peter horan

"The bumper sticker for an entrepreneur is adapt, improvise, overcome."

- Peter Horan

Peter outlines what he looks for in a start-up

Talk Takeaways

Jeffery Potvin kicks off his interview with Peter Horan on how he started his career with an intersection of luck and good decisions. From writing the manual for Pong in 1975 to generating two billion dollars in transactions on the sell side, a billion dollars in transactions on the buy side, and about four billion of public market value creation. Peter has shared his views on the entrepreneurial journey, the mindset of the VCs, and how its important for early-stage CEOs to surround themselves with people they can trust. To be able to pick your brain and discuss a no mercy, no malice conversion with the people you trust is important not only to gather feedback but for the CEO’s mental health as well.

Peter also shared stories for Skift and Pinterest and how it took multiple pivots in order to figure out the right market fit and to finally gain traction. He also shared his interesting insights on the investment landscape at the time of COVID.

About

Peter C. Horan is an entrepreneur and digital media investor with a history of building successful media, commerce and ad technology businesses. As a CEO and independent director he has been part of eight profitable exits in the last ten years totaling almost $1.8 billion in value and more than $4 billion in public market value-creation. He has also been actively involved in $800 million in acquisitions over that same period.

In February of 2014, Peter formed Horan MediaTech Advisors as an umbrella for his investment and consulting activities. Peter currently works with and/or has investments in: AdZerk; Business.com, Candid, Digital Trends, Lending Tree; Outdoor Project; Purch; ShopPad; Skift; Slumberkins, TougHer, and WildFang. He also advises a number of other media companies. Peter is an active early stage investor and is involved with the Oregon Angel Fund, Cascade Angels, and Portland Seed Fund.

The full #OPNAskAnAngel talk

Jeffery:
Peter Horan welcome and thank you very much for joining us today. Maybe to kind of kick things off, to give everybody a little bit more of a broad view strokes of who Peter is, maybe he can give us a little bit of a background. I know we’ve chatted a couple times so I’m excited to really dig in more but maybe you can give us an idea of kind of where you’ve started in, where you’ve kind of come through in your career of of working and everything else is to give everybody a bright light onto what you’ve been up to.

Peter:
Sure and I guess I’d start by saying maybe my career has been sort of this intersection of luck and good decisions. Yeah like so many things right. So luck in that I chose to go to college at the University of Santa Clara in the early 1970s, and it was a good school but it was based on where good financial aid that was sort of how I could be as far away from my parents as possible and remain within the state of California cuz’ I had a scholarship. So went to Santa Clara but simultaneously that became the early days of the rise of Silicon Valley. So the phrase Silicon Valley was invented by Don Hoefler during the time that I was at Santa Clara. And so then it was like all this interesting stuff is going on maybe I ought to focus on that. And so by the late 1970s I’d sort of decided that yeah I really was gonna take good horrible run at working around technology, so obscure claim to fame I wrote the owners manual for pong in 1975. I sold kick computers on the floor of the second West Coast computer fair in San Jose in 77, marketed cell phones in the early 80s, when I was writing the Microsoft ad account worldwide (inaudible 1:49) I helped launch Windows and Windows apps and office all that stuff. So I was really an advertising for the first 10 12 years of my career. Then I spent most of the 90s in traditional publishing. I was the head of a major account sales for international data group. We operate in 77 countries around the world. Which was actually a really interesting time to be there because that coincided with the rise of the internet, the rise of satellite television. And so companies had to really confront a lot of issues around you know how do I manage my brand across borders you know? And previously they’ve done things like oh well launch of the U.S. in May, launch in UK France Britain in October, will do rest of world sometime next year. And now they suddenly had to confront the fact that we were all rest of world, and whatever they said in one market became immediately known everywhere. And so and if I say oh I’m watching this new product and it’s not available that’s okay you know I’m gonna sit this one out I’ll wait until you get the new product available. And so there’s a whole bunch of stuff where suddenly we just got the first big step towards transparency. And it really — incredible opportunities and challenges. And then since 2000 which shockingly is now 20 years I’ve been focused on the Internet. You know again, perfect timing in the spring of 2000, I quit a steady job and started a venture backed web media startup company and went right into the teeth the first nuclear winter the internet. But then you know actually hit the CEO of trifecta – survived, got a profitable and walk out the door to my own power. Which puts me in the top 5% of the class anyway. Went back to New York, did a turnaround on about.com so that’s the New York Times. Did a couple of various startups and deals here, then ran all the media now telling properties for IAC, Barry Diller’s company interactive Corp. We just were like citysearch, evite, Ask Jeeves… And then really the last ten years I’ve been doing a combination of consulting, board work, and investing. And most notably I’ve been on the board of Lending Tree as we’ve taken that from a 700 million dollar market cap we spent of IAC 2008 to about a four billion dollar market cap today. So number summary two billion dollars in transactions on the sell side, a billion dollars in transactions on the buy side, and about four billion of public market value creation.

Jeffery:
That’s amazing. We should just open up a class and we should just sit around and well you’ve got to tell us because for for everything you shared right now I’m already beyond intrigued. I’m a huge fan of pong back in the day so I’m even more impressed that you created the manual for it.

Peter:
Like we needed go to the right go to the left.

Jeffery:
So basically it was a use case scenario on how to operate in the most simplest form ever.

