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    Art of Investing

    Ho Nam - Lessons in Venturing Differently

    Mon Jun 10 2024
    RetreatSuccessVenture CapitalEntrepreneurship

    Description

    This episode covers a wide range of topics including an announcement about a retreat in California, the speaker's early life and education, the concept of 'da-da-da' and drive for success, college years and career path, early career and venture capital experiences, successes and lessons learned, founding Altos Ventures, Altos Ventures in the 1990s, investing experiences and lessons, Altos Ventures' approach and philosophy, the Hedgehog concept, challenges and personal growth, venture capital insights, building great companies, capital allocation and entrepreneurship, venture capital and impact.

    Insights

    Hard work and discipline

    Hard work and discipline are highlighted as essential qualities for achieving success.

    'Da-Da-Da' concept

    The concept of 'da-da-da' symbolizes relentless drive and ambition beyond personal greed.

    Building strong relationships

    Building strong relationships with companies at various levels provides insights that can be applied to help new businesses grow.

    The Hedgehog concept

    The Hedgehog concept emphasizes focus on controllables and staying in tune with reality for survival.

    Recognizing successful investments

    Recognizing successful investments over time is crucial for venture capitalists to thrive in the industry.

    Great opportunities in life

    Great opportunities in life are rare, and it's important to distinguish between good and great companies.

    Real due diligence

    Real due diligence starts after making an investment, as investors become insiders working alongside founders.

    Relationships and trust with entrepreneurs

    Relationships and trust with entrepreneurs are valued more than control or board seats by investors.

    Venture capitalists as a form of support

    Venture capitalists view themselves as a form of support for others on a journey of self-discovery.

    Impact over managing capital

    The founder prioritizes impact over simply managing capital for personal gain.

    Chapters

    1. Retreat Announcement
    2. Early Life and Education
    3. 'Da-Da-Da' Concept and Drive for Success
    4. College Years and Career Path
    5. Early Career and Venture Capital
    6. Successes and Lessons Learned
    7. Founding Altos Ventures
    8. Altos Ventures in the 1990s
    9. Investing Experiences and Lessons
    10. Altos Ventures' Approach and Philosophy
    11. The Hedgehog Concept
    12. Challenges and Personal Growth
    13. Venture Capital Insights
    14. Building Great Companies
    15. Capital Allocation and Entrepreneurship
    16. Venture Capital and Impact
    Summary
    Transcript

    Retreat Announcement

    00:00 - 07:02

    • An announcement is made about a retreat in partnership with David Senra of the Founders Podcast happening in California.
    • The retreat aims to bring together high-quality people for meaningful collaborations and discussions.
    • The venue chosen for the retreat is surrounded by Redwoods, offering a beautiful setting for networking and learning.
    • The hosts emphasize the importance of quality time spent with like-minded individuals during the event.
    • Details about the event logistics, including meals and planned activities, are highlighted to ensure a seamless experience for attendees.

    Early Life and Education

    06:44 - 14:02

    • The speaker shares about their early life, growing up in Korea and immigrating to Southern California in the 1970s with limited resources.
    • Despite challenges, the speaker's parents worked hard to establish various businesses, including a gift store and a corner convenience store.
    • The speaker's educational journey included being identified as gifted despite language barriers and skipping a grade at Andover boarding school.
    • Reflecting on life decisions, the speaker emphasizes the importance of long-term thinking and doing the right things for success.

    'Da-Da-Da' Concept and Drive for Success

    13:33 - 20:58

    • The speaker's parents worked tirelessly without taking vacations for over a decade to survive in the US.
    • The speaker's mother, despite being successful in business, was not as ambitious as her father who was driven by curiosity and continuous learning.
    • The concept of 'da-da-da' symbolizes relentless drive and ambition beyond personal greed, focusing on continuous learning and serving others.
    • Hard work and discipline are highlighted as essential qualities for achieving success, along with allowing curiosity to guide one's journey.
    • Finding a purpose or cause bigger than oneself can provide a lasting drive and fulfillment in life, similar to how Steve Jobs shifted his focus towards serving a greater cause.

    College Years and Career Path

    20:40 - 27:23

    • Steve Jobs picked a successor who was encouraged to lead in his own way, resulting in decisions Jobs wouldn't have made but were successful for the company and shareholders.
    • The concept of an intertidal organism, thriving in chaos, is introduced, reflecting on personal experiences and influences during college years.
    • Discovery of Harvey Mudd College through junk mail led to a decision to attend based on high SAT scores, starting salaries, and placements.
    • Harvey Mudd's emphasis on humanities alongside engineering influenced the speaker's education and career path.
    • Attending Harvey Mudd with a focus on engineering eventually led the speaker to a career as an investor.

    Early Career and Venture Capital

    27:02 - 33:46

    • The speaker initially worked on a summer project related to Henry Singleton and Teladine, which led to being listed as a co-editor of a reference book.
    • Henry Singleton is regarded as one of the best CEOs in corporate history by notable investors like Buffett and Munger.
    • The speaker's early career included working at Bain, where they were attracted to the entrepreneurial environment and had exposure to the venture community.
    • The speaker later joined Trinity Ventures, where they learned from mentors like Larry Orr and Noel Fenton, gaining insights into venture capital and deep value investing.
    • Starbucks was a pivotal investment for Trinity Ventures, exceeding expectations significantly.

