Billionaire venture capitalist Chris Sacca surprised many in the tech world on Wednesday when he announced that he was retiring from startup investing.
After a stint at the Silicon Valley office of law firm Fenwick & West and then Google, Sacca struck out on his own and founded Lowercase Capital in 2007. He built his reputation and fortune on early investments in companies like Facebook, Uber, and Twitter.
In late 2014, he was introduced to a more general audience in the “Startup” podcast (in the process of being adapted to television by Zach Braff) and then to millions more when he joined the hit show “Shark Tank” as a guest investor the next year.
Sacca, known for his goofy cowboy shirts, wrote on the Lowercase Capital blog this week that he was “hanging up the spurs” and stepping away from startup investing and “Shark Tank” to focus on his young family and other projects. He will continue to advise the companies he’s invested in but his Lowercase Capital partner Matt Mazzeo will handle the portfolio. Sacca also said he’ll be launching his own podcast and hinted at involvement in a political project that doesn’t involve running for office.
Back in 2015, Sacca told “The 4-Hour Workweek” author and tech investor Tim Ferriss in an episode of Ferriss’ podcast that his ability to spot and develop startups that would become billion-dollar companies came from nearly 20 years of experience and the counsel of veteran investors like Josh Kopelman of First Round, Tony Conrad of True Ventures, and Hans Swildens of Industry Ventures.
He noted that luck is involved and that his intuition can be off sometimes — he still regrets declining to fund Airbnb and ignoring an early email inquiry from Snapchat cofounder Bobby Murphy — but his investment philosophy made him one of the Valley’s top names in the last decade. Here are its four elements he cited.
1. Invest only if you can add value to the company.
When Sacca and his Lowercase Capital partner Matt Mazzeo decide to invest their money into a company, they are also committing themselves to be advisers to its founders. Sacca said that if he’s going to make this commitment, he doesn’t need to think that he’ll be able to see a startup through to its IPO but, he explained, “I need to know that I can have a material impact to make something more likely to succeed.”
2. Invest in a company that’s already great.
Anyone with a regular job has to work on projects that are assigned to them, whether they want to or not. Sacca said rookie investors are often so used to this mindset that they leave themselves too open to deals.
“When you get into investing, your default stance should be ‘No,’ because most deals suck,” he said. “Most deals won’t make money. Most companies will fail. And the temptation always is you see your first deal and you’re like, ‘OK, I know I can be helpful to these guys, I know I can make this s—-y thing better.’ And so your first few deals are always your worst.”
3. ‘Give yourself a chance to get rich.’
Sacca learned that it’s important to build a portfolio that allows for chances to make money from the “unicorns” (rare billion-dollar companies) and moderate successes by not spreading yourself thin, entering at a price that’s low enough, and making investments with a longterm perspective.
Sacca said that before he realized this, he once “sold a company to Amazon where I saw 3x on a $50,000 investment in a fund. By the time the fund got paid back … I had been busting my ass with that company for a couple years, and like I barely had enough money left to buy that [founder] dinner to celebrate the deal.”
4. Be proud of the deal.
Sacca said he’s unwilling to compromise on his integrity when he makes a deal, and it’s worked out for him.
“There’s stuff that I’ve passed on that I just don’t regret it at all,” he said.
Some examples he mentioned are advertising businesses that place deceptive ads on misspelled domains, subscription services that are intentionally difficult to cancel, products built on unsubstantiated claims, and social networks that utilize anonymous content.
“It seemed like a good way to make money,” Sacca said, “but I don’t have to explain to my kids that that’s how I’ve made money.”
You can listen to Sacca and Ferriss’s full, in-depth conversation on Ferriss’s site or wherever you get podcasts.