Interview Transcript: How to Become a Venture Capitalist with Charles Hudson

Stevon Cook
35 min readJul 29, 2020

https://youtu.be/WVh8kGWz7e8

Stevon Cook:

Peace, peace, and welcome to another dynamic, incredible, informative discussion. I’m super excited to launch into and learn from this man’s story, Charles Hudson. I first actually saw… He doesn’t remember this. People are in front of him all the time. But I first saw Charles Hudson speaking at an event in Oakland that we brought our students to. It must have been back in 2014 or 2015. He was talking to a group of young black men about his journey coming… They were all students going to college and he was the keynote speaker. And he was someone that I paid attention to since then. It’s been really dope to watch from afar all the things that he’s gotten off the ground and accomplished, and refreshing to see him be the change in terms of what it means to invest and be a VC leader. He’s super smart too. Thank you Charles.

Charles Hudson:

Thank you so much for having me. I can barely contain my laughter. That was way too kind.

Stevon Cook:

Yeah man. I was actually doing a little research before our discussion and I saw a TV interview you did with The Exchange and you needed a mic to drop. As you were speaking there was like some mic dropping that needed to happen, because you had said something about becoming a VC. And you were like, “Yeah, I got two degrees from Stanford. I used to be a partner at a company. And for some reason it’s been harder.” And so I was just kind of like, “This whole new wave about supporting black tech founders or just black businesses has obviously up ticked tremendously since the murder of George Floyd, but you’ve been doing it.” You’ve been… I was looking at your company profile. So anyway, you run a VC company. Talk a little about the company and then I kind of want to dig back into current events.

Charles Hudson:

Yeah, so I started-

Stevon Cook:

Firm, I should say. Sorry.

Charles Hudson:

Yeah, no. Company is fine. We started… Well I started Precursor five years ago. Originally it was just me. Now we’ve got a team of three, me, Sydney, and Ayanna. It’s awesome. But you know, I’d been a partner at another venture firm called Uncork. It used to be called Soft Tech. When I joined my partner Jeff we were a teeny tiny firm. $15,000,000 under management, which by venture capital standards is very small. A decade later they have half a billion dollars under management. And what I noticed is when we first started fundraising for the fund, when I joined Jeff, it was hard to raise our third fund, and we had already invested in Fitbit, which hadn’t gone public but was doing really well. We had Eventbrite, which eventually later would go public. We had some really good companies in the portfolio. It was hard to raise. We got that fund done, and then sort of we had these breakthrough where fund four was not nearly as hard to raise as fund three. And I think we sort of got into this place where we were established.

Charles Hudson:

And as our fund got bigger I wanted to start a fund that I thought could give back to the old work that I enjoy doing, which is really simple. So at Precursor what we look for is founders that are at the earliest stage possible. So you’ve got an idea at what you want to build, but maybe you don’t even have a prototype. You probably don’t have a launched product, but you’ve got some other things in your favor. Normally a really big idea that’s really to communicate that even I can understand. And we’ll give people 250K and work with them for a year, with the eye of getting to a place where there’s enough evidence about the product that the founder should keep going with the idea that they’ve started off looking to pursue.

Charles Hudson:

It just turns out when you have a lens that says I will work with people that I don’t know who are outside of my network, who don’t have launched products and who don’t have like everything figured out, you end with a dramatically larger canvas of people you can back. And I feel like it just felt to me that venture was really honing in on this really fixed model, which was we were mostly giving seed fund capital to people who had been entrepreneurs before, had worked at companies that were kind of famous, went to a really small narrow set of schools, and had a very narrow set of academic training. And I was like, “This can’t be right.” I just generally believe the universe of people who can be successful entrepreneurs in technology is largely than we’ve historically believed in venture, and I felt like the only way I could really do that in the style that I wanted was to start my own firm, and a firm that would be kind of much smaller in terms of head count and the dollars that we manage.

Stevon Cook:

There is a lot in that that’s connected to ongoing conversations about non-inclusive tech is and frustrations that I hear from founders about access to venture. And so, you’re now on the investing end. I mean, there’s so many different directions we can take this conversation, but 250,000. You work for the companies for a year. I was just looking at the company. I was looking at Precursor’s website and it’s very diverse the types of the faces of the people. The companies are listed in alphabetical order, but the faces are everybody. The founder is above the company name, so when you look through the website, when I was looking through the website I was like, “Oh, this is like my public school. It’s like hell of people of color.” And so, it doesn’t look like at all how I know a tech workforce looks like. What is the selection rate based on how many people that you actually give money?

Charles Hudson:

Yeah. So I can tell you last year we were approached by 3,000 companies and I think we invested in like 30. So it’s like 1%, which I think I pretty typical for most venture firms. Like most venture firms they might not see 3,000 companies. It might be they meet 1,000 companies and they pick 10. But that’s sort of the model that works for us. And it’s interesting what you mentioned about our website. Like what I tell everyone about Precursor is that like we are an intentional firm. We do things on purpose. We make mistakes sometimes, to be honest. Like not everything works. But most of the things we do there’s a reason behind them, and with the website that was very intentional. I think a lot of venture capitals if you ask them and say what’s the most important thing, it’s the founders. We’re in business for founders.

