• Big Data Hasn’t Hit CEO Searches But It’s Coming, Says Jon Holman

    people-pie-chart“People analytics,” applying predictive analytics to people’s careers, is here to stay. Perhaps the most recent indicator is LinkedIn’s brand-new acquisition of venture-backed Bright for $120 million — its biggest acquisition to date.

    Bright uses machine-learning algorithms to recommend particular roles to job seekers. But plenty of other companies have sprung up with formulas to help with the hiring process. Evolv, a San Francisco startup, uses data science to advise companies on hiring and managing hourly workers. Knack, in Palo Alto, Ca., uses computer games to test cognitive skills, working memory, and risk aversion. And San Francisco-based Gildhelps companies find software engineers.

    Jon Holman, a renowned recruiter who has been placing VCs and CEOs at Silicon Valley startups for more than 30 years, thinks big data will eventually impact CEO searches, as well. (“Hopefully, I’ll be retired by then,” jokes Holman.) We talked Friday; our chat has been edited for length.

    What’s one interesting example of how companies are using this science?

    Take Marriott, the big hotel chain. It has a game that it uses, sort of like “FarmVille,” to hire kitchen managers. They have hundreds, if not thousands, of [these employees], so they’re trying to predict whether someone will be good at the job through this game, which requires them to keep six things in their head at the same time and moves faster as it progresses.

    It seems like most startups using analytics or gamification are still targeting hourly workers. Is that true?

    For now, these startups are largely peddling their technologies to companies like Walmart that are looking to reduce turnover by 1 percent, which is a huge cost savings. But that’s changing. More [companies] will say, “Geez, that worked so well here, let’s start to apply it to students in management training programs.” Then, “Let’s try this with mid-level executives and product managers and accounting managers and sales executives.” And it will work its way up the food chain. It’s hard to imagine that it won’t happen.

    Will it reach the corner office?

    I think so. It hasn’t come to CEO searches yet because the numbers aren’t big enough. No one is hiring lots of CEOs, so there’s no easy way to gather the right kind of data.

    What would be a good starting point for a startup willing to try?

    Well, when it comes to hiring CEOs, it all comes down to reference checks. No one has interviewed more senior execs than I have, and it’s impossible to know based on an interview if someone is honest, if they work hard, if they get along with other people. Any senior exec knows how to answer questions about their collaborative style. In fact, 98 percent of the people I interview make perfectly credible presentations.

    Ultimately, you get the data you need by talking with the people they’ve worked with – not just the names that they give you but four or five others they didn’t. And you do that because most people will be 10 percent more positive about the person than they really feel, and they probably won’t tell you if the person is an alcoholic or has harassed someone in the workplace because they know that person won’t be hired.

    Is there a way to institutionalize the types of questions you ask?

    I’m not sure how to incorporate it into a software system, but the secret to reference checking is not to let people get away with generalizations. You’ll hear of someone, “Jon was really nice to work with.” You then have to ask that person: “How many bosses have you had?” If they’ve had 11, you say, “Obviously, you’ve liked some more than others. Was Jon the best boss you’ve ever worked for and if not, what differentiates him from the best boss?”

    You force [the references] to do forced ranking, to come up with something that’s less good about someone they thought highly of. You’re forcing them into conversations about negatives. That’s the secret to reference checks.

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  • Another Niche E-Commerce Company, Jack Erwin, Takes Off

    erwinVCs must be hearing a lot of pitches from companies that want to be the next Warby Parker, the chic discount online eyeglass vendor, whether it be high-tech wine gadgets, fitted shirts, or dress shoes for men.

    If the market is getting saturated with these new brands, you wouldn’t know it. In fact, this morning, another new shoe company called Jack Erwin is announcing that it has raised $2 million in Series A funding led by Crosslink Capital, with participation by Shasta Ventures and Menlo Ventures. Yesterday, to learn more, I reached Lane Gerson, one of the founders of the six-person company, at the startup’s Brooklyn-based offices. Our chat has been edited for length.

