Larry Augustin (fmr CEO VA Linux, SugarCRM) and the magical secrets of IRS Form 990 - D.F.A. #12:
Ever wondered how to transition from being a 'typical investor' to a board member? This week's issue features an in-depth interview with a tech veteran who shares his insights, and more!
I first became familiar with SugarCRM when realtor/developer and all-around cool tech guy Fred Schoeneman told me about it in 2006. We were standing at Elmwood Realty, the real estate office co-owned by Fred’s older sister Sarah, and he told me, “Adam, there’s a CRM that’s so good, and it’s actually free!” This was only a few years after Salesforce had come out, so I could barely believe it. Today, SugarCRM has 2M+ users across 120 countries.
Nearly 20 years later, I’m friends with former CEO Larry Augustin and also co-founder Clint Oram. They’re two of the smartest guys I’ve ever met in CRM, and CRM is absolutely my favorite area. As I’ve broken into venture capital as an investor, Larry has given me much wise advice, not just on startups, and who to work with, but on the lens with which I evaluate companies. It’s one thing to have an area of specialisation. I’ve always been good at CRM, I’ve written a bunch of books about it. But, wow, working with Larry has really helped me see companies in a new light, especially software companies that help people grow their businesses at scale.
I was thinking, “Gee, one of the coolest things I can think of is a long lunch with Larry downtown Palo Alto, or long phone call with Larry” [who you should also follow on Twitter]. “I wish I could give that to all of my readers.”
Well, now, all you’ve gotta do is download the Substack app on your phone, and press play. It turns any newsletter into a podcast, so the interview below will read to you while you drink your morning coffee. I hope you dig the insights, and be on the lookout for some blog posts from Larry Augustin too. (He and I are also really big Last of Us fans too!)
1. Your first CEO role was with VA Linux, a company that has greatly influenced today's tech landscape. Could you discuss how that experience has shaped your career and what impact you believe it has had on the technology industry as a whole? [It helps if you can shape this answer for the young founders of today a bit.]
VA Linux was an incredible learning experience for me. I was naive and inexperienced. Fortunately, I had great people around me that I could learn from. At VA Linux, we had incredible investors in Sequoia Capital and great board members such as Doug Leone, Carol Bartz, and too many others to list them all here. It was a tough board with high expectations, but I learned from that, and they were great mentors to me. I tell any young founder today to build a board that will challenge and mentor them. Surrounding myself with great people is a strategy that has always served me well. Have high standards. Dive deep and understand the details. But you should feel that you're learning from the people you hire. Your job as CEO is much easier when you have great people around the company.
I'm not sure VA Linux so much influenced the tech landscape as it was influenced by it. We were one of the first companies, along with Red Hat Software, to show that Open Source was a critical concept that would forever change the commercial software world. Building a business where the software was freely available was a radical concept at the time. Today, it's hard to find software that doesn't include some Open Source components.
2. As an Angel Investor, you've invested in a variety of companies. Could you share your thought process on how you evaluate a start-up for potential investment, especially in a field like CRM or ERP, which you know really well?
There are many things I look for in a business. Great founders who have a deep passion and don't know that they can't conquer the world. Unique technology that solves a problem better, faster, and cheaper than any competitor. People who know how to be scrappy get things done quickly and with minimal resources. Those are all nice-to-haves. But there's one thing that you can't fix around a business: market size. You need to solve a big problem that people will pay you to solve. I've seen many great technologies I'd like to have but wouldn't pay for. You don't have time to convince people that they have a problem and that they need a solution to their problem. They need to feel the pain. They need to be looking for a solution. Finding a solution must be valuable to them. And there needs to be a lot of people facing the problem. Big markets are forgiving; they have room for you to make mistakes. You can't build a big company in a small market. Company building is hard. It's hard to build a small company. It's hard to build a big company. So you might as well build a big company, and you need a big market to do that.
3. You have a significant amount of experience taking on board roles in both non-profit and for-profit entities. Can you share some insight into how one transitions from being a 'typical VC' to someone who is heavily involved at the board level?
Serving on a board is a big responsibility. I've been lucky to serve with and learn from great board members.
First, do your homework. Work hard. Study. Come to board meetings prepared. Review the material beforehand so you're not wasting time coming up to speed during a board meeting. Many of the same concepts you use for due diligence also apply to a board role. Keep up to date on the company's products and customers.
Next, add value. You are there to be helpful first. Constantly be thinking about how you can help the company. Is it a customer introduction? Recruiting? Connecting the company to someone with deep expertise in an area the company needs? Coaching leadership in functional areas such as sales, marketing, product development, etc.? Be a resource. I know I'm doing my job when a CEO calls me, saying, "Larry, I need help thinking about a problem. Can I talk it through with you?" I think too many people start by thinking of the role primarily as one whose job is to question, probe, and challenge. Yes, you need to do those things. But you need to do them in the context of helping the company make good decisions.
Listen. There's a lot of deep expertise sitting around a boardroom. Listen, learn, and don't jump to conclusions. Everyone in that board room has value to bring to the table. The more you listen, the more you understand, and the better decisions you can make.
4. You've been part of the tech world since the '90s. Has there been one trend that you can say, "Yeah, I called that one," but another one that you'd say "Wow, that was a big surprise?"
Linux and Open Source are clearly at the top of the list of "Yeah, I called that." Open Source just had to happen for software to continue to develop with the speed and quality the technology world needed. Open development methods consistently produce great software.
