When the web hit, it was like a neutron bomb hit the Internet, meaning that it killed all the people but left the buildings standing. It was all about content and nothing about community.
Below is the audio transcript for Episode 7, lightly edited for clarity.
Hey listeners, it's Lucia. Welcome to Episode 7 of Rock The Boat.
Have you ever dreamed of becoming an entrepreneur? Or wanted to start your own thing? I think there’s something in all of us that wants to create or build something. It’s especially common today when technology has lowered the barriers to entry to starting a company. And now with HBO shows like Silicon Valley glorifying the life of a startup, being a startup founder feels like a badge of honor.
I speak with Ben Sun, a partner at a venture capital firm called Primary Venture Partners, based here in New York City. Ben focuses his investing activities mainly in consumer facing companies.
Some of his most notable investments include:
- Jet.com, which sold to Walmart in for $3.3 billion
- Slice, the pizza delivery app rumored to be the inspiration behind the Hit HBO Series’ Silicon Valley’s Season 5 premier, and
- Coupang, South Korea’s largest online retailer
Ben witnessed the early days of the Internet - and by early, we mean pre-Facebook, pre-Myspace. He takes us back to the mid-90s right when Netscape went public.
In this episode, we speak about:
- How his early days as a banker influenced his decision to launch his internet business,
- How he built the first Asian American and African American online community,
- His path to becoming a leading Venture Capitalist,
- The traits he looks for when investing in a company, and
- His advice to budding entrepreneurs
The Early Days of the Internet
Lucia: Ben shares similar traits with a number of our previous guests. Ben’s from New York and started off on a traditional career path. Ben’s parents are both entrepreneurs having run dozens of different businesses from restaurants, produce stores to printing businesses, but Ben followed in his brother’s footsteps. Ben and I met in a conference room in Flatiron where one of his portfolio companies is headquartered.
Ben: I’m Benjamin Sun, I’m a general partner of a venture capital firm here in New York called Primary Venture Partners
Lucia: You have probably one of the most fascinating stories out there where you're kind of one of those OG (Original Gangster) Asians who started different social networks.
Ben: Yeah, I was born and raised in NY, grew up in Queens. I went to school at Michigan for college. Post-college, like most college kids, I didn’t know what to do. My brother who was 7 years older actually used to do investment banking. He said, if you’re interested in business, why don’t you try banking?
Lucia: After college, Ben applied for finance jobs and got accepted to Merrill Lynch, which at the time was one of the top financial institutions in the country. They gave him a choice to work in the insurance division or the tech division and Ben chose tech due to the exciting nature of the industry.
Ben: When I joined Merrill Lynch and I went through training in the mid '90s, Netscape went public. I was like "what’s this web browser thing?" I mean it was so new and at that point I don’t think anyone was really using email.
When I first joined the tech group, the whole Internet boom started happening. We decided to pitch this one company to take public. It was going to be our first pretty high profile internet deal.
There’s a big team on it, I’m the low guy on the totem pole. We go up to Cambridge, Massachusetts. I’m carrying the presentations and we get to the office. The office was this old gutted out homeless shelter. We rang the doorbell, they let us in. They put us in this conference room where this wall unit air conditioner would start to rattle really loudly and there was a dog running under the table.
We brought 10 bankers including some serious people: the vice chairman, head of investment banking, 2 research analysts, the head of capital markets, it was kind of a big deal. The 10 of us are on one side and the CEO is 25. He had just graduated from Harvard Business School, the CTO had just graduated from MIT undergrad.
They stroll in with white t-shirts. We’re going through the presentation. At this point, the company was less than 1 year old. It had 60K in revenue and we were going through the presentation when we hit the valuation.
"We want to take you public and we think your company should be valued at $350M."
The CEO looks across the table, stares at us and says, "That’s low". At that point, I was like, I don’t know much about this internet stuff but I think I better learn fast
Lucia: Ben sensed an opportunity with the internet. While working on the deal, he overheard a theory from the CEO whose company he was trying to take public. The CEO’s theory was that prior to the web, people used the internet to connect with each other. The arrival of the web focused more on content and lost its original community aspect. Ben’s theory was that communities would migrate onto the web. That’s when the seeds for Community Connect were sown.
Creating Tribes on the Internet
Ben: Being originally from NY and being Asian American, I thought real world communities should also have a place online.
I thought of communities as race ethnicity being an affinity, creating an anchor to it. I started talking to some friends about it. We decided to work nights and weekends on the idea. We were doing that for a while, and then my 2-year analyst stint ended.
We launched Asian Avenue in 1997, completely bootstrapped. We’d asked for a bit of money from our moms and brothers and family members. None of us were getting paid. It was a really early social network.
To give people context, the term social media hadn’t been coined yet. There were only 2 or 3 digital photos on the market. We had to ask our members to mail in their photos so we could scan it in for them. It was a really different time.
We decided we needed money to buy servers. Pretty quickly the site started getting a bunch of traffic. I remember the first user on the site came on within 8 minutes of us launching. It was this 16 year old girl from Dallas. It was so weird. We were all sitting there in my apartment, the user comes up, and we started chatting with her. We were like, "What are you doing here?", and she said, "I’ve been waiting for you guys to launch".
