Charles Hudson: Managing Partner at Precursor Ventures

Charles Hudson is the Managing Partner and Founder of Precursor Ventures, an early­ stage venture capital firm focused on investing in the first institutional round of investment for the most promising software and hardware companies. Under his leadership, Precursor Ventures has raised four funds and has over $200 million under management. He has invested in more than 400 companies and has supported more than 450 founders, including the teams behind Bobbie Baby, Carrot, Incredible Health, Juniper Square, Modern Health, Pair Eyewear,  Rad AI, and The Athletic (sold to the NY Times for $525 million in 2022).

Transcript

Pablo Castro: 0:01

Welcome to the new Light Ventures podcast, the definitive guide to navigate the venture capital landscape. I'm your host, Pablo Castro, and every week we dive deep into stories, strategies and successes of emerging VC managers whether they're navigating their first fund in midst of growing their second or successfully running their third. In this podcast, you'll gain exclusive insights from the front lines of fundraising management and innovation whether you're an aspiring manager, an experienced investor, or just curious of the world of Venture Capital. You come to the right place. Join us as we explore the trials and trams of those shaping the future of investment from in depth interviews with industry leaders to practical tips for our own venture journey. We're here to provide you with knowledge and inspiration. You need to succeed, so subscribe now, share your thoughts and let's embark on this journey together. Welcome to the new Light Ventures podcast, where Capital meets innovation. Let's dive in. Hi everyone. Welcome to the new Light Ventures podcast. Today we have an amazing podcast with an amazing guest i have been looking forward to having for a while already. Our guest today is Charles Hudson, managing partner and founder of Precursor Ventures, an early stage venture capital firm focused on investing in the first institutional round of investment for the most promising software and hardware companies. So, Charles, welcome to the show.

Charles Hudson: 1:20

Thank you for having me, Charles.

Pablo Castro: 1:23

I've been really excited to have you on the show for a while i know your background, but maybe some people in our community don't. ¿So, if you could just share with us a little bit about your background, how did you get into venture and how did you start precursor?

Charles Hudson: 1:38

Sure.

Pablo Castro: 1:39

Wow.

Charles Hudson: 1:39

I'll try to sequence this in a somewhat logical way. So i started my career going all the way at the beginning at Inkutel, the CIA's venture capital group. And i found my way there through kind of fortuitous circumstances. I was interning at a tech company. I didn't know anything about Venture Capital. I thought I was going to go into public equities after college, or maybe investment banking, or maybe even consulting. But i didn't even know what Venture Capital was. And i met a woman and her husband ran a Venture Capital Fund. And he hired me on as analyst [sos/eos] and that was my break into Venture Capital at twenty two years old. Did it for a few years, really enjoyed it, but realized towards the end of my time there were just a lot of insights about running companies that I didn't have. And i had the fortune of being able to be a board observer and be in the room and hear these conversations. I was like the people that are making these decisions about what to do with the company. They just have way more experience than i do. And like without that experience, there's probably a cap on how effective I can be. So i went back to business school thinking I was going to become an entrepreneur and i left business school and tried my hand at a number of Jobs product management, product marketing, Biz Dev. And sort of realized that like Biz Dev partnership stuff was where I was most interested ÿousand and where I found the greatest benefits. And so i ended up working at a couple of companies in Biz dev roles. Started two companies of my own. And then around twenty ten decided i wanted to get back into venture. And so i joined a firm called Uncork Capital. It was then called Soft Tech. It was at the time a one partner firm. And i just thought my partner Jeff was onto something super smart guy had been really successful before i joined him. And when I got there, i was like, this is pretty awesome. I like this seed stage investing. It's really fun. When i was there, we had a very little fund. They've now raised quite a bit of capital. They have a much larger fund. And what I realized, you know, Pablo, sometimes you do this and you have the light bulb moment. And i was like, Oh, for me, it was I realized I like this style of investing. That's kind of like being angel with a big checkbook. I like being able to work with people at this really early stage before they have a product, before they figured out a ton of stuff. That's where I get the most joy. And that's where I think I actually make the best investment decisions. So i should find a way to be in a fund. That's focused on that sort of zero to one pre product market fit style of investing. That's what I set out to do. And i don't know, after a few years at uncork, i was like, i think the direction here is going to be to get larger, to become more institutional. And if we do that, we're probably going to do less of this zero to one style product investing that I like we're going to probably do more big seed. And i was like, i think I want to do more of the zero to one. And i have to go find an environment where I can do that. And i didn't feel like there were a lot of great environments to do that. So i decided that I would start my own fund with a really simple premise. ¿I was like, look the founders who are repeat founders? They're pretty well covered. People are looking out for those people. If you went to Stanford or Harvard, there's lots of people looking for you. If you're a YC grad, there's people looking for you. If you were an early employee at one of these big companies. It's probably fine if you weren't one of those people. So if you weren't somebody with these, like, known, pedigree signals and you didn't have traction, i just felt like there wasn't really anybody looking out for you. There wasn't a venture firm who's like come pitch us like you're what we're looking for. And i was like. Well, that's crazy. I've met a ton of people with that background who've been very successful. ŸOusand i want to build a venture fund. That's very, very open to working with folks like that.

