Thursday, November 6, 2014
Zuma Ventures: Creating A New Technology Startup Model
Story by Benjamin F. Kuo
David Carter and Allen Hurff are two startup veterans, who believe they have a new formula to help create early stage, technology companies, through their new "startup studio", Zuma Ventures (www.zumavc.com). Carter was a co-founder/partner at Amplify.LA, and also was founder of Vertical Technologies, Thoughtstar, and S5 Wireless' Hurff was formerly the EVP of Engineering at MySpace, and also was an EIR at Science Inc. We sat down with David and Allen to learn more about how the company wants to change how startups are created.
Explain exactly how Zuma Ventures works?
David Carter: Zuma Ventures is a company that makes other companies. Internally, we look very similar to a tech company, in that we have a development team, go-to-market team, and product people, and the ultimate goal of what we want to accomplish is to create companies that can run independently, with their own management teams.
How is this different than accelerator or incubator?
David Carter: There is a lot of misunderstanding on what an incubator is, and what an accelerator is. When I was at Amplify, we had a lot of people wondering what an accelerator was, and how we differentiated from an incubator. I would go through and explain the way I saw it, and other people would disagree. I think the best conclusion I can come up with, is an accelerator, in general, like Amplify, LaunchpadLA, and Mucker, are more or less looking for companies with an already existing, basic team. What they do, is accelerate that team or company to get them to the next level, and then go through and put in some investment money, help them build out the management team, and help with vendor relationships, help with overall strategy, and then help those companies riase their next round of capital. Incubators, at the core level, take basic core level technology and try to build a company around it. I think what we're doing here at Zuma is a piece of what happens in an incubator. However, the other pieces of what we do are a somewhat evolved model similar to the early days of what Bill Gross did at Idealab.
What's your background, and how did you get into this?
David Carter: I started out as an engineer. After being an engineer for a year, I ended up starting my own company, using a $5,000 co-signed loan from a friend of mine. We created a product that would allow you to print barcodes. It ended up being one of the best selling products in the world for printing barcodes, and we ended up selling that to a NASDAQ listed company called Zebra Technology, out of Illinois. I stayed on as president of a subsidiary for awhile, but then found that corporate life was not to my liking. So, I ended up leaving and started another company, Thoughtstar, which is much like Basecamp.
We built that, and sold that to another, NASDAQ company, iManage, which sold to Autonomy, which is now HP. I was then brought into a fund as an EIR, an Entrepreneur-in-Residence for Epic Ventures. The reason I was brought in, was because one of my board members, Tim Draper, who was a board member at my first company, encouraged me along with some of the other partners at Epic to come and spend a year there. I spent a year there, and they wanted me to stay on as a partner, but I decided I would instead go out and do one more company. We gold involved with S5 Wireless, which at the time was really just a base technology, developing wide area location and telemetry technology which allowed you to locate where a chip was, indoors and outdoors, without having to use GPS. We raised over $20M, but then ended up losing control to our shareholders. When that happened, I came out to LA and helped to co-found Amplify. At Amplify, I evolved into wanting to do a fund, and thought about doing a regular venture fund. Through some friends, I backed into this model, which we call the studio model, which leverages the background we have, which is a lot of the operational side of building companies. At the same time, it also uses the investment side, which I have lots of experience with, having invested in 24 companies as an angel, and having been on the board of advisors of thirteen. Allen and I had met previously, and it made sense to have him take part of this and lead development.
Allen Hurff: I actually grew up in Virginia, but moved out here to start my tech career in 1997, working for Altavista. I worked for Shopping.com/Altavista in Corona Del Mar, and ended up working in Europe after the Dot Com crash. I ran Altavista from 2001 to 2002 in Europe, and came back to the states, doing a lot of consulting between the Dot Com crash and the beginning of social networking. In late 2004, I became the 39th employee at Myspace, and built a team under me of 300 people, in engineering, project management, QA, and creative services. We had people in fourteen cities worldwide, including San Francisco and Seattle. At Myspace, I had the chance to overlap Mike Jones and Peter Pham, after we acquired Photobucket and Mike Jones' chat engine for Myspace. I had asked Mike Jones for advice on entrepreneurship, and raised money for a startup through Mark Suster and Jon Callahan, and ultimately ended up in San Francisco in 2011. I came back to Los Angeles at the request of Mike Jones and Peter Pham, to help get Science off the ground.
Both of you have a significant amount of time up in Silicon Valley, how did you guys end up here in LA?
David Carter: In my case, I really enjoy the culture of Southern California. One other thing, which is better in Los Angeles over the Bay Area, is my own personal situation. Why I think that is better, is LA's culture is one that embraces art and the creative side of technology. If you look at the technology business up north, it's very, very focused on STEM--Science, Technology, Engineering, Math--though they're now calling it STEAM and adding Art, because I think technologists understand that art plays a very big component in technology and creation. I think the thing Los Angeles has to offer, is it has a high degree of atmosphere. The culture here is one that breeds the type of environment that creative people need. That's why creative people seek out Los Angeles. You also find that LA has never suffered from a lack of engineers. If you look at just Caltech, UCLA, and USC, and you look at our population base, we're pouring out more engineers than pretty much anywhere. The problem we had before, was everyone was leaving because there were not enough opportunities. We now see a lot of those engineers staying here. I think we really have an amazing opportunity to do something different than Silicon Valley. Personally, I think that's better for me.
Allen Hurff: From 1997 to 2009, you could never really find a group of people in Southern California you could meet with at a cafe in the industry, but if you went to San Francisco, you could go someplace like 21st Amendment near South Park, and sit in a room with eight people and create a future protocol of the Internet. You'd find one friend at Google, another at Facebook, you could sit together, iterate, and make it happen. That was the case I think until 2010, when I think something very beautiful happened. I think it all crystallized in 2010 on the Santa Monica promenade. That same environment is now spreading to places like Culver City, and happened tow years ago in Silver Lake. It's becoming normal in this town to be talking about technology, about a protocol, and know at least where you can meet to talk about those things. I think Paige Craig, and David, and Tom McInerny were instrumental in making that happen in 2010, by spreading a little bit of money around and starting these companies on the Promenade, which led to where we are right now.
Do companies apply to your company, or how does the model work?
David Carter: In our first phase, we are building companies we create internally. We are not seeking external companies to fund and/or build from. We actually are ideating internally. In our first phase, there is no outside investment in companies. Only companies we are creating.
How many companies or products will you work on at once?
David Carter: We have a dev team, and actively working on projects now. The idea is we'll do three products and companies in the next 18 months, and we're hiring as we speak.
What do you think is the biggest thing startups need to do to be successful?
David Carter: I think the biggest thing startups need to do is find mentors that they can trust and learn from. There is a lot of benefit to having someone who has had the opportunity of going through and build one or two or three companies, and has had that experience, and is able to take things they've learned and apply that to whatever project you are working on. When I when I did my first company, I would have loved to havesomeone to help me figure things out. It took me almost seven years to build that company, and I think I could have done it in a year or two now, because I know what I am doing. There are a lot of people here, lots of successful people here with great backgrounds, who you can get mentorship from. Entrepreneurs should seek those people out.
Allen Hurff: The only thing I would add, and I'll never stop giving this advice, is that everyone has an opinion on how you should approach things, and you just have to get to doing it. Back in 2009, everyone had an opinion on how I should pitch people. The problem with people's opinions on how they did it that day and raised money, is even though it's all great advice, every situation is different. You have to just start pitching and trying to raise money, and not get caught up on the right way or wrong way to do it. I missed that in the beginning.