Welcome to another episode from our “2Inspire” series!
We hope you learned a few tips and tricks from our previous interviews with Brian Massey and Sujan Patel. If you haven’t seen them already, don’t wait any longer! Find out how they got to where they are, what they did before that, what does a day or week in their professional/personal lives look like?
In this episode, we’re super happy to have Marvin Liao with us.
Marvin is a Partner at 500 Startups, a global Seed Venture Capital Firm and Startup Accelerator based in San Francisco. The business sectors Marvin is interested to invest include FinTech, Digital Marketing, Digital Health, IoT, Marketplace, Enterprise sales, and SaaS.
He has worked in Silicon Valley for over 17 years and held roles in the various departments of Sales, Business Development, Ad Operations, and Marketing. Also, he is a Mentor for several Startup Accelerator programs in Europe, Asia, and the US, helping guide startup teams with their sales, marketing, and partner development efforts.
Check out the full interview below.
What was your first job?
Geoff: What was your first job and then how did that job lead to this journey of being in the VC community?
Marvin: Great question! So actually my first job here in Silicon Valley was actually at a PR agency called Porter Novelli and lasted about three months. I was so bad at my job that they fired me on my birthday. But then that led me into finding a job at an eCommerce company called Alibris that raise thirty million dollars early-stage, I did two years there and that led me to 10 a half years at Yahoo!. Yahoo led me to doing fairly well and just being able to just goof around for a couple of years, and that goofing around kind of led me to VC. So I am now being a VC for about five years so I kind of joke that I’m kinda like the Forrest Gump of Silicon Valley.
Why did you move from a big company to the start-up world?
Geoff: That’s funny! Well back to your Yahoo! experience, what was that experience like, and how did you sort of transition out of I guess what ultimately became a pretty big company into kind of the startup world?
Marvin: Yeah so I spent 10 and half years at Yahoo!, when I joined them we were probably less than three thousand people worldwide and when I left Yahoo! there was probably about 15 or 16 thousand people worldwide after we had fired about three or four thousand people. And so you know there’s a lot of great things working for big companies, a lot of not so great things working for a big company. One of the good things about working at a big company in its growth phase, the stock options so I basically took two years off just goofing around you know angel investing. I joined a bunch of boards and advisory boards and just mentored a lot of startup accelerators and met a lot of VC funds, and we were just goofing around basically. And that kind of led me into this world of just mentoring and doing a lot more this stuff. I think you just start building more relationships and ties. One of the accelerators I was mentoring I was 500 and I guess they felt guilty for me just spending all this time with them, they felt forced to give me work or something like that I guess.
When you evaluate a business plan, what’s the most critical element you look for?
Geoff: So when you start talking about getting involved with some of these, when you’re looking at a business, what are you looking for in a business plan or a company that’s already kind of up and rolling, to be something that you’d want to invest in? Are there some critical elements?
Marvin: Yeah I mean a lot of it is, I would say is probably 70% sort of team, are these like good people, are these smart people, do they know what they’re talking about or at least they have some process to go and figure out answers to questions about the market, or they’re systematic, right? And I would say it is probably 30% on like “Okay, can this be like a huge business?” speaking as a VC, can this be a huge multi-billion dollar business or has some potential to do that? And also the thing that I care the most about is what’s a go to market strategy? Like what’s your customer acquisition strategy? What’s your go-to-market strategy? Do they even have any clue about that, at least some sort of thoughts or hypothesis on what that looks like. That’s probably what I care the most about.
Geoff: When you’re listening to a company pitch you on their go-to-market strategy, are there any kind of key items in there that says okay these guys got it, or you know, I’d better run like hell because these guys are full of it.
Marvin: I think a big part of it is just sort of how well they understand the competitive landscape. I also think it’s a combination of how well they understand the competitive landscape and how different they and what their offering is. And I think the other big part, in my opinion, is it just how well they understand their customer or the customer segments that they have. So you know when I meet a founder and I asked him ”Who’s your customer?” and they’ll be like “Everybody!”, I’m like yes, what you’re building could be used by everybody eventually, but in the beginning, it’s like, who is going to be the customer segment or the customer that you’re going after? And the more narrow that it is, the better! You’re gonna build just a much more suitable product and hopefully, in the long run, they’ll be able to expand that segment into new segments. But in the beginning it’s not about trying to serve everybody, it’s about serving a very, very specific niche in the beginning because if you cannot do that, you have no chance.
