What Venture Capitalists Want | Wally Hawley

 

About Wally Hawley

Wally Hawley is a co-founder of InterWest Partners (1979), one of the larger venture capital partnerships in the United States, formed to make equity investments in diversified U.S. growth companies. His prior experience includes seven years as President of SHV North America Holding Corp., a wholly owned subsidiary of a Netherlands corporation, and seven years with McKinsey and Co. His current affiliations include Chairman Emeritus of the Advisory Board to the Stanford Institute for Economic Policy Research; guest lecturer at the Stanford Graduate School of Business; former Chairman of the Board of Trustees of Young Life; Board Member of Stanford Alumni Association; Advisory Board Member of Rosewood Venture Capital; and Director of several educational companies including several online companies.

Interview Transcript:

Alan
Welcome back. I’m visiting here today with Wally Hawley. Wally Hawley has created a number of companies throughout the years in Silicon Valley. About midlife, he took a change of direction, which we’ll get into in just a few minutes. But Wally, welcome to today’s show.

Wally
Thank you for having me.

Alan
So while it, can you give us your background?

Wally
Well, I am 75 years old as of last week, and in the early part of my career education was Stanford undergraduate in Harvard Business School. I married my wife when I got out of Harvard Business School, and this year, we will be married 50 years. I went with McKinsey and Company after Harvard, and was in San Francisco and then spent four years in the Netherlands helping them with their European operations, where my two daughters were born. And then I came back to San Francisco and became the president of one of my Dutch clients, here in the United States. And as part of that effort, we formed a venture firm for them. And in 1972, I decided that venture capital was going to be more significant than it had and would really grow. I was right, but I certainly didn’t understand how significant it was going to be. So in 79, we formed our own firm Interwest. It’s still going, it’s on its 10th. Fun, although I am not involved, I am doing angel investing, which I think we’ll get into a little bit later. I live in Atherton, I’m an involved in nine board of directors and I’m a happy camper.

Alan
Well, I want to change direction. So in, in looking at all these companies that you created over the years, and you’ve seen both good and bad ones. Yeah, what do you value most in a company?

Wally
Well, if you limited me to one word, it would be people. There’s three things I tend to look at when I’m looking for a company. The first two are scale, because it needs to get size or it won’t make any difference. The second is to make sure that there’s a sizable market that will permit that scale, because you’re gonna have a great product with no market. But the next one is one where I think people tend to fall down, they pay lip service to management. But I’m looking for a plus people. And the reason I can be on nine boards is that I have an A plus guy leading every one of those nine entities. And if you pick the right leader, you’re over 50% On the way, it may mean you have to make changes, or adjustments, whatever. But it’s the good leader that sees the need for that and gets it done. So I’d say in a word, it’s people,

Alan
When it comes to building a team and a company. How do you identify that talent?

Wally
That’s a tough one. It really is, you’re not sure you always have that when you go in if you do it, you might not have back some of those. But basically, you begin to see whether the person has an interest in working with other people, including the board of directors, if they are willing to build a significant board of directors with serious people, it means they’re willing to listen to other people. And to think about a team at the director level. If that’s the case, there’s a good chance they’re going to be thinking about a team at the company level as well. But if they’re already in operation, because many of those are already started, that we get involved in, I can learn more by walking around the company, and watching how the people react to the leader and to me and others than I can by reading any business plan.

Alan
How does a leader make the hard decisions? Well,

Wally
they’re very different styles. Some people are pretty self sufficient. For me, I tend to think that more often not It means being collegial of getting more people’s input. I’m fond of saying, you know, if I want to get an answer, I’m probably not to get a very good one if I just look in the mirror.

Alan
You know, and throughout the years, you’ve you’ve had lots of good experience in both for good and bad. interest was 1979. And, and then you worked up to what year, early 90s, early 90s. I visiting here today with Wally Hawley, he’s a Silicon Valley entrepreneur and seen the valley grow up over the years. And beds Interwest was one of his, you know, was founding as a founding partner there and the company and then a lot of a lot of great companies throughout the years. While we were going to take a quick break here, and when we come back, I like to get into you know how we look at leadership and companies and scaling and you know, will you stick around with this? Sure, absolutely. We’ll be right back after these messages.

