“I want to find the next Facebook when it’s just Mark Zuckerberg.”
That statement from Kevin Rose pretty much sums up his life’s ambition these days. The Diggnation poster boy of yore is gone, and a young VC ravenous for the Next Big Thing has taken his place.
Like anyone who’s spent the majority of his adult life online and in some degree of limelight, he’s had to do a lot of maturation in the public eye, and the result of this is a thick skin and an accurate assessment of what he brings to the table.
Related: read our in-depth analysis of Google Ventures.
I’m meeting Rose in a tea shop. Tea is part of his iconography. The shop we’re meeting at even has a “Kevin Rose Collection” of the young entrepreneur’s favorite teas.
After some preliminary chatter about lapsang souchong, we settle in to talk about another aspect of Rose’s idiom: entrepreneurship, especially in the earliest stages of building a company.
Rose, as it turns out, is quite self-aware. He’s been roundly criticized in the days leading up to Digg’s sale and relaunch for any number of his failings as a chief executive and founder, and he knows his weaknesses. His strengths are closely related, and he’s aware of those, too.
Rose is great at startups, especially early-stage ones; both he and I readily acknowledge this fact. He currently works at Google Ventures, where he meets with entrepreneurs and sees new products in their first, nascent incarnations. Since the Google Ventures team has a hands-on approach to investment, Rose will also be spending lots of time working one-on-one (or one-on-several) with founders, doing what he does best: Taking a great idea and fast-tracking it, blowing it up, and turning it out.
“It’s really easy to find Series A and Series B companies that are already on a path to success, then you invest in them and double down,” he says. “The most exciting thing to me is when it’s just in the wireframe stage. It’s just a seed of an idea, and it’s the boldest thing you can do in investing.”
While Rose gets his kicks from this most embryonic form of companies, he might not be so great at the long, monotonous haul between early, rapid development and a successful exit. The process can take years, and I don’t know many startup founders who have the patience for it (hence the Silicon Valley dictum “founders gotta found”). Even those who wait out an acquisition are off to the entrepreneurial races again as soon as humanly possible.
In Rose’s own career, one example of this difficulty is his slowly backing away from Digg. The company (and arguably Rose himself) pretty much peaked in 2008, when it fielded hefty acquisition offers and took in a nearly $30 million round of capital. But as its users revolted over and over again after product revisions, Rose left the leadership of the company in other hands and sidestepped to start something new, a mobile app shop called Milk. It’s a common theme for product-fiend founders; Twitter’s band of three (Ev Williams, Jack Dorsey, and Biz Stone) gave the keys to the company to Dick Costolo and took off to run different shows just as Twitter was getting its real-business sea legs.
The most exciting thing is when it’s just in the wireframe stage… it’s the boldest thing you can do in investing.
But at Google, Rose’s strengths will work to his advantage, and his weaknesses will work in his favor. He’ll get to be as intellectually promiscuous (fellow Google Ventures partner Joe Kraus’s phrase) as he likes, and as an early-stage investor, he’ll only be involved in what are, for him, the most exciting parts of building a startup.
Early-stage investments are cheaper by a long shot than later-stage deals, but they also carry more risk. Rose isn’t intimidated by this in the slightest; in fact, he seems to get a rush from it. The wilder the idea, the better.
“I like the big, bold, crazy ideas,” he says. “Even if the idea doesn’t work out, when people go back and look over your portfolio, they go, ‘Wow, he’s really invested in some interesting stuff.’”
The product fiend
But on his way to making those big, wild deals, Rose has to take a ton of meetings. Today, he’s been in a string of pitch meetings and is leaving to head to more. He’s working at a frantic pace. But far from being exhausted, he seems energized by it.
“It’s this back-and-forth interactive brainstorming session between you and the entrepreneur. I just love that stuff,” he says. “This morning I met with a startup that’s doing a dating service … a mobile app for people meeting each other. The first time I met with them, we just talked high-level about the app and the idea, what he was trying to accomplish. Three weeks later, he had a working prototype on his iPhone. He pushed it over to me and said, ‘Play with it.’”
In those early stages, Rose comes in as an experienced product lead with an eye for populist features and usable designs. He’s a fresh pair of eyes seeing for the first time an app or service that the entrepreneur has sweated over for months, or even years, in some cases.
And Rose, who, like every other product guy, has worked on his fair share of bombs, can spot a failure from a mile away — or from across a tea shop table, as the case may be. “Most likely because I personally wouldn’t use the product,” he says, “I get no internal feeling of excitement. If you notice any common theme among my investments, every single one of them is something I would use and be an advocate for. That’s the key gut call that’s always been with me.”
But he’s not just looking at apps and making product suggestions. “Sixty percent of the time, it’s product,” he says of the questions that come from entrepreneurs during these meetings. “The rest of the time, it’s little, tactical things. Terms on their convertible note, little questions. … They’re afraid to ask because it’s their first time at the rodeo.”
The venture capitalist
Altogether, Rose has probably closed around $60 million in VC deals for the various companies he’s founded. This is far from his first rodeo.
Usually, Rose has been sitting on the entrepreneur’s side of the table. He founded Digg in 2004; that company took $45 million from VCs in four rounds spanning six years. He started Revision3, a web-based entertainment network, in 2005, taking $9 million in funding over the next two years. Pownce, founded in 2008, took an angel round from Floodgate and investment demigod Ron Conway. And Milk, a mobile app shop Rose started just last year, closed two angel rounds totaling $1.7 million from some of the biggest names in the business — Tim Ferriss of The 4-Hour Work Week, Twitter founder Ev Williams, and the ubiquitous Ashton Kutcher.
And as an entrepreneur in those deals, he learned that the excitement has to be mutual.
