The Framework Project

Conversations with people thinking about tech and its impact on society.

Hunter Walk

Hunter Walk

Photographed by Christopher Michel

Hunter is a partner at Homebrew, a seed-stage venture capital firm. He led consumer product management at YouTube and worked on building Second Life at Linden Labs.

We met at the Homebrew office when I first moved back to San Francisco, and Hunter talked to me about his philosophy of bottom-up investing, addressing unconscious bias, and the work culture in Silicon Valley.


JACKIE

So one thing I wanted to ask was about this idea of bottom-up investing and what that means to you and what you see as the counter to that, which I'm assuming is the norm for VC.

HUNTER

I think it's more a philosophy about technology than it is a philosophy about investing. So when we think about what bottom-up economy means to us, it's a belief that one of the most powerful uses of technology is to empower, enable, and open up, whether it be individuals, marketplaces, access to information. As we leave behind or have left behind industrial capitalism (factories, production lines, high infrastructure costs) and move to technology-driven capitalism, that has a lot of attributes and characteristics, many of which excite us.

I'd say that how that influences our investing is that we think some of the most exciting opportunities are not about technology benefitting just the wealthiest consumers or largest companies, but essentially giving new types of marketplaces, revenue streams, data efficiencies, and access to those to a broader set of consumers and to a broader set of businesses, including what's called the business of one, individuals as economic units.

Even within the largest companies, more and more enterprise software is sold less as a compliance tool that's purchased by the CEO, CTO, CIO, you know, head of HR, whatever, and more as something that individuals, teams, and managers are bringing into their organizations. You might eventually, as a company, use that bottom-up penetration to sell a large enterprise-wide license. So it might still end up being a large line item on which the CTO signs off, but it was brought into the org on people's phones, by a VP who was like, "Well, I've got spending authority up to $50,000... This tool is going to help me and my sales team coordinate. I'm going to buy it." Versus the old days of Gartner Group and how many steak dinners you can have with the CIO before signing a five-year agreement, stuff like that.

One of the things that Satya and I were discussing even before the fund took shape was, "Hey, this is a trend we think is an enduring aspect of a multi-decade economic cycle, and whatever we do, investing or otherwise, is probably going to have some aspects of this to it." And then once we decided to do Homebrew, you know, it became just one of our guideposts on how we understand the types of companies for which we might be the right fit.

JACKIE

Yeah, it's interesting that you mentioned not addressing the wealthiest markets. I talked about that with Christina Wallace, someone in New York, and one thing that matters a lot to her is the idea that tech companies always address the same problems, and anything that's out of that—she did a clothing company at some point and couldn't convince VCs that it was a problem that women couldn't find the right sizes. And the wider, across-America take, on not addressing other parts of the country.

HUNTER

Two things twitch for me when you say that. The first is, when we joke when we do consumer stuff that we're low on Maslow's hierarchy—food, water, shelter. There's plenty of obviously amazing businesses built around luxury goods or more discretionary goods, but it hasn't been, by and large, where we've found ourselves or found ourselves pulled. And that's fine. It's not a judgment on those businesses—it's just, we ask ourselves the question, "Do we think this is a good place for our capital?", or, "Do we want to get up every morning and put sweat and reputation behind this company and its mission?" And if the answer's no for some reason, it's not a judgment on the validity of the business, it's a personal judgment on whether we're the right investor.

You know, I believe the best founders bring a hundred percent of themselves to their businesses, and especially at the seed stage, if you're bringing investors to the table in a lead role who can't equally be a hundred percent committed, those investors should have enough self-awareness to say, "You know what, I don't think I'm the right investor. Even if I could make money here, I'm not the person who's going to be the most useful to your company." And so we step back from those opportunities.

Some people say, "Well, you know, I only want to invest in things that make the world a better place." But that's a subjective and personal decision, and so I find it difficult. What I say is, we get excited about missionary founders who believe that the world is going to be better because of what they're building, but that doesn't mean that they're doing necessarily double bottom line businesses or that they're working only in health and education. I had my own experiences working at YouTube, working at AdSense, working at SecondLife—I believe the world was better for the work we were doing, even though I knew I wasn't curing homelessness.