Pablo Castro: 5:54

Wow. And of course, i've heard your stories various times. ¿And just so our audience can see how precursor has evolved what fund are you on right now? And size of the fund.

Charles Hudson: 6:11

Yeah. So we're just making the last few investments out of our fourth fund. It's an eighty five million dollars fund. I mean, the trajectory is interesting. So i started working on precursor in twenty fourteen. Our first fund was fifteen million dollars. Our second fund was thirty one million dollars. The third fund was forty nine. The fourth one was eighty five. And you know, we'll see, we'll probably raise another one at some point. It'll probably be around the same size. I mean, look at the end of the day, our strategy is not that elastic. I think, if you're going to write, we write like two hundred and fifty to five hundred K checks into early stage. Small rounds. There's only so much of that style of investing you can do. Yeah, at some point like a five hundred K check. Even if you get one hundred x on your money, it doesn't move the needle for the fund.

Pablo Castro: 7:06

No one hundred percent. And i think one of the things that I found super surprising is you have mentioned in the past that the first fund that you raised in Precursor was harder than you expected because you had come from a fund previously. That is considered successful. That has been doing well, you've had great experience as a manager and Stanford GSB grad. You have like all the right credentials, all the right checks. ¿What was so hard about this first one? ¿What are things that happened that you did not expect?

Charles Hudson: 7:43

Yeah, boy. I mean, i could make this the whole conversation, so i'll try to keep it focused. Bubble. So a couple things one is. And i've come to understand this in a way that I didn't at the time. I think a lot of LP's understand you in the context of the fund where you work. ŸOusand so when I was at Uncork, a lot of them were like you have been successful at Unkork. We understand that. But how do we know whether the success you've had at Uncork will translate to your own firm. ¿What if there was something about the uncork brand that made your life easy? ¿What if it was something about the infrastructure and I get it now? I'm on the investment committee for a fund to funds called screendoor. I get it. You always ask the question.¿Will this person be as successful when they unplug from whatever infrastructure they had at their old firm? And i underestimated that part of the LP analysis. I'd say second, you know, i knew what were coming to market with was not what most LP's were used to seeing. We were coming to market with a single GP fund that was going to make a lot of investments. And i was like you know, there's a lot of LP's for whom that's not like the sweet spot. That's not like their dream scenario. It's not really what they want to see. ¿I was like, okay, well, how do we address that? And the funny thing is, i spent all of my time and energy thinking about how I was going to handle the single GP piece and not nearly enough time, thinking about how people would react to our portfolio construction. And the truth is, the portfolio construction was, and still is, a much bigger road bump for people than anything else that we do at the fun level. There's like nothing else, even close.

Pablo Castro: 9:32

¿What would you mean by that?

Charles Hudson: 9:34

I think a lot of people can get comfortable with the solo GP. Like, they're able to say, like, oh, we've seen this work. There are other managers that we've met. This is not this is not scary. The portfolio construction, which is a lot of portfolio companies. That's the part where many of them are. Like, i just can't get comfortable with this. This isn't this isn't something that makes me feel good. And like, i can't i don't have examples of this working out and that ends up getting in the way of a lot of them saying, yes, i.

Pablo Castro: 10:11

Find was, and was it specifically, because it was the portfolio was larger amount of checks that usually are not seen for solo GP. ¿What were the main questions or the main, like, feedback that you were coming up against?

Charles Hudson: 10:32

I think a lot of it was. They're just like, well, you know, in our first fund, i was like, you know, we're going to end up with call it a hundred, and we're going to make fifty to seventy five investments. And we're going to buy a relatively small percentage of these. We're going to buy two to three percent upfront. And a lot of them said, Well, unless you pick really awesome companies, two to three percent of these companies, it's just not enough if you hit a winner. It's not. And I'm like, well, if we have big outcomes and a small fund size, we don't need huge outcomes. Like like as long as we choose Well, owning a small part of a big fund works great as long as you have a small enough fund. And so that's what I told. Lp's a lot of them. Just said it's hard for me to see how you're going to get companies of the scale that are needed. And i was like, okay, so indirectly, what you're kind of saying is you don't think I'm going to be as good of a picker as i think I'm going to.