Charles Hudson:

And you go to their website and what do you see? Like a bunch of logos. I’m like, “Well that’s not people. Those are companies. That’s different.” Or you see a bunch of pictures of the people who work at the firm. Again, that’s an important piece of the puzzle but I just wanted to send people a message that when we say we’re really about the people, we’re going to put the people front and center. And I thought it was interesting to go with a model where we’d say we’d make pictures of the founders the primary visual element of the site. But we wanted people to feel like that whether you’re a white male founder or a black female founder, you should see people who look like you in our portfolio. We wanted to send a message to people that Precursor is a firm for everyone, like everyone is welcome here and we want to invest in everyone.

Stevon Cook:

Like this feels courageous in a way. I mean, you’re in the business to make money. So people are giving you money and there’s a proven track record on how to make money, right? And so, it looks like what you said happens. They started companies, they went to a narrow set of schools. So you stepped out on your own to say, “Nah, I’m going to chart a new path and do everything intentionally and back people that don’t traditionally look like tech and we’re going to make money and do it.” Right? How long were you sort of sitting with this before you finally decided to step out and make it happen, and how many other firms would you say are sort of similar to yours?

Charles Hudson:

It’s interesting. I tell people all the time, starting a venture fund is not liking starting every other kind of business. Like our product is money, this weird bundle of money and advice and support, which is different than if your product is an app or a service. So one thing I will say that’s true about venture, starting a venture fund that is like starting a company, the whole picture won’t be known to you when you start. There will be things that are revealed to you when you’re ready to see them. And like what I realized about Precursor is I went into this thinking the main reason I’m starting this fund is I think there’s a class of entrepreneur and like this is my canonical example.

Charles Hudson:

If you’re employee number five at Pinterest, you probably know the founder of Pinterest, he knows you. If you were starting a company, he might pick up the phone and make some calls for you. He could speak personally about his experience working with you, and the VCs he emails are going to take that call. If you’re employee 500 at Pinterest, you might be equally talented, equally smart, have an equally good idea, but it’s probably less likely that you’ve ever been in a board meeting, that you’ve ever met the investors of the company. And this is not to pick on Pinterest. This is like generally any tech company. The odds are the employee 500 doesn’t have the same relationship with the CEO that the first 25 or 50 people do.

Charles Hudson:

So I was like, “If you’re that 500th employee and you’re a smart person and no one’s going to extend their social capital to help you get a meeting, how do you get in the door?” And I was like, “Well, what if you had a firm that really said like, ‘We think that there’s valuable insights and cool companies to be built up and down the employee badge number count at famous companies.’” There’s people who worked at bad startups that were not successful who still can be good founders. There’s people who’ve never done startups who could be good founders. And I think for me a lot of this is rooted in my fundamental optimism about people. And the one thing I’ve learned about being a founder and having been a founder myself, is oftentimes no one, including you, yourself, knows what you’re capable of, like what that reserve of like superpower energy is, until you are put into a position where you have to use it as a founder.

Charles Hudson:

So I naively sometimes believe every single person we back has way more entrepreneurial capacity and ability to be successful than they even realize often at the time that we give them money. If we were right all the time, this job would be easy. But I go into every investment thinking, “This person has so much more capacity for leadership than they’ve already shown evidence of, that once they’re put in a position where they have to figure this stuff out they’re going to rise to the occasion and they’re going to surprise people.” And that enables us, at least me, to confidently invest in people that other people say, “I don’t get. Look at that person’s background. Or they don’t have this piece of experience.” I’m like, “Yeah, but I think they’re going to figure it out.”

Stevon Cook:

Is that decision… When you come to that decision like how much is it formulaic and how much of it is like instinct?

Charles Hudson:

This is a tough question to answer.

Stevon Cook:

I asked Charles a tough question.

Charles Hudson:

This is a tough question to answer. It’s interesting that you asked that, and I’ve learned more about this by having people on my team and trying to explain to them my thought process. I would say of the 25 companies that we do a year, five of them are pure instinct. Like I talk to the founder… I have three companies in our portfolio where I committed 15 minutes or less into the first meeting. And these were not people I knew before. These were like new people to me. Just like something was vibrating. I was like, “This all makes so much sense. This is clearly a good idea. We just have to put ourselves in the yes column for this one and we can’t really wait.” So the other 15 there’s a pattern. I wouldn’t say it’s formulaic. I mean, I’m really looking for founders that I think have a unique insight on a problem that they’re trying to solve. And that insight has to be a big enough insight that you can build a company around it.

