Intro
Adam: Hey, this is Corecursive. I’m Adam Gordon Bell. Usually each episode is the story of a piece of software being built. Today is something different. Our guest is a software engineer, but it’s about his journey, stepping away from coding, trying his hand at venture capitalism, trying his hand at being an investor.
Imagine this, you’ve spent years honing your skills as an engineer and it’s 2016 and you’re at the forefront of the hottest of the hot areas, cloud infrastructure, cloud native computing. And then you decide to switch gears. You want to get a job at a VC. You want to do investing, but you just met with some subtle jabs about not really fitting in.
Tim: Well, Tim, you look like a coding bro! Like, implying I don’t look professional like a VC is supposed to be, you know? And, I still remember those, those comments from folks. I was like, wow.
There are funds after you actually have dress code. It’s not very obvious dress codes, but there are dress codes, or not even dress codes, but even like, um, particular way they want you to talk.
And that’s actually, I feel like there’s like 30, 40 percent reason why I don’t get any job in VC is I don’t talk like the MBAs of the world. I’m still too much feel like an engineer ish guy. I do think that’s one of the big reason why more people should be VCs. Fundamentally, different GPs will end up believing different people and making different decisions and that excludes certain people already, subconsciously or consciously.
Adam: That’s Tim Chen. You’ve probably used projects he’s worked on. Kafka, Kubernetes, Spark, various Apache projects. But today we’re exploring why he wanted to jump into VC. And why the VC world wasn’t exactly welcoming to him.
Today’s episode is about seeing venture capital seeing it through the eyes of someone who doesn’t fit the usual mold.
Why would someone like Tim, with a really solid career, want to jump into investing? Why leave coding behind for something that, as his friends asked him, like feels a bit like banking?
And it all starts when Tim, who is living in Seattle, landed an internship at Microsoft.
Microsoft
Tim: I was there when, back in about 07 to 2010, or like 2010 or That was still the time where Microsoft still feels like it’s the biggest company ever.
Microsoft people feel like they’re like gods, basically. Like everything we deliver is much better. Linux is just a joke, right? Whatever we do is always the top of the world, right?
So it’s really weird, if you work at Microsoft at that time, you will find a bunch of employees working there for 20 years, and they’ll just tell you how not just like how great it is to be there, just how better Microsoft everything is than anything else.
Like they don’t even look at it. There was Hadoop, there was no SQL back in the day, like none of the people even care. Oh at Microsoft, we have, we have Microsoft server, SQL server. It’ll just do everything. You know, we got everything and we do everything like the feeling like it’s superior to anybody. that was the mindset.
Adam: Unfortunately, things were changing for Microsoft. The 2008 market crash had shook everything up.
Tim: I remember it was like 20,000 people got laid off or something like that. And a bunch of my teammates just got let go. And as big companies letting go people, it’s like a box. Next to your cube in the morning, like you have no pre notice. You don’t know you’re leaving.
You thought you’re gonna retire at Microsoft, and then you just have boxes next to it, and you have somebody watching you pack it up. And watching you leave the building in a couple hours. In almost like a 25 year history company. Like you feel like you worked for so long, your identity is completely wrapped up.
One day you’re just like, out of there.
Adam: Tim himself wasn’t let go, but he struggled with his role, which was building internally facing web apps.
Tim: It was really boring. My day job was so boring that I have to like, just find stuff I can code. Cause the job, even as a software development SD1 in a Microsoft job, you barely code, actually. You write a bunch of XMLs, you do some C# here and there. But it’s quite dry. So, I think these open source projects, uh, yeah. I was able to kind of jump here and there, just learn a bunch of things.
It really helped me to work on interesting stuff, that keep me feel like I can actually do more because my day job is just like fix ASP.net website. it’s quite boring.
Start Up
Adam: And so disillusioned with big company life, but having fun contributing to open source, Tim left to work at a startup.
Tim: But once I joined a startup, I was like, holy, you can actually just code most of your day? That was like, I never, never experienced that. Only when I was a student, right? Working on like, your coding assignments. But now you don’t have like, coding assignments all day long, right? Um, you actually just need to build stuff and people actually just use it. That, that was never ever a feeling I ever felt like, which is so funny to hear that.
If you only work at large companies, you probably know what I mean. They spend so much longer at meetings and documents and all that stuff, right? You barely even do anything coding wise. But I was so hooked on this idea that, wow, I have more direct impact and, and, and actually work on fun stuff, so I was kind of basically telling myself, I just want to join startups.
Like, even though the startup I joined first wasn’t working out, I guess it wasn’t so bad enough I wasn’t like, oh, I’ll just go back to a large company. I just like, I want to keep learning, keep doing something. So, went to a search engine startup first, and then went to, uh, work on a gaming company, as a, one of the only backend engineer.
Cloud Foundry
Adam: Then Tim joined VMware to work on Cloud Foundry. But after some internal reorgs, he found himself with nothing to do. So he just doubled down on his open source work.