Pablo Castro: 11:42

Wow, yeah, okay.

Charles Hudson: 11:43

That's okay like I get it like they're totally entitled to that point of view. And like, you have to make a call on whether you think someone's going to be successful. And a lot of people were just like we'd rather you owned ten percent of these companies, fifteen percent of these companies. And I'm just like that's not our model. Now, over time as our funds have gotten bigger, we've stayed committed to the same stage of investing. We just write slightly bigger checks and.

Pablo Castro: 12:11

We get more ownership, so no, perfect. Perfect. One of the things that I found super interesting was you mentioned that your first fund took maybe around two years to fully raise a fund. And one of the things that I find with a lot of first time fund managers let's not say first time investors, but first time fund managers is that, they say, psychological part of how to take those no's and those rejections, because I feel as a VC you are just taking no's all around from LP's. What were things that you did to just start another day fresh, you know, and not let that get.

Charles Hudson: 12:56

You well, you know, one thing someone told me is like, never quit on a bad day. And I'm a big. But i tell our portfolio company founders, this too is like you're going to have bad days. You're going to have days where things don't go your way. Like, never quit on a bad day second. I do think sometimes if you're on a string of nose or, like, not great outcomes, it's important to press pause and step back and just say, well, this isn't working. ¿What should I change or do differently with my pitch, with my approach with the LP's? I talk to with the storytelling. And i think the other thing is, this might be like a little touchy feeling. I think at some point, you have to get in touch with your own emotional state.

Pablo Castro: 13:48

Yes.

Charles Hudson: 13:49

¿And just be like, you know what? I am anxious. I am I'm experiencing anxiety. I should not do the things that anxiety but would encourage me to do. I should, like, recognize that i'm feeling anxious and like, press pause before i send that fifth follow up email to that LP who's not responded to the previous four. And i think a lot of it is like you kind of have to learn how to self regulate. And i think sometimes there's a difference between being on a cold streak. And sometimes there's something wrong with your pitch. Like, i hit a point where I was like, Oh, i think there's something wrong with our pitch. This isn't working. At least it's not working the way I want it to work. So this is not good. We need to, like, change the pitch. Other cases I'm like this pitch was working before Yeah. I've now pitched fifteen or twenty people in a row for whom it didn't work. I don't think the pitch failed. I think they just weren't interested in what I was offering. And i think the longer i fundraise, i can kind of self assess and say, Well, that was a pitch meeting where I didn't deliver the best pitch I could have delivered. And that's on me. In other cases, I'm like, i think I did a great job communicating what we're doing. That person just doesn't believe in our portfolio construction. It's overallocated to venture. Isn't taking on new managers. Like, i did my job. I showed up and gave like a great articulation of our fund. The person I was pitching just wasn't excuse me in a position to make a new commitment. And like that happens sometimes, and i think being able to disambiguate, like, what is like pitch error. ¿What is like disinterested LP? ¿What is like? Even now, i mean, I'm pitching precursor constantly every time. I had a pitch yesterday where I was pitching somebody for a future, for the future. And they highlighted something that, like, i don't understand this. I'm like Oh, yeah. Like, we just added a new slide to our pitch deck this week. ¿That now that we've added, I'm like, why didn't we have this a year ago? Wow, yes, we should have had it a year ago. It's something I've been talking my way through for years, and I was like, this needs a slide, and it took someone on my team doing, like, a research project and presenting with results. I'm like, oh, those results need to go into our deck.¿And in fact that those results have been missing from our deck for a long time, no?

Pablo Castro: 16:32

Yeah, i think one of the reasons why when people see the video and they see me laughing, one of the reasons why I'm laughing is in my experience, trying to fundraise a fund is like sometimes you don't never know. You never know why the person doesn't answer this. Says no, or is like, yes, I'm super interested. And then the next emails is like, no response. And then there's some things that I just feel you have to be okay knowing that you did your best. Because it just can be so many things. I think it's really one of those Yeah. Life paths.

Charles Hudson: 17:09

I think the even weirder thing is I have lP's who've told me Yes. Who've invested in our fund. And they haven't even told me why they said Yes, I've asked them. They're just in some cases i think they just don't want to tell me. In other cases, maybe they don't fully know. But that even that was as a You're an investor. Now you can tell me they're like no, give it the good work. I was like, but no, i kind of like want to know why. And they're like Sorry, you're not going to get that satisfaction from us.