Charles Hudson:

So if someone says, “Oh, you know Zoom doesn’t have this button.” I’m like, “Well, Zoom could build the button. Maybe they’ll have the button in a year. You don’t have the button either. You’re the founder. You’re telling me you’re going to build it. They don’t have it. So it’s a race. Will you build it first or will they build it first?” So I’m looking for people who have an insight on a problem, something they feel like in the world just hasn’t been well solved, that they’re uniquely qualified to address and where I also think they’re understanding of the market landscape that they’re walking into gives them some advantage.

Charles Hudson:

So a lot of times it ends up business model innovations are a big part of our portfolio. Like all of our competitors are ad supported and we’re doing a subscription product. Or everybody else sells this product for a lot of money and it’s complicated. We’re going to make an equivalent product that’s simple and it’s easier to use. So it’s those kinds of things. It tends not to be I’m a scientist and I built this novel technology or I discovered this drug. I’m not a scientist so I tend not to do those.

Stevon Cook:

Okay. Yeah. I touched on something before, like other firms that are making the intention and have that diverse portfolio that’s similar to yours. I mean, I just don’t know them all as well.

Charles Hudson:

Yeah.

Stevon Cook:

But you’re the only one that exists to me that has gone and done it in like a year.

Charles Hudson:

Yeah. I would say we exist on a spectrum. I would say there’s firms like Kapor Capital and Backstage that I think have an even more strong explicit message around the impact that they want to have with the investing work that they do and the audience that they really want to serve. I think Indie.vc, what Bryce is doing is really interesting and special, and I think he’s building a portfolio of founders that looks really different from venture at large in terms of the kinds of business they back, where they’re located, how they think about building and scaling those businesses. I think what Kesha Cash is doing at Impact America Fund is really interesting. She’s a super talented general partner and like more people should know about her work because I think she’s awesome.

Charles Hudson:

But I would say, something you said before, I still think people get hung up on this idea that like you can invest in a broad set of people without sacrificing quality. And I think there’s still a viewpoint amongst some limited partners and amongst some venture capitals that like this whole notion of investing in women or people of color, it has to either be a political statement or it’s a return sacrificing decision that you’re making. And I’m like, “Well, what if none of that is true? What if the net result of restricting capital to a relatively narrow…” And look, to be clear, I just want to be super honest. There are venture firms out there who’s returns are amazing who are bad at diversity. So I’m not going to sit here and say like you can have a successful venture fund if you don’t invest in women and people of color, because there’s plenty of evidence that historically that’s been possible.

Charles Hudson:

Now the question is will that work going forward? I’m pretty skeptical that going forward that strategy is going to work. I have some real concerns just if you look at where population dynamics are going, college graduation trends. Like the people who are starting companies today are more female and more racially diverse, so I think that’s hard to do. But I do think there’s still this vision as to wait a minute, if 98% of people have effectively been locked out of venture capital because they don’t fit the pattern, how do we know that that other 98% of people doesn’t have a bunch of gems in that pool? Like we were very good I think at identifying like, and look I say this as someone who’s also part of the problem. I went to some of the schools and worked at some of the places that are very common in venture. But I think venture capital is very good at assessing two guys who went to Stanford and worked at Google and their idea. We know how to do that very well.

Charles Hudson:

Venture capital as an industry, we’re not as good at analyzing two HBCU founders who are building a product for a predominantly black audience, and I think what we’re really bad at doing, which I think people don’t talk about, is assessing black female founders who are building products for mainstream, non-African American audiences. Like a black woman who is just building a regular old SAS company. Like in venture you don’t see that that often. And so, I just think we’re very clear at Precursor. I think we can achieve very, very good strong economic returns and have a portfolio that on a racial and gender basis that we’re proud of. I don’t think there’s a conflict and I’m unwilling to make a trade off. If I thought this would generate lower returns, I would structure the firm really differently.

Stevon Cook:

That’s so dope. And in terms of the types of companies, right? So you said 250,000 for a year. Is a company that’s too big to qualify?

Charles Hudson:

Yes.

Stevon Cook:

Or do you invest in any company?

Charles Hudson:

No, we have some people where like the capital needs for their business they need $5,000,000 to get started. Generally thinking those rounds are too big for us. We’re a small fund and I’ll the founder right up front like, “Hey, I think you’re raising more money than makes sense for our model.” And it’s important. I tell people like, “I won’t say you’re raising too much money. You might really need $5,000,000,” I would say, “But for our little fund writing a 250K check into a $5,000,000 round can not be our regular business process.” We can do it every now and then but it can’t be like our regular business process.

Stevon Cook:

So for the 30 that gets selected does that happen throughout the year or certain time of year?

Charles Hudson:

We try very hard to make it even and smooth. Two companies every month. Every now and then you do three. What ends up happening is it’s more random than that. I have some weeks where every company I meet I think is amazing. I have some weeks where I’m like, “All these companies are, there’s nothing wrong with them, they’re just not for me.” And so, historically it’s been bunchy. Like we’ll have a month where we’ll find five or six companies that are all amazing and then we’ll have a dry month. I try really hard to keep the firm on an even pace, because if you think about it it’s like we have this big assembly line where you have a bunch of companies that are going to get on it. The companies who get on at the same time tend to get off at the same time. So if you put 10 companies in the portfolio in one month, those 10 companies are going to move together as a cohort for a year and you’re going to have like a lot of work to do. Versus if you do two a month, it’s kind of a steady stream.

