In 2010, Rob Hayes ’95 saw a cryptic tweet about a new startup, something to do with transportation that was apparently “awesome.” As a partner with the venture capital firm First Round Capital in San Francisco, Hayes was always looking for seedstage funding opportunities, but he largely ignored the hundreds of tweets that crossed his radar daily. This one was different though; it came from Garrett Camp, who had founded the website StumbleUpon, in which First Round was an early investor. Hayes rolled his eyes, then shrugged and sent an email to Camp anyway: “I’ll bite. :-) Can I learn more?”
It was perhaps the most consequential emoticon of Hayes’s career, putting him in the driver’s seat with an untested ride-sharing company that was trying to merge the thennew platform of smartphones with the private-car-service market. Soon after, his firm, which reportedly had valued the startup at $4 million, invested over $500,000. Uber’s half-dozen staffers, including Camp and co-founder Travis Kalanick, moved next door to Hayes, allowing him to guide the company’s early growth.
Uber is now a 22,000-employee company that has grown far beyond its original incarnation as a ridesharing platform. In addition to providing about 15 million rides each day in more than 700 cities around the world, it is pioneering in the area of self-driving vehicles and expanding into shipping and food delivery, among other things.
In addition to investing in Uber, Hayes, who recently joined Columbia Business School’s Board of Overseers, also led First Round’s seed-stage investments in Mint, TaskRabbit, Planet, and Square. It’s a track record that has earned him significant recognition, including a place on the Forbes Midas List for several years running. He is now a board partner at First Round, meaning he no longer leads new investments but still supports his present companies and is active as an angel investor.
On the cusp of Uber’s IPO, Hayes spoke with Columbia Business about what he learned from the startup’s ups and downs, how individual leaders can make or break a startup, and the need for cultural change in Silicon Valley.
When you invested in Uber in 2010, what did you see that others overlooked?
People overlooked two things. Uber at that time was being run by Ryan Graves, who was untested but very good. People didn’t know him because he didn’t come from Silicon Valley— they overlooked his skills because he didn’t have the pedigree they were looking for. But I didn’t have a pedigree that people were looking for either when I started. I don’t spend as much time thinking about pedigree as I do about whether this person can do the job. The other thing is, I used the product. I don’t know if you remember when you first took an Uber ride, but you get that aha! moment when you get out of the car, you close the door, no money changes hands, and it works great. At that time, the standard market analysis would have compared Uber to a private-carservice— a relatively small market. I thought that was wrong. People who normally wouldn’t call a car service, or a black car service, would use Uber, so I knew this market was much bigger than everybody thought. Still, I never thought it was going to become as big as it has become.
When did you realize Uber was going to be really big?
Uber was maintaining 25 to 30 percent month-over-month growth for much longer than I’d ever seen a company do before. That was the first indication that this thing had legs. They really perfected a strategy for how to quickly scale in other geographies. We could see the insane growth curve of the San Francisco market, and the growth curves in almost all other geographies were even faster. That was in 2013.
What lessons did you learn from the tumuluous leadership and ultimate exit of CEO Travis Kalanick?
Now, when I invest in a company, one of the first conversations I always have is the importance of culture, the importance of diversity, the importance of all those things that I think help you scale into a large company from the very early days. The other thing I do is really invest in the relationship with the founder. Generally, our engagement with a company begins to dissipate after 18 to 24 months, but I want to make sure the relationship I have with that founder is still strong so that if issues arise or I need to have a difficult conversation, I have the relationship to be able to do that.
Is this focus on startup culture a relatively new consideration for VCs?
It is. For years and years, tech was kind of ignored in the economy. It was very frustrating for me in the 1990s when I thought we were doing these amazing things but we couldn’t get anything covered in the Wall Street Journal. Things transitioned suddenly to where tech companies were a driving force in the economy. But as an industry, we hadn’t really matured—there were blind spots. It’s tough, especially as you get larger, to start a diversity effort when you’re at 1,000 people or 10,000 people or 20,000 people, as opposed to when you’re at 5. That’s one of the things I really drive into companies today.
How can Silicon Valley become more diverse?
People talk about a pipeline problem, and there is a pipeline problem of not getting women and traditionally underrepresented minorities. This is a US culture issue. It’s a little easier to get ahead in a meritocracy if you’re relatively privileged—I had to work hard, I didn’t have things handed to me, but I also didn’t have many barriers. A lot of people have significant barriers, so you need to consciously figure out ways to bring those individuals into your culture. You have to be deliberate. I’ve had founders who have said, “I’m not going to hire another engineer unless she’s a woman.” And guess what? Their hiring slowed down while they waited to find that engineer. But once they hired that woman, the next one was twice as easy. Once they had two, it was actually relatively easy to hire more women engineers. That begins to solve the pipeline problem because people who are thinking of going to engineering school are thinking, “I’m going to be able to get a job,” because they see women or underrepresented minorities in significant roles in these companies.
What was the most valuable class you took at the Business School?
I took a class called Turnarounds with John Whitney, a professor in the Management Division. I had no interest in being a turnaround person, but I learned so much about management and leadership from him. It was easily the best class I took in my days at Columbia.
Looking back over your career, what investment are you most proud of?
As a venture capitalist, I’ll make dozens and dozens of investments over my career, but I’m going to be known for a handful of them. What really drives me, though, is working with those companies that have a significant impact on the world. It would therefore be disingenuous of me not to say that Uber is the thing that I am most proud of because that investment has had the most impact.
What deal would you rather forget?
The failures that I’ve had are when I made the wrong decision on people. I’ve had a number of situations where I’ve invested in companies that had an amazing product, great market, but a team that simply couldn’t execute it. I’ve gotten better at doing due diligence on people.
What's a red flag when considering pitches?
Most of the companies I talk to have two to three founders. I see founders who talk over each other, who seem to be disagreeing. If they are doing that in a meeting when I know that they are on their best behavior, it’s hard to believe that this is a good founding team. That’s a very common red flag. I like to see founders who do no-look passes instead of clobbering each other as they talk.
What are you looking for today in startups?
There are two things that I’m always looking for. One is the next platform on which a lot of growth is going to happen. Uber was on a smartphone platform, which enabled a lot of super interesting things, but that platform is 10 years old at this point. What is the next platform? Is it virtual reality? Is it crypto? The other thing that I look for is existing technologies reconfigured and remixed. In a world where you can combine a robotic arm with a camera and computer vision and machine learning, you all of a sudden have an arm that can do different things depending on the situation that it finds itself in. It’s that combined solution that couldn’t have existed five years ago. When that happens, I want to be right there doing those deals.