So there's very few areas—even if a founder believes that, let's say, for cash-based fantasy sports, "The world's a better place because we're providing entertainment..." I get that. I'm not sure I have the conviction around that, and it's hard for me to get excited around that, so I'm probably not the right investor, but I don't believe you're fundamentally wrong or kidding yourself.

There can also be a reflexive response to the question "Is that a tech company or not?" As software permeates every industry we're going to see every—or almost every—business become somewhat of a "tech company," but it's on a spectrum. There are businesses where the innovation is occurring primarily in building a new type of technology, and then there are going to be companies where the technology allows them to be successful, and they couldn't have existed even just a few years ago, but fundamentally they're more tech-enabled than taking on true technology risk. Both types can be successful. Both types can be great venture businesses.

Technology-enabled companies could not do what they're doing without the presence of technology, and there's also often great technology there—that's not to say, "Oh, that's where the junior league is." But they move within a fixed spectrum of what technology can do for them. So, like, a fashion company that sells online uses technology to manage their inventory more effectively than maybe people used to do, communicates with customers through multiple channels—there's all these things that they couldn't have done twenty years ago, but it's not going to fundamentally change the fact that cotton costs money, and making clothes costs money, and your margins are probably not going to look like Google's. Convincing yourself otherwise as an entrepreneur or venture investor is dangerous because you end up overfunding the company and trying to turn it into something it's not.

Venture is traditionally about winner-take-all, winner-take-most markets, where the ability to spend risk capital well ahead of realizing profits or taking profits leads to a bigger outcome and larger enterprise value. There's a lot of technology-enabled companies that can still be really, really valuable and venture-backed but shouldn't necessarily operate on that same set of constraints. So when we invest in technology-enabled companies versus technology companies, we also want to invest in founders who are going to grow their companies in a way that's consistent with the fundamental physics of their business, which is, "This is going to be a forty to sixty percent margin. This is not a ninety-eight-percent margin business. This company is ultimately going to trade at 4x revenue, not 20x revenue—and all that type of stuff."

So even, I think, when there's a venture investor who "gets" the problem—as opposed to, is oblivious to it—I think you still need to have honest conversations with the founders about what they believe to be true about the financial profile of this business over time, rather than just blindly believing that anything that uses technology is going to be unencumbered by the realities of their business model. Jeff Kearl, who started Stance Socks among other companies, always says the most important decision a founder makes is within what market they want to work. Because those markets have fundamental truths. And there's a reason he chose socks. And they're doing really well, but he chose it deliberately based on a set of things he thought he could capitalize versus other markets in which he could work.

I think the best investors are interested in having their eyes opened by entrepreneurs to problems they didn't know existed. But then regardless of that discovery process, they are able to have consistent structural conversations with the founder to understand whether, by that VC's definition, it's a venture-scale business or not. And in the Valley in particular, we do too good a job at marketing venture as thecapital with which to start your business.

JACKIE

Yeah. For anything.

HUNTER

I ask founders sometimes, "Why do you want venture capital for this business?" Most of their answers have more to do with availability and perception than fundamentally understanding the tradeoffs and constraints that come with it. Now, I couldn't always tell you what's a venture-scale business or not. If I could, I'd be the world's best investor because I'd have a historically good picking rate. But I do think that venture is either too hard to get or too easy to get for most people. And there's people for whom it should be easier and a whole bunch of people for whom it should be harder. We're still trying to figure out, you know, are we giving it to the right people?

JACKIE

Okay, so I guess I have two follow-up questions from that. One thing is—the idea around the signaling that matters and how often that can be "white male ex-Googler," ex-blah, blah, blah.

HUNTER

Hey, I'm white male ex-Googler!

JACKIE

Well, you know—

HUNTER

And I don't mean, hey, back off, I mean, exactly!

JACKIE

What are some ways—that makes it pretty easy, right? What are some ways you've worked around that? When it comes to evaluating people.

HUNTER

Well, then I'm proud that all my biases are unconscious. Because I truly don't believe that generically white male founders from Google are the best founders. Now, do I react to skin color, gender, experience set, you know, accent, in ways of which I'm unconscious? Of course I do. And both as an individual and as a partnership, we try to look at cases where that might be a factor in decision-making and understand when and why we're doing that and avoid it or confront it.

