January 18, 2016

Investor Profile: Chip Hazard - General Partner at Flybridge Capital Partners

Chip Hazard is a General Partner at Flybridge Capital Partners. He has been a venture capitalist for over twenty years and at Flybridge, he has made several investments which led to exits in local companies like Crashyltics (acquired by Twitter), Stackdriver (acquired by Google), & PatientKeeper (acquired by HCA). Prior to joining Flybridge, Chip was a General Partner at Greylock.

1.  Tell us about your background - where did you grow up...what prompted you to attend Stanford / what did you major in?  Why did you work as a Management Consultant at Bain initially, then go to business school at HBS?

I grew up in Wayland, MA with three older sisters and went to the Wayland public schools from Kindergarten through graduation.  After 18 years in a small New England town, getting as far away as possible and into the California sun seemed like a great idea.  I started out at Stanford as an engineer, but soon found that way too much work relative to spending time in the aforementioned sun, so in between being captain of the ski team, on the lacrosse team and studying overseas in Poland and at Oxford, I occasionally studied and ultimately graduated with Honors and dual degrees in Economics and Political Science.  I joined Bain & Company right out of school, which proved to be a fabulous crash course in strategy and operations, before moving to back Poland to work for a year on post communist economic transformation and coming back to Boston for business school.  

Chip Hazard Flybridge Capital Partners - Throughout The Years

Chip Hazard Throughout The Years

2.  How you did you get into venture capital?

I got into venture capital in a manner that largely does not exist anymore, namely I joined Greylock right out of business school.  At the time Greylock was just six senior partners and I was the first hire that they had made in 10 years.  While I am not entirely sure about their thought process at the time, I think they needed someone to fetch coffee, which was a fair trade for the chance to learn the VC craft from the best in the business.  I still remember making my first investment as if it was yesterday (I wrote about that company here) and feel fortunate every time we get a chance to help founders launch companies to realize their dreams.

3.  How has venture capital changed or evolved over the years from your days at Greylock to today at Flybridge?  You have been an investor in the Boston tech scene since 1994, how has the ecosystem evolved since then?

If nothing else, with 21 years in the business, I have gone from being the youngest venture partner in the Boston VC scene to now being one the 5 most tenured active investors.  On my 20th anniversary, I wrote about how the industry has changed here, but two things still stand out for me.  The first is how little change there has been in the fundamental nature of what entrepreneurs and VCs try to do day in and day out - namely identify large trends, develop disruptive solutions that take advantage of these trends and to build sustainable companies that can create significant value over time.  The second is how everything has changed - founders are far smarter and educated on the company building craft, the breadth of industries impacted by the innovation economy has grown by orders of magnitude and the cost to get a company launched and working with customers around the globe has plummeted.  The venture industry has reacted to this trend by being more focused and specialized, with each firm having deeper levels of expertise relative to the areas that they focus on.

4.  Do you have any interesting / fun stories to share from the web 1.0 bubble years?

It was a crazy time and while the past few years have been frothy in the start-up world, they don’t hold a candle to those years.  There was the sense that everything could go to to the moon in 2 years, and many companies did go from inception to IPO or billion dollar plus outcomes in less than 2 years on almost on no revenue.  My partner David Aronoff had one company where we returned 60 times our investment in 9 months from an acquisition and I was on the board of one company that went from zero to a billion dollar value in 2 years on cumulative revenue of around $3 million.  Neither company or product exists today.  The vast majority of today’s unicorns, while perhaps over-valued on traditional metrics, are growing exceptionally fast with sustainable business models, diversified customer bases and massive market opportunities yet to conquer.  I am convinced that it you bought an index of today’s unicorns and held it for 5 years you would well outperform the S&P 500 or other indices, and this was absolutely not true in the late ‘90s. 

5.  What stage of investments do you primarily target?

We are early stage investors, with the majority of our new investments being at the seed stage and the remainder at the Series A stage.   For us, a seed stage investment is a pre-revenue company with a small high-caliber team, looking to raise $1-2M to accomplish a specific set of goals that we think are steppingstones to seizing a large market opportunity, while Series A companies are generally raising $3-$6M and are on the other side of the seed stage and have early evidence of significant momentum.

6.  What are the top traits you look for in terms of investing into a company or founder?

We always start with market opportunity as a large and rapidly growing market can cover up a lot of sins and it makes it easier to hire top talent and raise the capital required to support growth. Companies are either trying to attack an existing market with a different approach, or create an entirely new market that could dramatically change an industry. One of our portfolio companies, MongoDB, disrupted the $30 billion database market by building a new database that was architected from the ground up to meet the needs of how developers build and deploy modern applications.   These markets are easier to analyze as you can speak with potential customers and understand their needs and frustration with existing solutions.  Harder to analyze, but in the long run perhaps even more compelling, are companies that create entirely new markets when if, successful, there is an opportunity to build a market leadership position with far less competition.  Our portfolio company Jibo, which has developed the world’s first social robot for the home is an example of a such a company as they have a huge market opportunity in front of them, but in a category that had not previously existed.   

Regarding founders, in my idea world, we would back founding teams of two people, with one person being very product/technology centric, while the other is more market/customer centric. We feel that this combination tends to work best among start-ups as the two founders can complement each other and push each other in unique ways. We’ve met all types of personalities, some better than others, but there are some general character traits we look for. Intelligence, curiosity, drive - we look for people who look at the world differently, who can paint a vision and generate excitement with what they’re trying to accomplish. We also like to use the term “pied pipers” to describe the founders we’re looking for. You want to see these people win. They attract advisors, partners, customer and followers that are intrigued by their actions. These are the people you want to invest in.