Geoff: That’s fantastic! How many companies will you talk to before you’ll finally decide to invest in one?
Marvin: It varies. I think that’s kind of like the law of numbers. And so you know for example there are weeks where I might speak to anywhere between 20 and 80 companies and not find anything that’s interesting and then a week later on, meet 10 companies and 5 of them are very, very interesting so it really varies. But I would say probably for every like 50 to 100 companies I talk with, I might only be interested in maybe one or two.
How do you engage with the companies you end up investing in?
Geoff: Okay, that makes a lot of sense. So when you do invest in one, how do you engage? Does it vary by company or do you have kind of a particular model that drives your engagement?
Marvin: So I would say if it’s through the accelerator versus sort of just a direct investment if it’s through the Accelerator or we spend four months with. They sit in the office with us, we work with them, meet with them every week., we have specific content and speakers for them, so we’re very, very hands-on. I think when it comes to a direct investment, a lot is really dependent on the founder so a lot of times I call it sort of a “hands if”, sort of a not hands on, not hands off, it’s sort of like “If you need help, ping me, we’ll jump on a call, meet with you, talk through whatever you need to talk through whether it’s fundraising or anything”. And the areas I tend to help the companies tend to be more on the fundraising, more on the team like hiring and firing and a lot of it is really the sales and marketing stuff because of my background, right? How are you thinking through the customer segments, how are you thinking through positioning, thinking of your pricing, various customer acquisition channels on the consumer side or B2B side. So I spent a lot of time with them on this stuff.
Any red flags that you keep an eye for?
Geoff: And as you guys are doing that, how do you identify red flags or areas that need extra attention, or things that could be problematic?
Marvin: For me, the biggest thing is just sort of do they have a clear focus and clear prioritization on sort of what is important and a lot of times where I’m just like “Wait a minute, you’re going to be running out of money but you’re talking about all these other random things”, you clearly kind of have your priorities wrong. So if you first start to run out of money, you’ve got to figure out your customer model, start to charge customers maybe more than you’re charging them right now to sort of make up for that, or maybe need to start thinking about the fundraising piece. And so a lot of times are just asking a lot of questions to help them get focused to figure out what the right answer should be.
Most common struggle you find startups deal with?
Geoff: So I mean you’ve mentioned a few things around competitive landscape and market focus. Are there a set of common struggles that you see the leadership of startups deal with that are universal, that you can offer advice to?
Marvin: I think one of the things that a lot of startups do a terrible job at is managing cost structure. They’re not as frugal as maybe they need to be or they’re spending money on things that probably are not important. The other thing that I think startups don’t do a great job on is recruitment, of just being much more discerning. And so that view of “hire slow, fire fast” unfortunately tends to be sort of the other way around, we’re just sort of like hire fast, fire slow. Hiring is really, really hard, firing is really, really hard, and for me, a good founder is really decisive about what they do. So if you’ve found that you’ve made a hiring mistake you have to fix it right away. It’ll be very, very painful for the company. If you let it linger for too long it’s a drain on your money and your energy.
Geoff: That’s really, really good advice. When you get into this and you talk about how your go-to-market in particular is so important, what are some thoughts or strategies or tactics that these startups can use to really attract those first customers and get the momentum going?
Marvin: I think in the beginning every single new business owner should be over indexing their time on talking to customers or at least potential customers. Because in the beginning you have a hypothesis and all the data points, what you’re looking for are patterns right? So the more potential customer, user or customer conversations you’re having in the beginning, the better off you are in the long run. And I think it’s a process that too many founders just don’t spend their time on. Because I think what you should be doing is, the more conversations you have, the more patterns you actually find. And there’s both negative and positive patterns, like these are the reasons why people would not buy your product. If one thing comes up over and over again that helps you fine-tune your product or actually fixing your product, or like there’s a lot of things that they really really like about your product, maybe that’s what you should be using as your hook to get them in.
Any important success metrics to track?
Geoff: So we talked about merchants and customers a lot and there’s different views on how to apply metrics to a business. What are your thoughts on metrics, particularly at the startup stage?