I think one way we're able to do that at a structural level is to focus probably disproportionately on founder-market fit compared to maybe some of our peers. And what I mean by founder-market fit is, if I had just one conversation with a founder, if I could only have one conversation with a founder, and I had to make a decision about, "Am I leaning in or out?" based on one conversation, I would focus on, "Tell me why. Articulate the problem you're trying to solve, and tell me why that problem matters to you." Because, for me, that's the strongest correlation to a founder who has been thinking about something deeply, has a personal connection to it, is likely to stick with it regardless of how hard or easy it is or, for better or for worse, what their investors tell them is right or wrong, and that's ultimately what you want. You want a founder that's a combination of attitude, aptitude, but, you know, who fundamentally believes that this company is what they were put on this earth to do.

When you do that, what we realize often is that there are founders who sometimes are not within that pattern-matching box that we mentioned and who are not necessarily founders you would back doing anything other than what they're doing right now. So they're not a universal donor blood type. Like, "Oh, yeah, I'd back you doing a CRM tool, ed tech, or a hardware project." No. You're not a generalist. But they are absolutely, without a doubt, a top-one-percent founder for what they're trying to build. So we have a set of those founders... BuildingConnected in the commercial construction real estate space, theSkimm in the media space, Primary in the kids' clothing space... All of those people strike me as examples of founders who are excellent, excellent founders, excellent operators, but are so right for what they're building that there's a set of characteristics that they have, a set of experiences they have, that transcend some of the things you would see on a resume—some of the things you wouldn't see if you just stood them in front of you and asked, "Did you work at Google? Do you have a CS degree?" and so on and so forth.

Now, there's a whole bunch of other things—privileges or lack thereof—that may have impacted them up to that point, right? But at least in the moment, I am much more interested in somebody who has experience, empathy, deep connection, and insights into the construction industry because they worked in it for a few years, coming to me and telling me that they are going to reinvent it, than I am in two twenty-five-year-old white Stanford engineers who worked at Facebook and are hella smart but are interested in the industry because it's large and because it's "broken," because there's not a lot of white Stanford Facebook engineers who've taken on the problem.

JACKIE

It's interesting how common that is.

HUNTER

I just think, if you have contempt for the market you're serving, if you try to disrupt it with contempt or hate as opposed to disrupting with love, it just feels different, and I think in a lot of cases it's an organ transplant that the industry's going to reject.

JACKIE

That's so interesting. Yeah, that is super common, just talking to people about companies, and they're like, "Oh, yeah, we're not experienced in it, but we saw this problem, and we're going to fix it from the outside."

HUNTER

And it's fine! We have an investment in a company called Honor that's in the elder care space.

JACKIE

Oh, my friend's brother works there.

HUNTER

Yeah! It's a great team, and we've known Seth for a long time. And he fits a lot of stereotypes in the sense of, like, he's a smart guy, white guy, exited a company at Google, previous founder, you know, all of that type of stuff. But the reason he started this company has to do with a conversation he was having with his parents, confronting what their AARP years were going to look like.

JACKIE

Sure, yeah.

HUNTER

Realizing that for the first time and realizing that everything he's done up to this point gave him the ability to address it. The company that he wanted to build to solve this problem needed access to capital and needed to be a twenty-year project, not a two-year project, four-year project, quick flip, whatever. And that all those conditions meant that he could leverage his privilege, right? Bring the team back together with which he worked, raise money right off the bat, and have the trust of the industry, the venture industry, in order to say, "Hey, this service is going to take a while before it works at scale. But when it works at scale, it's going to be big and important."

If it was your first company, if you didn't have credibility, you didn't have all these things, it would be hard to start that company. And that company is operating with great values, great ethics, you know, a more diverse team that many we see or in which we've invested. But it was a founder who fit the archetype, in some ways, trading on that to do something bigger. I think of that as pattern-matching judo. As opposed to just being able to raise $5 million for a stupid idea without question, where somebody who wasn't white, male, and known wouldn't be able to get that same $5 million, he was like, "I'm going to raise $20 million, and I'm going to do something that is really hard."

