Palo Alto's SoftTech VC is hardly your typical venture capital firm. Its founder, Jeff Clavier, is French. The firm helped pioneer the "micro VC" trend, bridging the gap between angel investors and big venture funds to place early bets on startups such as Mint, Fab and Fitbit.
The newest addition to the team, Charles Hudson, has a colorful history all his own, ranging from dot-com pioneer Excite@Home to Google to the CIA. He also happens to be one of the very few African-Americans in the venture industry. In this week's Elevator Pitch, Hudson talks about drones -- the commercial kind -- and how to widen the pipeline into VC.
Q How'd you get into this racket?
A When I was in college, I was working at Excite@Home. I thought I was going to go into finance after I graduated, and I was looking at career options in investment banking. My boss encouraged me to take a meeting with her husband, who was starting a new VC firm. That firm was In-Q-Tel (the CIA's nonprofit venture fund), and I ended up working there for about 31/2 years before I went back to business school.
I realized that I loved the world of startups and investing and that it was something I wanted to return to after I had some operating experience. With SoftTech, it's been great to have the opportunity to get back in after learning quite a bit more about how startups and big companies work.
Q What do you like about VC?
A For me, the best thing about the job is the ability to provide hungry, visionary people with the capital that helps them build businesses that really have impact. I get to spend my day hearing about the problems they're tackling and their visions for the future.
Q What kinds of pitches are you looking for now?
A I am a really founder-driven investor; it all starts with the quality of the founding team and their vision. So I tend to have a fairly heterogeneous set of interests, as I can't predict what kinds of opportunities are capturing the minds of smart people.
Overall, though, I am very drawn to marketplaces and mobile, as both are really interesting areas.
Q What's the biggest mistake entrepreneurs make?
A There are so many things that can go wrong. One of the biggest mistakes entrepreneurs make is failing to heed clear signs from the market that the idea they are pursuing just isn't working. There's a fine line between stubbornness and persistence, and the difference is often only clear after the fact.
The other big mistake I see is entrepreneurs raising only enough money to fund their plan, assuming nothing goes wrong. In almost every case, something does go wrong, and plans that don't have any cushion in them can leave entrepreneurs needing capital at the worst time.
Q What's the next big thing going to be?
A I wish I knew! I'm a big fan of commercial drones, as I believe they will have significant impact on the world in which we live.
I also believe we are in the very early stages of some big changes to the way urban transport and logistics function -- we are going to see many new, interesting things happen in that space.
Q You've worked for both the CIA and Google. Which one is more evil?
A Neither is evil, in my opinion. Both are really mission-driven and secretive and have to balance forces that are not always visible to the public. I don't envy the leaders of either organization -- they both operate in really difficult environments.
Q You've focused a lot of your career on social gaming. What's the future there, given that Wall Street still seems to hate Zynga?
A I really do love games. It's a great business. But it's clear that Wall Street has a hard time getting excited about it.
There's a handful of great private companies, including the folks behind Minecraft, SuperCell, King, Kixeye and Kabam, that all have strong financials. We'll see if any of them can make it to the public markets and change Wall Street's perception.
Q More than a dozen years ago, I participated in a tech-trivia contest with a bunch of Silicon Valley investors and execs, who were stumped when asked to name a black venture capitalist. Why haven't things changed since then?
A That's a really good question. I think it's due to the fact that the historical path to getting into VC is either starting a venture-backed startup or working as an exec in a major tech company for some period of time. And historically it has been important to have a technical background as well. When you apply those filters, the candidate pool is relatively small.
So either the candidate pool will have to enlarge -- and there are many people working on the pipeline issue -- or the types of candidates that VCs want to hire will have to change. I'd bet on the former over the latter.