Pablo Castro: 17:39

Wow. Oh, my gosh. I know because that could be even so much more you can better for you. So you could double down on those things or know that those are strengths. But yeah. No, no, yeah. On the on the side of maintaining relationships with your LP's, you've had various funds and usually an LP that invests in the first second fund stays for the next funds. ¿So how do you maintain your relationships with these investors? ¿Especially in the bad moments also?

Charles Hudson: 18:14

Yeah, i i don't know that. I have all of the answers here. I will say this. We we strive to get better in this department constantly. We really do a couple of principles. We try to live by one is, you should try to get the bad news out as soon as possible. I think so. That's one thing. If we have bad news, i try to get way out in front of it. Second, i think related to that most LP's don't like surprises good or bad. Third, i would say most of the LP's we've dealt with. I feel like i decided pretty early on, we're going to share a lot of information with them about our firm. Maybe even more than they want. But we're going to work together for ten plus years. So i think I would rather condition them that I'm like very open and I'm gonna share a lot and have them get used to that. Then, like, hold everything back. Which means in the beginning, we probably in some cases share more. Someone told me, like, Wow, you're like very like. They'll ask me questions. I'm like I haven't figured that out yet. I don't have the answer to that. I'm like spending a lot of time on it. I don't have answer to that yet. And that's been something some of them have been like, Oh, i was like, yeah. I'm not going to pretend that. I figured i haven't figured out yet. I need to figure it out. I'm actively working to figure it out, but i haven't figured it out yet. And so i also try really hard to understand their business and like And that's on two levels, Pablo. On one level, it's kind of like the firm you work for. ¿What are their objectives? ¿What are they trying to accomplish? ¿Are you a endowment? That's trying to build a new dorm. ¿Are you an endowment? That's trying to build a new building. ¿Are you a family office? That's like trying to like, make a splash. ¿Like, what are you trying to do? And that's kind of at the firm level. And then there's the individual where I'm like you as a person who cares about Zweitausendein your bonus and promotion and you're standing within your own firm. ¿How does investing in our how can investing in our firm? ¿Help you achieve that goal? ¿And can it help you achieve that goal in some cases? I think the answer is like if your rewards and incentives at your firm are to put as much money as you can into really name brand established vc firms investing in precursor might not actually, help you advance your career goals it actually might be at odds.

Pablo Castro: 21:09

Do you do a keep think about this information yourself to talk this with your team also. So they also can have a sense or an idea.

Charles Hudson: 21:21

I do. I do try to make sure our team understands. I mean, i do most of the fundraising alongside my head of ir, so she and I talk about this stuff a lot. But you know, i think for some of our team that's less involved in fundraising. It's this like balance between giving them exposure to the fundraising process, but also not creating like pressure and anxiety for a part of the business that they're not responsible for.

Pablo Castro: 21:49

So in talking to different investors, i've noticed that different GPS have different strengths. And there's some that are amazing networkers and this just comes to them. There's some that are amazing pickers or there's just some that just want to support their companies or portfolio companies. ¿And that's what they're best at. What would you say is the area of VC that you're best at? ¿And how do you maybe cover or make up for the areas that you're not as strong?

Charles Hudson: 22:21

You know, it's a really good question. I think the thing I can tell you, the thing I think about the most is sourcing. Sourcing and selection together. I just and for a couple reasons, as i think it was my friend hunter walk 11 said, you know, you can't portfolio manage your way out of a bad investment decision. Ÿousand so i think like, honestly in this job, the most important decision, the most important thing if you said you could only be good at one thing, i'd be like, oh, picking. If you're good at picking, it solves a lot of problems for a couple reasons. I think when you choose Well, you get to work with great people who are very capable and they will problem solve well on their own. I think a second thing that happens when you choose well is the problems that people bring. You tend to be the problems of success like we're scaling really quickly and we need more people and they're not the problems of languishing where it's like. No one wants the thing we want that we've built and we don't know what to do. And i just think like portfolio support. Also like, some of the very best companies i've invested in ask me for very little in terms of portfolio support. And my ego was fine with that. Pablo, if people are like, we're good like we don't actually need you to do anything for us. I'm like so long as you guys know that i would if you asked. That's the important piece.

Pablo Castro: 24:00

¿Is there any truth behind what i hear? Some investors say that the best founders don't want advice or are not looking for advice. ¿Or would you say it really depends on the founder?

