From his succesful investment strategy to the importance of gender balance and diversity in tech.
I’m proactively funding brilliant people trying to solve hard problems.
Actor and producer Kutcher, a Hollywood darling, has become a savvy tech investor. In 2010, he created a venture fund, A-Grade Investments, with long-time friends Guy Oseary and Ron Burkle “to opportunistically invest in technology start-up companies,” as their LinkedIn page mentions. Among his investments, some of today’s largest startups and scale-ups, including Spotify, Airbnb, Uber, Square, Nextdoor, Houzz.
“But that was mostly seen as a hobby for the two [Kutcher and Oseary],” Techcrunch reported in 2015, when, during SXSW, Kutcher launched his new fund, Sound Ventures, “a more formalized fund with some big backers … to invest other people’s money.”
At Techcrunch Disrupt SF, Kutcher and Sound’s chief operating officer Effie Epstein discussed not only their investment strategy, but also the geography of investing in tech today, outside of the usual suspects, San Francisco, Los Angeles, and New York.
Epstein mentioned Boston, Austin, Denver, Miami, Nashville. She added: “Seattle has always been in the background; I’m kind of surprised that we haven’t seen more out of Seattle.”
“The democratization of a lot of baseline software tools is actually allowing companies to start to spread up in other places,” said Kutcher. “Most likely, the next greatest companies in the world are going to be the companies where the most talented people want to work at” and that doesn’t necessarily mean San Francisco or New York. “We’ve started to see companies in other markets,” he said, pointing out that cities with lower cost of living helped startups “attract talent at similar to lower prices,” with a boost to diversity in their workforce.
Back to Kutcher’s investment strategy, on his post on Atrium he mentions: “I don’t have a magic formula, but there are four important factors that must all check out for me to invest in a founder.”
Here they are:
- Domain Expertise — The best founders have some unique insight in the domain where they’re building a company that gives them some edge. I often find that it’s one of three factors: a) Deeper understanding of consumer behavior; b) Historical Insight; and c) Data.
- Grit — Founders need some capacity of perseverance through really, really tough situations.
- Purpose — Is whatever they’re building someway connected to a greater purpose in which they’re personally invested? Whatever they’re building has some resonance relative to who they are, how they are, and what they believe — because belief systems don’t go away when you get into trouble or come across a difficult challenge.
- Charisma — There’s a level of charisma that many great founders have, especially if they want to be the CEO of their company.
He also talks about founders he’s wary about:
- Display questionable principles — I’m a very principle driven person. I have certain litmuses around gender equality, racial equality, and working with good humans. I only want to work with founders and invest in companies that share my principles.
- Lack domain expertise — If the person doesn’t know their numbers it’s an immediate killer.
- Lack of respect for time — The biggest factor people often forget when they’re busy trying to sell what they’re doing is a basic, human understanding of other people.
Women and diversity seems to be another important factor when it comes to investing in new ventures, as he highlighted at Techcrunch last year. Kutcher’s advice for startups is:
- Hire more women
- Get busy making sure that there’s equal pay within organizations
- Think about gender parity and diversity from day one and continue to tell stories about the extraordinary women in history and in your startup.
Something interesting about Kutcher is also the way he interacts with companies he has invested in.
Yesterday for example, he was at Nextdoor headquarters in San Francisco to discuss “the power of local community, civic engagement, and his experience as a neighborhood lead” with Nextdoor co-founder Prakash Janakiraman and new chief executive officer and chief neighbor Sarah Friar.