venrock because you want to partner with me.

Right.

And the partnership is very supportive and collaborative. So, it's not just partnering with me, it's partnering with all the other partners around the table who will be— I have done this for my partners. I've spent lots of time with their portfolio companies just helping them, making introductions, talking about product. I go and brainstorm with CEOs. You know, that's not my role. I'm not like an operating partner. I am out trying to find deals, and they would do the same for me.

Mm-hmm. Okay, got it. Well, thanks so much for coming in, Tom.

Absolutely. This was fun.

Yeah, and I hope you do a deal soon.

I do too. I do too. Yeah, this was fun. Thanks for having me.

Thank you.