Elevator Pitch: For a Valentine’s treat, here’s Steve and Trae Vassallo

Just in time for Valentine’s Day, ePitch brings you Steve and Trae Vassallo — married venture capitalists who ply their trades for competing shops. Trae’s a cleantech and consumer software investor at Kleiner Perkins, while Steve’s at Foundation Capital — where he invests in cleantech and consumer software!

Does this make for uncomfortable pillow talk? ePitch tells all.

Q: HOW’D YOU GET INTO THIS RACKET?

STEVE: My parents will tell you that my engineering career was somewhat preordained by the Lego truck I built at age 11 with a four-speed transmission and fully articulating suspension. I really started my career as an engineer at IDEO, where I was fortunate to lead projects including Cisco’s now ubiquitous VoIP family of phones (you may have seen them in the headquarters of Jack Bauer’s Counter Terrorist Unit or on Dwight Schrute’s desk, probably encased in Jello).

After IDEO, I led engineering at two companies. The first was Immersion, which develops next-generation user interface technologies. The second was Ning, which enabled anyone with a good idea to build and host their own social app. My early adventures taught me a lot about the entrepreneur’s journey and inspired real admiration for those who are trying to change the world. Eventually it led me to Foundation Capital as an Entrepreneur in Residence. At a different firm, that job may have led to my starting a company. At Foundation Capital, I discovered my passion for helping others start theirs.

TRAE: Following my gut, listening to smart people and taking smart, calculated risks all contributed to where I am today.

I am tremendously grateful to an amazing set of mentors and teachers who were key along the way. Sheri Sheppard, my undergraduate advisor, told me I needed to get my master’s at Stanford. Dennis Boyle hired me at IDEO, then tasked me with engineering the Palm V. Donna Dubinsky and Jeff Hawkins inspired me to go to Stanford business school to become an entrepreneur. Professor Andy Grove introduced me to John Doerr.

John introduced me to my co-founders and became a board member of Good Technology. After Good, he invited me to join KPCB as an entrepreneur in residence, and I worked my way up over 10 years to general partner.

Q: WHAT DO YOU LIKE ABOUT VC?

STEVE: I’ve always thrived off interesting people who are trying to advance great ideas. There is nothing more energizing than meeting with passionate entrepreneurs who have thrown themselves into the river of building something meaningful, big and (with time) wildly profitable. In many ways, I see myself as a river guide, helping entrepreneurs navigate the scariest parts of the journey.

VC also feels like the right place in my own journey – I started with a passion for building great products, moved on to focus on building great teams, and now have the opportunity to help entrepreneurs build great companies.

TRAE: Venture brings together a number of things that I thrive on, including constantly learning about new technology, meeting and debating new ideas with smart people, and working together as a team to problem-solve and drive forward while dreaming big.

I can be heads-down and geeky with technology one moment, and the next I am talking with the leading entrepreneur or market expert in that area. Venture requires a good understanding of the key risks, but it also requires a strong vision. It is incredibly easy to see all the reasons why something should fail; the hard part is envisioning the path to success. It would have been easy to turn down investing in Nest based on the underwhelming numbers around the thermostat market, but the combination of a truly exceptional team and strong thesis around the smart home made the decision simple.

Q: WHAT KINDS OF PITCHES ARE YOU LOOKING FOR NOW?

STEVE: In some cases I invest behind a thesis. Back in 2008, I met two brilliant entrepreneurs who were reinventing the way residential solar systems should be sold — and in so doing, blowing open a massive market opportunity hidden in plain sight. Today, Sunrun is a leading provider of residential “solar as a service,” through which they are giving tens of thousands of homeowners the power to become their own electric company.

In other cases, I invest more opportunistically. Sometimes you discover a great product and an indefatigable entrepreneur. So I don’t really look for pitches that fill “white spaces.” I’m still early in the venture business, but I believe the best investors walk a fine line between having a point of view and having an open mind — maintaining a fluency across a range of markets, then pouncing when there is an opportunity to invest behind strength.

TRAE: During my time at KPCB, I have invested in several different sectors, from enterprise SaaS to consumer, but every investment is rooted in a strong thesis around the market opportunity and conviction that this team is the best to execute on the vision.

I particularly enjoy opportunities where I have some unique insight to offer, whether it is my deep-rooted experience in connected devices or my point of view as a geeky working mother of three. I love beta testing new technology and have turned our house into a living laboratory. I expect to see the home be dramatically transformed with technology in the coming years. This includes how we communicate, collaborate and manage the diminishing line between work and home.

A few years ago, it was simply too hard to put anything technologically complex into the house, where you have no IT group to fall back on. With today’s connected and intelligent devices, the hardest issue is connecting to the network. One example I love to point out is that the mobile phone has effectively killed the landline, but it by no means does a great job of solving communication in the home. There is a huge opportunity there, and these types of design challenges are everywhere.