Peter:
Yeah yeah and you know it’s interesting about that though, and it really it does speak to some of the issues facing early stage investing. So I say I’ve been involved in five or six technology revolutions. Personal computers, cell phones, graphical user interface, the internet, mobile and in all of them with the exception of pong, people would say they adamantly did not want whatever it was we were selling. Yeah I’ve still got a focus group report I did for Commodore for the Commodore Pet, the person electronic translator, 1977 first personal computer where people said I can’t imagine needing a personal computer what would I want that for? You know when we launched cell phones in the early 80s people were like – you know not interested at all, I don’t need one of those. If I was a big-time lawyer or a sales guy I could use one, but I’m an average person I don’t need a cell phone. You know we ask people do you want to be able to see on your screen what you’re gonna see how the paper, they said no no because I got WordPerfect I wanted (inaudible 6:02) I don’t need that stuff. And so where that really goes to is… The challenges that particularly entrepreneurs are facing where they’re trying to you know do something really new and they’re trying to convince investors that you know that people will actually buy this. And you go out and ask people do you want this and they’re gonna say “no”. And so it’s that sort of you know how do you bridge that, how do you convince investors to sort of share your vision of how you’re gonna change the world. And that is like one of the most, for like genuinely innovative stuff, that’s one of the biggest challenges.

Jeffery:
100% agree with that. If you’re when you start to shift and everybody’s looking for the most innovative, biggest change, they think that this is the way to go. The problem is the big elephant in the room is change. We’re very afraid of change. Change is actually one of the highest stress causes because and I was having this call today with a company and they were building this platform, it’s massive, and it was interesting because at the end of it all I said what is the one little thing you’re solving, because right now it just seems like this big and by the time everybody gets through this, they’re gonna be so stressed that if you just take a little nibble and grow with them people will accept that better…

Peter:
And there’s a finding that one problem that people desperately need to solve. And I’ll call it a quick timeout for a story which is both heartening and terrifying for entrepreneurs.When Airbnb came out of the Y Combinator incubator nobody would vote for them. Nobody would invest in them, they were like oh no this is stupid, this’ll never happen.Yeah and so you know it’s and so you said that one hand it’s like oh my god it’s like if air B&B couldn’t get anybody to see you know what am I gonna do, on the other hand it’s like well guess what everybody said no and they went ahead anyway and they became successful.

Jeffery:
For sure. (Inaudible)

Peter:
that gap though and explain to people what you’re gonna do and why they should believe you’re going to do it.

Jeffery:
Exactly. And I think this is really an interesting trend that’s actually
happened now is that since that time, entrepreneurship was also a tough space to get into and everybody believed if big business was I’m not gonna have you as a customer because you’re gonna fail. So you take that ten fifteen years ago even when I went on my own to where does today, risk has changed so much and or innovation and new has shifted a lot. So I think if you took what’s going on now, more people are jumping on to almost idiotic ideas because the fear of losing out the both they don’t want to lose that. So now the ability to grasp one of things that aren’t really functional and may be properly embedded to be a business or startup, people are jumping into because they’re afraid if I don’t do this it’s not right, I better sign up of every part of it.

Peter:
Yeah

Jeffery:
Interesting that you say that change back then was I think it wasn’t adaptive and it wasn’t as fast as it is today. And I think now we’re starting to see that tech is getting in and failing fast just because they’re not getting the next investment because they’re not finding a traction, they’re not finding the usership, and they might be five years before time, they might be ten years ahead of time because the change hasn’t got there. but changes rapidly occurring.

Peter:
Yeah but and I guess I’m focused on kind of the narrow thing we’re talking about which is entrepreneurs, early-stage companies going out to raise money. And you know especially you know angels and seed fund stage and then there’s that where you know I think and they sort of I’ll say there’s heavy Silicon Valley exceptions. You know I was just looking at a company called Niva which is founded by 2x Google guys and they’re a long way from a product – they raised thirty seven and a half million dollars

[Applause]

…but you know they’re not like you and me yeah. It’s like yeah I used to — one of the partners that one of the first VC firms I dealt with was a former NBA player and he said you know why basketball players date supermodels? No, John, why? Because they can. Hey the same thing issues like if you’re a former early and employee at Google, an SVP at Google they’re gonna start up so yeah give me 50 million bucks and people know yes thank you. So why do they do it because they can. But that doesn’t mean that most people have the ability to go out and say oh give me ten million bucks or five million bucks. It’s like most people have got to go and sweat to raise the first half a million and million and and that’s really I think what sort of like in the real world that’s actually the challenge right because like okay if I can get into market, if I can get a product, I think it certainly gets improved points then I can start to put up some numbers and this concept I had that sounded crazy, I can demonstrate the people really want it. But it’s that sort of it’s the first million bucks of revenue it’s the first million bucks of funding, is we’re kind of a lot of stuff falls on the floor.

Jeffery:
For sure. And I completely agree with that. There’s also racing. The hardest is raising your first million, and getting your first million in revenue seems to be a bit easier but then the next Lachman is even harder. You’ve got some traction but how do you get the expansion, there’s a lot of moving pieces inside of this and — so I think one of the things I want to kind of backtrack a little bit to was what got you interested in actually investing versus working with these companies? You were working in the space you were doing a lot of innovative things of course you’re in Silicon Valley or leading up some of these top products that were coming to market and what changed you over from being kind of dug into that market and deciding you wanted to invest?

