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Arthur Patterson on Venture Investing

February 2, 2023
Written By
February 2, 2023
Season 3 Episode 10
38:56
Written By

Arthur Patterson, the founder of venture capital firm Accel, sits down for a fireside chat with super{set} founding partner Tom Chavez as part of our biweekly super{set} Community Call.

Tom and Vivek sit back and review the tape - analyzing Arthur’s insight into the early days of venture capital, where venture stands today, how venture capitalists view long time horizons, and what he is most proud of from his long career.

View the videos from Tom's fireside chat with Arthur here.

Transcript

Welcome to the Closed Session, How to Get Paid in Silicon Valley with your host, Tom Chavez and Vivek Vaidya.

Vivek Vaidya: Hello and welcome to episode nine of season three of the Closed Session.

Tom: All right. Oh, before we were starting, you called it season nine, but it's actually... We're not that old where you are, but I mean=

Vivek: I was just.. Old or efficient, two sides of the same coin.

Tom: I like how you try to sell that. Nice.

Vivek: This is a special episode.

Tom: It is a biggie. What are we going to do this time? It's a little different from what we've done in the past, right?

Vivek: Yeah. Yeah. So think for our audience, we have these community calls every two weeks or so, fortnightly, as I like to say.

Tom: That's fancy.

Vivek: Yeah.

Tom: Community calls at super{set}.

Vivek: At super{set}, yeah. Every two weeks. And oftentimes we'll invite guests for fireside chats. And recently, I think the last episode or last community call of 2022, we had a very special guest and it was Arthur Patterson of Accel, formerly of Accel.

Tom: Arthur Patterson, who looms large for you and me, right? He's been an investor in both of our prior projects. We've been very lucky to have his involvement in many of the buildouts and things that we're doing today at Superset. He is one of the OGs of Silicon Valley venture capital.

Vivek: Indeed, indeed. So we had him... Tom interviewed him at this fireside chat at Superset offices, and we thought it'd be fun for us to play snippets from that fireside chat and then give our perspective and commentary on what we learned and what we took away from that chat.

Tom: Let's do it. And if you wanted to see the whole thing, I think we're going to take snippets or even extended versions of this and be blasting them out on different channels. But this is the super premium edited, perfect version of the goodies.

Vivek: The highlights reel.

Tom: Highlights. There you go.

Vivek: Plus, plus.

Tom: Let's do it. So let's jump in here, and the first topic that we're going to be showing you is a wonderful sort of vignette from Arthur on the early days of venture capital and what it was like to start Accel. Here we go.

On Starting Accel & The Early Days of Venture Capital

(Start Interview Clip)

So let's dive in here, Arthur. I wanted to go back to the earlier days of Accel. You co-founded Accel with Jim Schwartz. What year was that? 19-

Arthur Patterson: End of '83.

Tom: '83. I'm curious if you could talk a little bit about the two or three traits that you looked for in hiring at Accel in those early days.

Arthur: You got to put it back in the context of that time. I got an venture business in '71 after working for the Treasury Department for a few years and said, Jim Schwartz and I had then had a firm as of '78 called Adler and Company and the venture business, it was, you had the nifty 50 in '69, you had a little high hot IPO market around semiconductors. And then nifty 50 and '72, '73-

Tom: By 70, I don't know what nifty 50 is.

Arthur: That was when... After the bubble in '69. Then there were selected 50 companies, of which Xerox and Kodak were the ones for all the institutions to own that were the growth companies. But underneath that, there was a sort of small venture business going on, was going Heiser that spun out of Allstate and raised a fund, which was the first fund. It was kind $80 million fund, and he started Amdal. Among other things, it's funny, he was an investment guy, but when he formed Heiser, he hired all operating people and then sure enough, two or three leaders, he had a portfolio of companies with his guys all running him as opposed to the investments that he'd been making for Allstate. And so '74, the business had virtually stopped. Tandem was only the only deal of note that even got done that year.

And I actually talked the bank into letting me buy the public companies because they were there and available in weren't any private deals, and they were very cheap. And so it gave me a lot of experience in public market investing too. So then from '74 in the City Corp portfolio at that point, which was sort of the index fund of the business, because we participated every... a lot of the good investments, federal express, everything, and that was six 50% underwater at that point in time. And by '78 though, that whole portfolio had compounded that 30% from '68 or '69 when they started the thing. And so that the venture business really got going in and about '78 you could begin to start a new fund and raise money. No one could really, before that. There were a few oddball little funds like Kleiner Perkins who were started in '72 or three, but they didn't have any money and hardly did anything. So we had Adler Company, we did about 50 deals in the next five years.

Tom: So you're at Adler company, what years? That was-

Arthur: Just '78 to '83-

Tom: Just before Accel.

Arthur: And then we could raise off of that record, we're able to raise Accel. Back to your point about what kind of person we're looking for, right? It's pretty early business. And it depends on what you're trying to do in your portfolio in those days, and there was no growth investing going on at all. And you hire very different people for early stage investing versus later stage investing. It's just completely different business. And so we would be looking for early stage guys at that stage. And the market was, in relative terms today, tiny. But most of the firms like KP and [inaudible 00:06:44] and Mayfield gotten started during that '78 period.

Tom: And so Accel is a relative upstart.

Arthur: Absolutely, but we had the good fortune of starting a new fund at a time when the market had gotten to a scale where you could begin to specialize. When we were running City Corp, we did a lot of all the technical deals. We also did sort of paper company buyouts and other things like that. Jim [inaudible 00:07:20] did a oil well services company, but the number of companies by '83 had gotten to the point where you could specialize, but it's very hard for existing firms to specialize because the partners had all done a variety of... They did a medical deal in the Semiconducting software deal and couple of other oddball deals and in the portfolios, and you can't change the relationships in early stage investing between partners.