Q: WHAT’S THE BIGGEST MISTAKE ENTREPRENEURS MAKE?

STEVE: The first mistake some entrepreneurs make is asking me to forward their business plan to my wife…

In seriousness, three things come to mind. When it comes to products, it’s a mistake to try to do too many things. I’ve always found that success for startups is about doing one thing 1000x better than everyone else.

Entrepreneurs invent the future, so by nature it’s hard to get people to see that future. That’s why you’ve got to always be selling… selling recruits, selling investors, selling customers. You’ll get ahead only if you can share and promote your view of the world – and convince people that your company has a role to play in it.

And then perhaps the biggest mistake: Choosing the wrong partner. The key in any effort is to find partners and investors who have the same value systems and want the same things. Otherwise, your journey is likely to be nasty, brutish and short.

TRAE: Great entrepreneurs must be great storytellers. I often meet entrepreneurs who are too literal. For example, when describing their product, they focus on describing key features in great detail. A good entrepreneur needs to inspire and tell a story. This often means taking a step back and focusing on the bigger picture. This is not only important for customers but also for hiring, raising money and setting the marketing tone of the business.

And to make it even more complex, the best entrepreneurs need to bounce back and forth between being inspiring storytellers and also being maniacally focused on reducing the white-hot risks.

Q: WHAT’S THE NEXT BIG THING GOING TO BE?

STEVE: Everything is up for grabs. Four years ago, who would have predicted that the taxicab experience would be reinvented? So the only honest answer I can give is that I’m optimistic there is more than one next big thing, and I’m eager to find it (before my wife does).

TRAE: The computing revolution is not stopping at the mobile phone. The smart phone technology stack is being further miniaturized, commoditized and embedded into many different important objects in our lives, from smart cameras and thermostats to wearable devices. The important objects in our lives will be powered by the intelligence of the Internet, and we will use our smartphones as our universal remote.

Today, I have iPhone apps that give me more control or insight into our cars, our dog, our kids and our house. This trend not only affects the home and family life but also the enterprise. For example, my company Enlighted can reduce lighting usage by 50-70 percent with a sensor at each light. Those sensors can also be used for other applications, including HVAC control and security. Smart buildings, smart homes, smart cars are becoming a reality.

Q: YOU GUYS ESSENTIALLY COVER THE SAME INVESTMENT AREAS — CONSUMER, SOFTWARE AND ENERGY — FOR COMPETING FIRMS. DO YOU HAVE HIS-AND-HERS SECURE WIFI NETWORKS AT HOME?

STEVE: We’ve got three amazing kids who we love tremendously and who also serve as a terrific forcing function to not talk about work at home.

TRAE: That said, this industry is co-opetive: we compete and we cooperate. I was able to source Silver Spring Networks through my relationship with Steve and his team. I introduced them to another one of our companies, and they invested. And we still laugh about competing over Opower; we had a sneaking suspicion that we were both engaged based on the mystery trips back East.

At any one time, our focus areas tend to be slightly different. Though I did recently reach out to a company to suggest a meeting, and the CEO responded that my husband had just invested.

Q: HOW DID YOU TWO MEET?

STEVE: By the dull glow of the oscilloscope in our electronics lab at Stanford. And then many “dates” to pick up transistors at Fry’s and old printer parts from Haltech. Total nerd love.

TRAE: We were both taking a robotics course in graduate engineering school. For a recent anniversary, I actually gave Steve one of the exact oscilloscopes from that lab.

Since Stanford, we’ve had surprisingly similar career trajectories. We both worked at IDEO right after school, then went to Stanford Business School (at different times), and we both helped start companies. We got married and had our first child before either of us ended up in venture. And while I was in venture first, I did not lure Steve up to see some term sheets.

Q: BOTH OF YOUR FIRMS HAVE GONE THROUGH SOME TRANSITION IN RECENT YEARS. WHAT DOES THAT SAY ABOUT THE TOUGH STATE OF VC FUND-RAISING AFTER A DECADE OF SLOW RETURNS?

STEVE: All industries get reinvented. It would be naïve to spend all day looking for companies that will reinvent industries and not expect that our industry itself could be subject of reinvention.

To start a business today requires much less capital than it once did, which means that insights and other resources matter much more. So we’re focused on providing those in a way we believe will build great companies and deliver great returns.

TRAE: Just like the underlying technology we invest in, the nature of venture is changing… and that is a great thing for innovation. There are many more funding options for entrepreneurs, and the pace of new innovation only seems to increase.

While it has been a slow decade overall, there are some phenomenal successes. Nest is a great recent example. Importantly, fundraising does not seem to be slowing the best firms down.

Photo by Dai Sugano, Bay Area News Group
 

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