Alan
Welcome back. I’m visiting here today with Wally Hawley is Silicon Valley entrepreneur, and Wally. I want to move into the topic of leadership, we talked about the importance of leadership within companies. What do you look for in a leader?

Wally
Well, first and foremost, integrity is critical. You have to have someone who’s going to walk the talk, and has good set of ethics that’s primary. Beyond that, there are a lot of personality styles, some of them tend to be autocratic, I tend to prefer prefer the people who really want to work in team kind of environments, and that they’re bringing along strong people because ultimately, if you’re going to build a sizable company, it’s not going to be a one man job. And it’s not going to be all about just one man, even though the name may be well known. It’s going to be the people that he or she bring in to the company to help build it. And that’s critical.

Alan
How do companies scale?

Unknown Speaker
Well, the you can learn from that by learning how they don’t scale as well. They scale normally, by setting up a pilot of something, it may be a product, if it’s a retail company, it may be a store. And the key here is to determine before you put too much money into it that the pilot works. There are examples of how you don’t do it by people who assume it’s going to be successful, put a ton of money in buildings all over the place, and then find out that you never really had a business model. So you got to start by doing something small to prove it.

Alan
So what are the pros and cons of bootstrapping a business?

Wally
Well, the pro bootstrapping, obviously is the person who starts out or the group that starts it retains more of the ownership position. So that’s an argument for that. However, in many cases, you want to have a situation where money is not the limiting factor, because if it does, it may start making decisions that don’t fit where you need to go. And if you’re going to try and get build something big, I generally find that you want to have the management not worried about where the next dollar is coming from, but worrying about the product, the market, the people and something other than the money. So that would argue for not bootstrapping it, but getting yourself well capitalized so that you can focus on other parts of the business.

Alan
For the companies that you’re involved in on the board, are you are you proactive with respect to measuring their progress or performance?

Unknown Speaker
I think that varies by company, sometimes the management’s have a good model for doing it. I view my role as a director as helping on a continuum. So that when people say, Well, there’s only three or four board meetings a year, that doesn’t matter to me, because the board meetings oftentimes are just a follow up of what you’ve been working on. You know, throughout the period between board meetings, I’ll give you an example. I’m involved in a couple of educational companies down in Texas, I’m probably on the telephone to them three or four times a week, maybe for only 15 minutes, or whatever. But it’s continually talking about what do we need and supportive. So if it’s supportive, you’re hoping that management’s going to deal a lot with the accountability question.

Alan
You’re also involved in a lot of Angel financing here in Silicon Valley. And what specifically is angel money?

Wally
That is money who comes come from people who have been successful financially, either as venture capitalists or as entrepreneurs, and the advantage of angel money, and there are many. First and foremost, you’re getting people that have experience in building companies. You’re not always going to get that when you get a venture capital firm, which may have people that are fairly Junior and not that experience. The second thing you’re getting is patience in the capital. This is their money. So they can take their time in terms of building as opposed to having other people’s money, and then you have the pressure to produce and get an outcome for them. That may put artificial constraints on the company. So you get experience, and you get patients.

Alan
I’m visiting here today with Wally Hawley. He’s in Silicon Valley on Trip Winner who’s been involved in starting a lot of companies here in the valley serves on a number of bulletin boards. Wally we need to take a quick break, and we’ll be right back after these messages.

Alan
Welcome back and bathing here today with Wally Hawley, he is a Silicon Valley entrepreneur. And prior to the break, we’re talking about your your career and starting companies what you value most in the company. And I want to turn the page to a different segment of your life, which one that I’m more excited to get into. When you So you spent 30 years of your career in Silicon Valley doing this venture capital, you know, working with venture capital community, and now you’re walking a different path in life. It’s something that Bob Buford calls halftime. Can you tell us a bit about that?