Charles Hudson: 24:13

My experience has been There's two things that set the best founders apart. One is they don't ask you for help in things that are really their domain. I'll give you like a tangible example. I think a good, a great founder would almost never ask me for help finding an individual contributor to join their team. I think they'd be like hiring an iOS engineer is my job, but a good founder would be like, hey, I'm trying to hire a chief marketing officer big high impact hire. That's like probably a you're going to get more bang for your buck, asking your VC. For that kind of thing, i would also just say this whole advice thing is interesting. People are like, i want founders who are coachable. I'm like, i don't care if they're coachable. I want people who make good decisions. If they make good decisions, that's the important thing. Not whether you listen to me so oftentimes, i will tell founders. There's this, like, two by two matrix one dimension. ¿It's like, was the outcome good or was the outcome bad? ¿Did you listen to my advice, yes or no? And I'm like if you think about it. If you listen to my advice and the outcome is good, everybody's happy. I feel good. You made the right decision. Everybody's happy. If you didn't listen to my advice and the outcome is good, I'm like great. This person's an independent thinker. I'm glad they didn't listen to whatever hair brain thing i told them to do. ¿If you listen to my advice and the outcome is bad, the natural thing as an investor is like, why wasn't telling you what to do? I was just like giving you input. And if you don't listen to my advice and the outcome is bad, it's just frustrating all around. But the more important thing is that the outcome was bad. So i just [sos/eos] generally think I tell people if the outcomes are good and you make good decisions, that's the most important thing. If you want my input and it will help you make a better decision, I'm totally here for it. If you feel comfortable making a decision without my input. That's okay too. Unless it's it rises to the level of, like, existential thing for the company.

Pablo Castro: 26:28

A previous guest we had on who is Sean Merani from Parade Ventures. Sean. Sean. Was saying was saying VC's get paid for their decisions. Nothing. Nothing else. VC's get paid for their decisions.

Charles Hudson: 26:45

Yeah.

Pablo Castro: 26:45

¿In the sense where you mentioned about the picking, is there a specific process that you have for picking anything that you're comfortable sharing with? Is it really, let's say, very mechanical. ¿Is it more is it more inbound? ¿Do you do some outbound too? ¿How does it work for you guys?

Charles Hudson: 27:05

We do a lot of we do. We're mostly inbound. And i think that's because the pre seed companies we're looking for oftentimes. They don't have much in the way of an Internet presence. So they're kind of hard to find.

Pablo Castro: 27:17

Yeah.

Charles Hudson: 27:18

Unless you really know where to look they're hard to find. So there's that the one nice thing is. We've made over four hundred investments at the firm. So we have a lot of data, and one of my investors was like great. ¿Why don't you take all of these data that you've collected and turn it into rules? ¿I'm like? Well, it's because I'm in the outlier business and the value of the data isn't to make rules. ¿It's to give me some clues as to what's worked in the past, ÿousand and then I can measure investments based on Well, how far afield is this? From things that have worked in the past which is different than a rule. A rule would be like up. You've tripped two of these five conditions. ¿Don't invest whereas the way I tend to look at this stuff is like, okay? These are the things that have historically worked for us. This person doesn't have them all. If i make this investment, I'm betting that there's something else happening in this company whereby the other things don't apply. So i have a little score sheet that i put every founder through. And it's things like ability to fundraise, ability to recruit, storytelling previous founder experience. It's all of these things. And sometimes it spits out a number, and sometimes I'm like, well, this is the number. The number isn't the decision. The number is a way for me to say, this is where this is how you scored this person and given this score. ¿Are you still as excited about investing with this person as you were before?¿And how much growth or gap closing are you betting on between where this person is and the most successful founders you've packed? And the problem with indexing on your successful founders is, you don't know what they have to remember what they look like when you found them and oftentimes what has made them great is the growth that happened between where they were when you found them and where they are today. And so i think the challenge with being too dogmatic and rules driven is you end up disqualifying people who maybe need where more good things have to happen for them to grow. And I'm like, well, sometimes those good things happen. Yeah, like they actually happen.

Pablo Castro: 29:40

One of the things I've heard you say is that you can't really know how good of a CEO, a founder is going to be until he is in the job. You can't really. And that you more look for people that you can see that will grow into that what are specific things that you look for and let's say in that founder or that you have something that works, i think of.

