5 Lessons from the Sage of Silicon Valley
When I entered the venture capital industry, I was very excited about taking risks on revolutionary ideas and seeing it pay off. But I used to be a little mystified by the idea of the venture capitalists [VCs] themselves. Based on the public versions of their success stories, I thought they were either extremely lucky, or they had a special gift of predicting the future, or a combination of both. I also found them very intimidating. They were unapproachable and unrelatable. I didn’t want to do business that way.
Amid this pack, Oren Zeev stands out. I call him the “Sage of Silicon Valley”. He’s had a lot of serious successes, investing in innovative companies like Houzz, Chegg and Audible. His keen eye for finding investment opportunities has both revolutionized legacy industries and created category defining leaders in new ones. But instead of being an overbearing egomaniac, he’s humble and quite friendly. He also flies under the radar: no blogs, no office space and no assistant. He answers his own phone and gets his own coffee. So, with his unlikely approach, what is the secret to his consistent success? How does he make his choices?
I first met Oren in 2013 when I was the President of San Francisco Bay Area chapter of the INSEAD Alumni Association, and our lives have often intersected since. Unlike other successful VCs, he’s self-effacing and soft-spoken - a true hidden gem in my alumni community. He is also a frequent guest speaker at at an INSEAD MBA elective course Building Businesses in the Silicon Valley which I co-teach as Adjunct Professor with Professor Steve Haslett. Oren shares his views on the venture capital sector, the journey of building his firm, and how he engages with founders. Students love hearing him speak - he is deeply insightful and openminded. Refreshing. Inspiring.
Over the years, he has become a generous personal friend and a mentor to me. His advice has given me a peek at the key strategies that drive his investment choices and a new approach to connecting with entrepreneurs. Here are five important lessons I have learned from him.
Lesson number #1 Fly solo to soar high
Work independently and decisively. Venture capital investments are about forming contrarian points of view, believing in the founders’ vision, and being consistently right. VC partnerships consist of strong personalities. Each person’s process and goals could be vastly different. Dealing with changing personal styles, and sometimes king-sized egos, is a waste of time.
Oren prefers to make independent decisions so that he can focus on the people he supports. Entrepreneurs know what they are getting with him. He brings the best of both worlds: the expertise of a VC, and the speed of angel investor. With more than $250 million in assets under management, he has the investing power of a large firm, even though he is a one-man VC. He respects entrepreneurs enough to tell them, “Show me something I have not thought of”. At the early stages of starting new VC firms, especially during fund I and fund II, flying solo is helpful. He then joins them on the journey of building a company and learning from them as they progress. Oren shows one can fly solo and soar high for a long time.
Fun fact: A new class of solo general partners have founded VC firms and blazed a successful path in building the next generation of the industry. Examples: Aileen Lee,Ashmeet Sidana, Celestine Schnugg, Charles Hudson, David Blumberg, Jason Lemkin, Jeff Clavier, Manu Kumar, Michael Dearing, Micky Malka, Pat Matthews, Shruti Gandhi, Steve Andersen, Sunil Dhaliwal, Sunil Nagaraj, Todd Kimmel and Ullas Naik. I join this esteemed group as a solo general partner founder of Sure Ventures.
Lesson #2 Invest in category defining companies
Arrive before the market is established. This is not a psychic exercise - there is no gazing into a crystal ball to predict the future. Instead, form a strong conviction on an unproven idea based on limited data, fall in love with a founder’s vision and trust your own intuition. Companies that create revolutionary new industries have the potential for growth far beyond the duration of a VC’s involvement.
Follow your gut. In 2003, while still a General Partner at Apax Partners, Oren led an investment in Audible when few people listened to audiobooks. But a savvy investor sees what the startup will become. It’s not that nobody likes to read, but more than 100 million Americans commute at least an hour each day and don’t have time to sit down with an open book. Audible removed the obstacles would-be readers faced. With this application, millions of readers gained access to multiple genres and hundreds of titles. The launch of the iPod and smartphones made it possible for Audible to actually create a market that didn’t previously exist. In 2008, Amazon recognized the potential phenomenon Audible would become and acquired the company to extend its own online book business.
Fun Fact: Today, Audible is the dominant player in audiobooks, a category leader. The company, if it were an independent business, would be valued north of $20 billion - a real startup unicorn.
Lesson #3 Search for diversity
Consider backing an entrepreneur who doesn’t fit your mold. Don’t let personal biases about gender, culture, age, ethnicity, geography and background influence the choice of entrepreneurs you work with. Investors need to confront their biases and preconceived notions about people or they will miss out on winning investments. When we challenge our judgement process, we not only generate substantial financial returns, but we also bring diversity into what used to be old boys club. Why not be the change we wish to see?
