VC Jeff Crowe on making the Midas List while his school teacher daughter struggles to pay rising SF rents
Forbes' Midas List of top venture capitalists is getting more competitive to break into than ever. This year there were only 19 new faces, compared to 25 last year and 38 the year before that. The Forbes methodology for picking the best VCs of the year is a murky mess that everyone loves to hate, so it's not totally clear how the Midese (plural for Midas in the Pando dictionary) earn the accolade. You can read Forbes' convoluted explanation of its process here.
One thing is clear, however: The Midas List is a mark of prestige for those who make it. It tilts towards investors who made "newer, bolder and earlier bets," favoring the ones who landed big whales of an exit in the twelve months prior. Whether it's the best way to calculate good investing or not, it's better than other metrics like number of investments or, say, a Klout score.
Pando sat down with one such newbie on the eve of the news: Jeff Crowe, Managing Partner at the relatively unsexy Norwest Venture Partners. Little about Crowe is sexy. He has been in the investment game for ten years, and founded a software company called Edify in the decade before that. He made the Midas List for the first time ever this year -- at number 77 -- because of his investment in a less-than-sexy unicorn: RetailMeNot. It offers online coupons for the scrimpers and savers of the world. As Pando alum Erin Griffith has covered, it's a favorite among Midwestern moms and largely forgotten by the T-echo Chamber.
It's not exactly revolutionary, but Crowe made an early bet on the company's ability to scale, and when it went public in July he reaped the benefits.
We chatted about everything from his experience as an entrepreneur -- it was so tough he could only hack it once -- to what it's like to be named to something called the Midas List during the most socioeconomically tense time in San Francisco's recent history.
The best bits are below, editing for breadth and clarity.You were a founder before you were a VC. Tell me about your life as an entrepreneur and how the transition from entrepreneur to VC came about?
I came out here to the Valley 34 years ago. Think about that ladies. 34 years ago.
I was a sparkle in my father's eye.
Exactly. We left this company Rolm, with eight other guys, to form a company called Edify in 1990. And I will wager that my startup Edify, with nine founders, is the biggest founding team in the history of the Valley.
I'll look into that. Sarah Lacy would know off the top of her head.
This amazing cool company called Edify, that was in the enterprise software space. It was self service software.
Then along came the Web in like 1993 or '94 and we went, 'Oh my god. This changes everything.' And so we added the Web to all of that and the company just took off. We raised venture money all along the way. Sutter Hill was an investor, the predecessor firm to Benchmark was an investor, Greylock was an investor.
In 1996 it went public, we ran as a public company and then we sold it in 1999. I was CEO from the time it was eight dudes plus myself in a garage.
Was it literally a garage?
It was literally a garage. We were in the garage of our CTO. Charles Jolissaint.
Because now they say garage and it's never a garage. It's maybe an Airbnb rental or a rather plush SOMA loft.
It was a garage back then. You can print that. It was a garage. That is definitely on the record. Our CTO Charles Jolissaint -- in his garage.
Was it at least a comfortable garage?
It was not comfortable. [leans closer to the recorder: Charles it was not comfortable!] But we were there. And yeah, it was a great outcome. We were at 400 employees when we sold the company, $80 million in revenue which doesn't seem like a lot today but back then was a lot, and it was a great outcome.
But as we were talking about before, the highs are high and the lows are low. There is nothing like the high of being a CEO of a startup when things are going well. There is nothing like that high. There is nothing like the low, either. And you have to have the constitution to deal with both the high and the low. It's really important.
Another thing that is significant is it's a very different skill set to be the founding CEO with eight other guys in a garage versus the CEO when you have 400 employees, 80 million in revenue, and you're public. It is a real trick to scale from being an entrepreneur to an executive. I have tremendous respect for the people who can do it. I lived through it and it's tremendously stressful.
Did you feel like you only had that in you once and that's why you wanted to go into investing?
Before I went to business school I worked for a large bank in Boston on the investing side. I was a security analyst recommending to portfolio managers what stocks to buy.
I loved investing. I looked at venture capital when I came out of business school before I started Edify, I looked at it pretty hard then. I felt that I really wanted to try to do it myself. Being an investor is totally different from being a CEO. And being an investor -- being a CEO you're like the quarterback. Being an investor, you're not even the coach. You're up in the owner's box. Right? And I just wasn't ready for that, to be up in the owner's box at that point in my career. I really wanted to try to do it myself.
So I did it, it was like -- there's the movie, you're directing the movie, you're in the movie. And at the end of it, I didn't necessarily feel like I had to do it again.
Because I had always thought about investing. I had always loved investing. That was point one. Point two, the highs are really high and the lows are really low.
It takes away from your time with your family enormously. My oldest, by 2002 she's in 10th grade. Back in 1992, I'm in the middle of my startup. They had Dad Day in Kindergarten class, and I never made it for my daughters. I'd send my brother, their uncle, as my proxy.
At some point you say, 'If they go off to college and you're CEO again, you decide that's a sacrifice you want to make.'
But for me, number one I loved investing. I love the intellectual challenge of trying to figure out who is going to win.
How did you adjust to the pace of being a VC?
I think you really just have to adjust your daily rhythm. It's just what it is. It's a very high paced daily rhythm in the venture world, it's just a different rhythm. It's no less energetic, it's no less busy, it's just different.
I'll give you another example of how it's different. An entrepreneur, you're always working towards a yes. You're trying to recruit someone to join you. You're trying to sell a customer. It's always go for yes go for yes go for yes. In the venture world, sure sometimes you're trying to convince an entrepreneur to accept your money because it's a competitive deal, so you're working for a yes there.
But more often than not someone is coming to you and you're going to have to tell them no. Think about it. If I see 100 deals a year I might invest in one or two of them. And so you're going to say no 98 or 99 times out of 100. That's a very different mentality from always working towards a yes.
I am by nature a positive optimistic person. And I resonate with, having been a CEO, founder, and having raised money, I resonate personally with a lot of these CEOs and founders. But I only have the capacity to invest in one or two a year.
That's the hardest part of my job. Because I'm wired to try to figure out the path to yes. And in the venture world you just can't do that.
Did you know you were going to be in the Midas List?
I really wasn't sure. We had a great outcome with RetailMeNot but it was clear there was a lot of positive outcomes for venture investors in 2013.
What did you do when you found out?
I'm driving down this gorgeous road [on vacation] in New Zealand, spectacular scenery. I said [to my wife], 'Hey looks like I'm going to be on the Midas List.' And she goes, 'What's that?'
It's a strange time to make the Midas List, given the socioeconomic tensions in San Francisco. The honor has different implications in other circles. From your perspective what do you think of the class battle happening in San Francisco?
I have very mixed views on that. On the one hand, I think in free market societies, when you have companies and their employees who are doing very well, it's natural they're going to end up bidding up rent as an example. And we're seeing that in San Francisco right now.
At the same time, my daughters are in their twenties. I have a daughter who is a schoolteacher. She's a teacher, and she wants to live in the city. And we were just having dinner the other night and she's saying, 'Dad, I have no idea how I'm going to be able to afford to live in the city.'
So, in my own family I can feel the difficulty of what that means. And she adores San Francisco, She loves this city.
Are we saying that teachers aren't valued members of society? And what does that mean? I don't have a magic answer but I have such mixed emotions about it. I applaud the successes of the companies that have been here and the employees who are here living in the city have every right to pay what they're willing to pay. And at the same time if everyone who is a teacher gets priced out of San Francisco where are you?
[image via Norwest Venture Partners]