You can't say one guy takes all the medical deals one guy takes, all the semi deals. So everybody else was just very spread. And so we said, well, Bain says that people with higher market shares do best. And so let's just choose a couple very... Jim Schwartz had done several notable communication deals like [inaudible 00:08:15] , and I'd done a few software deals as well as medical deals and semiconductor deals and everything else.

And I said, I saw software, and so I was going to do the software. He was going to do the... And then we hired a third partner who was going to do medical deals a little bit later. And by virtue of focusing and only doing those deals, it then allowed you to say, now what are going to be the best software deals or what are going to be the best telecom deals? And we could take a much more systematic approach to thinking about the business, which other people with their portfolios all bogged down and just a variety of things across the partners really weren't in a position to do. And so we took advantage of the fact that we're a startup and we had a clean start. Nothing like a clean start as we see every day. And so the prepared mind actually came from sort of derivatively.

We were able to think about what sectors we really wanted to be in and who we should get to know and everything in a way that people previously hadn't. And that we began to articulate it as a prepared mind. And we would say the test of the prepared mind is that when that entrepreneur walks in the door, 90% of his business, you just haven't found that the entrepreneur is critical and he's going to supply that critical 10% of the idea, but 90% of it, or you're not going to either bond with that entrepreneur or recognize the idea quickly and move ahead with it. And I think my best deal was, I was later, but it had been turned down by all the other venture guys who said, wow, we might be interested, but we've, you got to get a decent CEO in here. And because I'd been in the business and I'd been in the internet services business, and I knew how important the billing systems were, and so I had a prepared mind that recognized the opportunity that other people got stuck on the red herrings of it's not the right management. And

Tom: That was Portal.

Arthur: It was Portal, thousand to one.

Tom: Thousand to one. That's better than a stick in the eye.

Arthur: Right.

(End Clip)

Tom: All right. Well, that was fun. Funny for us to be listening to that Vivek as Arthur refers to this oddball company called Kleiner Perkins, because when we came up in the super late nineties, early odds, Kleiner Perkins was ruling the roost.

Vivek: Loomed large, as it still continues to do.

Tom Chavez: Though, without the same luster, let's say, as the dominance that they exerted in that time. But the other thing that really strikes me here, and that I think it's an idea that we're carry forward for sure in our own work, is this idea of specialization. So we, like Arthur mean, and it's just one of those generalists, I don't know how many generalists survive for the long haul. They seem to have their moments, but what feels more enduring is the ability to focus on a particular set of issues and challenges and to play to your strength as we try to do at Superset in the realm of data management, we queue to this data-driven thesis feels like a lesson we implicitly learned from Arthur now.

Vivek: No, exactly. Exactly. The other thing that struck out for me is in the early to mid 80s, the definition of software, what constituted software is, must have been so different or compared to now. Now software is so huge as compared to what it must have been in the early to mid 80s.

Tom: And that's so cool about thoughts wearing computer science and AI. Computer science as a field, software engineering as a discipline are pretty fascinating in the way that they continually reinvent themselves. When you went to college, you were learning FORTRAN , right? When I came up, I had summer jobs programming on base in Albuquerque at Sania and Kirtland Air Force Base in FORTRAN.

Vivek: Yeah, yeah.

Tom: Were you a FORTRAN program too?

Vivek: I actually ended up learning quite a lot of FORTRAN because of my focus in math and medical beginning.

Tom: But how much FORTRAN C programming is going on these days?

Vivek: Very little.

Tom: Flat. Almost close to zero, right?

Vivek: Yeah. Well, I'm actually... I think it's commercially, I don't know how much FORTRAN programming ever went on, but I'm sure in numerical computation labs or whatever, they were still doing FORTRAN programming. They may still be doing it, who knows? Or maybe python's taken over.

Tom: The point is was when Arthur's talking about software back in the 80s, and not to sound too snooty about it, but it just sounds kind of adorable relative to what we're doing today. But again, that's the magic of computer science as a field that continually embraces the new, continually embraces new frameworks, new possibilities. It doesn't get sort of high bound and stuck in old patterns.

Vivek: Your car is a big computer. And the other thing that struck me is, as you was talking about the early days of Accel, is they think of or thought of Accel as a startup, which it is.

Tom: Yeah. Well, it's kind of funny to talk about Accel as a startup today. Maybe if they're scrappy and doing it right, they're still thinking of themselves in that way. But most observers would look at Accel and say, no, no, no, that's a behemoth.

Vivek: Of course, now. Yeah, totally a behemoth. But it's instructive for me also, as we think of Superset, there's always this, we like to tell people that we're company builders with capital operators with capital, but there is the fund aspect of Superset as well, and it is a startup.

Tom: Oh yeah, yeah.

Vivek: Focusing on, like you said, data-driven thesis. And we're very intentional about what problems we want to go solve and companies we want to build, et cetera. So in that regard, a venture capital firm in the early days of its existence is very much like a startup.

Tom: Right. And these were the buccaneers of VC, right? Sequoia XL was the relative upstart. I guess KP was at it, but it was still, it's kind of just, again, adorable to think about the hundreds or thousands of funds and venture capital firms out there now. Yeah. Relative to the whatever, five to ten-

Vivek: Correct.

Tom: You had going back then. All right, let's tee up the next clip here. This is-

Vivek: Actually before we do that. Yeah, I think it's... Let's talk about this whole concept of the prepared mind. And we also benefit, we've learned about it from Arthur and I find it fascinating when he says that prepared mind means that 90% of the entrepreneur's business when they walk in your door and the extra ten percent is what the entrepreneur add in terms of special sauce or know-how whatever-

Tom: Which is not to say that the entrepreneur is fungible.

Vivek: Correct.

Tom: As many, unfortunately snooty venture capital funds fell into the trap of believing.