Peter:
And I’ll say most of what I know about investing comes from scar tissue. It’s like it’s all the stuff I did wrong on the way. And I’ll say, I had worked with a lot of VCs over time and then a couple of them decided that in the 2006 7 8 timeframe, this notion of hey these kind of lightweight companies and we could flip them. So let’s like raise only a little bit of money 18 24 months, sell out for 30 million bucks we’re gonna get rich. No they mean it sounded really good and the guys who were that we’re proposing this we’re smart and companies like for example remember cloud with a k’ that was one of the companies. So there’s a lot of you I was like conceptually as I can this Auto work and never worked out as well as we thought it was would. You know the things I learned is that you’ve got to – there’s no easy is like – you may get lucky and there’s an easy flip yeah we just had one of those with a company called the Wild Up Here in Portland which is a VR company just so happened that they basically got two first product it’s and somebody said oh that’s exactly what we need, thank you. We want to buy it but you know that happens three times in ten years. In there’s a version a bumper sticker in early stage investing which is that lemons ripen much more quickly than peaches. And it’s just the notion that you know the ones they’re gonna fail they tend to fail fast and ugly and the ones that like — so one of my best companies I’ve been in for seven years now and you know and another company for ten years and they’ve been good investments, they’re good companies but you know ten years later we’re still running them. And so I think, so I was wrong about this notion that early stage investing is about quick flips.

Jeffery:
That’s some good learning.

Peter:
I’m sorry

Jeffery:
That’s some good learning. it’s I think everybody goes in with how they want to envision investing because they come in it from so many different angles and you were able to go in with this approach that maybe you could buy and sell quickly, realizing that this is more of the long-term play, and they’re coming in at the bottom which is really starting off really early that there’s a long term play that could happen here. And if you try and speed things up, it may not always work. Like you said three everything but all three and ten years it may but there is a little bit more of a longer game so how do you start to build companies in a portfolio that fit into different time sequences? You know what maybe I could see this we don’t agree this one out in five and this one out and ten and then I’d well it’s my portfolio.

Peter:
Yeah that’s actually one of the things I wanted to chat about which is that mindset matters in this environment. That in the pandemic with the lockdown and incarceration, it’s hard to raise like it’s hard to do a big round particularly if you didn’t start it before. So I’m in three venture funds where I’m among the investment committee, and we do direct investing. I’ve seen a number of follow-on rounds. So the mindset of VCS during this period, the first thing was okay freeze don’t do anything, second thing was triage on the current portfolio, and the kind of simplistic way to think about is red yellow green. They go through their current portfolio and go okay who’s gonna be helped by this, who is neutral, and we’ll see and who’s screwed? And they just looked at it they said okay and so the first priority for investable capital became I’ll say portfolio maintenance and support. Yes so the first the first thing is okay how much of our capital do we need to get our promising companies through this pandemic. And you know one of the maxims is basically don’t reinforce failure. And so if you got companies that are struggling any way and it doesn’t look like, this is like we’re treading water then we’re tossing them a boat anchor, it’s like okay just let it go. Don’t spend more money propping up a company was gonna fail anyway. But the other hand say okay you know one of my companies, we’ve got these exercises okay for a stage one was we cut cost, and we got to her cash flow breakeven and stage two was okay now that we’ve proven were breakeven to profitable, how can we accelerate out of this downturn and go and come out of it stronger than we went into it. And so we were in the middle of that now. But that’s sort of the kind of mindset of most of the investors I’ve talked to. So things that are on the negative side, concerns about sale process, and so folks that have come in and said oh yeah I’m going to designer price sale and we’re like okay so how is it going to work to you know push a new enterprise sale through when people are working remotely, when you know in certain categories right I’m talking — I was being pitched by a company that’s in the travel space. And like we’ve already lost 2020, so we’re supposed to lose 2021 as well, I said well you know what happens to your business if 2021 is still lock down? And so there are certain categories that are greater concern but what’s interesting is these are the anti flip mentality. This is a good time to go in with a business plan said hey you know what I can go in with a lean team and a (inaudible) and while we’re on timeout anyway I can build. I’m gonna go build my product and when we come out of this in six months, 12 months, 18 months, I’ll be ready to go to market. And so I can make a little bit of money last a long time. I’m gonna code my ass off, I’m gonna build something and when we come out the other side, you know then when we rated that then we’ll go raise a bigger round for marketing and sales and acceleration. And so that kind of a mindset I’m finding to be attractive to investors right now. The you know tight team, talented people and just focus on and build, build product. The other thing we have invested against is folk markets that are open to change because of the pandemic. And sometimes it’s counterintuitive so you know, small business has gotten hammered. But a company I invested in recently called candid wholesale, I invested both directly and via cascade Angels. They’re in the brand to retailer e-commerce segment and and the premise was that because of all the challenges that retail has been facing with all the shutdowns and that now these retailers who before were like hey I’m not gonna have all so I’m busy, I gotta have time to change — are now going okay what do I need to do to to survive this? And so we’ve actually had a lot of tremendous amount of interest from small retailers because they’re going okay I’m in trouble, I’ve got a chain, I got something. Interestingly through one of my company’s business dot come which is a website helps big companies market to SMBs. Restaurant retail point of sale systems is actually that really really strong category. It would frankly surprised the hell I was going like what isn’t that a dead category? But again all of a sudden restaurants are having to go hey the we even got to figure out how to do touchless sales, we’ve got to figure out how to you know do remote ordering and suddenly it’s like oh yeah the people walking in standing in line, handing me cash that’s not gonna work. And so we look towards okay what are the changes, what changes are being forced on the market or (inaudible) I would look for new solutions and those are attractive for me right now.

Jeffery:
Those are great and I think there’s some adaptability that’s gonna happen inside of this as well right. Over the next three to four months as we kind of hopefully move our way out, people are gonna start to see are people really shifting to this stay at home model forever, or are they gonna shift it back and you’re gonna start to see the you know maybe there’s six feet but then in a week there’s gonna be one foot. Like everybody’s gonna go back to what they know. So there’s this real fear of do I have to shift so much that I’m changing everything, changing building new things putting my store up a different way? If everybody’s gonna bounce back to the way they were shopping, commuting, and walking around? So I think there’s that risk and how far do you take it before actually things open back up again.