Tim: I was basically spending full time working on Apache stuff. I start with, Hadoop stuff. And then went to work on Drill, which is one of those SQL and how to do projects, a query engine. Uh, so I had lots of fun becoming one of the, uh, committers, uh, that’s outside of this company called MapR that started this project.
And that really was the starting point for me getting reached out, I’m getting reached out by a bunch of companies out of, like, the Valley. One of them was Databricks, right? Early days, before it was like only, like, 8 to 10 people, uh, the Kafka team also reached out as well on LinkedIn and, um, yeah, I actually, interviewed both places, decided to go join LinkedIn Kafka team,
MesoSphere
Adam: So Tim moved to California and his open source work started to draw a lot of attention.
Tim: And, funny enough, probably like the week, first week I started at LinkedIn, working on Kafka, I started getting messages from Mesosphere.
Adam: Tim had just started at LinkedIn, but the folks at Mesosphere were giving him the hard sell.
Tim: So the CEO reached out, told me to join, got Marc Andreessen to call me, Pierre Levine to call me, like these big name investors trying to poach me.
Adam: What does that look like? Like, tell me about Mark Andreessen phoning you.
Tim: Well, it was really cool, cause, prior to moving down to the Valley, even though I worked at two to three startups, I never met any investor.
So literally the very first VC I ever talked to is Marc Andreessen in my life.
Which is really, really odd. I was like, I feel like I heard this name. I really don’t know who this person is. When Flo, the CEO, was talking, I’ll get Mark to call you, and I was like, who is Mark?
Uh, I literally Googled him, and I, I think the first result was a Wikipedia page, And I clicked on it, and I was like, oh, okay, NetSuite founder, hmm. Oh, I started an Andreessen Horowitz fund, oh, that sounds even more familiar. Like, I’m just so out of it.
I have no idea about the magnitude of these people, uh, but I realized, wow, I even like, I think I sent that link, and.
Uh, emailing some of my friends back in Seattle. They’re like, holy, I’m talking to Mark Andreessen. This guy seems to be a big shot, or something.
All I can remember, really, is, Was he spoke like five times faster than anybody I’ve ever met in my life.
I was barely able to listen to what are you, what is he talking like? He has so many words crumbled together. you can feel like he’s the smartest person you ever met. It’s kind of feeling right. All kinds of like, I was asking him like, why mesos, why mesosphere, why flow and Toby, whatever. It’s just so funny, um, that he’s just giving a bunch of like, so much information about like the future. That experience was really interesting. This is my welcome to Silicon Valley moment is talking to Marc Andreessen.
One of the decision making to join Mesosphere was I feel like that’s one of the good opportunities to join something that’s, it’s, there’s a wave and paradigm shift around it.
Start up Scene
Adam: This is the wave of changes that will be eventually called cloud native, with Kubernetes and the CNCF being created later that year.
But at this point in 2014, none of that stuff has happened yet.
Tim: And, it’s funny enough, at Mesosphere, I joined probably like, number 9 employee, but like, number 3rd or 4th engineer working at Mesos. And all the Mesos engineers were busy working on security stuff. I was a new guy, left over doing nothing. And he’s like, hey, you just joined, do some small patches here and there.
Just get to code based learning. oh, by the way, there’s this Docker thing that seems to be taking, like, a lot more attention. We want to add Docker to Mesos. How about you come and help us do that? I was like, fine. So I work with Ben Hyman, the creator of Mesos. And that was really my first big project, and then just getting Docker to be added to Mesos, And, lo and behold, once we, we, we did, and we just mentioned the word Docker. I remember we were even like announcing on our website, like, Mesos, Zephyr, we added Docker support. That single post, I think, I think our CMO told us it got like 20 to 30x way more visits than any other post at every cost. Really Docker was like the the thing we’re attached to.
So being able to be part of that early ecosystem To have see Docker took off, I become the container make guy for Mesosphere for a period of time and working with early Docker employees, working on swarm, seeing the kubernetes movements and all that kind of stuff.
VC Lunch
Tim: And I have started to have VCs reaching out almost like a Bi weekly to monthly basis like, ‘hey Tim, I saw you work at Mesosphere. Can you come to our little dinner? Can we come to our little baseball game?’ And I think all of that helped me to start to get started on thinking what to do next.
Adam: So some VC like hits you up on LinkedIn and says come to a baseball game?
Tim: Yeah, they they just found me on linkedin or some friends or like even a bunch of just found my email Reach out, like, oh, I, I saw you, are part of the Mesos committer teams. Can you, uh, we’re doing a piece comparing like, uh, Yarn and Mesos, where can you help us give us some opinions
Tim, you’re one of the interesting people, can come join this dinner and we have You know, Brian from Google or, or, this people and that and yeah, and then, VCs are also hunting down, uh, folks like me. It’s like, Hey, Tim, if one day you want to start a company, we also have a list of co-founders for you.