Vivek: Correct. Correct. So I thought that was fascinating and that's something that we internalized too in the solution memos that we write at super. That's our way of being prepared for what lies ahead when we embark on this company building journey for a new company.

Tom: That's right. The prepared mind, by the way for our listeners is a nod back to Luis Pasture who said that chance favors the prepared mind. In our notes here we have the original quote in French. Would you care to read it for us?

Vivek: No, Tom.

Tom: Okay.

Vivek: If my wife were here, she would've read it, but I would not insult the French language by try to read French.

Tom: Probably a good idea. In American the way we say it is, chance favors the prepared mind. All right. Okay. Shall we tee up the second clip?

Vivek: Let's do it.

Tom: This is on time horizons in venture capital. Here we go.

On Time Horizons in Venture Capital

(Start Interview Clip)

Arthur Patterson: Working in early stage deals, it takes potentially, I mean I'm in one, I've been in for 23 years now. Eight is a more reasonable number and five if you're lucky.

Tom: By the way, if I can say it among venture capitalists, well, you're unique in lots of ways, but especially that way because I think one could argue that many venture capitalists have very short attention spans. 23 years.

Arthur: Yeah. Well, I didn't mean it to be [inaudible 00:17:11]-

Tom:[inaudible 00:17:13] too. But I think it's safe to say also many, many others in your cohort would be like, okay, somebody else, please bust these rocks. Please handle this.

Arthur: But it also fits with your perspective. Different firms have different approaches to this. So we being new in Accel and being focused by industry, we took an approach to if we thought we had the thing pretty well dialed in as a good idea. Now it's very, you have to get a tailwind in these markets. It's not just the entrepreneur, but the timing of that is really hard to predict and you know can see it coming, but geez, when's it going to really click into the enterprise market or whatever. And so we were very stick to it in our projects and would carry them a lot longer and we'd have much higher percentage wins, but sometimes they took quite a while. Somebody like say, Sequoia, who'd been in the business for a long time or KP, could take the approach that we've got a better supply than other people because we've got the relationships and the franchise and they don't perform, they got to go. And they were known to be ruthless, but the company the entrepreneur didn't perform. And so-

Tom: Why did you stick to it? Why stick to it like you did?

Arthur: Well, because you... If you feel have to judge whether you're making progress or not. And at that point in time, every year you had to go out and raise money from somebody and that was a third party. And some companies just stay on that initial product plan and Excel spreadsheet, but it's a very small percentage of them and ten, maybe 20% and let them wander. And they may be making progress, but the market's evolving a little bit differently than you thought and you're having to move software particularly can be malleable. That's why we pretty much gave up hardware projects because boy, if you don't get it right day one that there's no money for the next generation. And whereas software you could move around quite a bit. each year you had to prove that what you were doing was the leader of this new opportunity.

And quite the criteria changed a bit, but you had earnest, good, intelligent, capable people working on the idea trying to prove it out and prove on it. And so they weren't making progress quite the way you intended. But I mean I've had some that there was Veritas where, which was a tandem competitor and in nonstop computing and there got down to where we raised in those days what would've been a billion dollars today to build this company. And we ran the Korean social security system and some other big apps, but hardware was going out of fashion. And one ways we got to a meeting, we only had about a million in the bank left over and we figured we had to sell the company, not once but about ten times to raise the amount of money necessary to build it. He said, I said that you guys have rebuilt the Unix operating system to be able to operate in this distributed environment.

And we have any software in there. And I've been sort of a student of the public software companies that were selling components going into IBM . And they said, yeah, well the file system, we really did a lot of great work on the file system. And so we reinvented the company around the file system and Joe Schondorf went off and got AT&T that owned Unix to declare it to be the high performance file system for Unix. And that turned into a $40 billion capitalization from so, but you don't want to have to do that too often.

Tom: From zero to hero, from the gutter, most to the uttermost, a billion dollars left in the bank to 40.

Arthur: But so back on the people. So I think you have to, people that are sufficiently curious and interested in the business and keep their heads down and it's working on early stage deals is kind of lonely. So even if you're in a partnership, it's your deal and it's your problem and you've got to keep coming back to your partners and telling them, oh no, we should keep supporting it. And still, I know it's not happening quite the way I laugh. I know I told you it was that, but now this-

Tom: Time I'm serious.

Arthur: So you're responsible. We always have a quote backup guy at Accel, but he can get pretty far back when they're not working. And so-

Tom: Keep him in the basement.

Arthur: As I say, maybe they'll straight up and you can recruit a lot of fantastic people to it. We did it at portal, but frequently you're just working away on this thing with the entrepreneur trying to help them figure it out and help them raise money and help them find the strategy and recruiting people. And so it's this sort of long lonely process. It might go on for five, eight years or more and you have to have individuals that are curious enough and just sort of don't have too much hubris because it's the other guy that's always be responsible. And if you go in and grab the steering wheel, I mean you're dead.

(End Clip)

Tom: Wow. A lot of good stuff there. What's your immediate reaction?

Vivek: The first mean, lots of immediate reactions, actually, I'll try to prioritize. The first one is this whole idea of tailwinds or as some people like to say, right place, right time. And we definitely benefited from that at Crux because as we had said along the way, what we were doing at Crux, people had tried that before and it didn't work the way it did for us because of this confluence of so many things, which collectively could be referred to as tailwinds for our business.

Tom: There'd been at least six to eight other players before us. By the way, people forget there were six to eight other search engines before Google came along. By the way, Crux wasn't the same kind of outcome as Google, obviously, but the pattern bolts up. You got to believe you have to have some tailwinds and a little contrarianism to believe that okay, number nine could be the one.

Vivek: And then also related to that is even when you have the tailwinds, it's not like it's a slam dunk. It still takes time. Five, eight, ten, 23 is just unimaginable from where I'm sitting right now. I don't know how that would work, but-

Tom: 23 years, my goodness.

