This is part of my operating manual series opening up the playbook of private equity and company building luminaries. Check out past ones with Mark Leonard, Andrew Wilkinson, Robert F. Smith, Joe Liemandt, Felix Dennis and Mike Speiser.
If you are interested in buying, growing, and selling small companies, check out my course & community on it at IndiePE.com.
Mike Speiser runs the best venture studio in the world at Sutter Hill. ~20% of their companies have been multi-billion dollar outcomes. Snowflake just IPO'd at $63B at they own 20% of it. Here is how he does it.
Speiser finds 2-3 co-founders and becomes the founding investor/CEO 2 days/week. He starts 1 new company per year.
He runs the customer development process, works to find product/market fit, handles fundraising, operations, and sales.
Then hands it off.
Founders generally prefer to stay when the startup is doing well. So VCs looking for replacement CEOs are often selling failing co's.
Speiser is different. His model is built on stepping down once companies are working. Executives know these are great opportunities.
Better Founding Teams
Since he's the CEO, he can focus on getting the right technical co-founders that have strong views on what to build & ability to build it.
Speiser meets with hundreds of potential founders and customers before deciding who to incubate a company with.
Securing initial enterprise customer pilots is much easier with a strong brand and pre-existing relationships with potential customers.
Doing this repeatedly gives them a playbook for honing in on the ideal customer profile, how to structure the pilots, etc.
Some founders will balk at the lower equity and lack of autonomy.
Originating companies is a massive amount of work. He gets far fewer shots on goal since he only does incubations.
The model scares off some founders that are afraid he'll start a competitor.
Speiser’s approach is to find a market undergoing a massive technology shift and go all-in on the transition.
He takes technical risk over distribution risk. The demand is there if it works. Most don't think it'll work yet.
It takes guts. Timing is everything.
They often do most of the first few rounds themselves.
Ability to self finance gives companies more flexibility on timing.
If raising is a distraction or they can't raise, Speiser can take the round & get back to building. Waiting for market to come around.
Snowflake ($63B) is all-in on cloud data warehouses. Not on-premise data warehouses.
Pure Storage ($4B) is all-in on flash storage. Not hybrid or disk storage.
Ghost Locomotion is all-in on computer vision autonomous driving. Not hybrid or LiDAR autonomous driving.