    You’ve worked as a CFO and a controller. Did you know anything about retail? And why shoes?

    My friend and cofounder [Ariel Nelson] was shopping for shoes for a wedding and just wanted dress shoes, and they were all either too [fussy] or too expensive. We wondered if we could find someone to help us make a pair of shoes for $100 that we could then sell for $200, and we spent three months talking with everyone we knew, and each was a dead end. As it happens, Ariel went to a two-seat barber and wound up sitting next to a [product manager of footwear] at Ralph Lauren, who was dealing with buyers and suppliers. We all went for drinks a few weeks later. That was August 2012; he just came on full-time in January.

    You have five core shoes in a few different colors. Where are they being made?

    In Portugal, at a third-generation factory. We’d talked with factories in Brazil and Portugal and received a bunch of samples and this one had the best quality leather shoes. So we worked with a designer, they sent us samples, we corrected them, and we placed our first [purchase order] in May 2013.

    You make it sound so easy. Where are the shoes shipped?

    They’re warehoused in a third-party logistics center in Brooklyn, less than three miles from our office.

    What’s your return policy?

    Free shipping, free returns. We want people to try them on and then hopefully they’ll enjoy and keep them.

    What percentage of your customers return the shoes?

    About 25 percent, but the data is inconclusive right now. We launched the company publicly in October and we’ve had tremendous demand — so much so that we’ve sold through or initial order and are left with broken sizes. So people are buying sizes that aren’t the right size, and they want exchanges that we don’t have. We raised the [venture] money almost purely to buy inventory.

    Is that supply-demand balance hard to manage? What’s been the biggest surprise so far?

    It’s all been really positive actually. We’ve learned there’s an appetite for people to buy new product and I think people like a new story and are wiling to give us a try. And if you can give them a product that meets their expectations and you’re responsive to them, you meet great people. We’re discovering that just being nice goes a long way.

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  • An Invite-Only Social Network Turns to Crowdfunding

    Erik_Wachtmeister.SquarecropYou may remember Erik Wachtmeister from his days at ASmallWorld, the exclusive, invitation-only social network community that he founded with his wife in 2004. The son of an ambassador and a countess, the aristocratic Wachtmeister disappeared from view after selling a majority stake in the business to movie mogul Harvey Weinstein, who elbowed Wachtmeister aside, tanked the business, and later sold it to a Nestlé heir, who has recently run into troubles of his own.

    Now Wachtmeister is back and taking another shot at the genre with his newest venture, Best of All Worlds, an 18-month-old, invitation-only social network that’s even harder to join. It features a new wrinkle, though: starting next week, accredited investors will be able to buy their way into the platform via a crowdfunding campaign. “It’s a way for us to widen our base of investors, stakeholders and global ambassadors of the brand,” says Wachtmeister. We spoke yesterday morning; our conversation has been lightly edited for length.

    We talked about Best of All Worlds in July 2012, when it was set to launch. What’s been happening since?

    It’s been in private beta. We launched it with 35,000 people, a relatively small group in global terms. And we’ve since been evaluating how people use it, what features they most like, whether the user interface is intuitive or not and making adjustments.

    Why did you decide to form another invitation-only social network?

    Not so much to keep it exclusive but to maintain an intimate space where people can network more openly. You can’t just walk up to someone at an airport, but if you’re in a private venue, the social rules are different; it’s more acceptable to walk up to someone.

    How does the admittance process work?

    It’s very democratic. Members decide who can be invited, but not everyone gets invitation rights, so there’s an algorithm that [decides how many invitations are allotted those with invitation privileges]. It’s to prime it and hopefully ensure that it grows in the right direction. We don’t want an overwhelming amount of students, for example. We want a good mix geographically, professionally, age-wise.

    Some might interpret this as yet another way for the “1 percent” to avoid everyone else.

    Not at all. It’s very simple. All we’re doing is creating what exists in real life online. People don’t necessarily want to pass out their business cards at Grand Central Station; that’s not normal.