Peter:
Yeah. You know I look at the current virus data, we’re nowhere as close to opening back up again at least we’re gonna probably lock down before we open back up again. One of my companies, which I was talking to CEOs where I say well when are you gonna reopen? Do you think we open the office because well we were hoping for August but the employees are afraid because they’re in office towers in New York and Portland. And they said you know if we had our own building ground floor park in the parking lot, walk through the front entrance, walk to your desk that’s one thing. But you know our guys, you know they probably come in on a light rail system, they’ve got to or you know go up in an elevator that we don’t control, they’ve got you know and so very realistically he’s not reopening this year.

Jeffery:
Well it’s interesting the environment is gonna dictate a lot of how the investment community is working and the companies that they are investing in there. I think you’re right, there’s going to be some further out plays that people can invest in by building a team, building a structure, taking their time being in the background building it up, so that they’re ready to launch what all of this is kind of downsized. But that just creates an opportunity to maybe take over some of the depleted assets or depleted areas that aren’t going to get attention right now. And then of course there’s the other factors of the areas that are getting a lot of upside right, like zoom in all these places where people are investing, they’re going after it because they say hey if this is gonna be the new norm we need to be fitting inside of here.

Peter:
So I guess telehealth, telemedicine everybody wants to get into anything that involved and enhances — you know if you think about it in some ways zoom is a pretty blunt instrument. I mean you know we use it and it’s great but we also all start to build this like long list of gee you know I really wish it would do this or boy its and in a sense they may be that they could be the you know the myspace of social network right. Like I don’t know that’s what it looks like and then Facebook comes in behind it goes – anyway this is really how its supposed to be. You know and but I think you know here, a lot of folks say you know I’m not rushing to get on airplanes, I’m hearing clients on the buy-side going hey you know what you don’t actually have to come out here, we can we can do this kind of meeting it’ll be just fine thanks.

Jeffery:
No that’s exciting because the world’s needed a little bit of a pause, and a little bit of shift, and a little bit of change here and there, and I think those are all hitting everybody quite quickly so yeah it’s good to see that people are taking their health into consideration but also realizing the business still works on video and that you can still conduct things and move it forward. Now you kind of jumped in on how you started investing and how this is all unfolded now, is there a part that really drives you, that gets you excited about it. I can tell you’re excited and you’re passionate about startups in the community which is awesome and but is there something that really is your favorite part of investing that you can be can talk to.

Peter:
Yeah it’s working with entrepreneurs. Actually really it sounds dumb and obvious. You do this because you want to help entrepreneurs realize their vision. You know and you know your questions you asked about sort of the financial side of it, versus the you know mentoring coaching side of it. You know I’ve got some where I just write a check and you know ready to get work but in a lot of cases it’s you know being a sounding board, helping them to think through the strategy because you know being a small business CEO is a pretty lonely job a lot of the time. And you know and sometimes like you gotta have somebody you could say “okay I’ve had this like scary thought, this may be wrong, or you know what happens if this happens?” You know and they can’t talk to their team about it and also sometimes even later on if they get like a professional VC, and now that I’m not a professional VC, but there’s sort of the classic Silicon Valley VC and the CEO one as I want to talk to them. Silicon Valley VCs always always say oh yeah it’s like they tell all sorts of lies on their website on the front page. First one is oh you know we don’t care which stage or industry, we’re just looking for great people with great ideas. Then they actually look it’s okay, well we’re just actually invest it’s like no – they invest in a very specific stage, a couple of industries, a couple of patterns, it’s a great but one of the other things you know they’ll say is and we care about our companies, we are here to support. And I said yeah but the Silicon Valley VCs care about their companies the way a poker player cares about his cards. if I think they’re gonna make me money I keep them together, if I think they’re not gonna make me money I throw them away. And you know and so as a CEO you just have to do this, it’s not inherently a bad thing it’s only a bad thing if you don’t understand that’s the way the game is played. It’s important for early-stage CEOs to develop a group of people they trust. And — we met through Ash Karbasfrooshan from WatchMojo. And so for some like 10 years you know he’s been served on the back floor, I’ve been on the other end of the bat phone, and it’s like oh wait somebody called me they want to acquire me you think I should sell or Oh what do you think? And you know and he knows he’s a fabulous entrepreneur and a great guy but when he counts one is the no mercy, no malice conversation and it’s like okay here’s what I’m really thinking and here’s what I’m really afraid, I’ve been, what do you think. and I’ll disagree with them all sorry also yes you’re right, you’re wrong whatever. But it’s just a no-holds-bar conversation. And early-stage CEOs need to cultivate people that they trust, and that they count on to look out for them, and their interest. Because their interest could be different than the employees interest, it could be different than their investors interests, they gotta have someone they can talk to and and honestly say hey here’s what I’m thinking.