Unknown Speaker
Yes, that book had a huge influence on shifting my career and direction. And Bob’s book deals with people who have been, he puts it in quotes successful, turning success into significant but the successful. He’s defining initially as financial success, and then you move to significance. And I read that book on a vacation and thought, wait a minute, that should be me. Do I want to just keep building quote, success financially? Or do I want to become significant? Now that was in tandem to my becoming Christian, which also changed my attitude from moving from? It’s about me, too, it’s about others. And that was the big shift. So once you start to make that shift, you say, Well, okay, how do I want to live then the next part or half of my life. And what that means is dealing with others giving to others helping others. And I began to move into the nonprofit arena, which includes a lot of education. It includes Christian activities, and I became involved in a number of organizations that are dealing with helping other people, much of it focused on youth.

Alan
What does it mean to be a Christian?

Wally
Well means a lot of things to different people. But to me, it means becoming a follower of Jesus. That’s what it means. And that’s what I’m trying to do. And of course, that gets you over into things of what do you do like covenant groups. And like other things, I’m in a covenant group where we are studying spiritual formation, trying to learn more about what Jesus taught. And we study a lot of the great authors about this and discuss it and try and see how that impacts our lives. And I think it just means really helping other people. If you’re involved in a church, it’s getting outside the church, getting outside the walls, and helping in the community.

Alan
Why do you feel so important to give back to society?

Unknown Speaker
Well, let’s start with the fact that society gave a lot to me. How would I be where I was at that point without society having the foundation, the freedoms, all of the elements that allowed me to be financially successful? So to me, it’s just sort of natural to give it back. Secondly, I don’t think when you reach the end of your days that what you want to do is look back and say, what was my financial net worth? I define it, I want to know what my net worth is. But my net worth is not my financial network. My net worth is what I’ve done for others.

Alan
So good point, what impact can the social entrepreneur have on others?

Wally
Large, I think that’s one of the encouraging things that I find about our society is it’s the nonprofit and social entrepreneur is becoming significant, more prevalent. And I think, you know, that is one of the keys to our society. I know Peter Drucker said that our success here in this country is going to be largely dependent on the third arm, not the government, not the financial sector, but the social sector. And we’re seeing this in the schools weigh in down in the junior high and high school where they’re doing various projects out in the community, and as moved up to the colleges and the business schools where they’re studying nonprofit entities and social things. And it’s one of the encouraging things for me about where we’re headed.

Alan
So what types of projects are Are you involved in now?

Unknown Speaker
Well, one of them is called Young Life. It’s a major Christian youth organization. We reach about 1,200,000 kids every week in clubs, and we have camps. And we’re now in 70 countries around the world. And we’re just exposing the kids to the gospel. It’s nondenominational, but we want them to learn about the gospel and about themselves. So that’s one where I worked actively and became chairman of the board. At one point. I’m on two boards at Stanford University. Institute for Economic Policy Research, which is a nonprofit organization dealing with economic problems. I’m on the Stanford Alumni Board and where we’re working with the University on things that we’re doing along with their graduates and alumni. I’m also involved in something called the Dallas Willard center. And this was an outgrowth of my covenant group where we were studying Dallas Willard teaching, and he’s one of the major Christian writers of our time. And so we are going to put a library up down on the Westmont campus with all of his writings and activities. And we’re going to build courses and curriculums, and we’re going to make it available to all other universities, not just Westmont. So here’s a situation where you start something like getting involved in a covenant group. And it just gradually morphs and moves on to broader things. Another one I’m working on is something with Reggie McNeal called missional Renaissance, the whole idea there is getting outside your church, and not being a club not being in the walls and being responsive to what the communities need. And this is a lot of fun. You’re just watching impacts of other people. And it just, it’s a joy giver.