    We want to grow our community in an orderly fashion, where you’re starting with people who have a lot of affinity for each other and know the same people and have similar appreciations for what’s around them. Our goal is to have an eclectic mix of people from all over the world, from all kinds of backgrounds, but there should be a certain commonality of interest.

    You’re turning to crowd-funding. Will these investors who may well be strangers to your other members be able to access the site?

    Anyone who invests will of course be able to become a member. At a very minimum, investors should be able to able to find their way around the site.

    Why do it?

    We see it as complementing our fundraising strategy with giving our members and other accredited investors the opportunity to “take a bet” on a private company.

    Which crowdfunding platform are you using and what’s the minimum investment?

    London-based crowdcube.com is doing the deal. The minimum size is $1,000, but we’re limiting the number of investors to 200. Our goal is to raise around $500,000.

    Are you also talking to VCs?

    We’re very open to it, though VCs tend to want to see that hockey stick [growth] being realized already – they want huge traction – and we’re not quite there yet.

    What makes you think you can compete with Facebook?

    I think people are sick of Facebook. They use it like a directory, to look up people, and if they’re bored, they’ll look to see what people did yesterday. It’s for vanity and self-expression. We’re more a utility.

    Once we have critical mass, for example, we’ll create verticals for groups of people who share the same passions. Facebook Groups are great if you’re organizing something like a bachelor party but not if you want to hook up with people with a strong passion or knowledge in a given area. Facebook has several million of these groups, with an average size of 20 members; our goal is to have a few dozen “worlds” with tens of thousands of people in each world. It’s a completely different concept.

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  • The Scoop on Swell, a Pandora for News Radio

    SwellIt’s hard to find an overlooked niche, but Palo Alto-based Concept.io may have found one with Swell, a seven-month-old smartphone app focused on streaming personalized news radio.

    Unlike competitors whose users choose what they want to hear, Swell is a discovery service that learns users’ listening preferences over time and pushes them content they’re liable to enjoy. Don’t like what’s streaming? Swipe, it’s on to the next story.

    The app is easy, even delightful, particularly for fans of NPR, the BBC or Comedy Channel — just three of Swell’s growing number of content partners.

    The question is whether young app users will embrace it in large enough numbers. Pew Research Center’s recent surveys find that while nearly 60 percent of Baby Boomers say they enjoy following the news “a lot,” the number drops to 45 percent of Gen Xers and just 29 percent of Millennials, a generational difference that has remained virtually unchanged over years of surveys. (When it comes to news radio, specifically, 38 percent of Gen-Xers and 27 percent of Millennials tell Pew they’ve consumed news radio as recently as “yesterday.”)

    To learn more about who’s using the app and when and what’s next, I caught up with Concept.io founder and CEO Ram Ramkumar, whose last company, SnapTell, sold to Amazon in 2009. Our chat has been edited for length.

    How did the idea of Swell come about?

    We really wanted to build a product that people would use every day and that would really engage users and make use of their time when they’re driving or exercising – time that’s underutilized, generally.

    Much of product’s allure is that you just turn it on, like the music discovery service Pandora. Broadly speaking, how does the personalization technology work?

    It’s complicated. Let’s say you’re interested in startups, and perhaps you love long content in the afternoon and shorter content in the morning. Well, we have to manage the freshness of the content, which is unique to the spoken word. If you think about it, music is relatively evergreen, but with news or stories, you don’t want to hear something that’s stale, so it’s a difficult problem. We’re shifting through thousands of individual tracks and finding the ones that you most want.

    Are there any humans involved?

    We have an audio curator who comes from the radio world and curates the content that goes into Swell at a program level. After that, an algorithm kicks in your preferences, so someone who loves the “Freakanomics Radio” show might like an Economist podcast. Then, the most powerful element comes into play, which is the community network effect, where what Swell’s hundreds of thousands of users love gets automatically promoted — and what they don’t love is less likely to show up in your queue.

