Union Square Ventures' Jared Hecht likes weird, fringy things
Lessons from a 2x founder & how he invests in the next big thing
When I was working at BrewPR and first met Jared Hecht in 2010, he (and his co-founder Steve Martocci) had only just recently started GroupMe - but it was clear they had the drive, vision and smarts to succeed in the startup world. According to them, they also had a lot of luck.
Last week, I had the opportunity to interview Jared about it all: 2 successful startups (GroupMe and Fundera) and his new role at the storied VC firm Union Square Ventures.
He shared a ton about what he learned from his experiences as a founder - when he knew when he was onto something, what to prioritize, how to balance your personal life (precariously), why storytelling is so important, what two very different acquisition processes were like - as well as, of course, what he’s focused on as an investor.
He said luck was 80% of GroupMe’s success - going from founding to acquisition in about a year - but I’d say it’s clear that a lot of that luck was created.
Read on for just a few highlights from our packed hour at Union Square Ventures HQ. But to get all the great stories, learnings and the full audience Q&A, listen to the full interview (YouTube link below). Whether you’re a founder building for B2B or B2C - it’s definitely worth the listen.
A personal passion to solve the problem is startup fuel
Both GroupMe and Fundera started from trying to solve personal problems that Jared and his friends or family faced. With GroupMe, it was the pain of organizing trips with friends over email, and a desire to make it easier for people to make decisions together via text (back in the day when there was no group messaging yet). With Fundera, it was seeing how hard it was for a family member to get a loan for a successful, small business - a local chain of restaurants.
In both cases, he and his respective co-founders got something working up and running very quickly - and also quickly saw customers come in. That demand demonstrated that there was something worth pursuing.
Though Jared ended up working on Fundera for 7 years - and several more than on GroupMe - in the end, he knew that he didn’t have enough personal motivation around the problem to keep going. He and the team went through extremely challenging years as Covid decimated small businesses and therefore small business lending as well; they had to downsize and eventually figured out how to insert themselves in the PPP loan program and helped facilitate north of $10B in funding for tens of thousands of small businesses. But after all that wartime experience, he and his leadership team was really burnt out.
Jared shared the honest moment when they agreed they didn’t have enough left in the tank to go through another few years of re-building the business with all the uncertainty of whether small businesses would rebound, and therefore sought acquisition opportunities.
It is an important lesson for founders to internalize. You have to have the passion for mission to do everything it takes to keep surviving. Though Jared & Fundera were able to find an acquirer with strong alignment (NerdWallet) - not everybody will be so fortunate. Founders need to make sure they are truly personally passionate about their mission and ready to dedicate their years to it.
Sometimes the stars just have to align
At GroupMe, there was an interesting point in time (~2010) where there was no ability to “reply all” to text messages. As consumer started to shift away from mobile and mobile applications started to gain in popularity, GroupMe arrived just at the right moment.
They were also lucky that a service like Twilio existed, making it easier to build on SMS and literally launch within the time span of a hackathon. Further, big central startup gathering points like SXSW allowed mass adoption of consumer products.
To this day, even though there have been no major updates to the technology in years - 30 million people still use the app. It has serious staying power.
A piece of me felt like we just got really lucky… With a lot of consumer applications, it can be somewhere between, call it, 80%-90% luck, and then 10%-20% executing against that luck. It’s kinda like you capture lightning in a bottle and it’s really your job just to not fuck it up.”
All the cliches are true about being a startup founder
The cliches are there for a reason, they’re all true! Jared agrees with a lot of the ones we’ve heard before:
This shit is hard
It really is all about the journey
Time passes, you’ll get through all the hard times
There will be more bad times then good, but you’ll only remember the good times
There’s no shortcut around all the difficult times, only way to get through it is by going through it, not around it
This is one of the most rewarding things you can possibly do
Union Square Ventures is industry-agnostic and thesis-driven
The current thesis: USV invests at the edge of large markets that are being transformed by some combination of technological and societal pressure.
Large markets = companies that can do things without permission that don’t rely on gatekeepers (regulation, large companies, etc.) they can ship things and get them immediately in the hands of customers and get feedback.
Technological pressure = transformative things like AI or more narrowly, things like at-home diagnostics in healthcare.
Societal pressure = might exist when a group of people are fed up with how an industry works. For example in healthcare, people are starting to say they want to be accountable for their own wellbeing.
The confluence of all these factors is what they look for.
“I like weird, fringy things”
USV has remained small by design, they typically invest at series A or seed - with average check sizes at around $5-$7m.
Jared is looking for things on the edge, things that feel/look a little off. Things should look that way at first. Then a few years pass and those are the companies that are on the epicenter of a technological shift in the market. For example - Foursquare, Uber and Airbnb all seemed weird at the beginning, but became mainstream.
His #1 piece of advice to founders: practice storytelling
Be a great storyteller. That is the thing that I think matters most, and I think people discount that way too much.
Founders are not spending nearly enough time practicing and refining their story - they are discounting that too much. You have to practice over and over in front of a mirror to the point that you can pull your pitch out at any time in any place and do a great job. It is your job as a founder to be able to convince people to leave their jobs and join your startup or investors to give you money - the only way to do that is to tell an exceptional story.
It was a joy to work with Jared back in GroupMe’s early days, and even more fun recounting the memories together. But the hindsight includes tons of valuable lessons and experiences to learn from. Hope you found it inspiring and motivating.
Full video of the interview
(note, the audio dips out for a moment at the beginning but is very clear from 2:25 on)
More upcoming programming from Lynx Collective
April 3 - Startup Bootcamp: How to Recruit the Best People - NYC ($50 for non-members / free for members)
April 17 - Seed and Series A Founders Lunch - NYC (Free, sponsored by FundedBuy)
May 21 - Inside: AlleyCorp with Susannah Shipton (Free, approval required)