Jeffery:
I like that the no mercy no malice conversation and there’s been a lot of times in over the last decade or two were different entrepreneurs or different businesses will come in they’ll say how do I really infiltrate this community of entrepreneurs and startups and get them to want to talk to me and open up and share things. And I’m always kind of about you got to have a balance of value, I got to be able to provide you with something to provide something back to me and then we’ve got an equal balance in a relationship and when you talk about a VC, they’re providing the financial stability to run your company. So it’s hard to go back and tell them “hey I’m thinking about taking the company in a whole different direction, I know we’re making money but I’m gonna go this way” Yeah kind of sets them off but if you have somebody that can be on the outside and you’re exchanging value through ideas and concepts, it is a good way of testing the water, but also learning on what their perspective is, because they’re not biased to their bank account they’re biased to helping you succeed. And I think a lot of the time an entrepreneur feels the fear of who can I really tell something to and they ball it up and then you get this bigger thing which is now becoming a little bit more prevalent which is mental health issues, like that so I really do agree and respect it you know. You got to work with that entrepreneur to give them the concept but they gotta find a few people to trust and they got a few people that they can bounce ideas off of and that goes across inside their business, outside their business, and advisors, and etc. So it’s really important these days I think to get as much bonding if you can with young people that are gonna help you. I love the fact that you said that it’s someone else that has your back. That is so important that you you have no ideas an entrepreneur when you think you’re in this tower by yourself that if you’ve got somebody that’s down there trying to find a trampoline for you to bounce off that you know that they’re gonna come with it right and I think the fear is that I’m here alone. So I like that.

Peter:
No and that’s actually, and you’re right. There’s actually been a lot of studies about sort of mental health issues among founders for that reason. They feel like they’re by themselves and you know and there a point where any sane person wants to run screaming for the door. And if you’re by yourself it just you get totally in a ball, you know you don’t want to go to your spouse and say honey I think I’m gonna lose the whole business and we’re gonna be bankrupt and the living in the car. It’s like you know you put that conversation off. You know you don’t want to go to your investors right away and say hey I’m afraid this product won’t work or at least you want to be able to rehearse the conversation before you talk to them.

Jeffery:
Agreed but I like the fact that you’re opening the door and that you’re allowing and wanting that to occur. That’s really beneficial to the entrepreneur for sure.

Peter:
Yeah

Jeffery:
You’ve shared a bunch of different stories kind of along the way in your career and how you’ve been working with startups and is there any real heartfelt story that you can really say that you know what this startup did X, they hit the wall. We came in, we did a brainstorm and man they really turned it around and this company’s really gone this way but there’s been some real heartfelt story that you could share that really kind of depicts the lifestyle of an entrepreneur and where they start and where they kind of go to.

Peter:
Yeah so one o my all-time favorite entrepreneurs is if I like Rafa Collie. And he founded paid content back in the day so that’s the Guardian. Like a lot of acquisitions, you know it sort of doesn’t always work. The folks that are acquired, they like cashing the check but they enjoy working for that big company that just bought them. And so he left that and he was going through a lot of personal stuff and we were talking about what do you want to do next. And he sort of had a notion for a travel company – a travel news company. And it was like okay well tell you what, he was gonna go walkabout for a while. And so we sat down on the concept and said time out let’s hold this and when you come back from your walkabout then we’ll start again. And so came back, and we went to a vegan tea house in Manhattan and said okay you know what are we gonna call out, what we’re gonna (inaudible) and I wrote about $25,000 check on the spot which is his first money and it ultimately has become you know in spite of all the chaos of the travel industry, it’s become over six or seven years one of the most trusted and respected sources of news information about the travel industry. Conferences and now of course it with another phase of reinvention because of everything there, but and what was interesting was we started out and this is since several years ago we don’t got to be a resource of big data company, and so we’re gonna raise a million bucks now and then we’ll come back away with a bigger round and we’ll get into data and it turned out that we never could raise a bigger round. And one of the something that’s important for entrepreneurs understand is that rightly or wrongly, venture investing is a fashion business. And you know it’s like the movies right. The same oh kid a cowboy movie every day’s cowboy movies, then I can’t when it comes along it’s like oh wait where’s my cowboy when we get more common movies until I basically just squeeze all the juice out of it, and then it’s like all right give me a horror movie. But VCs tend to do the same thing. It’s like when you know a Sequoia invests in a certain category, everybody else goes oh my god where’s my (inaudible) or like that. And on the other hand when they say you know we’re not doing immediate investments anymore or you know Oh big day that was last year, when you’re not sort of on trend with VC investment, gets really really hard. So what happened was we and I’ve had this a couple times where it’s like it’s a categorical problem. It’s like you know the business was hitting its numbers but it’s like oh yeah we’re not doing media investments. So with Skift what we did is we actually just hunker down, those of us there already around the table wrote more checks and said no we’re fine, we still believe in you. So we put in like raise up like another million or two. And so the good news is that’s all the money we’ve raised. And so yeah we probably could have gone out and raised it around and been all been deluded but instead all the folks that were in early still owned most of the company. And it’s become a very successful very valuable company.

Jeffery:
That is awesome. Sometimes you have to retrenched, figure out what you want to do if there’s pivot in there. But if other people aren’t finding the value then hopefully the people that are already mid in there can see and still believe in the CEO and believe in the team which is what you talked about if being important then you guys stuck behind that and look what happened and we’re able to overcome those barriers and grow it and find more value.

Peter:
The things is you invest in people. A good entrepreneur first of all it’s got to be somebody that you can trust, it’s gonna be somebody that you want to work with over a period of time, and adaptability — oh there’s a one of my favorite bad movies is Heartbreak Ridge and there’s a bumper sticker either you adapt, improvise, overcome. And that is the bumper sticker for an entrepreneur – adapt, improvise, overcome. Because you know nothing ever happens the way your business plan says it’s going to and so the successful entrepreneurs are the ones that go oh that sucks sorry I’ll try this and they stay at it keep working the problem.

Jeffery:
Its pivot, pivot, pivot right. In your mind you’re pivoting more than the company actually is pivoting because you’re always trying to reinvent yourself especially in your own mind as an entrepreneur. And I love that adapt, improvise, and overcome instead of waiting to hit the wall you hopefully you’re doing that on a regular basis challenging you your team’s and that’ll help you keep moving.