Charles Hudson: 30:06

So I can tell you the things I worry about and that I'm trying to like make sure we're not choosing people who have these characteristics. I think to be a successful startup founder, you have to have a bias towards action. So you have to have some base level of urgency about you. I think you have to have comfort making decisions with a high degree of ambiguity. That's we'll come back to that one because it's a big one. And i think the other thing is, you kind of have to have this mentality that like no job is too small for you. In some ways, you kind of have to be a little bit of a control freak. ¿And so i think a lot of times, if you think like, well, gee, are those behaviors that would make you successful in a big company? Oftentimes the answer is no Zweitausendein because a lot of big companies, if there's ambiguity like well, let's just keep gathering data till this is less ambiguous. And I'm like that costs time being a control freak in an environment where jobs are small doesn't really work. Because I'd argue, most companies want to keep the zone of impact for junior employees as small as possible because they're more worried about you blowing the company up than they are about your uncapped upside. And if they probably should, it's true, right, you get fifty thousand people. Your big fear is like one of these junior people does something that like tanks the company. And so you need to have, like, an appropriate risk reward profile. And so what I tell people is like, when you're a startup CEO, you're designing the company from scratch. So that has to be an exciting challenge. You relish not something you fear. And I'm always trying to figure out when we put this person in this highly unstructured environment. And tell them go make sense of this, it has to be something that's very, very exciting. And I've met a lot of people for whom this is not exciting. And i find a lot of people from big companies zero to one is hard. It's really hard for them because they're coming from an environment like Well, i worked on startup projects at Google. I'm like the at Google part is actually doing a lot of work in that comment, like And i don't mean it. And like the funny thing is, Pablo, i don't think these people are lying to me or lying to themselves for sure. I think they just don't know. And so i think this is maybe a little bit more esoteric. My view is that most founders are not trying to lie to me and convince me that they're better than they are or better equipped. But i've seen this movie thousands of times. And so my job is to figure out is there a disconnect between the aspirational version of themselves, the person who wants to be a founder, who wants to be in the arena, and the reality of, like, where they are in life and like what they're actually prepared to go through. Sometimes I'll meet people and I'm like this person wants it, but i think 11 they get it, they're not going to want it. Yes, yes, it's like the dog that catches the car. ¿It's like now what? And like we've i've seen people who were very successful in highly structured, highly organized environments do very poorly at startups. And it's not like these people became less talented or less smart. I'm just like the domain that you're in a startup is just different. It requires different skills. There's no managing up at a two person startup. Yeah, there's isn't. I tell people going to go hire people with a no name startup company is very different than, like, emailing people from your Google dot com address. It's just a different experience. And that being but again, that being said it doesn't mean we'll never invest in people from that background. It just means i have a heightened sensitivity Zweitausendein to that point, when I'm looking at them, i am much more attuned to the fact that like, hey, this is a person who's coming from a highly structured environment. I should be very sure that my read on this person's correct.

Pablo Castro: 34:50

Yeah, i think one of the things that maybe I realized when I did my first startup is that it really at least for me, i'll say my experience was that most of the time it was like, just surviving, focusing on surviving and it's some anxiety and just a lot of emotions that you think is going to get better even if you do all the right things. But it's i think it's just part of the job. ¿You know what i mean? Just part of the job and living through that and it's.

Charles Hudson: 35:24

It'S really hard to know how resilient people like I look for clues in people's life. ¿Like, one of the things I look for is, has this person ever deviated from the golden path? And it doesn't have to be professionally. It can be academically. It could be in some other domain. ¿Has this person ever put themselves in a position where they've been uncomfortable? And if i can find examples of that, like, i just funded a guy who, like, he like, moved to Japan to do a startup. He's like, not Japanese. He like, didn't know a lot, but, like, wanted to like. And like, he, like, this guy, like, his name is Tim. He is like a phenomenal background self taught engineer. I don't know if his new company will be successful, but i'm certain he won't quit.

Pablo Castro: 36:17

ŸOusand.

Charles Hudson: 36:19

Yeah, and it's funny. ¿One of the founders in our portfolio this weekend, Pablo was like, well, when does it get better? I'm like, oh, it doesn't get better. It just gets different. ¿He's like, what do you mean? I go Oh, the problems you have today. Those problems will go away, and you'll look back in a year. And you're like I can't believe I was, like, so stressed out about that thing, but that will be replaced by a new set of problems.

Pablo Castro: 36:48

It's so true. Oh, man. Yeah. It is a special type of personality. I would say it really does take that.