Adam: They say that at the dinner?
Tim: Afterwards, like dinner was just more like a mingle and a VC was like, Hey, I want to reach out and, and, oh, can, Tim, can you also be advisor for a couple of our startups are doing container related stuff like Mesos is going to be quite crucial. Can you, so I remember, uh, one of VC want me to become like advisor and consultant for like a couple of companies and also able to work with early customers with people using mesos also got me a lot of thoughts of how people are struggling to use this this container thing.
HyperPilot
Adam: Tim saw those container struggles as an opportunity, like a startup opportunity. So he left Mesos. He got a co-founder and they lined up meetings on Sand Hill road where, you know, many VCs are based.
Tim: This is pre Zoom days, pre COVID days, that you literally had to pitch in person every single time, right? Uh, get your sparkling water and just sit there waiting for, these fancy suits people to be ready. And besides talking to like the big names, we also got introduced to some of these like smaller name VCs I never heard of.
So I think that experience kind of like taught me that, Hey, the VCs that stand out, for me personally, are the ones more focused on a particular space as well. It wasn’t your generic fund because I was building a very specific thing.
Adam: That thing that Tim wanted to build was a tool addressing many of the problems he was hearing about from mesos customers.
Tim: So people using Mesos, the biggest problem after getting it set up was just like how do I actually even figure out what are the right containers right next to each other? because containers, the selling point of containers versus VMs is VMs you can only run a couple. Right? Seven to eight of them per physical machine. Right? There’s a lot of overhead, it’s slow, but you can literally run hundreds of containers on a machine.
Like, I remember like our large companies, uh, customers are literally running like, three digits of containers per machine. Hmm. Which is crazy because, container doesn’t have like such a strong isolation. So you could run into a bunch of noisy neighbors pretty quickly.
How do you know which, which thing, which, which particular machine actually runs better, right? What container run next to each other actually is better, right? How do you get the visibility in the right settings to have all these trade offs?
Salary Cuts
Adam: To be a founder, Tim needed to get VCs on board, yes, but he also had to get his wife on board. He had to talk to his wife about his plans and his career trajectory.
Tim: And it’s funny, joining startups has never been, my salary has never increased. My, my salary just went down in time. We supposed to go up, right. As a, as a normal career progressing person, right. He’s from college, SD1, SD2, senior engineer. You want to just, you want your salary to go up. You want your title to go up, not flat or not down. Down has something really bad
Adam: And now he wanted to cut his salary again and to take a small seed stage CEO role. His wife didn’t get it, but she wanted him to go after what he cared about.
And so he started HyperPilot. After two years of hard work, HyperPilot was acquired in 2016. It wasn’t a huge acquisition, there’d be no shopping for yachts, but Tim suddenly had some cash on hand.
Tim: We have an acquisition post, we put out there. Uh, I just have friends reaching out to me. Oh, Tim, congratulations, getting, joining Cloudera, can we catch up? And, I have more time, and of course, my salary is nothing great, but, um, better than paying my founder’s CEO job.
Adam: So despite his general career trend, Tim now had more money than he was used to. And even though running his startup was tough, you know, he missed parts of it. He wanted to talk to other founders. He liked that experience. He wanted to stay connected to that world. To him, it was clear, right? If he found the right idea, he’d be back at it again, starting his own company.
And that’s how he started talking to David.
Investing In Flatfile
Tim: I met David, I think a conference or something like that before. So I really knew him and I think I saw him starting a new company, just randomly browsing LinkedIn and We’re just chatting. Hey, I’m gonna start a pre seed round. Tim, you’ve been a founder. Can you help me out knowing what investors to talk to? What’s it feel like to fundraise? you know, let’s chat about it. Like, also like, hey, I’ve been doing also like, I’ve learned so much trying to sell to enterprises as well. I’ve gone through a lot of troubles and it was interesting. Helping the founder.
I still remember, everybody was having trouble figuring out if this was going to be a big company or not. Because Flatfile, in the early days, was doing like a small feature. It’s like, import your CSV, import your JSON into your website, right?
Adam: David listed him as a reference and soon other investors were calling.
Tim: Because most investors are not technical. I am. So they want to talk to somebody else that are technical to help them learn more others perspective. So he put me up as a reference and I started talking to investors for him. Like, why I think Flatfile has a chance to become something much bigger, and I think I was doing a good enough job, some folks do come in at the pre seed, and anyway, that, that kind of exercises was interesting, realized,
The reason it was fun for me to talk to investors, because it’s not just my engineer hat, being a founder, especially being like a CEO, and I’m, I’m not a good CEO, like I was shitty at it, but, you just have to learn enough. To know what a product is, right? What part of marketing is, like, why does the customer want to buy from you, right? Like, there’s a whole lot of exercises there, and fundraising as well is all about selling your future, right? So at least I’ve gone through it once.