Peter:
Yeah well let me give you a personal story on that one. I wish it was my personal story but it’s a friend’s personal story. I was having breakfast with the phone and Bill Losey in New York number of years ago now. And I just seen that Pinterest had raised you know another round of money and I said okay congratulations (inaudible) go really well. Because you know it’s funny because I’ve been in that for five years, he goes for four years and nine months of that I was gonna write it off I thought it was going nowhere, he goes this was a cousin, it was the sixth or seventh pivot that finally caught. So he said at any point if we’d also lost faith, you’d never would have heard of Pinterest. They had enough money in the bank it wasn’t a huge amount but they managed it well and so they sort of had bought themselves the time to keep working on the problem until they figured it out.

Jeffery:
And you know what sometimes you’re not gonna define the problem right away. You think it’s one way and you’re gonna kind of slowly maneuver once you learn about it, you got to be in the space a long time. This one coming that was doing that I was talking to today and they were kind of going through the whole big picture and what and they told me that these are the three roadblocks we keep hitting and we’ve crossed the one barrier and we’ve proven to everybody that we belong here. And I said you know what, you’re probably not gonna know we were business until about five years so I said in this plan when you’re talking to people make sure they understand that you’re gonna be here for five years because it’s gonna take them that long for this technique that’s up to everybody else. You’re so far advanced if the only way you’re gonna survive is by having a plan that’s gonna get you five years because then that’s gonna build traction and those clients are gonna start dumping their money in because you’re solving a big problem that right now is fear is preventing them from using you.

Peter:
Well you know behind this as an idea one piece of advice that I give to founders is that they always resist. Most business plans, financial plans we get are priced for perfection. It’s served okay everything’s gonna go exactly going to plan and then there is A around for twenty million dollars (inaudible) I’m like okay so actually two bits advice. One is be really specific about how you’re going to use this money to get you to the point where you can raise an A around. you know what are the milestones that you have to hit to be able to raise your next round of funding. And don’t tell me how months this is, tell me what you have to accomplish. but then the second thing is and then hold back 20, don’t spend it all. Hold back 20% because you know you’ll get to your point no you’ll have to actually you know reinvent the product at least once you know you’ll come you know you’ll be just about ready to go and then COVID hits. You’ll and it’s like and you know the number one, , two and three rules of being a better CEO is don’t run out of cash. And so you know and there was like well no I need to have that money, to spend that money, it’s like and even the VCS spend, spend, spend, but you always got to have a little bit left in your back pocket, see yeah that a little bit more time to either go get a better deal in the next round or fix the product or get one more customer but don’t plan on sort of running out of fumes and immediately stepping into an a round.

Jeffery:
It almost seems like somewhere along the line of how the startups when they first start and they’re working through all of these different problems, one of the things that I find that would be really helpful is if they had some financial planning. A way to better understand how the finance works. Because when you’ve been working your butt off for no money for the last year and a half or last year you’re going to raise this big chunk of coin and then you think man I’ve made it. But you don’t realize is that’s just the smallest part of your made it part. You’ve got a lot of growth that you got to get to and you got to be able to hit those other stages and you got to prove your model all the way through. And I wonder if there’s — I’ve never seen it, but some small little I don’t know if it’s a walk through, a coach or presentation something that just says here you’ve got five hundred thousand store one hundred thousand you can’t touch that. This four hundred thousand is all you’ve got to build your company for the next year. The hundred thousand that is basically going to sit in that Bank account for the next ten years and you’re gonna keep growing that ten, twenty percent a year because you can’t spend it that’s your emergency fund. Everything else if you don’t have it’s gone so you better work your ass off on that four hundred thousand.

Peter:
That’s exactly the advice I could give it to people and they keep pushing back. Because you know okay they said they were if you give him five thousand, they’re gonna spend five hundred twenty five thousand and it’s like no no no like hold some bags

Jeffery:
This was a probably I don’t know maybe eight, ten years ago, there was a gentleman named Chris Carter. Big fan he works at Schulich he’s bought and sold his company a few different times but he had this story where a story or realism that he did and what he sent to the company was he said here look I’m going to give you $200,000 and I’m going to pay you personally money out of that money based on the amount of money you have left in a year. And the reason being is that he wanted them to build and grow and make revenues so that they would protect that two hundred thousand like it was the last two hundred thousand because it’s gonna give them a percentage of that just as a bonus and if you’ve got nothing left you get nothing out of it. But if you leave some money I’m gonna give you some of it and outside of what you’re being paid. And I thought that that was pretty clever and the reason being is there’s this mindset of stress that’s driven from managing money or having to pay for bills and not knowing what’s gonna happen in six months or eight months and I think that if you can take away that stress of the finance without just saying here’s all these gobs of money but managing it. I think that probably would allow that entrepreneur to be more active and being able to figure out ways to solve problems quicker, you know generate revenue, and profitable faster, versus saying I got money in the bank so let’s try this and let’s try this there isn’t that urgency.

Peter:
Now there’s a lot of over funded startups particularly in the valley of the U.S. Because having so much money takes away the urgency to solve problems. It’s like if you’ve got you know half a million or a million then your earlier point you can solve one problem well. And you better solve it fast. If you’ve got thirty million bucks you can sit around, think big thoughts about well so what are gonna be, when, we’re, let’s go to office, let’s get marble on the floors, here guys we need you know company cars… As an investor, way back in the early is Silicon Valley, the first investment banking firm was Hamburg Doomquest, and you know they they invested directly and then you know also were bankers. But I was talking one of the partners George Quiz and what he says we don’t like to invest until the entrepreneur has already put all of their own money into the company. So we invest after they’ve mortgage their house, max their credit cards, broken into the kids piggy banks, and when they sort of fully understand that their life will be a smoking hole in the ground if they fail – then we’ll put money.

