The Global VC

Q&A with Christian Hernandez Managing Partner at White Star Capital

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500 Global Team

500 Global Team

PUBLISHED

2015.03.11

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Christian Hernandez has over 16 years of operating experience in technology companies, developing and scaling products and businesses internationally. Prior to co-founding White Star Capital, Christian worked at Facebook and led the international expansion of the company’s Business Development, Platform and Gaming Partnerships groups. He previously held leadership roles in the U.S. and Europe at Google and Microsoft and started his career in technology at MicroStrategy, a startup he joined prior to its 1999 IPO. Christian has worked closely with entrepreneurs and leading VCs and has been an active angel investor and advisor.  He serves on the Board of Advisors of Seedcamp and the Digital Task Force for the EVCA and is a Young Global Leader of the World Economic Forum.

Premoney Miami is around the corner (March 20th) and 500 caught up with speaker and White Star Capital Managing Partner, Christian Hernandez.

Looking back on your last fund, what are your plans for going forward? 

White Star Capital is currently investing from its first institutional fund. We started investing with our own funds under the White Star Capital brand in 2007 and our portfolio includes companies such as Betaworks, Dollar Shave Club, Summly (sold to Yahoo!), Ludia (sold to FremantleMedia) and KeyMe.

With a presence in North America and Europe, we actively seek to back ambitious entrepreneurs on both sides of the Atlantic and help them scale internationally. We have purposely built a team with direct experience founding, building and exiting businesses and work closely with our entrepreneurs on product roadmaps, go-to-market strategies and business development.

When appropriate we also help support portfolio companies to move from Europe to the US or expand from the US into Europe. As an example, Bloglovin’ started was founded in Sweden, but the team relocated to New York last year and hired seasoned media executive Joy Marcus to help continue their phenomenal growth as a platform for fashion and lifestyle content.

Our plans continue to be the same: Identify ambitious founders with the technical acumen to pull of their vision and help them with funds, our own experience and our network to launch, scale and delight millions of users on both sides of the Atlantic.

Do you think the venture capital industry today is innovative? Is there anything that needs or can be changed for us to keep momentum? 

For an industry that funds disruption and innovation, the ability for Venture Capital to radically change its current model will take some time. Part of it is due to the length of many of our funds which have a 10-year relationship with our Limited Partners. What we are seeing is a smarter use of data to discover investment opportunities sooner. Be that in-house systems or third party tools like CBInsights and Mattermark. Secondly, we are seeing firms seeking to internalize and deliver more services to their portfolio firms: From community managers that connect entrepreneurs and team members across portfolio companies, to content-driven services such as First Round’s Review, and targeted efforts to support first time entrepreneurs through internship programs or “hacker in residence” programs.

At White Star we have tried to innovate the model through both our geographic presence, which provides us with some great deal flow on both sides of the Atlantic, but also our Partnerships model through which we invest and partner with entrepreneurial platforms across different geographies. Be that Science Inc, the e-commerce and mobile studio in LA, to curated fundraising platform Alphaworks, to Seedcamp and The Family in Europe. These vertical and geographic partnerships provide us with not only deal flow but also experienced mentors to help companies come out of the gate much more ready to face the reality of the the market and their users.

Lets talk about the 2 and 20? Is that something we as an industry can move away from? 

This will require a seismic shift in not only the VC space but across the whole Private Equity asset class of which VC is a subset. LPs have allocations for PE and within those sub-allocations to VC and within those allocations (when appropriate) to Growth and early stage. As an example, many institutional investors continue to demand a hurdle rate (commitment to deliver at least certain level of annual return) from their VC investments given that it has been a longstanding requirement for large LBO and PE funds. Given the risk/reward profile of VC investments, our joint incentives should be aligned to focus on delivering 10x returns… not optimizing to ensure that we return 8%.

What are the top value-adds that VCs provide? 

Funding, in all honesty, should be secondary. I recently wrote a blog post titled Tinder Speed and 7-year itch reflecting on the disparity between the speed at which VC investment rounds happen and the relationship they are cementing. Flirting, negotiating and signing happens in weeks or months when the process is cementing a investor/founder relationship meant to last 5-7 years. I would argue that entrepreneurs should think through the relationship they are establishing with the specific partner driving the investment. How will he or she support the company in the short term, but also how will that relationship evolve and morph as the company grows. We are financial investors but also advisors, supporters, mentors, and sounding boards.

How are you building a different kind of VC firm? 

White Star Capital is our own startup. We made the conscious choice to launch a new VC firm in which we could create the team, focus and culture of that we felt could benefit our entrepreneurs. We founded the firm based on a number of tenets: First,a geographic presence that allows us identify fantastic entrepreneurs across North America and Western Europe, but also allows us to leverage our networks on both sides of the Atlantic for the benefit of our entrepreneurs. Secondly, a fund size that allows us to invest at Seed stage when appropriate but to support our entrepreneurs through subsequent rounds of funding. Thirdly, a purposely selected team that blends financial and operational experience and is heavily weighted towards people who have founded, built and exited technology businesses. This allows us to share our own experiences in scaling a team internationally, managing the sale process to a large coprorate acquirer, or the challenges of scaling a team from two to three hundred.

Finally, we firmly believe in being “good actors” in the markets in which we operate. By that I mean being active and vocal supporters of entrepreneurship in the ecosystem and with governments, mentoring companies and founders, even if we don’t invest. At the end of the day being good actors will hopefully translate to good deal flow and good partnerships with other firms.

Are there common characteristics of someone who is a successful VC? Do you have any examples of people who you think are really pushing the envelope in the industry? 

In Europe you are seeing a number of VCs spinning off into new firms. This rejuvenation, and entry of new capital, is fantastic for the industry. I could argue that the European VC landscape could be twice the size it is today and that there would still be space for new players. In the US, a fund that I would say we gained inspiration from is Greycroft. Much like our presence between London and New York, they connect NY and LA. They have consistently raised funds around the $150 million mark allowing them to continue to focus on early stage investments rather than scaling up the fund size to benefit from increased management fees. Hopefully putting this on paper will keep me honest, but that is a model I would want White Star Capital to emulate.

How has the VC business changed since you joined White Star Capital? 

I still consider myself a “newbie” in the industry having just evolved White Star from our personal investment vehicle into a VC fund, but I also hope that new perspective translates into new ways to think about supporting our entrepreneurs and the ecosystems in which we operate.

Let me ask everyone’s favorite question, are we in a bubble? 

There is a lot of focus on the fact that NASDAQ recently passed the 5,000 mark for the first time since 2000. It might be the same level but we are living in a very different era. The fundamentals behind companies going public are much stronger and the market understanding of the role technology is driving in disruption is much more dissipated and accepted. This does not mean that private-market valuations are not seeing a certain level of frothiness with a very different set of actors competing for later-stage deals. From Asian corporates to Hedge Funds and Sovereign Funds, there is a lot of new money coming into private companies and therefore allowing firms to stay private longer.

What advice would you offer to founder who is looking to raise capital for their new startup? 

Have a bold ambitious vision and emphatically share that vision with whomever will listen, and then prove to me that you have the technical chops to pull it off. Think carefully about using external advisors, especially for early stage funding, for much of the story I am backing is the founding team. Have global ambitions blended by the humbleness to surround yourself with investors, team members and advisors who can help you pull it off. And remember that your focus is to ship product and delight users.

Want to dive deeper? Get your last minute tickets to Premoney Miami HERE. (Use “V!P” code for $150 discount).

PreMoney Miami is a one-day conference, produced by 500 Startups, covering the most disruptive strategies, models, and technologies for the future of venture capital.

500 Global Team

500 Global Team