JACKIE

Yeah. That's really cool. Another question I had was—I think you gave a talk about total addressable markets and how that's not an ideal target for founders to pitch to VCs. What do you see as the alternative for that?

HUNTER

So my belief is that total addressable market as a slide in a pitch deck is nothing more than a crude intelligence test, in the sense that, if that entrepreneur hasn't figured out a way to say that it's a big market, they've failed. But at the same time, it obfuscates what you should really be thinking, which is, "What's the problem I'm solving? And is that problem large, urgent, and valuable?" So TAM, in and of itself, is a backwards-looking statement about where money has been spent based upon the available options.

Problem size, urgency, and value are indications of how receptive the market is to your solution and whether you can earn money from it, with adoption and value on a timeframe that would be able to prove that it's a venture-scale business. So, if you only have one of those three—if it's large but not urgent or valuable, I don't think you can build a business, venture dollars or not. If you have two of the three, I think you can probably build a business. I'm just not sure it's venture velocity, venture-scale. But if you have all three, that's an interesting value proposition.

So, for example, the company BuildingConnected is in the commercial construction space. Construction is a $7 trillion industry. But that would be a ridiculous fact to throw out because that speaks to a whole bunch of materials, labor, things that have nothing to do with what they're building. But then if you go all the way to the other end of the scale, the software space that they were attacking, today, or when they started in 2013, was basically a $100 million market. That's tiny. That's too small for a venture-scale business. So if they had said it was $7 trillion, you'd roll your eyes. If they had said $100 million, you would say, "This is niche. This is too small."

But why is their TAM $100 million? Their TAM is $100 million because that represents one percent of the problem. Ninety-nine percent of that is being done through spreadsheet, roll-your-own databases, email. It just so happens that one percent of the problem is being solved by bad, five-to-ten-year-old enterprise software that these guys can kill, as well as get the other ninety-nine percent of the market off of email, off of homegrown databases, off of spreadsheets, into a freemium SaaS product.

I think, if you're going to be an early-stage investor, where fundamentally you have to be early or contrarian, if you are chasing after just large TAMs, you're going to be incremental. You're going to be late. And you're going to lose the nuance of saying, "Okay, what has to happen during the first one to two years to prove that this business exists?" The classic argument is that SMBs (small and midsize businesses) are a large market in aggregate, large TAM, but, first, they're fragmented, so their needs aren't all the same. You can't just say an accountant is the same as a sandwich shop, but both would be called SMBs. And they're busy. So if what you're trying to pitch them isn't one of the top three things they're trying to solve this year, it's a nice-to-have, not a need-to-have. And no venture-scale business ever grew in the first few years off of trying to bring a nice-to-have to market. And so we really try to ask not just, "Oh, is this a big market? Is a lot of money being spent?" but, "What's the problem you're solving, and why is your solution better than how people are solving this problem today?"

JACKIE

Makes sense. Let's see. So, back to starting a company—there was this discussion that Blake Robbins started a week or two ago, about work culture here and whether it's healthy and whether you can be successful without ascribing to the 24/7/365 mentality. I wanted to know what your take was. I know you shared a piece that Sara Mauskopf wrote.

HUNTER

So I believe that—people sometimes say that it's a marathon, not a sprint, and I think that it's sprints with rests. I respect entrepreneurs and people in general who say, "I perform at a high level because I don't just work smart, I work hard. But I also understand myself to know when I need things besides work to help me recharge, to help me focus, to help me have a life that will allow me to do this job for one, five, ten years. I know that by choosing to do this startup, I am making some set of sacrifices and tradeoffs." That, to me, is different than seeing your only two options as work forty hours a week or work a hundred hours a week.

I think it's more dangerous to tell people that you can succeed in tech startups working forty hours a week than it is to warn people that, in order to succeed doing early-stage, mid-stage companies, you are going to have to make some tradeoffs. You are going to have to prioritize it in a way that prevents you from doing other things. That doesn't mean that you don't need a support network, that doesn't mean that you don't need to understand and value self-care, that doesn't mean that you can do it sustainably forever to the sacrifice of everything else in your life. But anything that has been built of consequence required sacrifice and tradeoff from the people who dedicated themselves to it.