Jeffery:
Yep urgency. It lights a fire under ass. Because you don’t want to go back to where you didn’t want to be right, I always say to myself I’m living on the brink of destruction every day because if I don’t have something kicking me in the butt what’s gonna drive me to wake up and do something more tomorrow. And I literally have been thinking about this a lot over the last couple weeks and one of them was what creates an urgency? Why do people say I got to launch this next week? I’m like what you can’t even feasibly do it in a week but why do you got a punch next week? You’ve got like four weeks, why don’t you do it in four weeks? And what I liked about the urgency of creating a date that’s not achievable is that it will work harder to achieve it regardless of anything you put behind it. There might not gonna be nothing right, you might open the door no it’s achieve and that’s it. You’re like there’s nothing here I thought you were like had billions of ad spend dollars, why you didn’t have that? So it’s the fact that the urgency creates you to work harder, your teams to combine together to find the solution and make it work so I think we always have to create an urgency it seems to be the only way that gets the light go and gets everybody moving forward quicker.

Peter:
You know but what you’re bringing up triggers another thought which is the why now. Okay because so the other sort of dirty little secret of investors is VCs have a no-cost option on your company. Yeah you commands ever the great plan… oh gee that’s really nice… And you say oh I’m gonna do this, that’s great so come back when you do this and this and then show me again… You come back and thinking like that did these things well that’s great what do you do next oh we’re gonna sell this customer what you thinking… I’m too cool tell you what so after you talk to those guys come back and see me again. And so you know VCs what they’re doing is they’re saying all right just you know you keep building the company on your dime and it’s like we’re playing poker and the entrepreneur has gotten like keep panting you’re putting money in, and he VC only has to decide they’re gonna put money in after they see the cards. And so one of the things that entrepreneurs need to really think about is in the classic, or else is, and I have a term sheet, and so if you want to play you got to write the check now. But they need to sort of be conscious of why they need to do this right now but also why does an investor need to come to the table now? Why is it different? Why should the investor not wait longer to see more of the developments.

Jeffery:
oh that’s a good point. And you’re right it’s mitigating, if I mitigate the risk by doing all of these things, does that mean they’re gonna ask for more things, or if I prove this will they jump in, so how do I create enough urgency that we’re mutually meeting in the middle and their dollars are gonna help us strive further and faster but I’m not gonna get pushed to hey can you do this thing for me as well which eats away another 30 months and then maybe they choose not to because they had found another company that was on a higher growth trajectory.

Peter:
Yeah. Well you know (inaudible) example of these kind of asymmetrical economies is in the pharmaceutical industry. And so you know it only makes a headline when some little biotech company is sold for 300 million dollars to Amgen. But what’s happening is and so probably 20 billion dollars was invested and most of those companies failed. But the one that succeeded those that company got a huge return. From the big company side it’s like okay as opposed to me taking on the risk of developing all these drugs and seeing what will work well I’ll get through stage 3 FDA trials whatever I’ll just wait and I’ll pay a premium for the winners. But it’s now a no-risk deal because oh it’s already done, it works it’s already approved, so fine so I’ll just pay more for it and then I’ll overcharge the consumers. The same model works by the way in oil. You know the historic wildcatter out with his burro in the desert. He takes all the risk and if he fails you know his bones bleach in the desert, nobody ever sees him except for the vultures. But if he succeeds he gets rich and a big oil company pays him for the claim he found. But it’s like few successes, huge payouts and a lot of other stuff just gets washed out.

Jeffery:
No I like that. And I think that in time there’s a lot of learning that comes through this and I’m gonna say that the first time you did it, to the second business of the third business, each time is gonna be a little bit different and you’re gonna get different people coming after you in different ways to solve problems. And different money thrown at different times, it’ll never work out to be the exact same pattern the first time, he second time, the third time. And I guess that’s what makes business exciting. I want to do one thing which I think will be a little bit different. We’re gonna call this rapid fire. So I’m gonna ask you a bunch of quick questions rapid fire and answer no thought just boom and then that way we solve some of the other questions and then I got one last big question for you. How’s that work?

Peter:
Go

Jeffery:
Alright. How many companies or dollars do you invest per year?

Peter:
Directly? I probably do five or six companies, being the various funds of where I work in, its maybe another twenty million dollars a year

Jeffery:
Perfect. Do you do follow-up investments? And how much of the portfolio percentage-wise?

Peter:
Yes and that’s something I didn’t start out intending to do follow on investments. But I realized my good companies would need follow-on. It’s probably a third.

Jeffery:
Okay, I like it. Any notable companies that you have in your portfolio that you want to share that are worth two seconds to answer?

Peter:
A kids book about… it’s a new business model book publishing company. And I made the investment early and then it came up just in time and you know it’s books to help parents have tough conversations with their kids. Came out but (inaudible) launched and then COVID came and we did a COVID book gave it away for free to build a database. And then the founder who is biracial wrote a brilliant book on racism just in time for the #blacklivesmatter movement. And you know it was the number one book on Amazon and so the company has just exploded .

Jeffery:
Awesome I love it. Any verticals that you focus on our company?

Peter:
Our company is Horan Media Tech Advisors, we started out doing mostly media and technology things like that. Lately been doing a lot of consumer products.

Jeffery:
Consumer, okay. Do you lead rounds?

Peter:
No, not really. I mean through some of the funds we work with we do but individually no.