Marvin: It is super important. One of the frameworks we use is ok we have our metrics of the funnel, of you know acquisition, activation, retention, referral, and really understanding where your problem is and that metric should be really dependent on where that problem is, like you have an acquisition issue but you can’t get anybody coming in so then the metric should be very specific for that, but then once you sort of find that you’re able to do well in that part, maybe look at the next stage; okay great you’re getting a lot of traffic and getting a lot of people into your business but nobody’s staying, nobody’s buying, maybe digging in, having the metric that digs into that. So I think at least having one or two metrics in the beginning are really important. And that everybody in the company should know and be looking at. And if a project is not increasing that metric or driving that metric then that’s how you drive prioritization.
Geoff: So when you see a founder who’s beginning to attract some seed capital, what challenge do they seem to run into most as it relates to the maturity of their decision-making or being open to other ideas? Do you know you have any particular experience there?
Marvin: I mean it’s all over the map. I think the biggest issue a lot of founders are not good at telling their story or telling the story of their business well, not really understand their numbers and metrics really well. I think it’s a big problem. And also not being decisive in general right. I think if you decided to fundraise, you need to have the ability to focus.
Which companies have impressed you the most, and why?
Geoff: So you’ve obviously worked with tons of companies in both an investor and accelerator role. Are there some names – name if you’d like to – that have really impressed you with the way they thought about their business and why, and then maybe some others that might be examples of ones that you would want to learn from.
Marvin: I would probably want to focus more on the positives than negatives, but you know there’s one company a called Shippo. It was in my first batch, two young two young founders in the early 20-something. What they do is have an API for shipping right? So, for example, the biggest challenge that a lot of e-commerce companies have is shipping. It’s just super expensive. And so they allow eCommerce companies to have get network effects of getting cheaper shipping, so the more folks are using your product, they can drive the pricing down. So kind of like network effects and winner-take-all which is kind of interesting. And super smart founders, really thoughtful about the market and the problem they’re sort of solving because they faced it themselves at their previous startup they tried and that ended up pivoting into this business.
Geoff: Well it’s interesting you mentioned that business model because that’s one that sounds like it would be easy to get carried away with like all the millions of customers, right? They could serve everybody because of a network effect. How do they narrow down the initial market focus and define the competitive landscape but stay focused?
Marvin: I think that they were just really good about talking to customers on a regular basis and having very, very good customer profiles in the beginning. Like this is an archetype of the customer that we want, it doesn’t fit with this customer. In the beginning, they did some experimentation and found that this specific archetype is better suited for what we have right now so let’s just focus all our energy on sort of like getting these customers through these various channels. And I think that’s what made them so effective.
Geoff: That’s great! Is there a particular type of company right now or vertical that you’re really, really focused on?
Marvin: Not really. We’re general investors, so I’m still interested in fin tech and digital health, still looking a lot of SaaS and enterprise software marketplace businesses. I look at pretty much everything.
How does a productive day look like?
Geoff: Fair enough. A little bit about you, in addition to your perspective. Tell me, when you kind of get up and get going during the day, what’s a productive day look like?
Marvin: I think routines are important. So a good day for me, especially when I’m not traveling, I get up in the morning, I try to get up you know 6:00 or 6:30 in the morning, now I have I have a regular sort of workout routine. I meditate as well too which is very very helpful. Between the exercise, meditation I have a young daughter so basically you know just having breakfast with her, dropping her off for school. And in the best best-case scenarios, in the first sort of couple hours, I’ll just be spending time reading, I catch up on email and things. And then I basically got meetings pretty much the rest of the day.
Favorite work/personal tools?
Geoff: Great! Are there some work tools, or personal tools that you take advantage of to help you kind of prioritize and get through your day?
Marvin: I feel like one of the important things in the morning or at least even before you go to bed like having at least a list of like three to five things that you think about in terms of “I absolutely need to get this thing done”. So looking at your calendars the night before, which this is stuff I wish I followed a lot more religiously. But one of the things, at least in the morning, would be getting up, looking in your calendar, having at least two or three things that you obviously have to get done, that’s probably something that’s important. The other thing that I’ve been trying to build in as well is sort of an hour of the day in the beginning where I’m just like working on maybe non-business related things. At least free your mind up a little bit more because I feel like sometimes being too ingrained into your work in your business sometimes it’s not a good thing and does not open the creativity that you probably needs it to be more effective.
What are some inspirational people that you look up to and why?
Geoff: Sure. In the spirit asking for help, who was inspirational or acted as a mentor to you as you were sort of evolving through your career?