I'm not sure I'd call it a "big surprise," but the world moved faster to hosted solutions than I expected. I remember thinking we'd see the software world split with a mix of on-premise and cloud. But cloud ate the world faster than I expected.
5. Open Source has been a significant part of your career, contributing immensely to its growth. How do you see the role of open Source evolving in the era of cloud computing and AI?
Open Source allows us to see the building blocks of an algorithmic solution to a problem. That solution is expressed in the source code, and with Open Source, we can understand, secure, fix, and extend it. AI, really neural network based machine learning, allows us to solve problems for which an algorithmic solution is untenable. That solution is defined by the training set and the resulting ML model. The training sets and ML models are the "source code" for this new generation of solutions. As with the algorithmic solutions, that "source code" will also become open and freely available for the same reasons so much infrastructure is now Open Source. We need to understand, secure, fix, and extend them. So Open Source will continue to eat the world of software, and the same open principles will apply to the world of AI.
$38.5M raised - Lead Zeppelin’s Clients
Over the next few weeks, you may see a bit more via email about Lead Zeppelin’s investment firm clients. At this point, there’s eight, and these clients have now raised a total of $38.5M.
The way it works is simple. Clients choose a plan, and then every day they receive somewhere between 1 and 2 LPs. These leads are typically LPs or family offices. The investment firms typically do a brief intake call to get to know the potential investor, and if it’s a good mutual fit, they continue the conversation.
If you have startup founders that need help with sales and fundraising, send them to SellandRaise, our startup sales acclerator.
To learn more about finding LPs for your firm, feel free to check out Lead Zeppelin’s pricing page or book an intake call.
Unraveling Family Office Connections through Non-Profit Filings
Family offices, those discreet guardians of vast fortunes, represent an intricate part of the financial landscape. Ever wondered about the relationships they foster and maintain? Let's explore the exclusive realm of the UHNW. These private firms artfully manage the wealth and investments of high-net-worth families, such as the Rockefellers, Waltons, and Kochs. With their fingers in numerous ventures, mapping their strategies can be a fascinating challenge; it's like piecing together an elegant puzzle.
So what's the big deal, right? Well, the big deal is the fog of mystery that surrounds these family offices. You want details? Good luck! The maze of connections is often hidden behind closed doors, leaving investors, competitors, and curious minds like you and me in the dark.
But wait, there's a back door, a hidden treasure map that leads to some answers. I'm talking about non-profit filings. Yes, the very documents that collect dust in boring legal archives. They're not just about charity galas and bake sales; they're goldmines of information on family office connections.
Stick with me, and we'll embark on a thrilling expedition into these uncharted territories. I'll show you how to decode the secret language of Form 990s, navigate the twisting alleys of GuideStar, and emerge with knowledge that could make even Sherlock Holmes tip his hat.
Understanding Non-Profit Filings
Non-profit filings are like the DNA of charitable organizations, detailing their mission, operations, and financial activities. They're the paperwork behind the altruism. The 501(c) organization is the rock star of the non-profit world, tax-exempt and operating solely for charitable, educational, or similar vibes.
But why should you care about these documents? Here's the twist: These filings can reveal the hidden connections, investments, and the puppet strings of family offices. Imagine finding a breadcrumb trail leading straight to Warren Buffet's investment strategies through his philanthropic endeavors.
Feeling like Indiana Jones yet? You'll need your whip and hat, and GuideStar is the treasure map. It's a digital library packed with information on non-profit organizations, including those golden Form 990s. It's like the Google of the non-profit world, only less interested in your browsing history, and there's no guy named Larry.
Buckle up! This ride's just beginning, and we're digging into places that few have dared to explore. Dive into the deep end with me. Let's make some waves!
How to Search for Family Office Connections
Step 1: Identifying Names and Entities:
Scouring the world for family office names and their high-flying associates? It's no small feat, but with some serious digging through financial publications, investment forums, and by rubbing elbows at industry events, you'll find your golden tickets. And hey, if this sounds like a marathon you don't want to run, [check out Lead Zeppelin's pricing] - we can save you 5 to 11 weeks of grunt work, helping you nail 100 LP meetings with ease.
Step 2: Using Candid and Similar Databases:
Candid, ever heard of it? Time to become BFFs with this database. It's your go-to for the lowdown on non-profit organizations tied to family offices. Here's how to wrestle with it:
- Get on over to Candid and sign up.
- Throw in a search by name, keyword, or industry, and flex those filters.
- Find your target? Click and dive into their world.
- Premium access? You bet, for those who want to get deep and dirty with financial data.
Section 3: Case Studies and Examples
If you want to understand how real life examples can guide investing strategies and LP strategies, read on. There's some wild stuff in here.
- The Philanthropic Investor: Remember when Bill Gates donated millions to various charities? By examining the Form 990s of these organizations, savvy investors uncovered insights into Gates' investment strategies and philanthropic focuses.
- The Family Office Connection: Ever wonder how the Rockefellers manage their wealth? A deep dive into Form 990s connected to their charitable trusts revealed investment patterns, asset allocations, and more.
- Failed Treasure Hunts: Not all who wander are rewarded. One analyst tried to uncover the investment secrets of a reclusive billionaire through Form 990s but found the forms too vague and outdated to be of value. If you feel like you're going down a rabbit hole, stop.
[To read the rest of this post, check out the Lead Zeppelin blog here.]