    So Swell has hundreds of thousands of users?

    Yes, hundreds of thousands and not millions yet, but it’s growing gradually. And we have really strong engagement. We see more than 40 minutes of listening per day and over four hours of listening per week. There’s a big uptick in the morning and also in the afternoon, when people are commuting.

    And eventually, you’ll insert ads into the stream, a la Pandora?

    Right. Ads and subscriptions are the way to go, though there are also special things you can do, like offering users access to their entire listening histories so they can search through what they’ve listened to in the past. So we can do premium features along with advertising as it gets to critical mass. What we’re working on next is adding identity and a social layer to the product, so you can sign into Swell and see what your friends are listening to and share.

    You raised $5.5 million from Google Ventures and others last summer. Is that expected to last you a couple of years? Are you interested in raising more yet?

    We’ve had interest and continue to have interest. Our A round was preemptive – someone called and wanted to invest — and there’s a possibility that that will happen again. But we’re not looking to raise money.

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  • For This Startup, the Hunt Is On

    The HuntThe hunt for new funding is on for community-driven shopping startup The Hunt, whose users seek out items like clothing with the help of other users.

    The concept was inspired by the personal experience of founder and CEO Tim Weingarten, a former venture capitalist with Worldview Technology Partners. As Weingarten tells it, a few years ago, while surfing around Tumblr, he “happened to see pictures of a bunch of guys at a wedding wearing a really slick tux with a narrow cut and peaked lapels. I wanted one, but if you start looking for a tux, a billion options come up. It struck me that there was no good way to solve this problem.”

    Investors apparently agreed it was a pain point in the market. In November, the now 17-person company closed on $5.5 million in funding from Javelin Partners, along with Ashton Kutcher, Tyra Banks, and other celebrity investors. Now, as Weingarten resumes talks with VCs — he says the company has “plenty of cash,” citing its “momentum” as a reason to reengage with investors – the question is whether The Hunt is growing fast enough.

    Weingarten says that one million people have registered since the service launched last January and that 300,000 of them – 90 percent of them women between the ages of 15 and 30—actively use it.

    Unlike platforms such as Pinterest, users’ “hunts” also demonstrate a stronger intent to purchase, says Weingarten, who compares the conversion rates to those of Google’s search results. “We don’t have to worry about proxies or guessing your intent based on what pages you’ve visited; we know what you want to buy, which puts us in a strong position.”

    Indeed, Weingarten says the startup has already been approached by a number of brands looking to pay for greater visibility, with some, including clothiers Lulu’s and 22Singer.com, already actively jumping in to answer users’ searches. (Says Weingarten, “We encourage brands to solve hunts, though I let them know not to spam our users. I don’t want them posting 10 products in response to a user who’s looking for a certain kind of dress with stripes.”)

    Naturally, the Hunt has plenty of challenges, including competition from other question-and-answer platforms. Just last week, Twitter cofounder Biz Stone launched a social search app called Jelly that invites users to ask their friends for help in finding information. The Hunt’s young demographic, while attractive to brands and advertisers, also tends to be fickle.

    Perhaps most importantly, it still hasn’t established the kind of critical mass that is, in itself, a kind of defensibility.

    Still, attempting from the outset to build a bridge between photo sharing and e-commerce is very likely refreshing to some VCs. Knowing that a former investor is at the helm may also hold special appeal.

    I ask Weingarten whether The Hunt is spending on marketing, for example, and he tells me that it’s “much more interesting to have less growth and for that growth to be purely organic. As an investor,” he adds, “if I thought that a startup was buying a bunch of ads, I’d look at it differently.”

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  • For Nest Investor Shasta Ventures, Persistence Pays

    coneybeerGoogle’s plans to acquire the smart home appliance maker Nest Labs for $3.2 billion in cash should translate into a tidy return for the half dozen firms that invested $80 million in the three-year-old company. Kleiner Perkins may have the most reason to kick up its heels, having led Nest’s Series A round in early 2011. (The deal, rumored to give Kleiner a 20x gross return, might well convince its limited partners that Kleiner has recovered its mojo.)