“You want to make sure there’s natural chemistry both ways,” he says. “It’s not like I’m going there just trying to sell you on why you should take money from [Google Ventures].”
In fact, Rose has even cautioned entrepreneurs against taking money at all.
“A random company I was talking to was going to take money from some VCs, adding a couple board seats. I asked him, ‘You’ve got plenty of money in the bank. Why are you taking funding right now? Can you spend another six months driving up the valuation?’ There are a lot of people that want to get in at the lowest possible valuation. … Having started a few different companies, I want to make sure they hold onto as much control for as long as possible.”
He also has the experience to caution founders against inflated titles and delegating too much responsibility too early. “One company was bringing on VPs,” he says, “but why would you need a VP at a five-person company? Will you want this person to be a VP when you’re at 150 people?”
His resume is jammed with entrepreneurship and angel investments; when it comes to the higher-stakes world of venture capital, he admitted he still has a lot to learn.
He calls Google Ventures, which invested in Milk, “a team of people that have actually built projects, big projects, in the past. … I try to soak up as much of that knowledge as possible. When we invest larger amounts of money, some of the due diligence is a lot deeper than I had ever done at the angel level. I switch to learning mode.”
For love or for money?
Clearly, Rose has the itch I’ve seen in the truly obsessed — the drive to discover something new, to help the visionaries, to guide them, to save them from making expensive mistakes, and to take part in their success.
But the investments he’s made so far show some other patterns, as well. As an angel investor, he wasn’t pumping money into world-changing, social-impact products; what he was doing was generating fantastic returns.
It gives me this hit of dopamine. Every time I hear a really good idea, I can’t sit still.
He picked gamemaker OMGPOP for an angel round in 2007. The company wasn’t doing much then. This year, it debuted DrawSomething and sold to Zynga in a huge $210 million buy. Rose participated in rounds for Twitter in 2008 and Foursquare in 2009; both are on their way to generating big revenues in innovative ways. Also in 2009, he picked Zynga (which went public) and Square (which just became the point-of-sale solution for Starbucks). He’s also invested in Fab.com, the design shopping site that’s going gangbusters, and investments such as Gowalla, Yobongo, SimpleGeo, and DailyBooth have all been acquired.
It’s a portfolio that’s heavy on consumer apps, social media, and casual games. It’s also heavy on big windfalls or at least respectable “acqui-hiring” exits.
So when I ask Rose whether he invests for love or money, I truly want to know whether he really has that much love for social consumer products or whether he’s got that sharp a nose for commercial success. Or both.
“Whether you’re putting in your own money or from a fund, you want to see a return. That motivation will always be there,” he tells me. “I’ve seen a handful of ideas that I know will be moneymakers, but I don’t know if they’ll change the world. Especially in the clone area.”
Rose isn’t trying to be some sort of digital Mother Teresa, obviously, but he is looking for something more than just filthy lucre. “I’m attracted to the wackier, more disruptive ideas,” he says. “It’s really kind of a new take and potentially something that can bring down an old way of thinking.”
More than that, though, he’s looking for the visionaries. I think he’s looking for an entrepreneur who reminds him of himself in an earlier stage of his career: on fire and ready to take down anyone who stands between him and the disruption of an entire industry.
“It all comes down to the individual,” he says. “There have been amazing ideas where I met the entrepreneurs and was like, ‘Eeeugh. I don’t know.’”
But with other founders, he’s caught the “crazy, mad scientist vibe” from them and decided on the spot, “I’m going to invest in you. This might not be the idea that makes it, but you’re going to do something amazing with your life.
“I know he’ll come back to me next time. I want to back people like that.”
But Rose also requires his mad scientists to be hustlers. “That person … has to be a salesperson,” he says. “If they can’t sell me, how can they go out and sell other developers, consumers?
“Sometimes I’ll meet extremely brilliant geeks that don’t have that charisma, and that’s important to get people excited about your idea. … Wearing all the hats as a CEO and founder, you have to have this strange miture of qualities.”
But what about Rose, the founder? Going back to that “founders gotta found” dictum, we’ve all seen Rose illuminated and on fire with a new idea. As excited as he gets about the startups and founders he’s seeing as a VC, I wonder out loud whether he’ll ever find himself with yet another product idea of his own, another itch to scratch.
“I’ll definitely have a tea shop at some point,” he says, off-topic but on-idiom. But tea aside, Rose says his real passion is squarely within the startup realm.
“I love doing angel investing; I think that will always play some role in my life,” he tells me.
“It doesn’t feel like work. I can’t ever imagine retiring early; I enjoy new ideas too much. It gives me this hit of dopamine. Every time I hear a really good idea, I can’t sit still.”
As for being a founder, Rose tells me in so many words that he’s simply burnt out.
“I’m sure at some point I might get the itch [to start another company],” he begins. “But I’ve been through eight years of ups and downs, user revolts. I’ve seen it all.”
As excruciating as it’s been for us on the consumer (or journalist) side to watch products like Pownce or Digg stir up enthusiasm only to enter a quick (or, in Digg’s case, a very long) downward spiral, I can hear in Rose’s voice how much more excruciating the process has been for him. Milk’s sole app, Oink, was shuttered after just four months on the market with very little explanation. Some speculated the app failed to gain significant (by Rose’s standards) traction.
The fact of the matter is, as much as we startup people fetishize failure, it’s gut-wrenching to live through and recover from. I can’t blame Rose for realizing that a few failures are enough for him. As a VC, he will only experience secondhand failure from now on. As thrilling as founding is and as thick as his skin has become, he sounds unwilling to put himself on the front lines again — at least for now and possibly forever.
Kevin Rose the founder is dead. “The next few years are going to be about helping others,” he says. And as for founding, he tells me “If I had a roadmap, starting another company wouldn’t be on it.”