Stevon Cook:

Yeah. And back to this point about not sacrificing sort of the mission and the values and believing that the returns are there. In the brief interview that I saw you do, you talked about essentially it being more difficult, and you didn’t say this explicitly, but like you’re qualified, you have the expertise, you have the network, and people aren’t investing. It’s been harder for you to raise. And so you’re kind of like fighting on both ends. Like you’re fighting to get the investment dollars to deploy and then you’re doing it with companies that are having a harder time with their raises. And so, it’s kind of like, what’s that been like?

Charles Hudson:

It’s a really interesting life experience. So what I tell our team all the time is nothing about Precursor was designed to be easy. And like my general view is we’ve encountered a lot of resistance in trying to get the firm off the ground, but I think it’s because what we’re doing is different. And if you’re doing something different, you should actually expect resistance instead of being frustrated by it. You should say, “This is evidence that the thing I’m doing makes people really uncomfortable.” And the thing we didn’t have time to go into in that interview is, I don’t think all the fundraising challenges are because I’m black. There’s things about our model that just don’t fit with what people expect.

Charles Hudson:

So the people who invest in venture funds, limited partners, they have their own worldview about how to run a venture fund. Many of them think the best way to run a venture firm is to have a relatively small portfolio where you own a large percentage of every company that you’re invested in. And it makes sense, right? Like if you own 10% of a company that sells for a billion dollars you get $100,000,000. If you own 1%, you get 10. It’s a lot easier to generate the kind of returns that they want to see if you own a large chunk of companies that are successful. My argument is that like strategy should be stage dependent. If you’re going to invest in late stage companies, the overall pool of them is smaller.

Charles Hudson:

So if you’re like, “Hey, I only want to invest in companies that have done $50,000,000 in revenue,” there’s only so many companies that clear that bar. You should have a smaller portfolio, you should put more money to work because those companies have already proven quite a bit to get there. At the stage where I invest we’re happy if 60 to 75% of the companies we invest in make it to the next stage. That’s pretty good for us. To me that necessitates a larger portfolio because we’re accepting that because of the limited amount of information we have about these companies they won’t all succeed.

Charles Hudson:

And I think the challenge when you’re a black founder or a black entrepreneur of any type, whether as a fund manager or restaurant owner, when things are hard you don’t know how much of this resistance I’m facing is because of my race or my gender and how much of it is like that people just don’t like what I’m doing. And I have to say, there’s been a lot of LPs who have just told me, “We just don’t like your model. It doesn’t fit what we think successful venture firms look like.” And I’ve told them, “Well, by the time we both have enough data, and we’re approaching that point, it’s going to be too late for those people to join our firm.” Like we won’t have room at the end, so to speak.

Charles Hudson:

So I’ve just sort of taken comfort in I believe our model is the right one. I expect resistance because like what we’re doing is kind of unorthodox. And thankfully, with a relatively small fund we only need to convince a small number of people that this is a good idea.

Stevon Cook:

And in order to qualify to invest you have to be a qualified investor, right?

Charles Hudson:

Yeah.

Stevon Cook:

To have money in Precursor and that’s typically like $1,000,000? Like what are the general qualifications for it?

Charles Hudson:

Yeah. We have the accredited investor threshold for our fund. So I won’t go into it. There’s like 15 different ways to qualify. The most common one if you’re an individual is I think you have to have made $250,000 a year two years in a row or have $1,000,000 net-worth, not including real estate assets. Most of our investors in the fund though, are foundations. We have a lot of foundation investors. We have some family offices. We’re thankful that we have some individual VCs at other firms who I’ve gotten to know, who’ve been extremely helpful to us in building out the platform. I just feel fortunate that we’ve had their support, and hopefully like as we continue to prove that this works… The whole reason to do it is I think that we’re going to eventually prove to people that this works.

Charles Hudson:

I’ve been doing it for five years. Internally we can see that it’s working. Like we see the companies that are performing. We can see the returns. It’s not yet obvious I think even to all of my investors that it’s working, but I think sometime in the next two to three years we’re going to start delivering the returns that I think are going to make it unambiguously clear that our model works for us. It doesn’t mean that it would work for everybody, but I am basically only concerned with proving that the way that we practice venture capital at Precursor works for us. If other people want to emulate it, great. But I need to first prove that it works for us.

Stevon Cook:

For the way that the round works, and I asked you to do some one on one for us because we want to be venture capitalists like you one day.

Charles Hudson:

Yeah, of course.

Stevon Cook:

So how big is the existing fund?

Charles Hudson:

So our last fund is $31,000,000.

Stevon Cook:

Okay.

