Venture Capitalist (“VC”) David Hornik recently visited a coding class at San Quentin State Prison and shared how he went from being a public defender to one of the top venture capitalists in the country and why he loves it.
“It’s a crazy job, a really fun job,” he said.
Hornik has been honored as one of the top 100 VCs, according to Forbes Magazine. In 2013, he was VC of the year, according to financial firm Deloitte.
He was invited to San Quentin by fellow Venture Capitalist Chris Redlitz who, with his wife, Beverly Parenti, founded the coding class, Code.7370. The couple also started The Last Mile, a program that teaches incarcerated people how to become entrepreneurs using technology for a social cause. (One of the assumptions Hornik clarified: you don’t have to be rich to be a venture capitalist.)
Hornik entered the classroom on Oct. 25 with the flair of a charming, self-deprecating comedian. When Redlitz asked him to stand on a platform to address the students, Hornik, who is 5-foot-4, joked that he thought they built the elevated platform just for him.
The VC described growing up in New Hampshire as the dyslexic son of a computer scientist. His older sister and little brother were sent to smart kid programs, he wasn’t.
Despite dyslexia, Hornik racked up degrees from prestigious colleges while searching for a career. He received an undergraduate degree in computer music from Stanford, a master’s degree in criminology from Cambridge University and a law degree from Harvard. After passing the bar exam, Hornik became a public defender.
“I was really good at this job and really bad at this job,” Hornik said. “I settled all the cases but one by saying, ‘let’s figure out how to make this go away in a way that makes everybody happy.’ I got all these great deals.”
Except under the “great deals” his clients weren’t happy. They were the ones who had to serve the time for the cases he settled. He didn’t like having unhappy clients so he decided to “sell out” and move on to a big corporate New York law firm. After working three years representing firms like Ticketmaster, his wife noticed he wasn’t happy. She recommended getting a new job.
“…how do you establish credibility when you don’t yet know anything? Honesty”
“I do whatever Pamela tells me to do because that’s the safer path,” Hornik said.
Hornik moved to California to work as an attorney representing startups. He said startups “blew his mind. They have an idea of how to make the world a better place and they do.”
Sitting in on board startup meetings, Hornik began to express opinions beyond his role as the attorney. During one meeting, Hornik contradicted the board member who had put up the money for the company. The board member had Hornik fired.
After losing that job, he spent four months learning about being a VC at a friend’s company and was eventually hired.
Being a successful VC doesn’t require money, it requires making good decisions. Hornik’s job is to decide which startups his company should invest in.
One of his successes was Pay Cycle, which Intuit bought for $100 million, netting Hornik and August Capital a big return.
He brokered a deal for August Capital that turned an investment of $9 million into $600 million with Splunk, a company that created a search engine that tracks error files, now worth $10 billion. Hornik also curates for tech TED conferences, blogs for VentureBlog (the first venture capital blog), and does VentureCast (the first venture capital podcast). August Capital, to which he is a general partner, has $450 million to invest in startups. They have funded companies like PayCycle, eBates, Bill.com, Rocket Lawyer, and Wepay.
One of the errors a VC can make is failing to invest in a company that excels. He said he passed on Facebook, LinkedIn and Uber.
Despite the staggering amounts of money Hornik deals with, it’s not making the most money that he regards as his best deals. It’s backing great people.
“I reach out to amazing people working on amazing ideas,” Hornik said. “If I think it’s really interesting, I check them out to see if it’s an idea people will need, then I give them $10 million of someone else’s money.”
Hornik’s advice for those wanting to get a startup funded seems like good general advice in life: don’t exaggerate, lie or talk with certainty about things you don’t know.
But how do you establish credibility when you don’t yet know anything? “Honesty,” Hornik said. “The right answer is to say…‘I don’t know the answer to that, but I know these things, so I think the answer is this.’”
One student asked him if companies should engage in philanthropy.
Hornik answered: “Startups are so hard you shouldn’t be doing anything that isn’t helping your business. Go make your business extremely successful, then take the money and give back. If it turns out giving people a second chance is good for your business, then give people a second chance. The best employee can be a former convict. He’s the best because he’s so grateful we gave him a second chance that he is astonishingly loyal to the company. I think there are lots of opportunities to make choices that are good for a company and good for society.”
Student Harash Patang asked, “What’s the next big thing?”
Hornik answered, “I wish I knew. VCs don’t know – we have thoughts; we have guesses. If we knew, we wouldn’t ever fund bad stuff.”
He talked about going to California State Prison-Solano to help out Defy Ventures, an entrepreneur program for incarcerated and formerly incarcerated people. “Those entrepreneurs knew something 20-year-olds out of Stanford don’t. They have aging parents – a lot of their ideas were about the aging community and how to take care of them. I promise you a billion-dollar business will come out of that. I look to you because every great business is about solving a problem.”
Hornik said he was inspired by the incarcerated coders he met. “They’re a bunch of folks trying to build great stuff – focused on creating, not on the past.”