Pando

Jeremy Liew: If I were to go back, I'd skip all my operating experience and go straight into VC

By Michael Carney , written on December 16, 2014

From The News Desk

“I’ve learned that venture is hard. Startups are hard. You do the best you can with imperfect information. Some of the time, you get it right. Sometimes you get it really right. But sometimes you get it wrong. We invest in entrepreneurs and their vision of the future.” ~Jeremy Liew
Almost a decade into his VC career, Lightspeed Venture Partners partner Jeremy Liew has found his way into a few of the best companies of their generation. His portfolio includes apparent home runs like Snapchat and Honest Company. In the waiting there are category stalwarts like Bonobos and Blockchain.info.

Like anyone who’s been in the game any length of time, he’s also had some big misses. Where Liew is perhaps unique – and maybe snake bitten – is that he has a habit of betting right on a sector, for example calling social games, daily deals, and ride-sharing early, but picking the second- or third-place player in each category. His list of one-time high fliers, and early pioneers of hot categories includes Playdom, Living Social, Sidecar, and ZestCash.

Part of what sets Liew apart is that he entered the venture industry without ever having founded a startup himself. Prior to joining Lightspeed in 2006, Liew was a corporate strategy executive at Internet giants like IAC (then USA Networks), AOL, and Netscape. He also led sales at CitySearch, a mid-90’s Internet pioneer. Before his foray into the Internet, Liew was a consultant with McKinsey in Sydney and Johannesburg.

According to many in the tech industry, the only way to be an effective investor and board member is to have the empathy and experience that comes with having walked in an entrepreneur’s shoes. Liew disagrees. And while his non-founder background certainly places him in the minority in the Valley, it’s one shared by enough other top investors, including John Doerr and Fred Wilson, to suggest it’s not a black and white rule.

During tonight’s PandoMonthly fireside chat in Santa Monica, Liew went as far as to say if he were to go back and do it all again, the only thing he’d do different is to skip his operating and consulting experience all together.

“I think I would actually be a better investor if I’d spent all of my time as an investor,” Liew says. “The more you do anything, the better you get at it. If you were gonna be a surgeon, it doesn’t make sense to spend five years becoming a lawyer first. You’d be better off spending 10 years becoming a doctor.”

Liew cites Vinod Khosla as a counterintuitive example to prove his point. When Khosla works with companies today, he isn’t drawing on his experience from Sun Microsystem, Liew believes. Too much has changed in the two decades-plus since he became a full-time investor. Rather, Khosla is drawing on his experience from the boards he’s served on in last five to 10 years, Liew believes. He goes so far as to argue that having too much personal experience can even lead to over-extrapolation, given that no two scenarios are the same, Liew feels.

“Empathy can cut both ways,” Liew says. “Everyone extrapolates from their own experience in all scenarios and empathy is incredibly important to becoming a good investor. But there’s lots of ways to become empathetic. You don’t need to literally walk a mile in an entrepreneur’s shoes.”

Because of his unique background and perspective, Liew takes a different view of the business of venture capital than many of his contemporaries. For example, he is more apt to dive deep in researching a category in the hopes of arriving at a clear thesis before ever meeting with prospective investment targets in that space. It’s a throwback to the early days of startup picking.

“I’ve always liked to puzzle things out, to connect the dots and figure out where things might be going,” Liew says. “I enjoy doing this, so it makes sense for me to invest in this way. I like to say, ‘There seems to be something interesting going on over there.’ I want to meet everyone working in a space so when I meet someone doing something, I have a calibration to recognize greatness and can move quickly.”

Liew believes that by having a deep understanding of an industry or category before entering his discussions with founders he gets to skip a lot of the basic explanations and instead have higher-level conversations. And then, after he’s in a deal, this deep understanding allows him to act as a founder’s eyes and ears.

“You never see 100 percent of the picture, but even by seeing 30 percent, you’re ahead of the game compared to people who haven’t done that work – and entrepreneurs appreciate it,” Liew says. “95 percent of time, founders know more than I do – otherwise something’s gone terribly wrong. But, if you become knowledgeable, you can help entrepreneurs with more relevant insights. A good board member provides a founder with peripheral vision. This can be hugely valuable when you’re focusing on the main thing but something worthwhile is happening in the margins.”

Another way Liew differs from many of the smartest minds in the financial community is in his view of what defines success. Whereas many VCs and certainly most of Wall Street, view Groupon and Zynga as failures – at least relative to their one-time expectations – Liew has a different perspective. In defending Groupon, he argues that a $6 billion market cap is hardly a failure, given that the company was at one point just three guys and an idea. It’s hard to disagree, at least a macro level. But for investors and early employees who could have sold to Google for nearly the same sum three years ago, it’s hard not to feel disappointed today.

Asked by an audience member about what qualities make for a successful investor, Liew said: “These things are necessary but not sufficient: optimism, curiosity, a willingness to be wrong a lot, and some way to connect with entrepreneurs, whether that’s a history of success, great product insights, or a great network. But there are also lots of people like that, so you also need to get lucky.”