Investing Outside Silicon Valley, “Prepared Minds” and How to Build Strong Boards

Next up in the The Twenty Minute VC Accel series is partner, Rich Wong. Rich shares much of his background with Harry in his interview, including how he got his start in venture capital 11 years ago with Accel. He serves on boards including Atlassian, Checkr & ServiceChannel, and he led the firm’s investments in Airwatch, Admob, Rovio, MoPub, & Swiftkey.    

Some of the highlights from the discussion follow and you can listen to Rich’s Twenty Minute VC episode here.

Multi-Billion Dollar Companies Outside of Silicon Valley are "Hiding in Plain Sight"

Rich gets into a pervasive Accel theme: the idea that Silicon Valley is increasingly a mindset and not just a physical location. What we mean by that is more than ever before, we’re seeing tenacious founders start companies outside the Valley. We’ve seen category-defining successes emerging from Australia, Finland, Sweden. We’ve also seen strong companies arise in previously overlooked U.S. markets like Salt Lake City, Baltimore, and Portland. And these companies are not just  staying in their respective cities and countries long-term—they’re thriving there.

Qualtrics recently spoke to the New York Times about the belief that their HQ in Provo, Utah is actually a key element to their success, rather than a barrier to success. Rovio, meanwhile, is another recent example of successful technology company based outside the Valley that went on to a 2017 Initial Public Offering outside the U.S.

Rich also discusses how we look for companies “hiding in plain sight” and the lengths we’ll go to find them:

• “. . . you do have really interesting companies hiding in plain sight, but you just have to expend the effort to network with the locally knowledgeable entrepreneurs and other angel investors to find those interesting companies [like Atlassian, Qualtrics, Rovio, Spotify, Squarespace, and Supercell].”
• “. . . what matters is the unique or special company. Even if it takes a 12 hour flight to find it.”

A “Prepared Mind” to Identify Opportunity

When Arthur Patterson and Jim Swartz first co-founded Accel, a core tenet of their approach was a thesis-based approach called a “Prepared Mind.” Nearly 35 years later, Prepared Minds are still an integral part of how our team approaches, learns about and invests in new opportunities. Rich talks about how the deep insights the arise from this approach inform our investment decisions. In short, it leads to a collection of investors with conviction. Which ultimately means that when we invest, we share the same conviction and commitment as our founders. And this, ultimately, makes us better long-term partners:

• “It comes from Louis Pasteur . . . chance favoring someone who has a prepared mind. It's having a thesis-based approach to sort out what's interesting . . . whether it's the Slacks, or Clouderas, or Dropboxes, or InVisions.”
• “. . . at the early stage, you're purely betting on teams. [That means] entrepreneurs that completely understood the category they were working in, [with] an authentic understanding of the problems.”

Building Strong Boards & Fostering Lasting Success

Lastly, Rich talks about the importance of building for long-term success. This applies to the companies he advises. And it also applies to how he and the rest of the Accel team think about creating an engaged and supportive partnership:

• “Having a diverse syndicate that has different points of view, even if you don't 100% always agree with the other members of that board, can actually make a dramatic difference in helping the company be successful long term.”
• “. . . we spend a lot of time thinking about . . . how do we get folks that are just starting in their career engaged, plugged into the partnership as quickly as possible, and leading deals as quickly as possible? When I first joined Accel I was able to lead my first deal within 30 days of actually starting. That wasn't because of me, that was because the organization encouraged and supported that. And so, I think we've proven over the years the ability to do that and, of course, it's the heart of how a venture capital firm stays healthy.”