Boldly believe. Houzz was founded by a husband and wife, Alon Cohen and Adi Tatarko. Investors often balk at unconventional entrepreneurial teams like couples. Both professionals, the couple labored after hours on a revolutionary concept that grew from their own home remodel experience. They struggled to find the right professionals, and to communicate a vision for their home. Their only resources at the time were word of mouth referrals and magazine clippings - a very inefficient way of doing things. Houzz created a platform to showcase a vast range of home professionals and their work, giving the consumer a variety of choices. Oren met the founders before the company was incorporated, and was intrigued by the idea of a married couple as co-founders. Oren considers his own wife a trustworthy sounding board, so when she tested the app and loved the concept, he considered it a solid market validation. Today, valued at over $4 billion, Houzz is the largest venture funded startup run by a female founder and CEO. It is on track to be one of the biggest success stories in venture capital investments.
Fun Fact: As a result of Houzz’s success, female entrepreneurs in Zeev’s portfolio make up the largest portion of the overall return on investments.
Lesson #4 Back early and stay forever
When you are investing for the long-term, never talk of exit. Because investing is not only about money - it’s about pouring your heart into people’s dreams. So stick with people throughout the journey, even if the road is not always smooth. Actually, this is the fun part: it’s exhilarating to connect with entrepreneurs when ideas are still taking shape and watching them crystallize. Along the way, the journey of growing a startup goes from strictly business to a deep and meaningful relationship. It is an honor to have the opportunity to play a role like this one.
Be a loyal friend TripActions is an innovative startup founded in 2015 and designed to alleviate the many frustrations of business travel. Oren was a founding board member and led the $4 million seed round when the company was just an idea and did not even have a website. He is very different from typical investors who have a short shelf life, forcing entrepreneurs to find and establish relationships with new investors and board members at every stage of the company. Oren had decided from the outset to make an enduring commitment and stay with the company, be flexible and adjust to its needs as it grew. He subsequently led the Series A, co-led Series B and C, and followed on in Series D rounds of funding, and is one of the largest shareholders. Long-term victory is much better than short-term advances.
Fun Fact: In under 4 years, TripActions has grown quickly, employs over 500 people in offices around the world, and is valued at over $1 billion.
Lesson #5: Favor the brave newcomer
Invest in an idea from novice founders who want to disrupt an industry and avoid the herd mentality - everyone wants to get into a hot market in a trending sector crowded with players. But Oren doesn’t look for something in a ‘sexy’ market. In fact, he looks for a market that is decidedly ‘un-sexy’. Great startup ideas often originate from industry outsiders. He looks for founders whose painful personal experience with an industry problem gives them a deep conviction to come up with a solution. Because they know only a little about the industry they are disrupting, they don’t know what can go wrong, so they are willing to experiment. While experts in a field are bogged down by the 1000 ways that an idea would fail, lack of comprehensive knowledge helps industry newcomers bring fresh perspectives.They are fearless.
Support Outsiders to the Industry who are Insiders to the Pain.
Guy Goldstein, Nissim Tapiro, and Alon Huri started Next Insurance, a digital insurance company for small businesses. Back in 2005, at a previous startup, they attempted to do what all businesses have had to do for the last 100 years: buy insurance. But the lack of transparency in the agent/commission model made it impossible for the company founders to know if they had a quality deal. They knew they should be treated better as insurance consumers. The pain of dealing with such a frustrating process became the seed for the idea to start Next Insurance. Unintimidated industry outsiders, these entrepreneurs built the company to ensure other business owners are not blocked from achieving their dreams because of insurance.
Too much experience is your enemy. It is a form of PTSD - the anxiety of past failures forms a cloud of pessimism. But naivete can work to your advantage. Pain and frustration makes you passionate to find a solution. Outsiders are willing to step out on faith and experiment, build creative solutions, and break down barriers in existing businesses.
Fun Fact: Though the founders have no background in insurance, the company raised $131 million in venture capital funding and manages a full-licensed insurance carrier with plans to operate in all 50 states in U.S.A.
Studying Oren Zeev’s investment strategies and philosophy has made it clear to me that a successful and influential VC can also be approachable and friendly. Oren believes in people; he serves and supports them on their journey. His thoughtful and empathetic approach of building deep relationships make him a true sage in a field full of cutthroats. This people-based philosophy is also wildly successful while undeniably changing the game. It inspires me to support customer-focused entrepreneurs who solve important problems, simplify otherwise complex methods and enable people to live their best lives.
Edited by Maryann Rose