    Successes and Lessons Learned

    33:19 - 40:30

    • Starbucks exceeded expectations by being 20% ahead of plan and went public with a $800 million market cap in 1991.
    • Despite the success of tech deals, one individual made more money from Starbucks and stayed on the board for years.
    • Howard Schultz played a crucial role in turning around Starbucks during financial crises, leading to significant growth.
    • Lessons learned from investing in successful companies like Starbucks are valuable for future entrepreneurs and firms.
    • Building strong relationships with companies at various levels provides insights that can be applied to help new businesses grow.

    Founding Altos Ventures

    40:03 - 47:00

    • As their company grew in scale and relevance, investors from around the world started flying into Korea to meet with them.
    • Attending Stanford instead of Harvard Business School was a pivotal decision that led to meeting key individuals like Han, who eventually co-founded Altos.
    • The decision to start Altos was influenced by professors at Stanford who suggested hiring young people to manage a venture capital portfolio.
    • Networking and relationships played a significant role in the founding of Altos, including connections made through previous experiences and education.

    Altos Ventures in the 1990s

    46:39 - 53:42

    • In the late 1990s, there was a surge in venture capital investments following the Netscape IPO, leading to a different market environment compared to the early 1990s recession.
    • Altos Ventures initially started with a $30 million fund to build relationships and gain experience before potentially accessing larger capital during market downturns.
    • Altos Ventures made a strategic decision to focus on developing early stage opportunities rather than chasing deals from more established venture firms like Kleiner Perkins.
    • During the 1990s bubble, Altos Ventures experienced success with IPOs and billion-dollar market caps but ultimately faced losses when many companies failed post-IPO.

    Investing Experiences and Lessons

    53:16 - 1:00:19

    • Investing experiences include a hotly contested deal with John Doar leading to a signed term sheet.
    • Attending Berkshire Hathaway shareholder meeting in 1999 introduced the speaker to Warren Buffett's investing philosophy.
    • Surviving challenging times between '99 and 2003, including the dot com crash and 9/11, led to a new investment thesis.
    • Raising funds involved resilience, perseverance, and convincing investors by the speaker's partners Anthony and Han.
    • Focusing on smaller businesses for growth equity investments instead of larger ones paid off with successful franchises.

    Altos Ventures' Approach and Philosophy

    59:51 - 1:06:51

    • Surviving through challenging times in the first decade was attributed to persistence, good luck, and building goodwill within the ecosystem.
    • Emphasizing patience and capital efficiency over fast growth rates and large funding requirements sets Altos apart from traditional VC approaches.
    • Altos focuses on building sustainable companies with responsible management and long-term value creation rather than quick gains or conventional VC metrics.
    • The Hedgehog concept, emphasizing focus on controllables and staying in tune with reality for survival, is a key principle followed by Altos.

    The Hedgehog Concept

    1:06:21 - 1:13:03

    • Hedgehogs focus on deep knowledge and understanding rather than superficial knowledge.
    • Hedgehogs are humble about what they know and curious to learn more.
    • They prioritize learning to serve their life's work or business goals.
    • Being a hedgehog involves staying focused amidst distractions and managing data overload.

    Challenges and Personal Growth

    1:12:40 - 1:19:44

    • The speaker struggles with prioritizing tasks and gets easily distracted by new exciting projects.
    • Despite self-diagnosed ADHD tendencies, the speaker enjoys mentoring and giving back to young entrepreneurs.
    • As the speaker ages, they rely more on crystallized intelligence over fluid intelligence to contribute and add value.
    • The importance of understanding one's limitations and honing a circle of competence in venture investing is highlighted.
    • Taking risks, following curiosities, and being willing to look like a fool are encouraged in order to discover potential successful investments.

    Venture Capital Insights

    1:19:25 - 1:26:06

    • The most profitable large food delivery business in the world is outside of China and part of Delivery Hero.
    • Venture capitalists often focus on a few key deals each year, driven by fear of missing out, but there are only a few truly great companies born each year.
    • The power law concept in venture capital suggests that a small percentage of deals will drive the majority of profits, with one deal potentially surpassing the combined returns of all others.
    • Recognizing successful investments over time is crucial for venture capitalists to thrive in the industry.
    • Having the ability to identify outstanding companies that stand out significantly is essential for long-term success in venture capital.

    Building Great Companies

    1:25:51 - 1:32:34

    • Great opportunities in life are rare, and it's important to distinguish between good and great companies.
    • Successful businesses can change lives and create generational wealth, but not all will produce billionaires.
    • Investors should be actively involved with entrepreneurs post-investment to truly understand the company.
    • Real due diligence starts after making an investment, as investors become insiders working alongside founders.

    Capital Allocation and Entrepreneurship

    1:32:22 - 1:39:22

    • Partners are working together to figure out business strategies and capital allocation decisions.
    • CEOs of successful companies become great capital allocators over time.
    • Relationships and trust with entrepreneurs are valued more than control or board seats by investors.
    • Entrepreneurs are encouraged to think independently and follow their own path for success.

    Venture Capital and Impact

    1:38:57 - 1:46:10

    • Investors view themselves as a form of support for others on a journey of self-discovery, leading to conviction and knowing where to go.
    • Venture capitalists have the privilege of exploring relationships and businesses early on, even if it may not always lead to spectacular returns.
    • In Korea, there has been a shift towards supporting tech entrepreneurship despite societal pressures favoring traditional career paths.
    • The venture capital firm has had a significant impact in Korea, fostering a sense of mission among its employees and contributing to the growth of tech billionaires in the country.
    • The founder sees their role as continuing to contribute as long as they can add value, prioritizing impact over simply managing capital for personal gain.
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