Charles Hudson:

I can’t talk about the thing that we’re working on now because the SCC is very particular about this, but we raised a $15,000,000 fund first an a $31,000,000 fund with our second round.

Stevon Cook:

So the way it works is that you get a bunch of money, you put it out in the streets. I’m using hip-hop terms, you know?

Charles Hudson:

Yeah.

Stevon Cook:

How long does it take to invest down a fund?

Charles Hudson:

A lot of my investors they spend, so spend is an okay word.

Stevon Cook:

Okay.

Charles Hudson:

No. So here’s the deal I have with my investors. I’ll just give you kind of the high level. They commit some amount of money to $31,000,000. I’m like, “Here’s the deal. You guys give me the $31,000,000. I’m going to skim a little bit off the top because I have to run the organization, but don’t worry I’m going to pay you all these expenses back before I take any profits.” And I’m going to go invest in probably 75 companies. We’ll write a first check to all of them. Some of them will graduate to a place where they deserve a second check. We’ll write them a second check. And some of them will eventually make it all the way to IPO on MNA and they’ll return money to us. The way we’re going to make this work is I’m going to take the 31 and until I give you back your full 31 all the money that comes back in proceeds I have to push back out to you.

Charles Hudson:

Like I don’t get any of the upside until I’ve returned all of your money plus the money that I’ve used to run the firm. After that, we’ll split every dollar 80/20. So you guys get 80 and I get 20. So the goal in a venture fund is if I have a $31,000,000 fund and we can somehow turn that 31 into 93, that would be pretty good for everybody that works at Precursor. We’d give them the 31 back and we would split the other 62 80/20 and like people at Precursor would do pretty well. Just to give the audience a sense. We’re doing a 3X. That’s called a 3X gross return, so it’s 3X gross, you back out the original, and that would be a 2X net fund. A 2X net fund is a good fund. It’s not a legendary fund. It’s a good fund though.

Charles Hudson:

And so, like the goal for every venture capitalist is not to do a one and a half or 2X fund. It’s get to a four, five, six, 10X fund, because if you do one of those in your career you’re kind of good forever like financially. Then you’re doing the work because you enjoy it, but financially like you’re good and your kids are good and a lot of people in your ecosystem are good for a very long time. But it’s hard to do a high single digit multiple fund. Very difficult.

Stevon Cook:

Yeah. There’s all this money in entertainment and there’s a lot of what I’ve seen recently is athletes trying to get involved in tech. You mentioned that you have sort of like a smaller fund. What has been the sort of engagement with that community around people behind you?

Charles Hudson:

Yeah. So we have some athletes as limited partners in the fund. It’s amazing. Like they’re so cool. Like I love them. They’re like some of my favorite people. We have some people that manage money on behalf of athletes involved in the fund.

Stevon Cook:

Okay.

Charles Hudson:

We haven’t done as much with entertainers yet. I think it’s interesting, like they just come from a different world and I think their perspective is so different. But the thing I enjoy about speaking with the athletes and entertainers that we get access to, I think VCs think they understand pop culture. Athletes and entertainers understand pop culture. And there’s things you can talk to them about around pop culture that you can talk to them about a consumer app and they’re like, “People aren’t going to use that.” And they’re speaking from a position of a different kind of authority. Not from someone who has seen a 1,000 apps or services, but someone who is like I’m embedded in this world and ecosystem and I know what would work.

Charles Hudson:

The other thing I’ll say is that most of the athletes and entertainers that I talk to they’re hungry to understand how this business works. Like they’re not content to just hand me money and say go do this. They want to learn. They want to learn how to do it themselves. They really do, and I think that’s important piece of the puzzle for them. I think it’s going to allow several of them to find second careers as investors that are maybe as successful as their first careers as entertainers and athletes.

Stevon Cook:

Yeah. I’m just basically trying to say everybody that’s black in entertainment should be investing in Precursor.

Charles Hudson:

We would love to speak with any of them. And look, most of our relationships with people that are entertainers, in most cases they’re not investors in the fund but we pass opportunities back and forth and sometimes they’ll call me and just say, “Hey, I’m looking at this company. Did you look at this? I got a bunch of questions. I have some concerns.” That’s been a fun experience for me to get to know them. And if they become investors great. If they decide they want to invest on their own that’s fine to.

Stevon Cook:

Yeah. I mean, I appreciate that just in your willingness to do this interview you made yourself accessible and available, and I think that generosity is deeply appreciated and I think ends up paying off in the long run. The intention behind what you’re doing is super dope. I’m wondering like where all of that came from. How did you get to be so nice? You’re from Detroit.

Charles Hudson:

Yeah, I don’t know.

Stevon Cook:

So you’re from Detroit.

Charles Hudson:

Well I’m technically from Southfield. Like my Detroit friends would be like, “Don’t claim you’re from the city.”

Stevon Cook:

My bad.

Charles Hudson:

I’m from the first northern suburb. My wife is from the city and she reminds me all the time, “You are not from the city. You are from the suburbs.” I have to be honest.