Adam: So because he enjoyed it and because it felt impactful, Tim started spending a lot of time talking to these pre seed founders. These founders who just have an idea who haven’t really started or gotten funding yet
Tim: Hey, Tim, we love talking to you. You always been friendly.
You know, you just went in our shoes. We just want to work with you. Do you do angel investing? And I was like, uh, I never tried it. How does this thing work? After talking to founders, what I realized, they just wanted me to be involved. They didn’t even care what it amounts.
Adam: Tim’s excited about this, but it’s a family decision and so he brings it to his wife.
Tim: I was fortunate. I think she let me, of course we don’t have that much money to burn. you know, having an exit definitely helps, right? Because you suddenly have like some sort of infusion of some capital and even though it’s not big, you can choose to kind of like do other things.
We’re, we don’t have kids yet. We’re still young. I guess we can still able to like, do things and I, I treat angel investment. Not as like a spare money to like do hobby actually to me was almost like a way to like still get involved in a startup ecosystem because once you’re in a big company, even though i’ve been a founder before once, you’re in a big company, you know your your time energy is supposed to be consumed by whatever the big company things are doing.
And so I don’t get to see what a startup world is like anymore. So it’s almost like I know I never want to be here long term and I know I want to either by searching for something else, right? So this is almost like a way to help me network and be able to still plug into other things that’s happening.
It wasn’t like I have a budget of how much I want to spend on angel investing. I just started with one check first, right? Or one or two checks. So it was like 5k, you can kind of try it out, and see. it’s impossible to know if I did the right choice or not.
But one, one thing I definitely realized quickly after angel investing is like, helping founders, that is a particular thing that can grow a reputation Founders start to talk to other founders about me and also talk to their investors about me.
Adam: Just like with Flatfile, other investors want to know why Tim invested in a specific company. They see him as this technical expert, so he’s already vetted these ideas, which is great for them because many of them aren’t technical or they’re just not familiar with this area.
I think by seeing me being helpful to their founders and by seeing them, I’m also adding value to their processes. They just want to sync with me. Like I’ve invested with basically say, Hey, Tim, can we just sync up every month or every two weeks or something like that? And they prompted it, and I was like, sure.
Tim: And I, I was intrigued, right? And every discussion was so interesting, right? You know, like, oh, we’re looking at this company that’s doing a, uh, a graph thing, and it’s doing a machine learning and networking, and what do you think, Tim?
Like, from your engineer background, how hard this is? what is it? you know. I just, I just realized this is so cool. Getting to be plugged into like all these interesting things was so interesting.
Exploring Venture Capital Employement
Adam: Of course, there’s a big problem with Tim’s new sideline and angel investing
Tim: The part that sucks is, you’re never gonna, you’re never gonna see those money back anytime soon. So we’re all gonna run out of some pool of money at some point in time.
Adam: Because investing in a startup at the point where it’s not even really a company, right? It’s just a founding team, even in the best case where it becomes a huge company and IPOs, like that might be in year 10 and this is year zero.
Tim: So I can’t recycle any money back from that pool of money I put in. For a long, I don’t even know when it’s ever gonna come back, or, or none, none of them will come back.
Adam: So Tim had another idea. He’s good at helping founders, and he thinks he can spot promising ideas. So why not just get a job at a VC firm?
Tim:
And so I tried that probably try like six months or seven months Talk to maybe like ten ish funds, Yeah, nobody wants to hire me Yeah, it wasn’t a thing. I wasn’t a hot commodity whatsoever.
Adam: What does that look like?
Tim: I mean, one is like these VC, no VC funds has a job opening called investor, come apply here. Right. Especially I was like thinking if I want to join a fund, I want to join a fund. Like, I feel like I can learn a lot from, so hopefully it’s a name I heard So that even makes it even harder
I didn’t realize how hard it is to join a VC fund. I know it’s like maybe not easy, but I didn’t really have any idea. how difficult it might be to do it.
But just putting a word out there like, hey, I am interested to join a VC, as a VC. Is there any opportunity opening? And some folks, say, Oh, maybe let me ask some friends, and I, even somebody even reached, uh, refer me to a recruiter. Cause there are actually recruiters finding VCs roles as well. And so they also connected me to some. VC that are looking for investors to join.
It was all basically word of mouth to some degree.
And, and these interviews are so weird too. It’s like, come on, talk to us. Well, come talk to this partner, Oh, come grab a coffee. Oh, maybe join a little founder pitching too, and just invite me to things very ad hoc ly. There’s no steps, there’s no plan, there’s no what you’re looking for. I have no idea what they’re looking for. It would just be a random text message or email. Hey Tim, do you want to come join us? Uh, grab some, uh, this and that. And then just don’t know what happening afterwards.
No, no next steps. No, no, nothing. Um, so yeah, that’s, that’s like the process. It’s just like completely abstract. Like, what is happening here?
