The VC Who Funded Dollar Shave Club $9.8M (2024)

John Livesay interviews Lylan Masterman

Hi and welcome to The Successful Pitch. Today’s guest is Lylan Masterman, a venture capital investor at White Star Capital in New York. He has primarily focused on late seed and series A investments and is also a Kauffman Fellow, where he is doing academic research project on the internet of things. He previously worked as a software engineer in product management for 15 years, and joined Atlas division of aQuantive in 2004 where he focused on big data. He helped lead the company’s Rich Media advertising technology platform and has also led product organization for four early stage companies, and prior to joining that he worked at Microsoft. He’s also worked at Sierra Ventures, a San Francisco-based VC firm, so we’ll be sure to ask him the differences between San Francisco and New York as I’m sure there’s quite a few. Lylan welcome to the show.

Thank you John. It’s a pleasure.

Before we get into all the wonderful things you’re doing at White Star Capital now, would you take us back to your days of being a software developer at IBM, and then being a program manager at Microsoft; did you have a vision that you were eventually going to get into VC? How did you go from that to where you are now?

Yeah, I was a computer science geek. I went to University of Waterloo which, for people who are not familiar with the school, is considered the MIT of Canada, or for the people in France is the polytechnic of Canada. From there, my last internship per qua in the ’90s was at Microsoft WebTV in California. My manager at the time had discussed career options with me and there were some people down the hall who were product managers, or Microsoft Power Lens program managers. We agreed that that could be a really good path for me because I was getting frustrated spending hours on that, then trying to fix a bug in the code that was a missing semicolon. I like the interpersonal aspect while also leveraging my technology background. So I went to Microsoft full time in Redmond, that was some of the first team to launch a Visual Studio .NET. So the first ever .NET team in C-sharp and J-sharp.

Then I went to a company that I’d never heard of that time in Seattle called Atlas, which was part of aQuantive, and we doubled and tripled the business year over year. It was just fantastic. I ended up having four jobs simultaneously. I was running the Rich Media, Behavioral Targeting Product, User Experience, and Internationalization all at the same time, because that’s what you do when a company is growing quickly.

In my last year there, Microsoft acquired us for $6 billion, which at the time was larger than all of Microsoft’s other acquisitions combined.

That’s quite an exit there.

Yeah. Skype’s subsequently surpassed us. What was interesting there is that Mike Galgon was one of the co-founders of aQuantive, and at one point I approached Mike for a little bit of mentorship. I was considering to go to my MBA and I was already in my 30s, so it was now or never. Mike was a great mentor for me, and in the discussions we talked about the history of aQuantive. The web and knowledge about Venture Capital was different back then. Mike told me the history of starting aQuantive, which was then called Avenue A, about how he and his co-founders started but also how he raised money from venture capitalists. I didn’t even know what a venture capitalist was. But similar to how my manager at Microsoft in the ’90s, urged me think about product, Mike didn’t necessarily urge me to think about venture, quite the opposite, but he did awaken my interest into it. I think having this as your best choice of career. Because, it’s a dark side and all.

When I started thinking more and more into it, I thought, “I might just absolutely love this.” It was a perfect timing for my career because I was going already to business school, and business school’s a great time to try something new, right? While at business school, I decided that I was going to try venture capital. I did not know that the economy was going to tank, and that I’d be looking for an internship in 2009. So what I did is I networked, and for me what that meant was looking up every single VC firm I was aware of or could learn about online. I read the bios of every partner in principle in the firm, and I would find the one person in the firm who I thought had the most similarities to me, or most affinity to me as some people put it, and I would email that person.

I’ll give you the clue. The colloquial version of the email said, “Hey, we have this in common. We both study mathematics, we’re both Canadian, we both work in online advertising, etc etc, and I think what you do for your career is interesting. Do you have 20 minutes? I’d like to pick your brain.”

I love that so much because I’m constantly telling my audience you must do your homework on the investors you are fortunate enough to pitch. What you just did was look at the similarities because you want to make sure that who you’re even approaching for money has a lot of things in common with you, whether it’s background, experience, or connections. What you just shared is gold. I love it. Keep going.

Then one of the investors I reached out to was a New York investor, Geoff Judge. In my conversation with him at the end of the call, he said, “Hey Lylan, I like you. I think you have some good potential. There’s no space at my firm to take on an intern, but let me introduce you to somebody.” He introduced me to his friend, Mark Fernandes, and Mark’s admin wrote me back and said, “Mark would be happy to have a call,” and I did what you trained to do, why? “I very much would appreciate a call but I happened to actually be going to the Bay Area in a few weeks. Is Mark available to meet in person?” She said, “Yes.” Then I booked my flying ticket.

Then I met Mark in person, and Mark made it very clear to me at the beginning of the meeting that they had never hired an intern before, they had no desire to, and what I subsequently learned also is that the founder of Sierra Ventures is Peter Wendell, who teaches venture capital at Stanford GSB. One can reason that if Sierra were to bring on an MBA intern, it would be from someone from GSB, but by the end of in-person meeting, Mark seemed interested. I think my technical background, combined with fact that I was already in my 30s and didn’t need to be overly coached had an impact. He knew that he could bring me on and I could run independently. I owe so much to Mark for giving me that break. It was an absolute joy. From there, I had a great experience at Sierra, and then I applied for the Kauffman Fellows program.

Let me just ask you to pause because there’s another gem there. After those rejections, most people would just say, “Oh well.” Lying is not something we have ever propose people do, but, you were willing to go the extra mile, put your own dime to get yourself there for that interview that didn’t look promising, but you still were willing to do it. That’s that extra mile that a lot of people won’t do unless they really think they have a good shot, but you still went. You get there, all you hear is a bunch of objections about why they never do it, and if they do do it, it’s going to be from somebody from some place else, and then you are able to turn that around. That’s the kind of tenacity and persuasive selling skills or storytelling that’s required to get someone like you now to say yes, correct?