I went through—and I probably still do at times, but I know I went through when I was on the operating side—extended periods of prioritization of work that were unhealthy for me, both physically and mentally. I probably could've handled it better and performed the same way if I had had access to more mentorship, access to a better understanding and articulation in the moment of what I was feeling, more conversation with my peers about it. So I think I could have had the same performance with better health, but I know that I couldn't have done it, accomplished what I accomplished as part of teams, without prioritizing the work and sacrificing other aspects of my life.

So—if that's too nuanced and you're going to put me on a spectrum, I'm going to be more toward the work versus balance. But I don't think it's in a way that we should celebrate divorce, celebrate breakdowns, celebrate suicides, celebrate drug addiction, as the things you have to do in order to really win.

JACKIE

Yeah. Well, because I think there is some of that. The glamorizing of health issues, for instance? Like with Sam Altman. There's always this story of how he got scurvy when he was building a company early and only eating ramen. What do you think is behind that specific impulse, I guess?

HUNTER

It's romantic and addictive. I internalize that period, even though I know what I did to myself and I know how fundamentally unhappy I was outside of my work accomplishments at several times. I just think back, and I get a little shot of adrenaline when I remember, "Oh, yeah, you got that done in a way that you left it all on the field, left it all on the table. That was the physical manifestation, the mental manifestation, of what you did." And I would never want to go back to that, I'm not proud of it, but there's a dopamine hit that, for me, comes from when I think back to sacrificing everything, getting the physical ailments, the mental ailments. I also have memories of things that were all good, didn't have those tradeoffs, but I'm like, "Man, I did it."

So I don't know. I think it's biological in some sense. Fight-or-flight type of shit. And essentially you're in the fight. Just like we take painful experiences and mitigate the way we remember the pain to allow ourselves to do it again as a survival mechanism. I think that's the same type of shit we're talking about. And is the culture, do those stories, end up with collateral damage, unintended consequences? Sure. I don't think it's just—I think it's a physiological thing as much as it is cultural in tech. And that exact thing is probably more horizontal than it is vertical. Exists in every industry to some extent.

JACKIE

Last question, then—I don't know if this one's too broad, and I can ask another one. But what do you see as your primary concerns or what you think can be improved most in VC in general? Current patterns or trends or whatever.

HUNTER

VC in general? Yeah. I think what I would just hope for everyone on the venture side is—I think you need a high degree of self-awareness in order to understand what investment model and strategy make sense for you, to which types of founders you're going to be most useful, and never forget that the founders are your customers. It's not your LPs, it's not your managing partners, not the other GPs. Those people may all feel like your customers, but they're your partners, your friends, your colleagues. At the end of the day, you need—while not forgetting that you're an investment manager, so that you can articulate and protect your interests—you have to serve the founder.

And so I think you have a lot of people who sometimes try to be all things to all people as opposed to saying, "Hey, these are the types of risks with which I'm comfortable, these are the types of risks with which I'm not comfortable. Let me take on the risks with which I'm comfortable. For the risks with which I'm not comfortable, I'm going to be a bad partner to that entrepreneur."

A lot of funds don't address how internal dynamics and politics play into the work and think everything's working fine but have a lot of the internal decisions that end up impacting the entrepreneur in ways that are unintended. I catch myself when I'm working with companies and remember, "Am I giving this advice because I think it's what the company needs? Am I giving this advice because it benefits me? Am I giving this advice because I don't understand it, but it's something I'm repeating from others?" And ultimately this founder needs to make a decision, and so I need to empower them and not assume that I have the right answer.

I mean, there's a host of things, but I think entrepreneurs would benefit greatly if we (and I fall into these traps as well) said, "No," to investments more often based upon an understanding of whether we can be of use to that entrepreneur rather than whether we think that entrepreneur can make us money. You commit to backing the person, not just the professional. We're about four and a half years into the firm—within our portfolio, we've had marriages and divorces. We've had babies and cancer. We've had all these life events that our founders are experiencing while they're doing this stressful thing, building this company.

I always just hope to have the trust with them that we can talk about how things are going holistically and help them navigate everything that would help them bring all of themselves to that business and hold them accountable to building something that makes them proud. At the end of the day, I want them to build something that they want on their tombstone, not just their resume or their bank account.

Tracy Chou

Tracy Chou