Why VC
Adam: And what, like, what did you think you would get out of all of this?
Tim: Well, I think the base level is I don’t have enough money myself to back more founders, right I’m meeting more and more interesting people because people are saying good things about me It’s not like crazy amount but definitely growing.
Adam: But why do you care about backing founders? Like you must have got something out of it?
Tim: You mean like money wise?
Adam: Like, whatever wise.
Tim: Oh, I got a lot of satisfaction. Yeah, I feel great, like. You know, I think a lot of founders have a hard time being investors. Because being an investor, you don’t, you’re not in the driving seat. And to be good founders, you almost have to have this urgency, you’re willing to like change anything, you have no patience, almost, like, I gotta make sure this thing is fixed.
Like, drive, as much momentum as possible. On the flip side, you can’t make any decisions for founders, right? Of anything, you want the founders to make all the decisions. So, I think I found an interesting way To influence without actually being their boss.
So when I was able to help out a founder and I can see what I did makes a meaningful difference in their journey. That made me happy.
Adam: Part of this, you know, was all about impact because in his day job as a big company developer, positive feedback was just harder to come by.
Tim: You know, why I enjoy being a startup in the first place was I was coding.
I can see myself compile and it runs right in production. That’s fun and cool. Right. You want that feedback, right? If I’m just doing something like in a large company, I’m building a little feature, barely even get mentioned. It’s no difference whatsoever. Like why, why the hell are you doing this anyways? But I guess maybe because I saw that feedback and I really feel so. Uh, happy that I was able to make someone else more successful.
And I was happy with it. And I think that made me like, you know what, if I can keep doing this, this actually might be fun
Adam: Some people, I mean maybe most people want to be a VC because it feels like a path towards wealth and towards glamour.
Tim: I didn’t really care about any of that, Um, and I didn’t really thought VC any much glamor in the first place. It was really more just solving a problem because I have no, I don’t have enough capital to keep backing companies. I just want to keep doing this. And the only way to keep doing this is to get paid because, uh, I, I do have a family and expenses and mortgages and stuff like that.
It wasn’t like I’ve sold my company for millions and millions of dollars, right? That’s really like the only thing I was trying to solve.
Starting Fund1
Adam: But Tim’s strength as an investor was actually a weakness when it came to interviewing as a VC.
Tim: Well, Tim, you look like a, you a coding bro, Ha ha ha ha ha! Like, implying I don’t look professional like a VC is supposed to be. Or, or not even dress codes, but even like, um, particular way they want you to talk. They feel it’s professional.
Adam: Tim wasn’t an MBA. He didn’t have a business background and it showed he didn’t feel like a cultural fit. Sure. He could vet engineering ideas and he could bond with the coding bros, but to the VC firms, if there was a social event, it would feel like he just didn’t click. And then his family grew.
Tim: We have our first son. My wife and I really, I think Seattle is much better for, for us to raise our family. So that’s for, for family reasons, we moved back, not for anything professional. and I was, I think I was fortunate. One of my good friend, he was, um, a partner at AngelList,
And uh, I was just catching up with him, like, hey, I, this is Jake Zeller, hey Jake, I have no idea why, nobody wants to hire me, I’m, I’m doing, I’m having fun doing angel investing, really want to see if I can pursue this, and um, yeah, he, he just told me, like, Tim, you should go raise a fund.
I was like, dude, how do I do that? he, he, he gave me like a pitch deck templates first, like, okay, write a deck first. You got to figure out what your fund is, Help me fill out some details. Like how big of a fund, how many investments you want to make? What is your thesis? He gave me some examples. It basically kind of like, like the seven, eight pages, like Google doc template to start with and filling out some information.
So Jake told me like, okay, Tim, you’ve never been to VC. I don’t think you’d even know if you like it or not. So don’t raise too much, right? You’re going to probably do this part time. So raise just 1 million, uh, uh, see if you can just raise enough to just get started and see if you can figure out if you like this or not. That sounds like a good plan if I can do it.
Adam: Like, what is the thesis? What do you tell people besides I’m raising a Fund?
Tim: Well, Jake helped me narrow it down.
So basically Jake told me. Yeah, just to infrastructure, DevTools, that’s it.
And just to one million. So he, I, it wasn’t me thinking about my thesis, really, of like, narrowing down my area. It’s just like, Jake told me just, this is the thing to do. I just, I just did it.
Adam: Eventually Tim refined this even more. He wanted to invest in people that were like him, technical founders, building infrastructure, building dev tools. And while he didn’t have much money to invest, he offered a lot of guidance because he was literally just that person, right? He had just been an infrastructure founder himself.
So with this clear focus, he took his idea and he took his slide deck out on the road.
Tim: So went to Bain, they’ve put 10 percent in first and of course Jake himself and his friends put another like 10%. I was like, wow, I. Now I have 20 percent of my 1 million raised.