Stevon Cook:

What was your upbringing like?

Charles Hudson:

I grew up just north of the city of Detroit and I went to public school for elementary school and then I went to private school for middle school and high school. And honestly, going to private school really opened my eyes. I had never seen money like that. Like our family was okay, but like I didn’t see money like that. I had just never been around an environment like that. It was a 300 acre private school. It’s big. It has a lot of land. It’s old. It’s an old school East Coast looking private school in the middle of the suburbs of Detroit. I’ll also just say, it was a great environment for me because it was a good place to be a nerd. It was like a very reading, writing, arts oriented school. And for me it was really formative, just in terms of what I learned.

Charles Hudson:

I don’t know. I just feel like in my life I’ve been fortunate to have a hand full of people do things for me on my behalf without me asking, and it’s put me in places I wouldn’t have otherwise been. And I feel like what’s the point of having social capital or power, whatever you want to call it, and not using it? Like why sit on it? And so I feel like I’m fortunate to have gotten where I am, wherever that is. I’m still figuring this stuff out. I feel like if I can give back and help other people it’s like my duty and responsibility because I wouldn’t be here if people hadn’t done that for me. I don’t know. We try to also inspire that spirit in that portfolio companies that we back.

Stevon Cook:

Which ones do you think right now are going to be like, they are going to knock it out the park in incredible and interesting ways?

Charles Hudson:

Very hard to answer. Many times the answer I give is a function of who have I talked to most recently and told me good news. But there’s… I mean, we have a number of great companies and it’s hard to choose. I’ll pick a couple that I think are interesting. We have a company Incredible Health that’s run by Iman. She’s a fantastic entrepreneur, like an incredibly strong operator. I’m really proud to be associated with that company. With have a company called Carrot Fertility that runs by Tammy Sun. Also a really impressive strong founder. She’s built a great business helping people deal with family planning. She’s like an excellent founder. We have a company called Noyo that builds HR infrastructure. Shannon and Dennis are just an amazing team and I’m really excited about where the company is going.

Charles Hudson:

Then I’ve got a soft spot for the guys at The Athletic. They’ve done a great job building that business. And as a sports fan that’s a product that really speaks to me. The team at Clearbanc is I think doing some fantastic work in terms of making financial products available to entrepreneurs themselves, so that they can build their businesses without having to sell chunks of it to people like me. Then I’m always excited about the most recent investments we’ve made because like I’m in the moment of peak optimism. Like the day you send the money you think everything is going to be amazing.

Stevon Cook:

Right.

Charles Hudson:

So we have 202 companies in the portfolio. Quite a few of them are doing extremely well.

Stevon Cook:

I kind of want to get into what life is like for you in San Francisco and some of the issues that the city is facing. Optimism right now is sort of in short supply given everything that… Well, I guess it depends on who you talk to. Everything that the world is experiencing right now. So that’s a very blessed place to be in. When we first, our first extended conversation was at a mutual friend’s birthday party and we were talking about school. You know that I’m on the school board in San Francisco. And we were talking about education and like issues in the city. I want to talk a little about issues in San Francisco. Then I kind of want to broaden out to just like I want to rift on things related to the black community nationally.

Charles Hudson:

Yeah.

Stevon Cook:

What’s it like raising a family in San Francisco?

Charles Hudson:

It’s such a hard question to answer mostly because I recognize that I’m very fortunate. We live in a good neighborhood in San Francisco that’s very safe, that has a lot of… It’s very family friendly. We have enough space. We have a good childcare set up, so like we have all of the boxes ticked in my household, so we’re lucky. I think if you relaxed any of those constraints it’s hard. I think about San Francisco, I think one of the big challenges is like almost overnight we became a tech hub. Like when I started, and this might be inappropriate to say, when I started in the VC industry in the last ’90s early 2000s as like a young kid, nobody serious had their company in San Francisco. If you were serious you were in Milpitas or you were in Mountain View. You were in some like office park slaving away paying a dollar a square foot in rent. Like the only people who had an office in San Francisco were like design studios, agencies, and people who weren’t really serious about starting companies.

Charles Hudson:

20 years later it’s the mecca and it just brings in on a daily basis so many people who come to San Francisco to work and maybe retire to other places in the evening. It just creates a lot of stress in the city. So I think the thing that’s interesting to me is like I feel like I know and have this really rich black professional community that parts of my personal life, which in a city that has a remarkably small and shrinking I think black population, I feel like it’s weird my son has a lot of black friends through our social circle. More than I had when I lived in Michigan, which is like outside of my family.

Stevon Cook:

Okay, right.

Charles Hudson:

So I think there are things like look we lived in the missions for a while and there were things my son saw when he was little that I would prefer him to not see, but he would have seen those eventually. Like life comes at you fast sometimes. So I guess I’m kind of more of the mindset that I’m committed to staying in San Francisco with my family and like working to make it a better place for more people than I am sort of throwing up my hands and saying I don’t want to deal with this, this is too much.