    But the deal is also a personal victory for venture capitalist Rob Coneybeer of 10-year-old Shasta Ventures, who was introduced to Nest founder Tony Fadell eight years ago by fellow VC Stewart Alsop. (“He thought we’d like each other,” explains Coneybeer, who is a mechanical engineer by training and shares Fadell’s love of gadgets.)

    Once acquainted with Fadell, Coneybeer spent as much time with him as he could in the hope that one day they could work together. Last night, I talked with a clearly elated Coneybeer about his relationship with Fadell and his subsequent investment in Nest; what follows is a lightly edited transcript.

    Where does your story with Fadell start?

    I’ve been interested in mobile and hardware and investing in the Internet of things for a while, and when Tony left Apple, I kept in touch with him as he was investigating different ideas, including devices that use batteries to get recharged and what happens to those devices if you connect them to the Internet. So he’d been thinking about things, and we’d get together every two to four weeks to talk.

    When did it turn into more than that?

    Tony had gotten to know myself and some of my partners, and he’d developed relationships with a couple of different firms … When Tony became difficult to reach, I realized he might be starting something, and I basically pursued him and said, “I’d love to find out what you’re up to,” and I offered to sign an NDA. And he said, “You’d do that?” And I said, “Yeah, I never sign NDAs, but to learn what you’re up to, I would, absolutely.” A week or two later, he walked me through what he was up to, and I met the core team he’d pulled together.

    He went with us and with Kleiner [for Nest’s A round]. He’d known [Kleiner partner] Randy [Komisar] for a long time, and Randy has great experience in bringing consumer electronics to market [including as a founding director at Tivo].

    What was Shasta’s value-add to the company?

    It was a good personal fit. And having built [Shasta] around consumer and expertise around hardware companies, we were able to make great introductions, including to Best Buy and Lowe’s and other channel partners. We also helped with recruiting, in closing key candidates. Beyond that, it’s hard to provide a laundry list; Nest has such an accomplished team.

    Kleiner led the Series A round, but you say Shasta was a “significant participant.” Can you talk about what kind of return you’ll see from Nest’s sale? TechCrunch sources say it will return “almost all” of your second, $250 million fund, closed in 2008.

    I can only tell you that [the return will be] very, very, significant. I’m sorry I can’t be more specific, but you can write “very” three times.

    Is Nest your biggest exit personally? I recall that before Shasta, as a partner at New Enterprise Associates, you led an investment in the fiber optic switching company Xros, acquired by Nortel.

    That was $3.25 billion, so this is my second three-billion-dollar outcome. It does feel really good to build something from scratch [Shasta] and work really hard for 10 years to build a brand and to [be a part of] a product and outcome that people are really excited about. It feels like things are finally coming together.

    Are you even a teeny bit disappointed? I know you thought Nest could become a formidable standalone hardware business.

    I’ll just say that Google is acquiring the best hardware team on the planet. In terms of designing high-quality, durable, consumer hardware, you can’t name a better team.

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  • The Origins of Netscape, as Tweeted by Marc Andreessen

    marc-andreessenAs everyone now knows, Marc Andreessen apparently made it a New Year’s resolution to begin tweeting, just as some of the platform’s most prolific users are deciding to dial it down. That’s good news for the roughly 42,000 of us who are following him, given that he usually has plenty of interesting observations to make.

    Sunday afternoon, for example, Andreessen entered into a Twitter conversation with 21-year-old Marcos Villacampa, a self-described “startup addict” in Spain, who tweeted, “It is really, really difficult to find the *real* story of events in the past which involved winners and losers.” Villacampa then tweeted of Andreessen specifically that Mosaic “wasn’t exactly a one-man job…”

    Here’s the history lesson that Andreessen offered Villacampa in turn. (We feel vaguely trollish publishing it, but because it’s useful background, and conversations are so quickly lost on Twitter, we thought we should seize the opportunity to capture the exchange.)