I guess I could maybe raise a fund, right? It was, it was a weird feeling. I have no idea what I’m doing. Uh, but, uh, just having that early confidence and, and, momentum to start off with. Let me start to just try it.
LP Pitches
Adam: Jake tells Tim to just start talking to everybody he knows with money, right? As the fund manager, Tim will be the general partner, he’ll be the GP. And now he has to find LPs, the limited partners
Tim: So raising LP money was so weird. Cause I don’t know. I don’t, I don’t know how to. Who’s the right people. So I’m just trying different friends and people. And then I quickly realized that trying to convince all these like big company engineers that raise backing a fund makes any sense. It’s almost like a futile exercise.
Adam: A big company engineer, it turns out, has a hard time picturing how Tim writing checks could actually make money.
Tim: And I don’t have any good answers for how long it would take to make your money.
Like, I don’t know, yeah, raising, running for funds is quite interesting because your LPs are definitely not professionals. Not even knowing this thing you’re doing. They do have the capital and potential to be part of your journey.
Yeah, versus like when you raise money as a founder, you’re raising for VCs. However you think VCs are bad or good, at least VCs know what you’re doing. don’t have to teach them what a founding company means, right? They’re already set. You know where they are. They have a website. They’re here to put money in you.
Adam: Tim realizes he can only raise money from two types of people. Those that believe in him or those that believe in one of his angel investments.
Tim: Like remember Jake Zeller, or, or, or these VC funds, I think VC funds backing me was relatively easier because they can see my portfolio companies and they know them.
They’ve seen them raising and they have their own judgment calls. Oh, wait, these are interesting ones. They’re good ones, right? even though early that they know it, right? And, and they may not actually have the opportunity to go deep dive into it because they saw after announcement or whatever.
That got them interested.
Contracting
Adam: So meanwhile, while Tim’s doing all this, he still has to pay the bills. A traditional VC fund, if it’s like 200 million, they cover expenses with a 2 percent yearly management fee. So that would be 4 and networking dinners and so on and so forth
Tim: And Jake also like suggested like, hey, one million fund taking 2%, it’s not going to pay much anyways, yeah, don’t bother doing it. So try and just take no fees, and so I took no fees. So I had to put my own money I put five percent of my fund myself and pay myself nothing And spending a lot of time doing this. So this is like, uh, like, okay, I got to figure out how to get myself paid. I have no health insurance. I got, I got nothing.
Adam: To keep the lights on and stay flexible, Tim starts consulting.
Tim: And doing open source, the good news is, like, my resume is already on Github, so most of the time I don’t even have to, like, come up with a way, it’s like, hey, look up, I’m a committer for this, I work on Spark, I work on Kafka, I work on Docker, Kubernetes, all my patches are there, my talks are there.
Let me go find some contracting jobs, work on a side. So that’s kind of what I did. I started finding some contracting jobs here and there. One of them turned into, like, really wanted me to join full time, so I joined full time.
Actually, the CEO actually even asked me want to be their director engineer or something like that, because I previously I was VP engineer at a startup, right? I was like, hey Tim, you want to help out man?
We have nobody actually able to have experience leading teams. Do you want to help us like, uh, lead a team? And I told him like, hey, I just, give me an engineer job. I don’t want to manage anybody.
Being a VC, like, logistically, one of the hardest things, beyond like the fundraising times, it’s very difficult, but even after you’re able to fundraise, the hardest part is really able to, like, sustain yourself. Like, putting money in yourself, and not getting much out of it.
How do you actually have a job you can able to kind of get by while spending so much time on your fund? It’s quite difficult. Yeah. So I literally had to figure out how to like maximize my time as much as possible on both sides. Do my job in the most minimum amount of time possible. Uh, and try to do as much as I can as a fun, right?
So depending on the afternoon, it will probably be either a sprint planning meeting or a Zoom call or me trying to work on some feature.
With the Zoom call next to it. He’ll be VS Code on the right, Zoom call on the left. And, and, I don’t know. It’s just like, I was, I have to spend my lunch meeting, my night time, after my kids are sleeping, and some early morning spending time working on code. And then the rest of this, all the sprinkle time to do Zoom calls.
Adam: Tim loves the Zoom calls with founders. That’s what keeps him going, right? Finding ways to help them out. But now he’s swamped with pitches and code to commit and PRs to review.
Tim: And I originally when I was just starting off I had one hour zoom calls, right? And I realized I just can’t get over talking to enough people So I went to into half an hour zoom calls, I have a 15 minutes phone calls I think this is way too long.
I can’t really get anything done. But you know, it’s just like yeah, yeah, the day is pretty much filled with VS code and zoom call on some overlapping Frequency.
