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| Home - Venture Profile - Mar 04 Issue |
Venture Profile: Tim Haley, Redpoint Ventures
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Angel Mehta: Okay. Let’s talk a little bit then how you evaluate deals and entrepreneurs. We know the standard criteria that investors look for: market size, technology, people - but what are some of your personal preferences in terms of how you evaluate an entrepreneur or a business plan. If you could point to two or three things that an entrepreneur has to be ready to answer when he’s in front of you…
Tim Haley: Of course different investors have different points of view on this. My bias has always been to assess the people first. If they make the grade then I will go to the next step. When I get a business plan the first things I do is I go to the team section - I really want to judge the talent. I need to know upfront if the team is top notch. Otherwise I will lose interest immediately.
Angel Mehta: Let’s talk about the team and how they get evaluated. I think that a lot of entrepreneurs who need to evaluate a CEO that they’re trying to bring in look at the pedigree and find that despite a terrific paper background, things don’t work out. How do you gauge whether a CEO is right for one of your portfolio companies? What are some of the nuggets that say someone who is inexperienced in the area of hiring CEO’s should know about?
Tim Haley: I tend to be biased toward people that have been successful. I worry a lot less about seniority… whether someone, for instance, has been a CEO before. I am more interested in whether they have what I call ‘the genetics’ of start-up CEO.
Angel Mehta: I hear that all the time, people talking about the right ‘DNA’… but what does that mean?
Tim Haley: Are they a risk-taker. Have they consistently demonstrated an ability to take risk and win (at least most of the time). Whether a person has been in a big company or not is irrelevant. I want to know what they have actually done… whether they’ve taken a safe and easy path, or whether they have put themselves in the fast moving water and accomplished something important. They need to stand out above the crowd. You must be able to see them in the CEO job. It’s also very important not to rationalize away weaknesses because you want to hire them or invest in the company. An appetite for risk and the ability to deal with ambiguity is much more interesting to me versus previous general management or CEO experience, whether they’ve been in a large or small company. There’s a mentality, there’s a certain kind of intelligence that I think is required for success as a CEO of a small company. I sometimes think that people either have it or they don’t. I see it as both a challenge and opportunity to make that judgment and make it right. That’s how you can win big.
Angel Mehta: Can you give me an example of what you mean by that?
Tim Haley: Sure. I had a consulting job with a young entrepreneur in 1992 named Reed Hastings. At that time Reed was in his 20s, he had virtually no management experience and had never founded a company. At first pass he seemed to be yet another talented software guy who had developed a great little SW tool and had an itch to build a company. If you had read his resume there would have been nothing to indicate his appetite for risk, leadership skill, ability hire amazing people and vision. He had the DNA. It would not take long and you could just see it.
Angel Mehta: They merged with Atria and then Rational Software, right?
Tim Haley: Yes. The company he founded was Pure Software. He built it, brought it public, merged it with Atria and eventually merged with Rational. It was quite a ride.
Angel Mehta: Hey, didn’t he do Netflix?
Tim Haley: Yes, in fact Netflix was my very first investment as a VC.
Angel Mehta: Quite a gap in terms of domain, isn’t it? From CASE software to online DVD rentals?
Tim Haley: Absolutely. And here’s the point to the story. Reed not only battled and won the standards war with DiVix. He also pioneered DVD revenue sharing with the major studios and created an entirely new channel for content distribution. He has really changed the way many customers acquire, manage and pay for video content. He not only had the vision he had the conviction to change an industry at a time when both DVD and online commerce were just emerging. We are talking about 1997. It’s a great example of the right CEO DNA.
Angel Mehta: Is this a billion dollar market opportunity…
Tim Haley: Yes this is a good example of what to look for in CEO. Reed’s one of these guys that constantly looks forward and almost wills things into existence. He does not admit impediments. If he needs to make a strategy correction based on data, he can do it. He’ll point the company in a direction, based on a hypothesis and he’ll move it. If that hypothesis turns out to be wrong, he will make a strategy correction very very quickly. He can navigate a company without spending huge amounts of dollars and a lot of time trying to prove that the wrong strategy is the right one. I think the art to really good CEOship is that ability to navigate a company, make strategy corrections and build a team around the business model that you’ve put together – but then correct the model on the fly. Reed is a great example of someone who would not fit any conventional model but yet he’s got these qualities: super intelligence, risk-taker, can view strategies, can recruit phenomenal people to work for him and build a great team
Angel Mehta: What do you know now that you wish you knew then, not including investment tips?
Tim Haley: I have to say that I never do that. I really don’t like looking back. It’s much more productive to look forward.
Tim Haley is a founding partner of Redpoint Ventures. Prior to founding Redpoint, Tim was a general partner with IVP, a firm he began working with in 1987 and joined in 1998. Tim focuses on investments in enterprise software and software infrastructure. Tim can be contacted at thaley@redpoint.com for article feedback.
Angel Mehta is Managing Director at Sterling-Hoffman, a retained executive search firm focused on VP Sales, VP Marketing, and CEO searches for enterprise software companies. He can be reached for feedback at: amehta@sterlinghoffman.net
 
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