Reid Hoffman
Reid Hoffman

Reid Garrett Hoffman is an internet entrepreneur, venture capitalist and author. Hoffman is best known as the co-founder of LinkedIn. Hoffman, with a net worth of US$4.7 billion, is ranked as #341 on the list of the world's richest people.

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What criteria are you looking for in investing in companies from the discovery fund?
The attributes we most look for is great entrepreneurs who have a drive, an interest in learning and a passion for excellence and ability to lead and bring other people in.on space side, it’s something that can grow to be a $1 billion business. the discovery fund allows us to build much earlier and take early-formation risk so it’s ultimately the same kind of massive opportunity but now in a much more formative stage.
What happens when you invest in a start-up from the discovery fund but not later in a traditional venture round? what does that signal?
The actual early stage entrepreneurial game isn’t about protecting the downside but about maximizing the upside. so signaling is misleading because it focuses on the downside rather than upside. we’ve actually seen lots of deals where a vc will have done a small stake and just not lead the next round. every good-to-great company has no problem with that whatsoever. that pattern already happens a lot.
One characteristic of the discovery fund must be speediness.
Absolutely. one of the investments we made, we made a decision in an hour. literally if an entrepreneur comes in with an idea and if you know them from their previous work, you can move really fast. there’s not a lot of due diligence to do (at suc...This knowledge is worth millions but signing up is free
You’ve said the fund has already made four investments. in what types of sectors?
Consumer internet and enterprise. all software.
What did it take to get this fund off the ground?
The basic thing was to make sure that everyone was comfortable with the way we partner with entrepreneurs and how we manage our lps’ money is all transparent. we weren’t toiling for weeks (on setting up the fund) but it did require lot of thoughtf...This knowledge is worth millions but signing up is free
A lot of seed investing appears to be just try-it money for venture firms–that is, it’s not that much skin off a venture firm’s back to put down $50,000 or $100,000, even if the start-up ends up failing. is this fund basically play money for greylock?
I’ve never done it for play and i’m not doing it for play now. the fund is supposed to return money and the companies (we invest in) have the characteristics that we normally look for.
How will this fund work differently than for greylock’s regular investing?
In an investment from the main fund, we typically invest a sizable chunk of money and then join the (company’s) board and it becomes one of the projects you’re really working on every week. whereas when you’re an angel investor, you just make coup...This knowledge is worth millions but signing up is free
Did greylock raise a separate vehicle for the discovery fund?
No, it’s a distinct entity but the same lps (limited partners). (greylock raised a $575 million fund, greylock xiii, last november.)
Why launch the discovery fund?
The highline is that we and I both still get lots of early stage entrepreneurs coming to (us) with the basis of an interesting idea, but it needs a substantial workout before the idea needs a venture round. so as we talked about it internally, we ...This knowledge is worth millions but signing up is free
What company do you regret not funding in recent years?
I passed on [the personal finance service] mint [which sold to intuit for $170 million after raising $32 million over three rounds]. I thought [founder] aaron [patzer] was really strong. I just thought it would be hard to get to sufficient size in...This knowledge is worth millions but signing up is free
Is it likely LinkedIn will go public next year, and do you care if you get out there before Facebook or vice versa?
I usually direct ipo questions to [ceo] jeff weiner. it doesn’t matter to me if LinkedIn or Facebook goes first.
Won’t the process drive you crazy? how many deals will you be able to fund this year through the firm?
Given how busy I am at linked in, I don’t have much time to do financings right now anyway. so there’s some likelihood that I won’t do any greylock financings this year; it depends on how time sorts out.
How long does it generally take for your partners to reach a consensus on a deal?
There’s no average time to consensus. of course, all venture partnerships pride themselves on enjoying the paradoxical qualities of being both thorough and capable of speed.
So how is venture capital different than you imagined, now that you’ve gotten a good inside glimpse of things? or is it exactly as you’d imagined?