Adam: But Tim managed to keep that up. He managed to deploy the million dollars and still keep his job and still pay the mortgage
Fund 1 Deployment
Tim: I was able to invest in some interesting companies from FundOne, Looking at some of my, actually I have my Fun1 portfolio in front of me. I baxed like, warp. dev to develop a terminal company. I was working on ready sets. I’ve baxed, Dataflow, Sardine, and Metaphor, and Coils.
So these companies are like, considered hot back in the day, basically. And seeing my name show up in TechCrunch on a repeated basis was really interesting. just because I have so, I’m writing small checks, right? So, and somehow I was able to get into good companies over and over.
Impact without Profit
Tim: Tim feels like it’s working because he has all this insider knowledge and immediate feedback. A founder needs help and he helps him or her and that helps the company.
Adam: He sees the impact. And there’s a long term vision, which is pretty clear, right? he waived his 2 percent management fee, but if the fund makes a profit, he gets a 20 percent carry. That means once investors get their money back, he gets 20 percent of the profit. If 1 million turns into 2 million, he might get 200,000 in profit.
But that’s not going to happen for many, many years. Not until all of these various investments are realized. And to outsiders, this can seem a bit made up, right? You take a million dollars, you turn it into checks at various super small, super new places. And then you hope on the other side, 10 years later, it’s actually turned into more money.
Tim’s wife was super supportive, but she was skeptical.
Tim: She’s not an engineer Um, and she never worked in an engineer company, right?
You So she doesn’t follow any of these startup things at all, like, she’s not looking at TechCrunch, all she sees is like Microsoft or OpenAI and some fun stuff like this, when I’m, I’m excited, like, Oh, one of our companies raised Series B, you know, and got into the news this way and, Uh, it’s like, oh, that’s great.
How much did we make? Ha ha ha. Uh, nothing, still on paper. I was like, don’t talk to me when we make at least something real cash, right? uh, there are, she’s way more DPI seeking than any of my LPs, if you know what DPI means, you know.
So in VCs, we’re judged in the end by DPI, by LPs. Real cash return to LPs, because a lot of times when you have a new round, it’s just on paper. Valuation worth 400 million, it raised 25 million out of this. So on paper, it looks like a higher price of a per stock you own, but they haven’t exited anywhere. But they haven’t sold it. You can’t sell it easily, right? So it’s all on paper. It’s like playing Monopoly money, virtual currency almost, right?
Like to, to, to my wife. This feels like virtual currency. Like I’m playing a video game with fake money building, like little buildings in some games, like, Oh, look at that monopoly building.
Just went up to 10 X. You know, look at, I don’t know, Jasper or, or, or mother duck went into 10 X. Like to her, it’s just like. a fake thing, like, cause you being a VC, unfortunately be early means you don’t really get much capital back at all. the only capital is your management fees, but you also spend so much money to put in your fund.
To her, it’s like, it’s just crazy. Like you’re spending so much time, spending all these things, doing meetups, dinners, all this stuff, and you’re just getting like these fake money on paper, uh, uh, when are you actually gonna actually get real money back, like, hey, uh, our friends next door working at Snowflake, the IPO, they got, bought three houses, so anyway, She’s, despite of all this, like, completely not understanding what the hell is going on here, uh, she still supports me, which is like, I think it’s actually difficult, right?
You know, supporting your partner, doing something you completely don’t understand, but actually has meaningful impact on your family because it’s your financial, backbone, right, uh, takes a lot of, like, faith, I guess,
Adam: And yeah, also it’ll be 10 years before the results are in. But you can’t do something like this part way.
Tim: There’s never a best time to do anything, I realize, in life, And everything worth doing takes, not just, A lot of effort and money, but also a big amount of time.
Do you have that much time? You have kids now, why do you want to like, make this happen, right? Family has issues, like, So this got to work. Like it doesn’t you don’t know if it’s gonna work But you have to spend so much time and energy and, and, and things to potentially see it working, or you can’t just put half assed in there.
Like you actually do have so much time. So you have to really, really like it, but you also have to have optimistic and also bring optimism around you.
It’s usually, a lot of people don’t choose to do this, not because it’s not doable. It’s rather like, the uncertainty of it. Because you actually do need to put so much in, and you might have nothing back
Up and Downs
Adam: But yeah, for Tim, it’s unknown if things will work out, but along the way, he’s getting little hits of feedback, little dopamine hits because he’s helping founders out. He’s helping these founding teams with small tactical things. Maybe they won’t make it long term and become the biggest thing, but medium term, he’s making a difference.
And after Fund 1, even with uncertain returns, Tim raised his second fund, 7 million dollars, 7 times larger.
Much of this came from VC funds who were recognizing that a lot of his early bets were turning into valuable companies. Tim is gaining momentum.
Tim: And because of that, I’m doing poorer and poorer on my job.
So, uh, I know the time is coming. Like a doom day is coming anyways. So, but I was trying to like prolong the insurance and the paid salary as much as possible.
I was like, okay, I see this is not going to happen.