Vivek: Yeah. Yeah. That was actually... Yeah, long time ago. So the takeaway for me over there is another interesting one, which is you have to have the right people who are curious and find joy in solving these problems that keep coming up.

Tom: One of our memes for company building along the way has been finding joy in repetition. It's a quote of a Prince song from Graffiti Bridge. Joy in repetition. What Arthur's calling us to do, and we've certainly found this to be the case for ourselves, is if you need a quick hit, if you're looking for immediate gratification, none of this is for you. It is a long pride swallowing, soul sucking siege, every one of these build outs. And you got to have to find, to your point, enough joy and just intellectual nourishment in the uncovering of each one of these little puzzles on your way to solving the uber grand puzzle.

Vivek: And I think what I've learned, I should say make it personal, is that in what appears to you to be repetitive or even, oh, I'm just doing the same shit, different day kind of thing. If you take a step back and you look for interesting, challenging problems to solve, even in that kind of process of doing the same thing over and over again, there's plenty of problems to be found.

Tom: That's right.

Vivek: And I think that's what brings me joy. That's what brings you joy in this company building journey that we're always on.

Tom: If you're bored, well either there was a selection problem at the very beginning where you shouldn't have signed up for any of this or in a couple moments, I think we've seen it. Whereas people just lose their spark, they lose their mojo, and then, okay, sadly, it's also time to just piece out. If you lose that basic spark, it's time to just hang it up.

Vivek: And the final thing kind of wrapping this up is I like when he talks about this notion of what I take away as personal causal responsibility, it's your deal. He says, even though you're in a partnership and you may have a backup, but that backup is way far back. It's your deal. You have to show up in front of the partnership and give these updates and you have to help the entrepreneur.

Tom: We've seen this once or twice as well. And by the way, we say co-founders, anything that's going on with the company is your problem. You might be a product oriented co-founder, here's a sales issue, still your problem.

Vivek: Correct.

Tom: You bleed the company and we find the CEOs and the founders who start to externalize and say, well, that's something else going on. There's somebody out there or the gods are conspiring to keep me down, or any way or any moment when you start making those kinds of excuses, you're not exerting personal causal responsibility and you've lost the plot. Hey, let's go to the second clip. This is a good one where we ask Arthur, hey, what are you most proud of? This was your question.

Vivek: Yeah. This is my question.

Tom: This is a brilliant question. Yeah, it's a beautiful answer. Here we go.

(Audience Question) What are you most proud of?

(Start Interview Clip)

Arthur Patterson: I find the profession to be very satisfying in total because you literally get always thought, I feel you're doing good, you're doing well by doing good every day. You're helping, you know, could be a teacher in a school, or you could be working with your companies and trying to teach entrepreneurs and give them all the thing, tell them all the mistakes you've made so they don't waste, our money making the same mistakes. And so that's very satisfying. And you're creating all these jobs for so many people and creating interesting lives for them, and you're making out well yourself. But you feel that believe our whole standard of living is dependent on the market system, free market systems, and the entrepreneurs being a critical element of that. I mean, I think these big companies just become so unproductive that our standard of living in the country wouldn't be very good.

It'd be like living in Russia almost if the big companies had the only balls in town. And I mean, not quite. So I think that this... Look at the contribution of Silicon Valley, not just to the United States for the whole world, and who were the greatest beneficiaries of globalization, Russia and China, they haven't figured that out yet. And Silicon Valley, what are they just copying all the stuff in Silicon Valley. And so I think it's a very satisfying profession to be in. The individual company can go up and down. And I definitely feel about it better when they're going up than when they're going down. But fortunately I got some marbles on each side. So one's going, gone up that's gone down.

(End Clip)

Tom: Well, that is a lovely answer and it was important, I think for our hive to hear this from, again, somebody who is very appropriately lionized as mega successful capitalist. Yes. And we certainly agree competitive markets and capitalism are the foundation of free, fair, open societies. And we can't take that for granted. But yeah, it's about wealth for yourself and your shareholders. But we are also importantly, like Arthur, we think trying to create wealth for families and societies and it's probably the most nourishing part of the job.

Vivek: Absolutely. I think we've said many times along the way that one of the many reasons why we do what we're doing is to help people want to help people realize and do things that they even didn't think they were capable of. And in the process make their lives better, create immense wealth for them and their families. I find his response so grounded. If you look at it from one perspective, oh yeah, you're so full of yourself, but it's such an actualized response and such a practical response that if you look at the, and there's all this talk these days about Silicon Valley coming to an end and the big tech this and surveillance data of that and all of that, and all those things are true. But if you look at the long arc, that's what he's talking about, if you look at the long arc, there's a lot of wealth and value and innovation that's come out of Silicon Valley that's made the whole world a much better place.

Tom : And I think sometimes, you know, and I are talking to young up and comers and we find that they're a little squeamish when you ask them, hey, what do you want? Why are you doing this? They're a little squeamish when it comes to talking about creating wealth. And you and I both given our backgrounds, are careful to remind them, hey, don't ever apologize for wanting to create wealth for yourself and your family. If you come from humbled circumstances, especially if you didn't grow up with a trust fund. Or even if you did, but especially if you didn't, wealth matters. And so it is really important part of everything we try to do and build over here at Superset. And we're following really in the path that Arthur and others have established. Shall we turn our attention to the last question here?

Vivek: Let's do it.

Tom: Is it problematic that venture funds are getting so big? Let's take a listen.

Thank you, Superset.

Vivek: That special addition from Tom is when he comes out of the nap room at Superset, he naps a lot. For those you don't know.

Tom : Naps are very important. And for anybody listening, you better take a nap when you're not making any sense in a meeting. I tell people, do you need a little nap? There's maybe 20 minutes you can come back and then you would make a little more sense than you're making right now. It's just an idea.