She was just excited, she wasn’t exposed to other Asian Americans. She was really interested in joining and telling all her friends. She kept coming back and the site started getting traffic.
We would go to heavily Asian populated schools like the UC schools and get their student directories and literally find people's email addresses and email those people about Asian Avenue.
We would email them from someone named Jane Kim or John Lee because someone always knows a Jane Kim or John Lee. We’d say "Hey it’s been awhile since I graduated, I’m doing this...btw you should check out this site Asian Avenue!"
We were doing spam before spam was a thing.
Lucia: If you’re in marketing or work at a startup, you often hear the words growth hacking. It refers to a low-cost, highly effective strategy for growth. Ben and his buddies at Asian Avenue discovered their growth hack and Asian Avenue kept growing. But as the community grew, the cost of maintaining the site grew as well.
Ben: I tried to go raise money and there was no NY tech scene. I came from banking so I knew how to put together a presentation.
When people looked at the plan for Asian Avenue, a lot of them felt like it was pretty interesting. Anecdotally, there was a guy who just went to his son’s graduation at Harvard and said, "There were tons of Asians there!"
I had a plan to for us to do an African American site next and people thought it was the weirdest thing. Black people on the internet? They just never thought black people were going to be online
Lucia: Remember, this was in the late 1990s. The internet had just been invented, and it was primarily developed for scientists and the US military. It was a very different era back then.
Unable to raise money, Ben turned to the press, which actually ended up yielding some great results.
Ben: We got a bunch of pieces and the big piece was the Sunday Times piece just featuring Asian Avenue and I literally shopped this clipping around. Scanned it in and sent it to people. A friend of a friend got me to this guy who introduced me to this angel investor.
He sat down with me and after 4 hrs, he said he wanted to invest and he wanted to get his friends to invest. He invested $5 Million.
The money came in. Bob had never invested in anything Internet-related. He used to be the chair of an investment bank that used to be pretty successful.
Bob was in his early 70s, he didn’t even use email. We had to fax him everything. Why does this guy in his 70s want to invest in this company? So after the check cleared, I asked Bob, "Why did you invest in us?"
He said, "Ben, I grew up in the Bronx, I started my career as a broker". He worked there for 40 years and he became vice chair. He said,
"I base my success on being a really good people person. I’m betting on you, I’m seeing what’s happening in real world communities and you’re allowing these communities to do what they do online instead of offline."
Lucia: Turns out, Bob made a great investment . In 1998, The New York Times published an article that described Asian Avenue as "unusually successful" despite being "run out of an apartment". With all that buzz, investors started noticing.
Ben: Bob’s friend’s invested and we started our African American site, Black Planet. We had $1 million set aside for an ad budget and by the 3rd week, I said, don’t touch it. We need it for the servers because we started getting flooded with traffic.
It was all through word of mouth. People would call me up and say, "I heard your ads on Hot 97 because all the DJs joined Black Planet and they were giving shoutouts. Kanye was rapping about picking up girls on Black Planet"
Black Planet sky rocketed and started gaining a lot more traffic than Asian Avenue. At that time there were 40 million African Americans in the country versus 10 million Asian Americans.
Black planet took off, so we raised $15 million and we launched a Latino site. Then the dot com bubble burst. We weren't going to be able to raise money, dot com companies were falling by the wayside.
And I said, "Well, you know the biggest cost of these online gaming services is acquiring the customer or the users. And we already have millions of people on the site." You have people like Kanye on the site flirting with girls. But it was hard to identify if he was really single looking for dates. So we said hey, let's create a separate dating area where people can set up dating profiles and write to each other. They'd have to pay. So, we launched that in 2001. Suddenly people with credit cards were paying for subscriptions, and we became very profitable.
Lucia: Ben continued running the company for the next two years. His investors were happy and the company was growing. Then one day, he gets a call from an angel investor he didn’t know. The angel investor said he owns a company called Intermix based in L.A. He told Ben he liked what Community Connect was doing and wanted to buy it. By that point, Community Connect included the social networking sites Asian Avenue, Black Planet, and Mi Gente. Ben knew that Intermix didn’t have the best reputation and so he politely declined. Then, that same year in 2003 a little company called MySpace launched out of Intermix and the rest was history.
Ben: I was in LA and and I met with the CEO of Myspace, Russ Duval. He goes, "It's great to meet you. My partner came up with the idea of MySpace." That partner was Tom, who is everyone's friend on MySpace. He said Tom was a big Asian Avenue user.
Myspace starts hitting its peak in the mid 2000s and Facebook just launched. It was originally for college kids. Then I saw Facebook and thought Wow. Our business started flattening out and Facebook then went open. They were just doing so many things right.
I had been running the company for 10 years. We just realized it was time to sell. We sold the company in 2008, before the financial crisis luckily. I stayed on until 2009 and then I took time off, travelled the world, tried to figure out what I wanted to next
Lucia: After his successful exit and taking some time off, Ben wasn’t fully sure of what he wanted to do next. He was considering starting another company. At the same time, he was getting recruiting calls asking him to run divisions of companies or be CEO of a company. Ben wasn’t interested. It took some self reflection and introspection to come to his final conclusion.
