For this 29th episode of Ask a VC Anything, our featured guest was Founders Space founder and CEO Steve Hoffman (Capt’n Hoff). In this discussion with Silicon Dragon’s Rebecca Fannin, we covered Hoffman’s constantly changing career path, his views on bootstrapping and giving away equity, and how the largely global business at Founders Space has adapted to Covid-19. See Silicon Dragon video of the show with Steve and Rebecca.
What Thrills Capt'n Hoff?
Hoffman has been an angel investor, an LP, serial entrepreneur, game developer, author, and a TV executive before creating Founders Space. He notes, “I’ve had more careers than cats have lives,” but of all of his experiences, he is most passionate about what he’s doing right now. Hoffman is the CEO of Founders Space, a global startup incubator and accelerator with over 50 partners in 22 countries. Before Covid-19, Hoffman was travelling 70% of the time, between countries, and he actually narrowly missed being in Wuhan for a book signing where the original outbreak of Covid-19 happened.
He is an early-stage investor, so companies that he invests in sometimes don’t have revenue, or even users. He puts a large emphasis on the team. Smart people that are open to ideas and exploration will make up a great team. Hoffman is based in Silicon Valley, and Founders Space has five incubators in China.
What’s Hot in China
Hoffman mostly invests in software because it’s easier to scale, retain customers, and monetize. Sometimes they’ll invest in hardware with a strong software complement. Hoffman continues to be impressed by everything eCommerce and social related coming out of China. Citing the growing buying power of the middle class, established companies like Alibaba, TikTok, WeChat (Tencent), and Pinduoduo are on the cutting edge of their respective industries with massive potential for years to come. Hoffman also notes that cleantech is well-backed by the Chinese government. He adds that it might be easier to be a startup in the industry under the new Biden administration than the previous one. Hoffman remains positive on China in almost every tech sector.
Still Bullish on Silicon Valley
Positive views about Silicon Valley remaining the gold standard of tech hubs has been waning. But Hoffman doesn’t see its status at the top of the food chain changing any time soon. “People like to be in proximity to other people with ideas, and money, and with talent. They have an abundance of that in Silicon Valley now.” He does list Austin, Miami, New York, and Boston as up-and-coming tech hubs, each with their own specialties. Hoffman notes, “the reason cities are big is because ambitious people tend to gravitate towards the geographic place where they can maximize their opportunity.”
With the rough estimate that 95% of startups will fail, Hoffman urges entrepreneurs to think twice about taking money from friends or family. Hoffman also warns to take the hints from the market, “if one of these educated angels will not give you money, there’s something wrong with your business”. If you are going to bootstrap, make sure it can be done with a small team of people, and just their time and talent. Although it isn’t the most common, successes like Mailchimp and Salesforce were bootstrapped startups in the beginning. Hoffman also bootstrapped his first startup.
Hoffman acknowledges that the way equity in a company is handled differs depending on where you are in the world. For example, in China, it is expected that the CEO and Chairman keep most of the equity. However, in the U.S., there is a much larger percent of equity given to investors and employees. Hoffman feels strongly that, “whatever culture you’re in, you need to reward people in relationship to their expectations, if you want to retain them.” He believes that one employee can be worth, two, three or even five times a mediocre one! If you have someone that you know is that good, pay up to keep them. Sometimes that means giving them equity.
Steven Hoffman, or Capt’n Hoff as he's called in Silicon Valley, is the chairman and CEO of Founders Space (FoundersSpace.com), one of the world's leading incubators and accelerators. He’s also an angel investor, limited partner at August Capital, serial entrepreneur, and author of several entrepreneurial books, including his upcoming title, Surviving A Startup.
A former Hollywood TV development executive and founder of two venture-backed gaming and entertainment apps in Silicon Valley, Hoffman went on to launch Founders Space, with the mission to educate and accelerate entrepreneurs. Founders Space has become one of the top startup accelerators in the world, training startup founders and corporate executives in the art of innovation.
Hoffman has a bachelor’s degree in Electrical Computer Engineering from University of California, Santa Barbara as well as a master’s degree in Cinema Television from University of Southern California.
by Silicon Dragon contributor Mike Weiss