(Audience Question) Is it problematic that traditional VC funds are getting so big?

(Start Interview Clip)

Arthur Patterson: Well, I think the funds that have that raised enormous amounts of money will be at a disadvantage in doing good early stage investments. And I think what they have going for them is that they've got good franchises. And it's like I was talking before about how we had to take a distinct approach because we didn't have a built up franchise, so we didn't have as good a supply. And so the funds, like Sequoia example, have... It's so valuable to a new company to get Sequoia's name on them that they will continue to have a good supply at the front end there. And even if they let the team and the efforts kind of become diluted, I think somebody like KP neglected their early stage stuff to some extent, they got off on the clean tech and they didn't protect their franchise. But it's hard to protect your franchise because it's so much harder to do this early stage business than the later stage.

So the people in the firm naturally gravitate to the easier projects. So you have to keep renewing and getting new people in there. So it's been an enormous explosion of early stage funds though underneath that. And those guys, they may not have the franchise flow going for them, but they may be able to with effort. We did come up with approaches that sort of work to find more good projects. And it's a competitive world out there. Some guys got some advantages and disadvantages, and the question is, can you make the best of your advantages and diminish your disadvantages? And I don't think... No question that the Sequoia partner that's now got five houses and two yachts is not going to be rustling around Silicon Valley at seven o'clock in the morning looking for the new deal. So the newer and more energetic guy might be.

(End Clip)

Tom: Well, there you have it. Five yachts, two yachts, sorry, my bad. Five yachts... Five houses and two yachts. That's a lot.

Vivek: It's a lot.

Tom: How many yachts do you have?

Vivek: Me?

Tom: No, we don't have to talk about it on the podcast. That's a little too personal. I resend that question.

Vivek: I have zero yachts.

Tom: Really? Yeah. How many personal jets?

Vivek: Huh?

Tom: How many personal jets?

Vivek: There's such a thing called a personal jet.

Tom: Yeah, your personal jet. Hello? Oh, I like the whole playing dumb thing.

Vivek: I have no idea what you're talking about.

Tom: Clever. Okay. That's a [inaudible 00:35:55] people. So I mean, think there's a lot of useful insight there and it kind of, for me, dovetails back to the specialization point. When you get that big, you're allocating capital. Are you really in a lane? Are you really committed to the craft? Are you generating IP that continually feeds that sort of prepared bind approach? It's hard for me to see how you square both heads against the middle.

Vivek: The middle. Yeah. I think early stage investing is also, there's a lot, there's a correlation between early stage investing and non-consensus investing. And when you're, like you're saying allocating large amounts of money when you're doing... When you're big fund, then it's hard to do non-consensus investing. You end up doing consensus and therefore you find it hard to do early stage.

Tom: That's right. Well listen, as we wrap up, this sort of best hits from the interview with Arthur, by the way, in the next episode, there's yet more goodies that get a little more personal and focused on company building. So more coming, but as we wrap up this episode, Vivek, what are the biggies? What are the key takeaways?

Vivek: I think the first one is just this, he keeps coming back to grit and humility and lack of ego, right? In that you just need to have the straits.

Tom: Which we spent a lot of time talking about in previous podcasts.

Vivek Vaidya: That's right. That's right. So yeah, that was the one that was the big thing for me.

Tom: And from the venture capital perspective, what we're hearing from Arthur is from that side of the table as well. You have to delay gratification. You have to stay curious and keep [inaudible 00:37:35] link away at the think as. It's not going to happen as instantaneously as young urgent bucks would like it to.

Vivek: It's a long game. You got to play it.

Tom: That's right. What about tailwinds? There was a note in there about tailwinds too.

Vivek: And that we talked about that we trust on that briefly earlier, the whole right place, right time dynamic. You may have the perfect idea, but it may not be the right time for it.

Tom: That's right.

Vivek: Because the business models are not set up correctly. The situation in the market is not set up correctly for whatever reason. So you need to have tailwinds behind you to make the idea or your company successful.

Tom: There you go. With that, let's call it a wrap. And again, in the next podcast, we're going to continue along these lines with snippets from the conversation with Arthur, but with more focus on company building and with a little more attention to topics that we think are especially relevant to entrepreneurs. Join us. Thank you everybody.

Vivek: Thank you.

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In the first episode of The Closed Session, meet Tom Chavez and Vivek Vaidya, serial entrepreneurs and podcast hosts.

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Early Team Formation

Now that you've written the business plan and raised money, it's time to recruit your early team. In this episode, Tom and Vivek cover the do's and dont's of building a high-output team - who to hire, how to build chemistry and throughput, how to think about talent when your company is a toddler versus when it's an adolescent.

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The Information: "TikTok Is Not the Enemy"

Tom writes a nuanced take on the TikTok controversy and outlines ethical data principles that will restore people’s sense of trust and offer them true control over how and when they grant permission for use of their data.

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boombox.io Raises $7M to Build Out Creator Platform for Music Makers

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From Chords, to Code, to Chords Again: The Story Behind Boombox.io

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Pivots and Possibilities

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The Future of Work and Talent in Tech

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Building Tech on a Moving Regulatory Target

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AI Hot Takes: Deepfakes, The Big Stakes, and What to Make

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Navigating the Startup Journey from Launch to Finish Line

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Understanding The AI “Alignment Problem”

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High-Velocity Personal Growth

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Harvard Computer Scientist James Mickens on The Ethical Tech Project

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How Boombox Nurtures Customer Collaboration for Success

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From unpacking Google search patterns to understanding the philosophical underpinnings of big data, Seth Stephens-Davidowitz offers a unique lens. As the NYT Best-selling author of “Everybody Lies” and a renowned data scientist, he delves into the ways data mirrors societal nuances and the vast implications for tech and its intertwining with everyday life.