Alan
Did you find it to be a big adjustment moving from the business world where it’s all about me and accumulating wealth to more of a Christian attitude, empowering others?

Wally
Well, when you say moving, I still have things in the for profit world. So I haven’t totally stepped out of it. But it’s not something that’s driving what I’m going to be ultimately with help of people like Bob Buford and some other Christian colleagues. No, I don’t think it was hard because the key decision was deciding that I just didn’t want to be full time. In the financial side. I want you open your heart and your mind to that. God provides the opportunities.

Alan
That is so true. Education markets, where do you see that going?

Unknown Speaker
This is a great time to be working in that field. 10 years ago, if you said, God, you want to help in the educational field, people would say, Well, you know, you can’t make any money there. You can’t be successful. It’s hide bound. And now we’re seeing that education is something that needs to be disrupted.

Alan
Wally, I need to hold this thought right there. I gotta take a quick break. We’ll be right back after these messages. And I wanted, I want to pull in what you mean by disrupted. And we’ll continue after the break. We’ll be right back after messages.

Alan
Welcome back and busy here today with Wally Holley, while he is a Silicon Valley entrepreneur that when he reached the midpoint of his career, he turned over a new leaf and started giving back to the world through service education and following a Christ like life. While he, before the break, we’re talking about the word disruptive education. And I want to pick up on that where you see the education markets going and your involvement right now in that industry.

Unknown Speaker
Well, disruptive is a term that comes from Clayton Christensen at Harvard Business School. And he studied industries that needed to be disruptive because they become hidebound. He started with the auto industry. Then he went to the steel industry. And recently Clayton has determined that the next place that needs to be disruptive is education. And why? Because much of our education goes back to what we were doing not a decade ago, but in some cases a century ago. And I know of no industry that’s gonna go without change for a century and that lasts so You are now beginning to see as the education has been turned on its head in terms of professors have to think differently. They don’t control things all the way. We’re looking at accountability of the schools starting from K through 12. And also colleges. And so the whole thing now is going to have a different structure. And we’re seeing this and all the programs that are being done and race for the top and all the things that the universities are sponsoring now to change. So we have some companies that are doing Distance Learning distance learning happens to be one of the segments that will cause disruption. Because now we have the opportunity to reach a lot more people than we could with the number of seats that we have on a college campus, for instance. So we have two companies that are involved in doing this one are buying universities in South and Central America, where we bought 11 universities in nine countries, and we’re providing distance learning so that a larger percent of the population can have a college degree and be functional in their society. We also have about 40, or 50. partnerships with state universities here, where their funding are drying up and through online, they can take on more students stay alive, and more people can get degrees. So distance learning is just one element but an important one of what is happening when I talk about disruption.

Alan
What do you see them education markets in a three to five year window.

Unknown Speaker
It may change the way you look at whether you need a college degree or not. We see businesses talking about they want their graduates to be functional and useful. But many of them have taken many courses that may have broaden them as an individual but are relevant for the companies. So some of these distance learning programs permit students to take a course that’s useful for the businesses. So some people are going to start to design their curriculums. They may or may not get credit, but they will get the recognition by the universities that they’ve done the course. I’ll give you one quick example at Stanford, there was an artificial intelligence professor who was teaching 60 students, he decided to put his class online. Now he has 165,000 Students taking his course. And half of his 60 students have dropped out of the on the regular course and are taking it online. So it has opened up to people they can now learn about that. And this is happening at all the major colleges. And I think we’re just going to see a whole different outcome of what it means to have preparation for the outside world after I’m gonna call it education, not college.

Alan
I’m visiting here today with Wally Hawley, he’s a Silicon Valley entrepreneur who, halfway through his career, turned over a new leaf and started giving back not only to the community but to the rest of the world, as recent projects have been in young life and education models. Wally, I appreciate you being on today’s show.

Wally
Thank you for having me.

Alan
We’ll be right back after these messages.

 

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This transcript was generated by software and may not accurately reflect exactly what was said.

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