Marvin: Well I was very, very lucky right? When I was at Yahoo! I had very, very, very good bosses that helped me out. Guys like Prashant Mehta who’s now very successful VC in India, guys like Greg Coleman who used to be head of BuzzFeed, you know like John Schwartz, David Ko, these are all very successful business people. They were incredibly helpful to sort of help me in my career. At Alibris, there was a guy named Paul Banas who is now almost like a father figure, brother, he was instrumental in helping sort things human being, businessperson marketer. Guys like Tim Chang who’s a very famous investor, Mike Maples, people I respect a lot that were incredibly helpful to me.
Best advice you’ve ever received?
Geoff: Sure that’s great! Is there a particular piece of advice that you were given along the way that you kind of lean on even to this day?
Marvin: Yeah, “don’t have heroes be your own hero”.
Geoff: That’s good!
Marvin: The other advice I would say is don’t meet your heroes because you end up being disappointed.
I think it is helpful having heroes, but you understand that once you meet them they’re kind of just like, they have their flaws but also they’re just like you and me.
Geoff: That’s great! Are there any books or other resources that you go to, to kind of continue to push your knowledge?
Marvin: I mean I read everything. And I think this is something that’s critical for every human being in general. We’re so lucky right you think about the condensed knowledge in a book, whether it’s a science fiction book, whether it’s a philosophy book. So I’m a big fan Marcus Aurelius, the Stoics. Also Tim Ferriss, the study of like excellence in athletics and thinking and medicine, business, academia, in art, I think there’s a lot to learn from that. So I read everything by Tim Ferriss, I listen to his podcasts. I really learn from everything. I’m a big fan of Baltasar Gracián , “The art of worldly wisdom”, so this book I reread every single year. So I read a lot as you can as you can probably figure out, I think it’s critical to just survive in this really busy world that we have.
Geoff: What hobbies or interests you have that kind of let your mind reset and take you away from the daily grind?
Marvin: It’s reading. I just pretty much read. I read, I have an exercise regime and it is fun being with family right? That’s something I don’t do enough of and it’s something I am going to prioritize and I’m prioritizing this year.
Any advice for entrepreneurs seeking investment from VCs?
Geoff: Is there some particular advice to give some entrepreneurs if they’re seeking some venture capital or vice versa, venture capitalists that are looking for companies to invest?
Marvin: Particularly for founders, I would just say really understand whether venture capital is really the right tool or mechanism for you. Not everybody should raise VC money because, what I tell founders is to think about why you started this company. You did it for freedom and because you didn’t really want to have bosses. I think the minute you start taking VC money you kind of have a boss and their interests aren’t always aligned with yours and so just think very very carefully about going down this path. And there’s something I tell my companies here too.
Geoff: So how important is that you know alignment between the investment interest and the go-to-market strategy and objectives of the company?
Marvin: I think it’s super critical. I’ve seen companies die because they take money from the wrong investors. There’s a lot of bad investors out there. I think the best relationship between an investor and a founder is that it’s a partnership. I think if there’s an imbalance, it’s never good. It’s like marriage. I think the investor and founder relationship is literally like a marriage and at least we did that seriously.
Geoff: Are you able to tell relatively quickly into a venture, even one that you’ve already invested in, that maybe you have a misalignment and it’s time to do something different?
Marvin: Yeah it’s hard. I have probably over 400 companies in my portfolio and it’s hard to tell. Sometimes you have companies that’s been with for four months and then the end they cheating us. Which is disappointing because you invest so much time and energy and then for them to sort of do something that is very non-ethical is very disappointing. It’s just, people are people. But thankfully that’s a very small number in the bigger scheme of things.
Any last advice?
Geoff: What other advice or thoughts would you leave our audience with, as you mentioned typically kind of small to mid-sized businesses that are looking to grow? What thoughts would you leave them with based on your experience working with 400 plus or companies?
Marvin: I think that one thing that all startup founders or small business founders aren’t spending enough time is talking to customers, number one. And the second part is just learn basic skills, maybe something like the basics or marketing or sales, which are mission critical for everything that you do. I’d even go further and say just like learn copywriting. I think copywriting is critical and it is incredibly helpful whether you’re going down the sales route, whether you’re going down the marketing route and it will help you in your life in general.
Geoff: That’s actually really good advice, actually I’ve heard that one before so thanks for passing It on! Thank you for your time, I really appreciated the time to talk to you and particularly all the insights that you offered to me and anyone else who’s gonna listen to this podcast. Thank you, Marvin, I appreciate it!
Marvin: Yeah, I hope it’s helpful for everyone. Thank you so much for having me!