Yeah, very much so. The idea of what you said earlier, of researching somebody, understanding their background, understanding your commonalities if there are some is so important. You don’t need to have some but at least show your research to show you didn’t just simply do a copy and paste, right? Maybe we’re drastically different about something and you want to talk about that. That’s fine. But just show me that you didn’t do a copy and paste and that you’re willing to do a little bit of effort just the way I continue to do.

It can even be somewhat playful, right? I see you speak French, I eat french fries, does that count, right?

Yeah. I haven’t received that one but that at least would show some level of research.

Right, and some playfulness and some human quality. If you want to stand out from the crowd, sometimes you have to do something a little out there like that.

So you’re doing well there and then suddenly the Kauff, tell us about the Kauffman experience.

At Kellogg, Azeus Jelani was a year ahead of me, and he’d been in there for the Kauffman Fellows program. I learned about it a little bit from him. I looked up the list of Kauffman Fellows who have history in the program and there are many fellows who are part of the who’s who of venture capital. The program is a two-year program where we meet once a quarter for three or four consecutive days. In the times that we meet once a quarter, there is a fixed curriculum. The curriculum is specifically on how to make us a better technology investor. The curriculum doesn’t relate to term sheets and financial terms, let’s assume that we learn that on the job or we’ve already learned it, and if we don’t then we can just ask.

Let me give you two of my favorite examples of the curriculum. One example was how to be a better board member, and what Kauffman did is invited internationally recognized VCs who are known as being exceptional board members.

Wow. Are these advisory board members or a board member of directors?

The board of directors.

Yeah, generally, they’re on the board. Just want to clarify for the readers.

Absolutely. That training was outstanding.

Do you have one or two takeaways for how you become a better board of director?

Well, everything that happens in Kauffman is Kauffman confidential.

Oh sorry, okay.

No, no, but what I can say, because a friend of mine actually recently published this, is in addition to having great board members coming to speak to us, we had an entrepreneur coming and speak to us. It was a well-recognized CEO, and at one point a question was asked if he know about his board and his level of appreciation for the board. There are many of his board members who he felt did not contribute as much as they’re capable of, they were not as helpful, and he thought that all those individuals had the networks, skills, intelligence, and all the attributes required to be helpful, but just had never invested enough time and effort and mental energy. When we asked him which of these people he would want in his board again, the answer was surprising or was disappointingly low. The key takeaways were often about some of the simple stuff John. Simple, read the deck, as a board member, read the deck a week in advance assuming it’s the CEO’s, so the two week in advance. And if you have questions, start asking those questions in advance so that you’re not staling the board meeting unnecessarily.

“Time, effort, and mental energy. Those are the three key elements to be successful in anything, whether it’s pitching for funding, being a good board member.” It’s all, like you said, simple things, but putting your time, putting the effort, and not just effort of being busy, but mental energy. I love that. That’s such a great line.

If you just do what intuitively feels like the right thing, and you make your portfolio coming a priority, that should naturally occur. There’s a lot of the small things too, so your behavior in the board meeting. How often are you checking your cellphone for emails? Are you writing down notes for yourself about what’s been discussed, and about your follow up and your action, and how to be helpful? That’s important stuff.

Sure. Well, it shows you care, right?

Yeah it does and we should care. Our job, personal income, and reputation is on the line, and in the life of most companies out there, the CEO is a CEO that was driving the company. There can be one or two seminal moments where an outsider, as in a board member, will observe something that the operational team will not observe because they’re stuck in the wheats. And it takes an attentive board member to recognize a seminal moment and to make a certain recommendation or to even ask the intelligent question allows the CEO or the team to reach a certain conclusion.

That’s so great because it works both ways, doesn’t it? When you’re pitching someone like you to get funding, you’d better be sure your phone’s turned off. You’d better be sure you’re listening to what you say and maybe even taking a note during the pitch meeting. Show that you’re engaged.

Absolutely. It’s fine to have your laptop open the whole time if it’s clear that you’re taking notes, and not overly multitasking. Or if there is something urgent in your life going on and you’re expecting a certain phone call, just say so. One little thing that I try to do when I have a meeting with someone I know and have another meeting coming up thereafter, instead of being the guy who is always checking his cellphone or watch, I set myself an alarm. In that way there, I’m not rudely checking the time, I trust that my alarm will notify me when it’s time to start wrapping up the meeting.

That’s very helpful. Meeting once a quarter is obviously a huge commitment in how to learn to be a better board member. Is there anything else you can share from those confidential quarterly meetings that you’ve learned?

There was another session on how to best define your personal brand and your firm’s brand. You can imagine that the VCs that we invited to speak on the branding side were different than the board member’s side. Some people are much better at one than the other, and so for us we ought to pick and choose and learn from the best at each part of the curriculum; that’s key to Kauffman. On the branding side, it’s all the normal stuff that we talked about just applied to venture. Branding is especially difficult for VCs who are considered generalist, and a generalist is defined as a VC who invests in many different categories.

But wait, there’s more!?

This post has been adapted from The Successful Pitch podcast. Listen to this past episode for more on the inspiring story of Lylan Masterman

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About
As a funding strategist, John Livesay helps CEOs craft a compelling pitch which engages investors in a way that inspires them to join a startup’s team.

After a successful 20-year career in media sales with Conde Nast where he worked across all 22 brands in their corporate division [GQ, Vanity Fair, Wired, W and Vogue] and created integrated programs for clients such as Lexus, Hyundai and Guess, John won salesperson of the year in 2012 across the entire company.

Follow John on Twitter at @john_livesay. We welcome your comments.