Charles Hudson: 36:58

And i do think also like so much of this is about kind of what you were alluding to. It's about the ability to, like, self regulate. And this is the other reason. I think people who've put themselves in uncomfortable situations ÿousand have an advantage. They've been in situations where they were uncomfortable. Maybe felt out of sorts. Maybe felt like they had to go through something challenging. ¿Have you ever? I've met some people I'm like they went to a great high school. They went to an amazing college. They took a very structured high pedigree job out of college. They went from that high pedigree job to another high pedigree job. And now they want to do a startup. I'm like, i think sometimes eventually go. Oh, if you haven't failed or faced adversity, you're not tough. I'm like that's not true. We just don't know. We just don't have the data. You could be very resilient. Just never test it. At least with the people who are tested, I'm like, Okay, i have a data point here. I know that this person can sort of get knocked down and get back up. Ÿousand without that I don't necessarily know that the person has that in them which again doesn't mean that they don't. It just means we have to make a bet as to whether they possess that skill.

Pablo Castro: 38:17

Yeah, man. Especially a structured job. I agree. One thing I i see a lot is especially if you've never failed or never really big, majorly failed until later in life, having that first failure can be a hard hit. A hit that even like, makes you wonder about yourself, who you are and who you really are. And it can be extremely difficult, i think it can be extremely difficult if someone has not failed before.

Charles Hudson: 38:48

And i deal with a lot of people who show up in my office having had very little up close than personal experience with failure.

Pablo Castro: 38:57

¿Ÿousand.

Charles Hudson: 38:59

Now, some of them have had none, but oftentimes like, i'll ask people sometimes like, hey, like, what's your sort of, like, biggest failure? And sometimes people will tell me something, and I'm like, wow, that's like, not that big you ended up at Morgan Stanley instead of Goldman Sachs, BCG, instead of Mackenzie. I'm like, i don't want to trivialize your struggle, but, like, that's the startup journey is gonna be it. But also, the other thing I've seen, Pablo, is, you know, like, i left Google to go to a startup that my parents had never heard of, and they were so confused by this decision. ¿They were like, why would you leave Google to go to this, known? And i think for some people, when you're on that, like, stairstep, gilded path, Ÿousand you're only really associated with high prestige organizations and starting your own company is generally a low prestige job, especially until you have a product that people can see. And i think some of this is, like, also just do people have the ability to, like, be in that zone of, like, I'm gonna do something that's like, very different than what my peers are doing. And in the short run will make me less money. Not everybody can do that or wants to do that. And I'm not saying, i think also we just have to get out of this value judgment that people who want to do startups are somehow better. Yes, they're not better. They're just wired. Maybe differently. But there's no shame of being like, i like being at a big company. I like being at Google. I like being at Adobe. I like being an apple. And I'm successful there. I'm like there's. No, it doesn't make you like to me Lesser. Maybe it means you shouldn't do a startup. But like I know a lot of startup people who would not be remotely effective at big companies.

Pablo Castro: 41:03

Well, i think we can definitely go down the right hall there. I have a lot of thoughts on that. And, Charles, talking about your younger self. Yeah.¿Knowing what you know now about life and your career, what advice would you give to your younger self?

Charles Hudson: 41:23

I would have said continue to take the most interesting jobs that come your way. And i think when i first graduated from school, i kind of had that philosophy which was like, you know, i had like an investment banking job, a consulting job ÿousand a startup incubator job. And this weird job with the CIA's Venture Capital Fund. And for me, it was a no brainer to take the CIA Venture Capital job. Just because like this is the job that isn't going to come around again. And so i was like the other ones will probably still be there. Maybe not for me, but there's probably a way to work. My way back to those inkutel will not come back again. So let's do the thing that won't come back again. Then i went to business school. And i think honestly, Pablo, I became a little bit more career conservative. And i had some opportunities to do things that were riskier. And i said no to them out of some mental model that like, i shouldn't take that. I didn't want to be a job, hopper. I didn't want to. I had these notions of, like, what I was supposed to do. And those experiences were awesome. I got a ton out of them. But part of me says like that was probably not the optimal use of my, like, skills and ability in that window and time. And i would remind myself continue to choose the most interesting opportunities in front of you if you do that like things happen.

Pablo Castro: 43:00

One of the things that i've heard you mention about were you choosing, of course. This position working in this fund in the CIA's fund. And then and then could tell you got to meet some of your mentors and some of the people that have helped you down the line a lot. So some there's a lot of serendipity in some of these decisions that you can really see. The dots just connect them backwards after things happening.

Charles Hudson: 43:25

Yep.

Pablo Castro: 43:26

And i want to be very respectful. Of course. Of your time.

Charles Hudson: 43:31

Yeah.

Pablo Castro: 43:32

Two, two last questions. ¿The first one is what is a piece of advice that you would give to a first time fund manager? That is raising their fund one. And they're trying to get to that zero to one under fund.

