Nishat Kurwa on Monday, Mar. 17th
Erik Moore’s career in venture capital began with a hot tub.
It sounds like the ultimate Bay Area cliché, perhaps even more vividly so when you hear that the hot tub in question was destined for the downtown building once sought after by flashy former San Francisco mayor Willie Brown.
It was 1999, and Tony Hsieh, one of the building’s well-to-do tenants, 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, one called Zappos.
At the time, he told Hsieh, “I’m not sure I have ever heard of a more stupid idea than selling shoes online.” But, deciding that Hsieh’s obvious talents as an entrepreneur outweighed the apparent dead-end nature of the internet service that became Zappos (which was later acquired by Amazon for $1.2 billion) Moore made the investment that eventually provided the seed money for his venture capital fund, Base Ventures.
Serendipity helped make Erik Moore a success, which is a common tale around Silicon 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 not exactly eager to expound on the challenges of that designation.
“We shouldn’t feel special in tech,” Moore says matter-of-factly, leaning back in his chair in his quiet office, where we’re discussing the dearth of blacks in Silicon Valley not just as investors, but as startup founders and engineers.
It’s a problem that began garnering national media 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, as well as his pragmatism in addressing the Valley’s ostensible monoculture, 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 all stops along Moore’s winding path to establishing Base Ventures. The firm’s office is on a leafy treed street near the Berkeley Hills, where the sprawling, turreted Claremont Resort and Spa looms over the cozy bakeries and boutiques in the area. This is an hour’s drive from Silicon Valley, and feels remote even from the burgeoning tech epicenter only 13 miles west of here in San Francisco. Seven miles to the north is the city of Richmond, where Moore, a native Californian, grew up.
“Most people in my neighborhood went the wrong way,” Moore said of the city’s south side. When Moore left for college, crime and violence were on the uptick, and Richmond was on its way to being one of the most dangerous cities in the country. Unlike Tony Hsieh, whose childhood worm farm is part of his lore, Moore didn’t have long-standing designs on being an entrepreneur.
He started in finance in San Francisco, where he moved shortly after college (with pit stops in New York and LA). “I saw the trading floor and lost my mind,” said Moore of the first time he set foot at Goldman Sachs. It seemed like the perfect job, even if Moore didn’t necessarily have the background for it (he studied French and history at Dartmouth). A new acquaintance told him to go to business school. He picked Wharton for his MBA.
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 other entrepreneurs even as he built his career in finance.
“It’s not easy knocking on doors and asking for millions of dollars,” Moore wrote me in an email about the challenges of building a venture fund from scratch. “And actually getting it. And then what? Once you get it, how do you manage it all, and the intricacies that go along with running a venture capital fund.” He cites strategic networking as an important factor in his success. That 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 boy’s clubs that don’t tend to be populated by black men from the hood in Richmond, California. 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 that 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 have acquired significant buzz, as Social Cam had after Moore met its founder Michael Seibel, their fundraising can advance rapidly, making it difficult for smaller investors to break in. Seibel’s company only raised 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 ”rockstar investors.” But Moore had been helpful to Seibel early on: after meeting through mutual friends, Moore set up a dinner with Seibel and MC Hammer, who then became one of Social Cam’s early and influential users.
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 Andreesen Horowitz, a $2.5 billion firm.
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).
Moore has been able to enter other closely-held deals because of the connections he has to influencers in the Valley, he says. And even in his Wharton days, he was cultivating broad networks.
“Even though I was part of (Wharton’s) African American MBA Association,” he recalls, “I still spent a lot of time with my majority colleagues. And when I went on spring break, I went with eight other white guys. And guess who my LPs are today? Those same guys I went on spring break with.”
The impediments of closed networks are concerning, Moore acknowledges, but then he asks, “What are you going to do, harp on that?”
Moore doesn’t harp on it. Instead, he elaborates on some traits he thinks an investor needs to possess to become successful: a good eye for talent-spotting, and the ability to form social bonds, lest you miss out on deals because “you’re socially awkward, not cool.”
The National Venture Capital Association doesn’t tally the number of African Americans who have started their own VC firms. But the Valley entrepreneurs, tech leadership firms, and foundations that I spoke to agreed that it’s under a dozen. So, for the pioneers, there’s no shortage of professional landmines. One Moore’s particularly sensitive to is the notion that black VCs would be more inclined to fund minority-led businesses simply because of demographics, or a double bottom line.
“I don’t invest in any of these deals out of obligation. That said, a large portion of my portfolio happens to be with founders who are phenomenal – oh, and by the way, happen to be black, or female,” Moore said. “I am very much a certified, classic capitalist. I am interested in making money, not just for me, but for my limited partners in my fund.”
He sees his involvement with people of color in tech as both serving this goal, and affirming his personal convictions. Moore is an advisor to the NewMe Accelerator, which supports minority-led businesses. He’s also a regular panelist for forums and associations that address issues of diversity in the industry, and he frequently mentors young entrepreneurs of color.
And 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.
This unflinching approach is informed by Moore’s own experiences in overcoming hurdles, “and I challenge anyone to suggest I didn’t have bumps in the road,” he says firmly.
“I’m a big, really dark black guy. So there are issues with that, that people (in tech) have. I’ve had to make myself a little bit shorter, talk softer. I make sure they’re comfortable with me.”
And to those who would call those adjustments “selling out,” Moore says simply, “Guess what? I’m writing checks now. So call it what you want.”
“I’m unapologetically black.”