     

     

     

     

     

     

     

     

     

     

     

    Connie

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  • Pricing in Deception

    stretching the truthYesterday, TechCrunch reported that a 2.5-year-old Boston-based social shopping startup, Kickscout, is being acquired by another shopping app, Mobee, for an undisclosed “combination of cash and stock.” TechCrunch wrote that as part of the arrangement, Kickscout’s founder (and sole employee), Michael Sheeley, is joining Mobee as its chief product officer.

    Most likely, the story would have gone unnoticed, but Boston Globe columnist Scott Kirsner tweeted soon after the piece was published, “Sorry, TechCrunch, this story is actually: Boston-based Mobee hired a smart guy whose startup didn’t take off.” Kirsner continued on Twitter, “If your app is being shut down and you are going to work for someone else’s company, that means you got HIRED, not ACQUIRED.” Kirsner – who seems to have a healthy sense of humor — then added, “Deal was a ‘combination of cash & stock’ – yeah, like [taxi] fare to Mobee’s office and some stock options.”

    Assuming that Kirsner is right – that Sheeley was just plucked from a bad situation – it’s easy to understand his aggravation. Silicon Valley’s compulsively sunny, rah-rah spirit can be nauseating. Talk to an entrepreneur or VC, and everything is proceeding as planned.

    Still, it’s hard to see the downside in allowing someone to save face in this situation or the many others we’ve seen in recent years, where struggling founders have been swooped up by another company that’s looking to lock in their talent for a while. I like that a person who has tried and failed can receive a fresh set of cards instead of shutting down their business with nothing but debt (which, by the way, still happens with the vast majority of startups).

    As for the argument that it’s unhealthy to portray face-saving maneuvers as successes, I’d argue that by now, we’re all acclimated to the culture of spin in which we live. We’ve basically been in an arms race of good news since TechCrunch was founded in 2005.

    Anyone following the industry is already pricing in some deception, so why bother getting upset about it?

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  • In Newest Digital Health Deal, Zephyr Health Lands $15 Million

    Suggested Logo-ZHAs more doctors and health-related companies digitize their patient records, research, and data from clinical trials, venture-backed entrepreneurs have been rushing in to help them.

    Now Zephyr Health, a 2.5-year-old, San Francisco-based startup is promising to bring that digitally formatted — but disconnected — data together in ways that help healthcare providers more easily and cost-effectively identify and target treatments.

    Zephyr has already convinced investors of its merits. This morning, the company is announcing a $15 million Series B round from Kleiner Perkins Caufield & Byers and Jafco Ventures — funding that has drawn Kleiner’s Brook Byers and Jafco’s Joe Horowitz to its board. Now Zephyr, which has raised $16 million altogether, just has to get companies to sign up.

    It already counts five of the world’s largest pharmaceuticals and device companies as customers, says founder and CEO William King, who spent much of his earlier career in sales development at Johnson & Johnson. We chatted yesterday afternoon. Our conversation has been edited for length.

    Why start the company?

    I’d spent a spent considerable amount of my career at Johnson & Johnson, focused entirely on life sciences, and what we saw there and still see is a huge amount of data that should be talking but isn’t. Consider an MRI image that could be talking with a blood pressure result, but instead those pieces of data are disconnected. We thought we could unify the data that isn’t talking and build a compelling visual front end for the analytics that’s specifically tailored for the life sciences environment.

    Is the data you’re parsing public or private or both?

    It’s data from the public domain — clinical trials, patient demographics, sales, interactions, medical publications — as well as proprietary data from our clients.

    You have 40 employees. What are their roles?

    We’re overwhelmingly an engineering [team, one that is focused on] data solutions and machine-based learning algorithms and ensuring that we can bring data together rapidly, accurately, and as inexpensively as possible. So we also have algorithm experts, data scientists, data researchers, and a few folks who are dedicated to client services and account management.

    You mentioned a compelling visual front end for your software-as-a-service business. What are end users seeing when they use Zephyr?