Charles Hudson: 43:50

This might sound weird. No one can no one else can tell you how to run your own fund. Not an LP. Not. Someone like me like no one, else, actually, has the answer for you. All of the answers will come from you. Which doesn't mean you shouldn't listen to other people's input, which doesn't mean that they don't have things to contribute. But, like, actually, nobody knows what you're trying to accomplish with your fund better than you do. So you actually are the person who's best equipped to answer those questions. And so i have to constantly remind people like I can give you input. I can't really tell you what to do. I mean, i could tell you what I would do if I were you, but even that's probably closer than prescription than I want to get. And i think when I was starting my fund, i went to all of these people who were more successful than i, who were farther along. ¿And i beg, what should i do? They'd be like I don't know. I wouldn't build pre i'm not building precursor. I wouldn't build it. I can tell you how we approached it at our fund, but like were optimizing for a different thing and it was a different time, and I think early on, i thought, well, lp's have the answer. Lp's like, well, this is what I'd like to see. But that doesn't mean it's right for you. So i think 11 you accept that like you are responsible for your own destiny and your own fund the way you approach, advice and feedback from other people, including people who tell you no is really different.

Pablo Castro: 45:24

Yeah, they're just talking with different fund managers there. It's just so different. There are very different. Fund strategies, fund construction. How they got into venture. There is no one right path, i feel from what everything i've heard, every single time, there's something different. So yeah. And Charles looking into the future a thirty years from now. ¿What is the mark that you want, precursor? To leave on this planet and to the entrepreneurs. You guys support.

Charles Hudson: 46:04

There'S like two things. One is. I hope, that the next generation of people who start funds have it easier than i did. And that, like somehow the work we've done creates new pathways for people and second. You know, i think most LP's and I don't blame, i say this, i mean this in a very non judgmental way. Pablo i think most LP's have a pretty fixed view of, like, how you can succeed with venture capital. It's a concentrated portfolio with not that many names and high ownerships and pretty hands on involvement from the GP. I am by no means suggesting that does not work. I'm merely suggesting it doesn't have to be the only way to be successful. ŸOusand and if i think about some of the firms that inspired me, like Sv. Angel was one of the firms that really inspired me. And when I look at the way that firm, you know, they've been doing a deal a week for basically my entire adventure career, and that's gotten them into some amazing companies. And i just think like they've done it really differently. Zweitausendein And so i think like the best, if i think about the firms that have made a big market venture many of them, it's because they did something different. They did something that people previously thought you couldn't or maybe shouldn't do. And i hope that when I'm done investing many years from now, people look back and say, Wow, precursor, like, it's in its own lane. They did something different. Like, i think about what Sokka did with lowercase and what Steve Anderson did with baseline. Like, those guys did solo GP before it was cool, and they did it really well. And i think they're like iconic managers as a result. And i hope that, like, someday people go, wow. Like, what precursor did was really hard, but they were very good at it. Zweitausendein and like, if we could find another one of those, we would we.

Pablo Castro: 48:21

Would do it Charles, thank you so much. I really do appreciate the time and everything you do for the startup ecosystem. And you have been a pioneer in what you're doing in venture. So i really just want to commend you for everything that you do and just for the different maybe LP's and startup founders or VC's that are listening to the show. Where's the best way they can get in contact with you.

Charles Hudson: 48:52

Email me at Charles at precursor VC dot com. That's that's pretty easy. The worst way is Twitter, DM's or xD. I'm very bad at those, but LinkedIn. I'm pretty good email. I'm pretty good. Just like not Twitter. I'm very bad at Twitter.

Pablo Castro: 49:03

Perfect. I will put your information on the in the show notes and so anyone can reach out and zweitausendein. Thank you so much, Charles, for everything I really do appreciate. We need to do a part two as there's a lot to talk about still, but yes. Thank you so much. Okay.

Charles Hudson: 49:21

Awesome, man. Thanks.

Pablo Castro: 49:22

Alright, take care. Thank you for tuning in to another episode of the new Light Ventures podcast. I'm Pablo Castro and it's been a pleasure bringing you insights and stories from the forefront of Venture Capital. We hope you're leading with valuable knowledge and inspiration to carry you forward on your own venture journey.¿Journey? If you've enjoyed today's conversation, don't forget to subscribe to our podcast. Leave a review and share it with your Network for updates, additional resources and to suggest guests for topics of future episodes. Visit our website and follow us on our social media channels. We're excited to continue this journey with you exploring our ever evolving landscape of venture capital. ¿Until next time, keep innovating, keep investing, and keep pushing the boundaries of what's possible? This is new light venture signing off let's keep the.