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Forbes: 5 Startup Studio Misconceptions

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What Consumers Think of AI and Their Privacy

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We don’t critique, we found and build.

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read more

The Era of Easy $ Is Over

The era of easy money - or at least, easy returns for VCs - is over. Tom Chavez is calling for VCs to show up in-person at August board meetings, get off the sidelines, and start adding real value and hands-on support for founders.

read more

Hold Fast: Game-Changing Wisdom from Seamus Blackley

Creator of the XBox and serial entrepreneur Seamus Blackley joined Tom Chavez on stage at the 2023 super{summit} in New Orleans, Louisiana, for a free-ranging conversation covering the intersection of creativity and technology, recovering back from setbacks to reach new heights, and a pragmatic reflection on the role of fear and regret in entrepreneurship.

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Jamming with Habu’s Matt Kilmartin on Partnership Strategy

Discover how Habu, a trailblazer in data clean room technology, utilizes strategic partnerships with giants like Microsoft Azure, Google Cloud, and AWS to expand its market reach and foster the potential of an emerging category. Learn from CEO Matt Kilmartin's insights on how collaboration is the secret sauce that brings innovation to life.

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boombox.io Raises $7M to Build Out Creator Platform for Music Makers

super{set} startup studio portfolio company’s seed funding round was led by Forerunner Ventures with participation from Ulu Ventures Raise will enable boombox.io to accelerate product development on the way to becoming the winning creator platform for musicians globally

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Good Ideas, Good Luck

Coming up with new company ideas is easy: we take the day off, go to the park, and let the thoughts arrive like butterflies. Maybe we grab a coconut from that guy for a little buzz. While this describes a pleasant day in San Francisco, it couldn’t be further from the truth of what we do at super{set}. If only we could pull great ideas out of thin air. Unfortunately, it just doesn’t work that way.

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The super{set} Entrepreneurial Guild

Has someone looking to make a key hire ever told you that they are after “coachability”? Take a look at the Google ngram for “coachability” — off like a rocket ship since the Dot Com bubble, and it’s not even a real word! Coaching is everywhere in Silicon Valley...

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Developer tools that are worth their while: KEDA and Boundary in action

Running cloud platforms efficiently while keeping them secure can be challenging. In this blog post, learn how two of super{set}’s portfolio companies, MarkovML and Kapstan, are leveraging tools like KEDA for event-driven scale and Boundary for access management to remove friction for developers. Get insights into real-world use cases about optimizing resource usage and security without compromising productivity.

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The Information: "TikTok Is Not the Enemy"

Tom writes a nuanced take on the TikTok controversy and outlines ethical data principles that will restore people’s sense of trust and offer them true control over how and when they grant permission for use of their data.

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The Information: The People OpenAI Should Consider for Its New Board

Tom Chavez writes in The Information that "OpenAI’s board needs a data ethicist, a philosopher of mind, a neuroscientist, a computer scientist with interdisciplinary expertise and a political strategist."

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7 Ways to Turn an Internship Into a Job at a Startup

Chris Fellowes, super{set} interned turned full time employee at super{set} portfolio company Kapstan, gives his 7 recommendations for how to turn an internship into a job at a startup.

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From Suitcases to Startups: Why Immigrants Innovate

How are immigrants like entrepreneurs? Peter Wang of Ketch arrived in the U.S. at age 7 with two suitcases and a box. Read his story in the latest "Pass The Mic."

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Horizontal Scaling at super{summit}

Vivek gives us the rundown on what the hive is buzzing about after super{summit} 2023: how to 'horizontally scale' yourself.

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CalMatters: Why visa reforms benefit not just California’s tech sector but the economy overall

Vivek Vaidya writes that America needs more H-1B workers. Common sense reforms to the program will even the playing field for startups, not Big Tech, to bring innovative talent to American's shores.

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Understanding The AI “Alignment Problem”

Vivek Vaidya recaps his conversation with AI researcher and author of "The Alignment Problem" Brian Christian at the 2023 super{summit}.

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Tech Crunch: Boutique startup studio super{set} gets another $90 million to co-found data and AI companies

Startup studio super{set} has a fresh exit under its belt with the sale of marketing company Habu to LiveRamp for $200 million in January. Now, super{set} is adding another $90 million to its coffers as it doubles down on its strategy of building enterprise startups.

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MedCity News: It’s Time for the Tech Revolution to Come to Mental Health Diagnoses

Headlamp Health co-founder Andrew Marshak writes in the MedCity News that "We need to take inspiration from the progress in oncology over the last few decades and challenge ourselves to adapt its successful playbook to mental illness. It’s time for precision psychiatry."

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The Four Types of Startup Opportunities

In our last post, we discussed how data is the new general-purpose technology and that is why at super{set} we form data-driven companies from scratch. But new technologies are a promise, not a sudden phase change.

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Forbes: Why The Biden-Xi Talks Should Put A Microscope On San Francisco

The prettifying and securing of downtown San Francisco, where super{set} is headquartered, should be the norm - not just for special state visits from the world's dictators. Here are 3 things the city of San Francisco should be doing all year round to make the city better to live, work, and invest in. Read Tom Chavez' latest in Forbes.

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Why the AI Revolution Will Be Data-Centric

Pankaj Rajan, co-founder of MarkovML, joins super{set} Chief Commercial Officer Jon Suarez-Davis (jsd) to discuss the role of data in gaining a competitive advantage in the AI revolution. Learn the difference between optimizing models and optimizing data in machine learning applications, and why effective collaboration will make or break the next-gen AI applications being created in businesses.

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Watch: Sandeep Bhandari Fireside Chat

Sandeep Bhandari, Former Chief Strategy Officer and Chief Risk Officer at buy now, pay later (BNPL) company Affirm, joins Vivek Vaidya, Founding General Partner of super{set}, in conversation.

