Wednesday, April 12, 2017
Chris Hollod On Investing With Ashton Kutcher, Guy Oseary, and Ron Burkle
Many investors, and many startups have heard of A-Grade Investments—the investment firm created by Ashton Kutcher, Guy Oseary, and Ron Burkle—and the many investments it has made, in such huge, breakout companies as Uber, Airbnb, Spotify, Pinterest, Warby Parker, Houzz, Nest, and many others—an investment that has now grown to be worth more than $250M. Chris Hollod who is Managing Partner of A-Grade Investments, and is now one of the partners in Burkle's newest venture fund, Inevitable Ventures (www.inevitablevc.com), sat down with us to tell the story of how he went from growing up in Atlanta to becoming the right hand man for billionaire Ron Burkle, how he instantly fell in love with LA, and how his approach to investing has helped to arguably make A-Grade the most successful startup investor in LA. Hollod is now joined up with Burkle and recording artist D.A. Wallach on investments out of a new fund, Inevitable Ventures.
How did you end up here in Los Angeles doing investments?
Chris Hollod: Growing up in Atlanta, I was completely oblivious to California and more specifically LA. My only relationship with LA was through the movies, so I naively synonymized LA with the glitz and glamour of Hollywood and never really gave it a chance. Alternatively, I truly enjoyed the balance, charm, and easygoing nature of the South, so I left Atlanta to attend Vanderbilt University and then moved to Charlotte after graduation to work for Wachovia’s Investment Bank. The first three years were fantastic, but my fourth year was very tough. I tragically lost my mom to cancer, my girlfriend (who I was living with at the time) and I broke up, and then my team and I were laid-off when the market crashed in 2009. It would have been easy to simply move home to Atlanta, but instead, I forced myself to try something new. I booked a one-way ticket to LA to visit my only friend in the city and crash on his couch. As soon as I walked out of the airport and felt the sun and saw the palm trees, it was love at first sight! I immediately started to bombard various LA professionals with LinkedIn messages. All day, every day. Until I was fortunate enough to secure a job with Ron Burkle at the end of 2009. I’ve considered LA home ever since and never plan to leave.
Ron is a multi-billionaire investor here in LA. When I started, it was fascinating, because everyone else wanted to just do these huge deals, the $100M and $200M deals, where I was looking at these $100K and $200K deals. I was the youngest person at the firm, fresh to LA, super excited about everything, and I gravitated towards those smaller deals in the venture space.
Coincidentally, that was the exact same time in 2009 when I moved out, when Ashton Kutcher started first investing. That's when the light bulb went off for my boss, who said, why don't we start a venture firm to capitalize on your celebrity, and your following, and establish his celebrity as an investing paradigm. We brought in a third partner, Guy Oseary. It was all a matter of being in the right place and the right time. Ron chose me to manage those investments. That was in 2010, it's all been venture for the last seven and a half years.
I imagine the link with Ashton, Guy, and Ron really helped opened up doors for A-Grade?
Chris Hollod: For sure. Ron, I think, is the most well connected person in the country. There might be individuals who are more well connected within their respective verticals, but overarching, there is no one more connected than Ron. Guy Oseary manages top talent, is the CEO of Maverick is associated with Madonna, and there's Ashton. To be connected to those three has been incredible. It's the deal flow, the connections. That's the thing I love about venture. I love to say that venture is based on comraderie. Unlike Hollywood, which is all about sharp elbows, about "my script", "my talent", "my private equity", "my deal", venture is all about community. People welcomed us with open arms, and always wanted us to co-invest, because they didn't see us as competitive. It just worked from day one.
With that kind of profile, how do you separate the good deals from all the noise I'm sure you get?
Chris Hollod: That is the trickiest thing. I find that I am getting exponentially better. At the beginning, fresh to a deal, I had no benchmark, and no comp. Now, I am seeing up to ten deals a day, every single day, and I can now evaluate deals much more quickly. Some people think I'm cavalier or callous about it when I respond in five minutes and say, it's a pass and this isn't right for us. But, because of our deal flow and expertise in the portfolio, we know very quickly, instinctually, if it's for us. It's almost a visceral reaction. That said, we are always trying to fine tune the signal to noise ratio, because there are a lot of deals out there. We know what we're good at, which is mostly consumer facing technology. We're not going to be investing in a B2B or analytical company. With that level of discipline to our approach, it's been getting easier and easier.
When you look at a startup, what catches your eye?
Chris Hollod: The way I succinctly describe it, is it's intuitively about the disruption. If the elevator pitch is over my head, or just muddled with jargon, maybe this will be a profitable company, and maybe a great business, but it's not the billion dollar business we're looking for. If it's intuitively disruptive, and I have a visceral response to it, I then extrapolate that and think, how would the people I know react to this business? I tell people every day, we are experiencing inconveniences and pain points. No one ever has a perfect day. Until we have that perfect day, there will always be smart entrepreneurs trying to solve those inconveniences, trying to resolve all of those pain points. If someone solves a pain point I experience a couple of times a day or several times a week, that's the kind of business we're looking for. And of course, that entrepreneur has to have the passion to pursue solving that problem. There are too many entrepreneurs who just want to make money, and who will either burn out or will sell too early.
So what about LA did you fall in love with?
Chris Hollod: I love talking about LA. Growing up in Atlanta, having no involvement with LA, you always synonomize LA with Hollywood. But, LA is actually a beautiful mosaic. It runs the gamut from Rodeo Drive to Skid Row, you have the mountains and the beaches, it's an amalgamation of all these cultures and subcultures. I try to tell my friends that all the time. They think I live in Hollywood, but there's Santa Monica, Venice, Echo Park, Silverlake, there's a scene downtown, I can go for a walk in the hills, I can go take a walk on the beach, there is just so much going on. It forces you to not have a myopic view of the world. I think in some cities, which are more homogeneous, you start thinking the same as everyone else does, like your friends. In LA, you are constantly running into all kinds of different people from different walks of life.
Do you think that helps in the venture investment world?
Chris Hollod: Absolutely! I tell people, and no knock against Silicon Valley, but sometimes when you're surrounded by like minded people, you start drinking the Kool-Aid and start thinking this might work or this is bad or this is good. My best friend in LA lives downtown, and works in hospitality. My other friend is an aspiring actor. My other friend is a businessman. There's just so many people from different walks of life, and it keeps you on your toes and makes it so you don't become complacent. Back in Atlanta, I'd run into maintaining a level of complacency, which never would have pushed me out of my comfort zone. LA is the type of city where you're always being pushed out of your comfort zone.
You're quite the early adopter—taking Uber Unlimited everywhere and not driving, for one—how do you use that in your investments?
Chris Hollod: I tell everyone I live and breathe everything tech. I must have fifty different subscription services, I buy everything online, I don't drive, I use Airbnb, I try every new product I can, you name it. That's pretty cool too, being surrounded by the people I am surrounded with, all these companies want me to try out their betas, or try out this new product, send me a case of a new CPG product, and I love all of that stuff.
Finally, what advice would you give to new entrepreneurs?
Chris Hollod: One piece of advice, from a cultural perspective, is we're developing an aversion to idleness. People can no longer sit still. Entrepreneurs put so much pressure on themselves to be constantly efficient, constantly productive. However, I'd contend that your free time is potentially your most productive time. I live and breathe that every morning. I go for a two mile walk and don't do anything--I just let my mind drift, and it's an introspective moment where anything can pop into my brain. I always tell entrepreneurs, don't measure how productive you are by how many hours you've coded or how much time you've spent in meetings. Make sure you take time to let your mind wander and digest. Otherwise, you just get consumed by the vacuum.
Thanks!