So I have to leave. Uh, not, I wasn’t forced out, but, uh, I, it’s kind of getting there. After I raised maybe about six months or so, I quit and just pretty much dedicated most of my time to, to do this.
Adam: Could you take a salary at that point? Was the fun big enough or?
Tim: I was finally able like to take some salary, but it wasn’t a lot. Um, 7 million fund, I take like a small percentage of it to be my, uh, salary, but yeah. So I still, I was trying to find a part time job actually,
So Bessemer was my investor before for my startup. I was talking to like the, the GP there. I was like, oh, I’m figuring out what to do. I have to pay my insurance now, it’s not cheap at all, and stuff like that.
So, hey, well, maybe you’ll figure out something. Luckily did figure out a small role for me as a part time job. So I was there about like six to eight months, almost like basic contractor, but they pay me some salary Doing stuff for them, but it gave me a little taste of what does it feel like to work at the VC fund actually.
Adam: You finally got your in at the VC?
Tim: Yeah, it was funny that there are times I need to reach out to other people as hey, I’m uh, I’m a Investor out of Bessemer, right?
Uh, we backed Twilio and Pinterest. And, uh, I was in a partner meetings. I was in team meetings. I was able to, like, see a little bit, like, say, like, more than half of what it feels like to be part of a, a larger fund.
Fund 3
Adam: Now, Tim’s on to Fund 3. And he’s earning enough to support himself without needing side gigs.
Tim: I will say now after six years in I kind of went back and forth on how much faith and belief into what companies were back, , now I trust my instincts way a bit more than I even started with, funny enough. And, we have our first biggest exit happened probably like a month or two ago. A company called Tabular, you know, sold Databricks and, uh, it’s not like made me rich or anything, but finally at least made us return some money.
That seems like more than just a tiny bit, right?
Adam: So now at six years and doing it full-time, Tim no longer has to code during pitch meetings. But like any experienced developer who’s seen many things go sideways. Tim is still a bit uncertain about some things.
Tim: So on one side of the hand I actually do know I’m gonna keep doing this, because, one, I already enjoy doing this for the most part. But am I really good doing this? I, I hope so. I think so, it’s just, I have to really keep figuring out more things, and keep learning, uh, as much as I can. To make sure I am at the best level. My best position to return better things.
So I don’t know. It’s just weird. This is a job. Like I still remember the days I can compile my code and push a production and see, see, see my, high crazy logs flying left and right when. When I was working with Halo, Halo 5 back in the day, right, the game launches and everything is just crashing and burning and it’s like, oh, Jesus Christ, like, okay, this is clearly something that I code is not working here, I gotta go fix it and then, right, you, you, you kind of get to know if you’re doing something good or bad, to some degree as a developer, um, but as a VC, your stock you pick can go anywhere, things that seem to work may actually just crashed and burned. Then somethign that doesn’t seem to be the most high flying thing, so it just blows up to be the biggest thing.
So, in, in the end, um, it’s much more about believing the team has what it takes or has relatively higher chance than anything else we’ve seen to succeed. And you have to have that belief. Like, it’s not obvious, but we believe that.
And we just have to be right a few times every fund. That’s kind of it.
Adam: Like, I mean, you came into this because you had your unique experience with like, Yeah. With like, ops tools and dev tools and stuff. How do you make decisions? I assumed it was based on, like, the depth of your skill.
Tim: The real answer for sure is still based on belief, unfortunately. cause I, I learned that no matter how much work you do and how much groundwork and how much data you look at, at the stage we’re backing, you can’t really have enough data to convince you just purely on paper.
You, you, you have to believe, And create this sort of like ecosystem of, belief to continue to like make sure this can continue to be working. And it’s a self fulfilling prophecy.
It’s, it’s like, it’s really, it’s one of the most interesting job I ever see, is being a venture capitalist.
Outro
Adam: That was the show. Thank you, Tim, for sharing your story. Tim, besides his VC firm, has a podcast about trends and computing infrastructure called Yet Another Infra Deep Dive. You should check it out. But yeah, I still think it’s wild that Tim spent years, with his VS code and one monitor and a zoom call.
And the other, you know, cranking out work between company pitches at the same time, like it sounds wild I think of a VC and I think what their days would look like, I never thought that, you know, between pitch meetings, they have to jump into a sprint planning meeting.
They have to do PR reviews amongst, you know, coming up with funding, doing whatever the legal paperwork is to make these deals work. It’s really wild.
And yeah, if you like this podcast, subscribe to my newsletter where I cover similar topics, follow me on Twitter. And for true fans, the best thing you can do is go to (https://corecursive.com/supporters)[https://corecursive.com/supporters]. And, uh, that’s like a Patreon page. You can join as a podcast supporter, receive access to bonus episodes, and really just support me and join the community. And until next time, thank you so much for listening.
Sticher
Overcast
Sep 02, 2024
46
min