Figuring Out What’s Next, The Signs of an Entrepreneur
Ben: I reflected on when I had the most fun. When a company is 0-20, it’s like a family. When it’s 20-50, it’s like a tribe. When it’s 50+, it becomes an organization. I had the most fun doing family and tribes. The reason why is, it's just a really different dynamic. Because everyone's in the same room, there’s no hierarchy, there’s no secrets, there’s a certain amount of energy. The energy of family and tribes. When we were doing stuff, it was like us against the world.
I left banking and decided to be an entrepreneur, not because I was driven by money. I just didn’t like the people I worked with in banking. I didn’t like the culture.
I realized my most fond memories were when I worked with great, talented people that shared common values. I wanted to build great relationships and not have an asshole culture.
I think some people do entrepreneurship for passion-market fit insomuch as your passionate about whatever the subject matter is. But then there's this notion of person-market fit, which is another side of the entrepreneurship journey. It's much more about controlling your own destiny.
For me, I wanted to get to work with the people I want to work with.
Lucia: Ben essentially distilled the two crucial elements of what he wanted to do next:
1. He cared more about controlling his destiny than a specific passion-market fit, and
2. He loved working with strong talent in the context of a family-tribe setting, that sweet growth spot when a company is between 1-50 employees
Knowing that these were the things that mattered to him, Ben started incubating business ideas. He talked to a lot of people. The idea to go into venture didn’t come immediately. He started by simply investing in really smart people he met. People like Bom Kim, the founder of Korean e-commerce giant Coupang, who last year was featured on the Forbes list of Korea’s 50 richest people.
Ben: It was so amazing, watching him grow and scale that business. He’s an incredible entrepreneur / CEO.
Lucia: When you say incredible entrepreneur / CEO, what kind of qualities are you referring to?
Ben: We ask 3 questions when choosing a CEO:
1. Would you work for that person? A great company is one that can hire great people. In Korea, everyone wants to work for Samsung. Bom was incredible at getting the talent at companies that were underappreciated.
2. Can you sell stock? Every startup has moments where they stub their toe and something happens. When you have capital, there’s much more you can work with.
3. What are the founder’s strengths?
Lucia: Ben’s referring to a 2008 study done by the University of Chicago, where they assessed 225 CEOs. The study measured the varying strengths of each CEO and how those strengths correlated with delivering financial results.
Turns out that CEOs who delivered better financial results had traits like following through on commitments, hiring A players, setting high standards, holding people accountable, and analytical skills.
Ben: If you look at the great tech CEOs, Zuckerberg, Bezos, Steve Jobs, they have this notion of not being able to fail. I have to make this successful. It could be a young first timer, or a seasoned serial entrepreneur.
Lucia: After a couple of personal investments into small companies, Ben decided to team up with his friend and fellow venture investor Brad Svrluga. They raised a $100 million fund to invest on a larger scale. They called it Primary Venture Partners, a seed-stage venture capital firm helping the founders they invest in scale and build world-class teams from the ground up. Ben talks about Primary’s investment thesis and what guides him in making investment decisions.
Ben: We don’t get too much in the weeds of the business model, because we know the business is going to change. The thing for us is the size of the market and the overall problem you’re trying to solve. If there’s a big enough market with tons of problems, that’s what we’re looking for.
VCs are different from companies that invest in a bakery. There are some businesses that are great but just won’t deliver the returns. So we take the stance of going after businesses that are big.
Words of Advice
Lucia: I asked Ben what our listeners should think about if they wanted to start their own business or enter venture capital. His advice to those who work in corporate jobs is to look within yourself, question what motivates you, and once you understand, dive right in.
Ben: I often talk to people who are really frustrated at work. I say,
Don’t be afraid to take a leap of faith and control your destiny. Most of the people I talk to are employable. What are you risking at the end of the day?
If you’re pretty miserable at work, you’ll probably find another job where you’ll be just as happy or miserable.
Lucia: What would you say to people who are really interested in VC but may not have much real world experience?
Ben: Venture is really tough because there aren’t many jobs. 4-5K jobs. The stats are it’s harder than getting into baseball and it’s a lot of work. A lot of VCs struggle.
The VC space is going to remain small. If you add too many VCs, they start funding too many bad startups and it creates a bad economy. You don’t need 5 companies starting food companies
On breaking in, you need to work at a startup. Or go the finance route in order to understand if you’re going to bet on an entrepreneur. If you’ve never been in one, it’s hard to understand.
Try to be an expert in something. When you start getting insights, you start becoming an expert. Start building a reputation. Start being known for something. When investors and operators start talking to you, everyone else is pretty smart but the people who stand out are the ones who hustle to get really good insights. If you show that, that tends to pull you over the top
Lucia: There’s no doubt that starting a company, switching jobs, or making a change is really hard. You’re probably going to fail a couple times. You’ll probably need a couple of tries before you find your balance. Entrepreneurship isn’t for everyone, neither is venture capital. The important thing is to play to your strengths and always ask yourself, what’s my person-market-fit?