Stevon Cook:

What do you think about the direction of the city right now?

Charles Hudson:

I’m actually really optimistic. Like I moved here from Michigan. Detroit shrunk my two thirds roughly. Cities are not designed to shrink, right? There’s lots of things that work for 2,000,000 people that don’t work for 700,000 people, like transit and basic services. I think cities also aren’t meant to grow as fast as San Francisco has grown, and to experience that kind of pressure. We have a lot of unhoused people. We have high rent. We have like clogged transit. Like we have growing pains. Like everywhere you look in San Francisco, growing pains. And I’m an optimist that we can fix these things. I really am because I think San Francisco is such a special wonderful place to be. People will stay and fight to fix it.

Charles Hudson:

I think there are some places where people are like, “I’m out of here. This isn’t a great place to be. I don’t want to be here.” And I think it’s hard to fix cities when there isn’t like a natural draw. But I think this is a place worth fighting, and I think we can solve some of the challenges with education, which you know way more about than I do. We can fix some of the things around housing. And we can do better and I think we will.

Stevon Cook:

Is there any conversations around activating venture capital to address some of the city’s challenges?

Charles Hudson:

I think venture capitalists have like a fraught relationship with government.

Stevon Cook:

Yeah.

Charles Hudson:

Which is like some companies are designed to directly challenge government’s provision of services, whether that’s fair… I think if you look at what we say in transit. What we saw were like private companies that in some cases decided to compete with the city in transit and in some cases decided they didn’t like the legal and regulatory landscape and decided to just change it or ignore it. And I think that like some level of disruption can be healthy, and outright flaunting of the laws and rules is not something I encourage our portfolio companies to do.

Stevon Cook:

Right.

Charles Hudson:

So I think like venture capitalists are very good at I think identifying market based solutions. Not every problem we have in San Francisco is like the solution is like a market efficiency argument. There’s somethings that maybe don’t fit that frame and maybe as venture capitalists we should be willing to admit we’re not experts in solving every problem.

Stevon Cook:

I hear that. We’re going to close out in a few minutes here. You’re a very, very busy guy and you have a family and all of that. And I want to talk a little bit about the broader things related to the black community. One of the big things I’ve always harped on is the importance of ownership, and when we first spoke I was talking to you about Master P because I love Master P.

Charles Hudson:

Yup.

Stevon Cook:

If he invests in you, if you know Master P, ask Master P to come on the podcast if he’s a friend of yours. I bring him up because I think that you represent that mentality in the work that you’re doing. When I see people striking out on their own versus working at a company, I really root for the person striking out on their own, and this whole idea of like buying back the block or investing in our own or like trying to uplift our community, how do you think about those sort of like ideas and what do you think is needed in our community to activate it more like what you’ve done?

Charles Hudson:

I’m still learning, but I think if you zoom out and think like, “Well what were some of the basically stated goals of structural racism?” It was to deny black people the ability to accumulate wealth. And you think about things like redlining and you think about some of these other policies and you compound them over time, there’s a reason that we’re behind. And I think this notion that it’s purely a lack of effort is like laughable if it weren’t so sad. Like there were specific policies designed to keep black people out of certain professions, out of certain neighborhoods, out of certain industries. And you can’t make up for 400 years of structured elimination of access overnight. But I think ownership is really important. And this is also I think part of the thing I’ve enjoyed about talking to the athletes and entertainers. I think they understand that like owning their brand and owning them…

Charles Hudson:

Look, as a Pistons fan it’s hard for me to be a big Lebron James fan, I’ll be honest. I think he’s the prototype. I really do. I think he’s very smart about businesses. He’s very smart about his brand. And I think he’s going to end up owning a much bigger share of the value that he creates than maybe previous generations of athletes. And so, when I think about the black community I think one of the big challenges that I see is I meet lots of talented black executives who I think would make incredible founders, incredible start up leaders, but they’re in positions that pay well in the short term and that are prestigious, but may or may not give them a real path to building generational wealth.

Charles Hudson:

I think that’s a hard conversation because a lot of them worked very hard to get where they are and the thought of leaving a prestigious visible position to go work at something that’s less prestigious and less visible, it’s a hard trade to make. It really is. But I think that’s kind of what we need. Like I could have stayed at my own firm. It’s a good firm. The returns are very good. The pay was good. And I would have done well. But this is like a chance to build something that I think could like really have a different kind of impact on my family and other people’s families. I think the same thing is true of being a founder. And look, my real hope is that some of the black founders that we’ve backed are so successful that it changes people’s mindset about what they’re missing out on. Like I don’t think it’s going to change the whole thing.

Charles Hudson:

When I came to the valley in the late ’90s a lot of people were like, “Well you can’t have a South Asian person as your CEO. Customers won’t buy from them. It makes them uncomfortable. You got to have someone more appropriate as the CEO.” Then people started realizing like, “Wow, there’s a lot of Chinese and Indian American and immigrant entrepreneurs who are just crushing it and if we like insist on this policy we’re going to miss out on a lot of great opportunities.” I think we’re in like the second phase of that with female entrepreneurs. People are realizing, “Wow, female entrepreneurs are great.” They’ve always been great, you just didn’t fund them. It’s not like they suddenly became great. They’ve always been great. And my like real expectation is we will get there on race but I think it’s going to be slower.