Most was stuff I was expecting. you know, as opposed to making a decision as an individual, you make it as partnership. you kind of work on the partnership, too, including helping some of the younger members of the firm and develop their practice....This knowledge is worth millions but signing up is free
So you’re there for the partner meetings and you’re paid as a partner? are you an investor in its funds, as all gps are expected to be, or are you trading on your early-stage deal flow instead?
I’m a partner just like any other and yes, i’m an investor in greylock’s fund.
So you’re a full partner at greylock. how much time do you spend there?
I’m at greylock on mondays and at LinkedIn tuesday through friday.
What are the other two deals?
The others haven’t been announced yet.
You backed the private, home furnishings website one kings lane after joining greylock. does that mean that you’re still investing your own money in seed-stage deals?
No, all of my investing I now do for greylock, but mark [pincus, ceo of zynga] and ali [gelb pincus, wife of mark and cofounder of one kings lane] are good friends and when I joined the firm, I said: I have these three things i’ve been working on ...This knowledge is worth millions but signing up is free
You were interested in a new venture practice; why not create one, a la marc andreessen or peter thiel? surely you could have.
In some sense, greylock is a new practice. it’s in the process of becoming a silicon valley firm, and david [sze] and aneel [bhusri] and the rest of the team embody the virtues that i’d want if I were building my own firm: they have deep operating...This knowledge is worth millions but signing up is free
Is that part of what you find compelling about greylock? is it an opportunity to attract more backing to some of your strongest portfolio companies?
To be a good investor for lps, you invest their money like it’s your own, but no, that would be a pretty bad plan. for me, I thought there was an interesting evolution in essentially how the [venture] practice can be done, partnering with entrepre...This knowledge is worth millions but signing up is free
So you don’t think follow-on rounds are an issue for smaller funds? did you do many follow-on rounds when you were investing on your own?
Only a couple. I would have done more if i’d had more cash.
Many of your industry friends argue that given the efficiencies web entrepreneurs now enjoy, microfunds make sense while big funds do not. meanwhile, you’ve aligned yourself with a firm that’s investing $575 million right now. what do you say to them?
The thought that you can fund successful software companies on much smaller amounts of capital is absolutely correct. but all the companies that get to scale and get to an interesting size — witness Facebook, LinkedIn, Twitter, zynga — all go thro...This knowledge is worth millions but signing up is free
Okay, what about one that is public?
Xapo [xapo is a greylock-backed company that has created a digital wallet for bitcoin]. my theory of why bitcoin is interesting is that there will almost certainly be in 10 years there will be one or more global crypto currencies that will either ...This knowledge is worth millions but signing up is free
Is there one top of mind that comes to you that you’ve done recently that fits that description?
Well, the last deal that i’ve done I think fits is still under stealth.
How do you maintain investing discipline in the current venture capital environment?
We have a promise to ourselves, to our lps [those who give greylock to invest], to our entrepreneurs, that we select the projects, the entrepreneurs that have the chance of being an industry-defining company — a company that lasts for decades, hop...This knowledge is worth millions but signing up is free
Are we in unicorn overload?
The question also is are there frothy valuations. the thing that people under attribute in the networked age we have many more customers, and the ability to grow, the ability to make a startling business is happening very quickly. the combination ...This knowledge is worth millions but signing up is free
Do we need to a new name for these $1 billion plus tech companies other than unicorns?
I think that part of it is that we’ve built up expertise about how to build massively transforming companies and it’s actually not accidental. it’s a strong and healthy byproduct of the network in silicon valley, and that’s actually a really good ...This knowledge is worth millions but signing up is free
Is the scale that silicon valley has achieved, with the massive amount of companies being built, good for the ecosystem overall?
Unequivocally yes. it’s not to say that there isn’t a bunch of noise, like an app launching for counting tiddlywinks or something. that always happens when the breadth of things gets larger. but the number of legitimate globally transforming compa...This knowledge is worth millions but signing up is free