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Detecting Software Bugs with AI

Gal Vered is co-founder and Head of Product at Checksum (checksum.ai), an innovative company that provides end-to-end test automation that leverages AI to test every corner of an app. He sat down with Jon Suarez-Davis (jsd) to discuss the exciting problem that Checksum is solving with AI and what Gal likes best about working in super{set}'s startup studio model.

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Diamonds in the Rough

Obsessive intensity. Pack animal nature. Homegrown hero vibes. Unyielding grit. A chip on the shoulder. That's who we look for to join exceptional teams.

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Why CTOs Should Care About Gross Margins, Cost-to-Serve, and Product Management

Why should a tech exec care about profit and loss? Aren’t our jobs to make the product great, and someone else can figure out how to make the numbers add up? That was my attitude for a long time until I finally appreciated the significance of gross margins for SaaS businesses during the early part of my tenure as the CTO of Krux.

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When Inference Meets Engineering

Othmane Rifki, Principal Applied Scientist at super{set} company Spectrum Labs, reports from the session he led at super{summit} 2022: "When Inference Meets Engineering." Using super{set} companies as examples, Othmane reveals the 3 ways that data science can benefit from engineering workflows to deliver business value.

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An Intro to Product-Led Growth from MarkovML

Want to grow your product organically? This blog post breaks down understanding costs, setting up starter plans, and pricing premium features using MarkovML as an example. Learn how to engage new users and encourage upgrades, enhancing user experience and fueling growth through actionable insights.

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High-Velocity Personal Growth

What's the price you put on personal growth? In his most recent note to founders, super{set} Founding General Partner Vivek Vaidya outlines 7 points of advice for startup interviews and negotiations. Vivek explains his compensation philosophy and the balance between cash and the investment in personal and career growth a startup can bring. Here’s the mindset you need to reach your zenith at a startup.

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Data Eats the World

The wheel. Electricity. The automobile. These are technologies that had a disproportionate impact on the merits of their first practical use-case; but beyond that, because they enabled so much in terms of subsequent innovation, economic historians call them “general-purpose technologies” or GPTs...

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Why Proprietary Data Is the Linchpin of AI Disruption

Read Vivek Vaidya's latest in CDO Magazine and learn why in this new AI landscape, those who harness the potential of proprietary data and foster a culture of collaboration will lead the way—those who don't risk obsolescence.

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super{set} Fund II: $90 million to intensify our serial focus on data+ai company building

Announcing super{set} Fund II

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How To Avoid Observability MELTdown

o11y - What is it? Why is it important? What are the tools you need? More importantly - how can you adopt an observability mindset? Habu Software Architect Siddharth Sharma reports from his session at super{summit} 2022.

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Not Just On Veterans Day

This post was written by Ketch Developer Advocate, Ryan Overton, as part of our #PassTheMic series.

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Former Salesforce SVP of Marketing Strategy and Innovation Jon Suarez-Davis “JSD” Appointed Chief Commercial Officer at super{set}

The Move Accelerates the Rapidly Growing Startup Studio’s Mission to Lead the Next Generation of AI and Data-Driven Market Innovation and Success

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Why Headlamp Health is Bringing Precision to Mental Health

Co-founder of Headlamp Health, Andrew Marshak, describes the frustratingly ambiguous state of mental health diagnoses - and the path forward for making mental health a precision science.

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Navigating the Startup Journey from Launch to Finish Line

Are you a launcher, or a finisher? The balance of conviction, a guiding vision, and the right team to execute it all make the difference between entrepreneurial success and failure. Tom Chavez delves into his journey as a first-time CEO and the invaluable guidance he received from a key mentor.

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How Boombox Nurtures Customer Collaboration for Success

In a conversation with boombox's co-founder India Lossman, the discussion pivots to the art of fostering customer collaboration in music creation. Lossman unveils how artist-driven feedback shapes boombox's innovative platform, with a glimpse into AI's empowering potential. Understand the synergy between technology and user insights as they redefine the independent music landscape.

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How Engineers Should Talk to Customers with Empathy

Do you get an uneasy feeling anytime you get added to a customer call? Do you ever struggle to respond to a frustrated customer? Peter Wang, Product lead at Ketch, discusses how customer feedback can help drive product development, and how engineers can use customer insights to create better products. Learn best practices for collecting and interpreting customer feedback.

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Q&A with Accel Founder Arthur Patterson

Arthur Patterson, founder of venture capital firm Accel, sits down for a fireside chat with super{set} founding partner Tom Chavez as part of our biweekly super{set} Community Call. Arthur and Tom cover venture investing, company-building, and even some personal stories from their history together.

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Why I'm Joining super{set} as Chief Commercial Officer

Announcing Jon Suarez-Davis (jsd) as super{set}’s Chief Commercial Officer: jsd tells us in his own words why he's joining super{set}

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Jeremy Klein on Leading super{set}'s Data-Driven $90 Million Fund II

Jeremy Klein is a general partner at super{set}. Jeremy helped build super{set} from day one alongside Tom Chavez and Vivek Vaidya, designing super{set}’s structure, recruiting co-founders, and laying the plans for a scalable buildout. super{set} recently announced the closing of its $90 million Fund II. He sat down with Jon Suarez-Davis (jsd) to provide insights into the strategic timing and vision behind launching Fund II, his professional journey from a legal expert to an integral part of super{set}'s fabric, and how his unique background and approach have been instrumental in building super{set} and recruiting top-tier co-founders.

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Building Tech on a Moving Regulatory Target

In an interview with Ketch co-founder Max Anderson, the focus is on data privacy laws and AI's role. Anderson discusses the global privacy landscape, highlighting Ketch's approach to helping businesses navigate regulations. The conversation also emphasizes data dignity and Ketch's unique role in the AI revolution.