    We offer a platform as well as different data offerings and different applications on the front end. Just like on your smart phone, different users will purchase different apps for different reasons. Our Illuminate app, for example, is used by people who are looking at clinical trial information. Cocktail, an app that helps you mix the different data types together and strain them, might be used by a marketing director.

    Our platform is designed for a broad spectrum of people, including people who aren’t accustomed to using analytical software.

    What’s a recent example of how you’ve helped a customer?

    Over the holiday, we heard from one customer who’d been trying to select a clinical trial site. Recruiting enough patients for a clinical trial is a big challenge for a whole variety of reasons. But we were able to take patient demographic information, [geographic] information, funding information and much more and combine it to create a refined view [that had helped the client make a decision]. As a result, this client’s recruiting was considerably ahead of schedule, which is meaningful because recruiting is a big cost and requires a lot of time and that has an impact on many other things.

    What’s your biggest challenge?

    Our biggest challenge centers on “big data” as a term. There’s a lot of big data competition, meaning lots use the phrase. One of the big challenges that we try and overcome is clearly defining what we mean by it and how it lends value to a person’s business.

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  • Nick Hanauer on Why VCs Should Fight for a Higher Minimum Wage

    Nick HanauerFor at least the last six months, Seattle-based venture capitalist Nick Hanauer has been arguing for a higher minimum wage and citing stats that underscore the myriad ways that growing income inequality will bring everyone down.

    Hanauer was one of Amazon’s first investors and cofounded the ad tech company aQuantive, which sold to Microsoft for $6.4 billion in 2007. He’s also the chairman of Pacific Coast Feather Company, a privately held family business that produces down pillows and bedding for clients such as Sealy and Eddie Bauer.

    Although Hanauer clearly isn’t living paycheck to paycheck, he has turned his sights on raising the minimum wage to $15 and is pointedly criticizing Bay Area venture capitalists for their inaction, noting that if they don’t start doing more to stem the “rising inequality in our society,” they are “idiots.”

    “VCs have a huge stake in a thriving middle class,” Hanauer told me over the phone yesterday afternoon. “If workers don’t have enough money, they can’t buy from our companies.” Leading the charge for higher wages is an “easy lift” for technology companies and VCs “because we get none of the pain and all of the benefit. If you’re running or funding a venture-backed company, you aren’t paying anyone a minimum wage. On the other hand, you’re hoping to sell your products to everybody.”

    I raise the oft-cited argument that many Bay Area companies are making it easier and cheaper to do things, and I can practically see Hanauer rolling his eyes. “There’s this Valley-based libertarian idea that as long as we’re businesspeople, we’re doing enough for our community — which is self-aggrandizing and just utter horseshit,” he says.

    Asked for concrete advice on how VCs can take part in the minimum wage debate, Hanauer suggests that the Bay Area look north. In November, voters in the city of SeaTac, Washington, narrowly approved a labor-backed measure that would require a $15 minimum wage for approximately 6,300 workers in the airport, hotel, and rental car industries. Hanauer is himself now part of a working group organized by incoming Seattle mayor Ed Murray to implement a $15 minimum wage in Seattle, and “I think it will happen,” Hanauer says.

    In California, Hanauer says investors should also throw their support behind Ron Unz, publisher of the libertarian-leaning magazine The American Conservative, who has poured his own money into a ballot measure to increase the minimum wage in California to $10 an hour in 2015 and $12 in 2016. The initiative, which will be voted on in November, would make California’s minimum wage the highest in the nation. (California’s current minimum wage is $8.)

    “There are a lot of fine people in Silicon Valley,” says Hanauer, “but there’s this really creepy thing happening down there where people are making stratospheric amounts of money and leaving everyone else behind. We need to ensure the economy enfranchises as many people as possible, and we need more civic leadership coming out of the venture community.”

    If it takes seeing low-wage workers as potential customers, so be it. “A rising tide lifts all boats,” he says.

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