Making Money the Old-Fashioned Way
WHY YOU SHOULD CARE
Because this up-and-coming VC star doesn’t really want to talk about one of the very things that makes him unique.
Erik Moore’s career in venture capital began with a hot tub.
And a chance meeting in an elevator: It was 1999, and a guy named Tony Hsieh had just sold his first company to Microsoft. Hsieh wanted to install a Jacuzzi in his penthouse apartment — but it was against policy in the building, where Moore lived, too. After the fellow tenants ran into each other one night, Hsieh drafted Moore onto the homeowner’s association. They got the sought-after hot tub installed, and became friends.
Good enough friends that Moore invested in Hsieh’s company, Zappos.
At the time, Moore told Hsieh, “I’m not sure I have ever heard of a more stupid idea than selling shoes online.” But, deciding that Hsieh’s talents outweighed the apparent dead-end nature of the service that became Zappos (later acquired by Amazon for $1.2 billion), Moore made an investment that eventually provided seed money for his venture capital fund, Base Ventures.
Base Ventures is itself a young, still exceptionally small firm. Under $20 million in size, it’s at the other end of the spectrum from a company like Andreessen Horowitz, a $2.5 billion firm.
The initial instinct that drew Moore to Hsieh — focusing on a founder’s intuitiveness, not just the pitch — has paid off handsomely. And that’s the primary lens that directs his investments. After all, Moore believes he got his shot — starting in college, where he didn’t have the highest test scores but did have stellar recommendations — because advisers took a chance on him.But it’s had successes: StyleSeat, an online booking site for hairstylists, just raised a $10.2 million round at more than double what its valuation was when Moore first invested. Balanced Payments has seen a seven-fold increase in transactions from January of last year, now up to $370 million. Moore’s firm also collaborates with Hsieh’s Vegas Tech Fund, helping to encourage promising companies to move to downtown Las Vegas. (Hsieh is Base Ventures’ largest limited partner.)
The Tired Conversation We Still Have to Have
The serendipity that helped make Moore a success is a common tale in the Valley. What’s less common is that Moore is part of a very small club within a club: black founders of venture capital firms. And he’s got some unorthodox views about that.
“We shouldn’t feel special in tech,” Moore says matter-of-factly, leaning back in his chair in his quiet office, where the white boards hanging on the walls are scrawled with data points on potential investments. He’s tall, with a wide frame that befits him as a former high school football captain, and an easy grin. As he discussed his career, Moore didn’t look inspired by questions about the dearth of blacks in Silicon Valley not just as investors, but as startup founders and engineers. But he went on to talk about it plenty, anyway.
It’s a problem that began garnering national attention in late 2011, when a prominent white tech blogger said he didn’t “know a single black entrepreneur.” But concern over the underrepresentation of African-Americans in white-collar industries has been an issue “since I have been old enough to understand the conversation,” Moore says. “It’s just an old, tired, boring conversation to me.”
Moore’s impatience with this topic, and his pragmatic response, is partly borne of his experiences in other industries where African-Americans have faced similar struggles. “[The conversation] has to happen because it’s unfortunately still an issue,” he concedes. “[But] it was the same when I was in investment banking,” he said, recalling that people were often worrying about “how few blacks there were in sales and trading, in M&A … how few blacks there were at Dartmouth.”
These were the mostly lily-white stops along Moore’s winding path to establishing Base Ventures.
Today, his office is on a tree-lined street near the Berkeley Hills, an hour from Silicon Valley. Seven miles to the north is the city of Richmond, where Moore grew up, and where “most people in my neighborhood went the wrong way,” he said. When he left for college, Richmond was on its way to being one of the most dangerous cities in the country.
He started in finance in San Francisco, where he moved shortly after college (with pit stops in New York and L.A.).
And though Moore began in banking, by the time he met Hsieh he’d already invested in a biotech company through a college friend. He continued cutting checks to entrepreneurs as he built his career in finance.
“It’s not easy knocking on doors and asking for millions of dollars,” Moore wrote via email about the challenges of building a venture fund from scratch. One key, he says, is building relationships with influential people, even if it’s not immediately clear how they might figure into your career path. Moore’s done this is by knocking on the doors of boys clubs that don’t tend to be populated by black men from the hood in Richmond, Calif. The latest is the secretive Bohemian Club, which Moore waited for more than a decade to gain admittance.
Of course, any talk about networks comes back to the key question all VCs face: “How do you get into these deals that are really relegated to the top-tier investors, where they hold slots open for people they know, or people who invested in these companies previously?” as Moore put it.
When young companies acquire significant buzz, as Social Cam did after Moore met its founder, Michael Seibel, their fundraising can advance rapidly, making it difficult for small investors to break in. Seibel’s company raised only one round of financing before it was acquired.
Moore says a company Base Ventures’ size “should have never been able to get into that deal,” among a list of “rock-star investors” like Ashton Kutcher.
One piece of advice he delivers is sobering: If you think the tech industry is racist, and you let that hold you back, then you don’t deserve to rise within it.
He says, firmly: “I challenge anyone to suggest I didn’t have bumps in the road.”
This piece was originally published March 17, 2014, and was updated as of Nov. 23, 2014.