Charles Hudson:

So I really want us as a community to think about wealth building because I think that’s how you have a multi-generational impact and like we live in a capitalist country and wealthy people have the ability to influence institutions in unique and special ways. And I hope that like once we find ourselves in positions of authority and wealth we don’t forget about our responsibility to the community.

Stevon Cook:

Is there an influence or a set of influences that you say would kind of help you get to that place? Because you said you had a comfortable position, you stepped out. Is there someone you can point to as like when I heard, when I learned from this person I was like, “I got to do it. I got to make this real?”

Charles Hudson:

There’s two. There’s a couple of people. One is like Mitch and Freada Kapor helped me a lot actually. For a long time I was like, “Racial justice is just not my thing. I have enough problems already as like a black professional trying to make it in the world. I don’t need more stuff to work on.” And spending a lot of time with them helped me understand like sometimes the work chooses you. You don’t choose it. It chooses you. And I was like, “Well, this work has chosen me. I can’t not do it. It’s like my responsibility as one of a small number of people who are in a position to do something.” I had a chance one time to talk to Robert Smith on the phone about Vista, and what he’s done with that firm to me is like really inspiring as someone who’s in an investing role. It was really just like eye opening and like inspiring. I don’t know a better word to use than that.

Charles Hudson:

Those are probably two people who’ve had I’d say an out-sized impact on me just in terms of like… In one case it was an hour phone call. It wasn’t like we have a some long relationship. It was very brief but impactful. And that’s the thing I always remember, it that like we touch a lot of people at Precursor and sometimes an hour that we spend with someone could have a really big impact on that person or that individual and how they think about the world and how they think about what’s possible. And every year I meet new people how have like an impact on my thinking and an impact on I’d say my team, like my two teammates have like, they push me really hard to make Precursor a better place and it wouldn’t be as good of a place to work, we wouldn’t be as good at investing if I didn’t have their sort of constant pushing to make us better.

Stevon Cook:

Man, I’m going to ask you a few final questions.

Charles Hudson:

Yeah.

Stevon Cook:

Quick rapid fire questions.

Charles Hudson:

Okay.

Stevon Cook:

And then I’m going to let you go.

Charles Hudson:

Okay.

Stevon Cook:

All right. What was your worst moment in business?

Charles Hudson:

Shutting down my own company when it failed was like not fun. That’s like the worst for sure.

Stevon Cook:

Who’s going to win the presidential election?

Charles Hudson:

Anybody who runs against the current president.

Stevon Cook:

You’re into hip-hop?

Charles Hudson:

Yeah.

Stevon Cook:

Who are your top five rappers?

Charles Hudson:

Whoo, oh God man, that’s like I’m going to get roasted no matter what I say. Nas, Talib Kweli, Kendrick Lamar, Eric B., and Rakim.

Stevon Cook:

That’s five, but…

Charles Hudson:

Yeah. Well yeah. [crosstalk 00:45:32]. I’ll say Rakim. We’ll go with it. And then I probably would say… I don’t know. I always struggle with this question because then I would say like The Roots as a group, because then what ends up happening is like in an hour I’ll be like, “You know what I should have said?” So it’s hard. It’s also a no win question, so.

Stevon Cook:

Yeah. Do you have a motto? Last one. Do you have a motto?

Charles Hudson:

One thing I tell my team all the time is like, “There’s a lot of things in life we can’t control. The one thing that we can control is the attitude we bring to our work every day.” It’s the one thing that is totally under our control. It doesn’t mean that outside influence can’t impact your mood, but this is something I do actually believe, that we can control the attitude. People are like, “You’re always in a good mood.” I’m like, “Not always. Most days.” But there are some days it’s very hard. It’s take real intentionality to say that in spite of everything that’s happening I’m going to approach my work today with a good attitude and I’m going to bring my best self to this work, in spite of everything that’s happening around me. And some days it’s hard, especially lately.

Stevon Cook:

This is Charles Hudson on Cook On Quarantine. I think I can retire now. I’ve talked to one of my heroes I really wanted to get on the podcast. I appreciate you brother. Thank you for the time today.

Charles Hudson:

Thank you so much.

Stevon Cook:

I want to put up on the screen so people can see his Twitter account. He has a website where he recently started blogging again.

Charles Hudson:

Mm-hmm (affirmative).

Stevon Cook:

So we’re going to keep him on hook, so keep spreading the good message so we can learn, observe, and hopefully follow in his footsteps. Thank you for the work you do, for the values you’re representing. Peace, peace and we out.

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Stevon Cook

Consultant: Strategic Advising & Recruiting | SF Board of Education | Cook on Monday Morning Podcast.