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Why I Left Google To Co-found with super{set}

Gal Vered of Checksum explains his rationale for leaving Google to co-found a super{set} company.

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Infrastructure Headaches - Where’s the Tylenol?

Head of Infrastructure at Ketch, and Kapstan Advisor, Anton Winter explains a few of the infrastructure and DevOps headaches he encounters every day.

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The RevOps Bowtie Data Problem

Go-to-market has entered a new operating environment. Enter: RevOps. We dig into the next solution space for super{set}, analyzing the paradigm shift in GTM and the data challenges a new class of company must solve.

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VCs Write Investment Memos, We Write Solution Memos

When a VC decides to invest in a company, they write up a document called the “Investment Memo” to convince their partners that the decision is sound. This document is a thorough analysis of the startup...

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How I Learned to Stop Optimizing and Love the Startup Ride

Reflections after a summer as an engineering intern at super{set}

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Silicon Valley’s Greatest Untapped Resource: Moms

This post was written by MarkovML Co-Founder, Lindsey Meyl, as part of our #PassTheMic series.

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super{set}’s Spectrum Detoxifies The Online Space

We are living in a time of extraordinary concern about the negative consequences of online platforms and social media. We worry about the damage interactive technologies cause to society; about the impact to our mental health; and about the way that these platforms and their practices play to our most destructive impulses. Too often, the experiences we have online serve only to polarize, divide, and amplify the worst of human nature.

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Lessons from the Startup Circus

super{set} Technical Lead and resident front-end engineering expert Sagar Jhobalia recaps lessons from participating in multiple product and team build-outs in our startup studio. Based on a decade of experience, Sagar emphasizes the importance of assembling the right engineering team, setting expectations, and strategically planning MVPs for early wins in the fast-paced startup environment.

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Podcast: Tom Chavez on How AI Startups Can Show Us What’s Next in Marketing

Tom Chavez joins the "Decoding AI for Marketing" podcast published by MMA Global and hosted by well-respected international marketing & AI experts Greg Stuart (CEO, Author, Investor, Speaker) and Rex Briggs (Founder/CEO, Inventor, Author, Speaker).

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The Product Mindset for Engineers

Ever find yourself scratching your head about product management decisions? Join India Lossman, co-founder of boombox.io, as she unpacks the product mindset for engineers. Unravel the art of synergy between PMs and engineers and delve into strategies to enhance collaboration and craft products that users will adore.

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Spectrum Co-founders Launch Nurdle AI

Justin Davis and Josh Newman, Co-founders of Spectrum Labs (acquired) launch Nurdle to get AI into production faster, cheaper & easier.

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Founder and Father: A Balancing Act

Making It Work With Young Kids & Young Companies

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Too Dumb to Quit

The decision to start a company – or to join an early stage one – is an act of the gut. On good days, I see it as a quasi-spiritual commitment. On bad days, I see it as sheer irrationality. Whichever it is, you’ll be happier if you acknowledge and calmly accept the lunacy of it all...

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Why Head of Product is Our First Co-Founder

At super{set}, we stand side-by-side and pick up the shovel with our co-founders. Our first outside co-founder at a super{set} company is usually a Head of Product. Let’s unpack each portion of that title....

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Forbes: Why A Collaborative Approach Trumps "Lone Genius" In Company-Building

Off the heels of super{set}'s first exit - the acquisition of data collaboration company Habu by LiveRamp for $200 Million - Tom Chavez writes how the super{set} approach to collaboration in company building leads to successful outcomes.

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Pivots and Possibilities

Discover how lessons from law enforcement shape a thriving tech career. Ketch Sr. Business Development Representative Brenda Flores shares a bold career pivot in our latest "Pass the Mic" story.

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super{set} Celebrates First Exit: LiveRamp to Acquire Data Collaboration Software Startup Habu for $200M

LiveRamp Enters Into Definitive Agreement to Acquire Habu, Reinforcing super{set}'s Unique Company Building Model of Founding, Funding, and Scaling Data+AI Businesses

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Forbes: 5 Startup Studio Misconceptions

It's still early for the startup studio asset class - and we hear misconceptions about the studio model every day, ranging from the basic confusion of accelerators versus studios to downright incorrect assumptions on our deep commitment to the build-out of every company. Read Tom Chavez' latest in Forbes.

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Building Fast, Scaling Globally

Harshil Vyas joined the super{set} Hive (i.e., portfolio companies community) in March 2023 as Co-Founder of Kapstan and employee number one in India. We jumped on a Zoom recently to talk about accelerated timelines, globally distributed workforces, and what is unique about the super{set} model.

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Redefining Customer Experience in Data-Driven Tech Startups

Ted Flanagan, Chief Customer Officer at super{set}-founded Habu, sat down with Jon Suarez-Davis (jsd) to provide insights into how Habu's strategies in customer experience set it apart in the data collaboration market. Learn how customer experience strategies helped Habu land a $200 million after being acquired by LiveRamp in January 2024.

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Tech Crunch: Answering AI’s biggest questions requires an interdisciplinary approach

Tom Chavez, writing in TechCrunch, calls for new approaches to the problems of Ethical AI: "We have to build a more responsible future where companies are trusted stewards of people’s data and where AI-driven innovation is synonymous with good. In the past, legal teams carried the water on issues like privacy, but the brightest among them recognize they can’t solve problems of ethical data use in the age of AI by themselves."

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From Watsonville To The Moon

This post was written by Habu software engineer, Martín Vargas-Vega, as part of our new #PassTheMic series.

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Tom Chavez in Huffpost Personal for Hispanic Heritage Month

Writing in the Huffington Post: "My Mom Sent Me And My 4 Siblings To Harvard. Here's The 1 Thing I Tell People About Success."

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