Jeffery:
You take board seats?

Peter:
Occasionally my time is a scarce resource. So I’ve got a feel I do some but not typically.

Jeffery:
What other things outside of money do you do to help your startup companies that you..?

Peter:
Yeah we talk over what we call the Batphone. it’s like you know and so for a lot of them it’s you know it’s everything from sort of introductions, it’s to you know to other funding, so we’re helping them raise another round, it’s meeting customers and partners, find people.

Jeffery:
You have any preferred terms?

Peter:
Not really. done some priced rounds lately which is good but I’d say the most common terms are convertible notes.

Jeffery:
Okay. That’s the actually one last question one thing that nobody will know about you that you want to share.

Peter:
They don’t know it about me because I didn’t want to share.

Jeffery:
(Inaudible) It’s something crazy that people will be like that’s amazing.

Peter:
I have non intersecting circles of friends. And when they periodic… So I am a professional photographer and I do a lot of stuff in the outdoors of environmental (inaudible). I’ll be on national outings for the Sierra Club — I and through social media periodically the circles intersect. And it’s like so some of the CEO one of my companies at Palo Alto was out with a fly fishing guy and all of us goes oh you know Peter Horan? And it was and and Chris goes yeah yes.. How do you know Peter? Oh because I saw a picture he took up this mountain and doesn’t know because like oh he’s on my board directors. But it was certain these two people that’s heard it was like a random harmonic convergence of stuff. But like I said is like and sometimes I’ll see these like discussions where it’s like oh these people these people actually knew who the other one was, this would be a really fun conversation. These are bumped into each other because I’ve got these sort of random non-contiguous circles.

Jeffery:
I love it well. That’s what happens when you’re connected and talking to a lot of people and helping a lot of people. So that’s awesome. So the last final question that I have for you today is, if you have a crystal ball what do you see happening in the next 12 to 36 months in the investment community or the startup community. Is there a specific vertical that you think things are gonna really start to blow up in? Do you think VCs are gonna have a lot of money they’re gonna start pumping that up and dumping that all in 12 months? Where do you kind of see the scale of things happening over the next 12 to 36?

Peter:
You know I think things that are enabling technologies for remote work, remote education, remote medicine. Apps are fine but the stuff that’s actually as a plumbing level is you know tends to be really interesting. I think things that are physical dependent, like things that are commercial, commercial real estate is ripe for a fall. You know not a big surprise there. But I think you know there will be vacancies and business closures and like the REITs with commercial real estate a lot a big problem. I said I think it’s you know I’m old enough to have gone through a number of these downturns, and we here in the middle of it it always seems like it’s the worst ever and it’ll never end. And it always does end. It’s Like we go through the nuclear winter of 2001 to like the analogy I kept using my team’s okay look it’s like we’re a life raft and we’re floating and someday a boat’s gonna come by and rescue us, we don’t know what day our job is to be alive when it comes by. And so you know for startups right now it’s hey get through this, it’ll end. You just got to be alive when it ends. and then try to figure out how you can get a disproportionate advantage you know when the recovery happens.

Jeffery:
I love it well Peter I want to say thank you very much for your time. Today it was brilliant I learned a ton. And as I always do, I took a ton of notes and I can say that there’s a ton of great lines here that I’m gonna utilize some in my day but I appreciate all the insights, all the information. I’m sure the audience as well will appreciate it. Everybody that’s online today or when we do publish it and to end it I want to give you the last word. So any last thing you want to share to the startup or investment community, and it’s over to you.

Peter:
Well I’ll go back to is in the early days when I decided I want to work in technology, everybody thought it was a terrible idea. And so one of the principal things to take away is do this because you’ll love it, because you need to do it, not because you think it’s an easy path to getting rich. It’s like you do this because it’s like an itch you got a scratch,. It’s like no it pisses me off there’s this problem, I know I could do this and when you feel t that’s why you do it. People that sort of get into just for the bucks it doesn’t usually end well.

Jeffery:
I love it. No that’s fantastic. Well I appreciate it . Thank you very much, Peter. We’ll be in touch and we’re gonna let you know when everything’s ready to roll but thanks again for all the insights and your great lines and stories.

Peter:
Thanks a lot. See you soon man.

Jeffery:
You bet. Thanks a lot. Well we just we were just on with Peter Horan. And man that was amazing thing I really delve into lots of great stories. I love the fact that we got to do some rapid fire questions. I think I’m gonna do that from now on, I think that was just a way better way of looking at things. But what I really liked about some of the things you said and of course you can go back to some of the lines and I think that really makes a big difference but you mentioned one which was lemons ripen more often than peaches. And I might be paraphrasing that but what I loved about this line is that when you are the diamond in the rough, you’re the one that’s working hard, you found this problem and like you said at the end it’s all about being passionate, finding a problem and going after it really hard and making sure you succeed at it, that’s exactly with the lemons ripen more often than peaches. And you know what those lemons you know they’re the sour ones they got all the bad taste so that’s the ones that we’re not sure of but at the end they’re gonna push through and they’re gonna persevere why because at the end of the day you gotta work hard and you got to find the problems, find that solution and make it happen. So I really love that about that part of it. You talked about a lot of great things that you kind of have to look at he went through a lot obviously from working back in his pong days all the way through and you know what adapt, improvise, and overcome and I think that everyday you got to look at life the same way not just in business in life everywhere and just adapt improvise and overcome. So today’s show I’m gonna throw that out there that’s what this was about. Peter’s message is adapt, improvise, and overcome so enjoy yourselves, keep working hard and nothing’s easy, and we’ll see you guys at the next
interview.

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