7.  What sectors of technology, industries, or trends are of interest to you?

I spend most of my time looking into “developer driven” businesses. Going back to 2007, we made a call that cloud based architectures were going to be the platform of the future.  We translated this into an understanding that as you build applications in horizontally scalable, loosely coupled ways, it empowers end developers to make fundamental technology decisions whereas in the past they had been told top-down what application components their IT and engineering organizations would support.  This opened up a go-to-market strategy for companies to build widespread and grassroots support with developers for their platforms, APIs or cloud services before investing significantly in sales and marketing resources, the largest cost for any startup as it scales.  We have backed eight companies around this theme (MongoDB, Crashlytics, and Firebase to name a few) that are collectively currently valued at 10 times our cost basis, so it has worked well for us and the founders of these companies.  Looking forward, if a task or routine takes a developer a lot of time to build or deploy, we want to see a company take that on as a core focus and develop a service/product that both vastly simplifies the implementation and increases performance.  I thought our portfolio company Firebase, which was acquired by Google in 2014, sums this theme up well with the tagline on their website: “We help developers build great software in a fraction of the time it used to take.” 

8.  What is the current fund that you are investing from?  

We are currently investing out of Flybridge IV.   You can read more about the fund and the investment themes we are focused on here in a recent blog post by my partner, Jeff Busssgang.

9.  You are a very active investor in Boston companies such as Digital Lumens, Nasuni, Predilytics, FirstBest Systems, Sciformix. What excites you about the current market in Boston?

The Boston market has always had great talent, both on the technical and business front, and this has led to the creation of many market leading companies over the years.  While this still holds true, what has me most excited is the change in culture.  The Boston market is a 100 more times collaborative and open-minded than it used to be and the re-urbanization of the start-up scene into the city and Cambridge has helped this culture immensely.  Further, there is much greater appetite for risk, an understanding this comes with the risk of failure, and as a result far a robust pipeline of young companies and a more active angel and seed investing climate.  

10  A lot of your previous investments have been successful leading to an exit, recent examples include Stackdriver, Crashlytics, PatientKeeper.  Looking back, are there any common traits about these companies that led them to a successful acquisition?

I have an old rule of thumb that you can’t build a company to be acquired, you build a great company and along the way it may be acquired.  But one of the keys to building a great company is to see market opportunities before others do and be laser focused on driving customer adoption and success.  All of those companies built innovative solutions and had significant momentum in markets that were taking off, which naturally caught the eye of larger players who were looking to take advantage of their success to build out their own offerings.  The other key to M&A success is to be deeply plugged into your market and to always be talking to players that could be interesting partners, even if they are less obvious.  Neither Twitter (Crashlytics) or HCA (Patientkeeper) were the obvious acquirer of those companies, but the founders of each company were creative and receptive enough to find ways the companies could work together.

11.  What companies in Boston, outside of your portfolio, do you find interesting?

Tamr is my current favorite.  I think the world of Andy Palmer and he has a secret weapon with Turing Prize winner, Michael Stonebraker, as his co-founder.

12.  Greatest misses - what company(ies) have you passed on that you wish you hadn’t?

Haha. Way too long of a list! We analyze our big misses regularly and a common theme is that we often see the company very early in its life and fail to think creatively about what it can become under the guidance of super talented founders as opposed to what it looks like at the time we see the company.  A great example is HubSpot. It was too early, and we couldn’t imagine what it would become. This was 2005, when Brian and Dharmesh were still in school building websites for small businesses. Inbound marketing wasn’t even a thought! But they transitioned their company superbly, and the rest is history. 

13.  Who do you admire or who has been the greatest mentor for you?

Henry McCance, who was the senior partner at Greylock when I was there, has been a great role model and mentor.  He could see around corners (he made the first pure software company investment in the venture industry), treated every founder with huge respect, always did right by the firm’s limited partners and ran an investment process that repeatedly delivered high quality outcomes.  Since retiring from Greylock has has turned his sites on the small task of curing alzheimer’s disease with a uniquely VC like approach, an ambitious and worthy next chapter.  If I have a fraction of his success and impact I will consider myself very fortunate.

14.  Outside of being a VC, what are you personal interests or activities?

Like everyone in our always on, connected world I have far less free time than I would like.  My wife and I have 4 children, ages 14-20 and I love to spend time with them.  Travel is a passion and I have been to 48 states and 50 countries and I still ski when I can.  Marrying the two, after a missed opportunity to ski in Northern Africa, I now have a goal to ski on all seven continents.   I also love to read and go to concerts, which is a good segue to the next question.    

Chip and his family skiing in New Zealand

15.  What type of music do you like?  What was the last concert that you went to?  OR… what was the last book that you read or movie that you saw?

The last two concerts I attended were Alabama Shakes and Alt-J and attending Coachella with my oldest daughter was a fabulous experience.  On the book front, I read around 50 books a year ranging from fiction to non-fiction to business topics that interest me.  Some favorites from the last year include The Martian, Things Fall Apart, The Age of Cryptocurrency, The Perfect Meal and What If?  My Amazon recommendation engine gets easily confused.  

16.  Are you involved in any charitable organizations?

I am on the Board, and Chair the Finance Committee, of Horizons for Homeless Children.  My wife is the Chair of the New England Aquarium and on the Board of the Boys and Girls Club of Boston.  

Keith Cline is the Founder of VentureFizz.  You can follow him on Twitter (@kcline6) by clicking here.