After working at Costanoa as a Venture Partner for the past two years, we are thrilled to announce that Mark Selcow has been named General Partner. Martina Lauchengco, Operating Partner, sat down with Mark to discuss what he learned from founding two companies (BabyCenter and Merced Systems), what he looks for in founding teams and how he assesses them, and why a drummer in a band is so important.
Watch the full video or read the lightly edited transcript below.
Martina Lauchengco (ML): Mark Selcow, you are finally joining us as a general partner at Costanoa. We’re thrilled to have you be part of the team. Tell us a little bit about your background as an operator and your journey to run two companies.
Mark Selcow (MS): I started my career in a different industry. I worked in biotech industry for a while. I was a pre-med, supposed to be a doctor and really enjoyed that field but I had the bug and I didn’t wanna start something in life sciences because it was big bad slow high capital needs. I wanted to do something that was gonna be quicker. So I co-founded two companies over the course of 17 years. The first was BabyCenter, it was a consumer internet company in the late 90’s. It was and still is the largest parenting resource online and in a mobile environment. It grew to about 17 million in revenue and we had nearly 300 employees at the time that we sold. It’s since been subsequently sold and is currently operated by Johnson & Johnson. It remains a really large and trusted resource for parents. That was really satisfying experience but it went by too quickly.
So started another company called Merced Systems after that in a very different business. It was performance management for high turnover workforces, mainly in financial industry back office, call centers, field service and sales organizations. Grew that over the course of nearly ten years to almost 70 million dollars in revenue, 20% EBITDA margins. A team of 275 people with offices around the world and sold that company to a great acquirer who made a good home for the people and products. So it was from those experiences and the learning, the scar tissue, the esprit de corps of working with teams of people that made me wanna do it again. And I wanted to find a right way to do it again and I found that in my new career in venture capital.
ML: You represent one of the most glorified archetypes in Silicon Valley, the CEO founder. What do you think you’ve learned having sat in that seat and for those that are aspiring to be or sitting in that seat, when do they know they need to bring on board another partner to help them succeed?
MS: I think it’s a common archetype for very good reason. If you’ve sat in the seat, if you’ve done the job, you can just be intensely helpful to an entrepreneur and a CEO. I’ll give you a few examples, in the early days of Merced Systems I was the sales force. I cold called. I closed all the initial business. I hired the first reps which were a distinctly different profile. Then when we were larger, made the decisions around when we would need a VP and who that VP should be. So, if an entrepreneur is wrestling with how to sculpt their sales organization, I not only have advice, I can tell them what my experiences were. There are countless other examples.
In the abstract, people give advice but if you’ve actually done it, you can work with an entrepreneur, I believe and let them know the mistakes and the successes that you’ve had. That’s what I love to do.
ML: Speaking of mistakes, if you had a magic wand and had a do-over as CEO in either one of your companies, what would you do differently if you had the chance?
MS: There are too many small mistakes to mention but I focus on the big ones. The big ones happen in the important areas. They’re around people and they’re about market selection.
So I’ll pick one, we sold BabyCenter too soon. We had intense pressure from some of our investors to do so. It was 1999, the markets were hot, we had a couple of different acquisition offers and I didn’t have the presence or the confidence to push back and say it was the wrong thing. So I regret having done that. But, I’ve internalized that and when I’m working with entrepreneurs, I will be really sensitive to when it’s their time because it’s their decision not mine, as an investor. So, that’s one.
Another one that comes to mind is terminating a senior executive in a way that I’m not proud of.
ML: Mark before you joined Costanoa you had some angel investments in companies like Greenhouse and as a venture partner you’ve brought Quizlet, Skedulo and Springboard to the company. What do you look for in companies that you invest in?
MS: I look for great markets where there’s an opportunity to do something meaningful. Companies that are developing product approaches that fit those great market opportunities. And really critically, and this is where I bring my experience having been in the role to bear, founders and CEOs who I think are really well suited to successful company building.
ML: Let’s talk a little bit more about that because how someone appears and even a series of meetings versus how they’ll actually function in this seat can be wildly different. What do you look for in that founding team and how do you assess it?
MS: The CEO role is an intensely challenging role because it is so variable in what the needs are of it. A couple core characteristics that really matter and that I’m sensitive to are, the person needs to have great judgment. They need to have great self-awareness. They need to have enough energy and charisma to lead the organization. They need to have enough substance in communication skill that great people would wanna work for them. All of those matter.
I enjoy first determining where the gaps are and helping a founder and a CEO in the areas where they need extra support and coaching. If that person demonstrates judgment and self-awareness, there can be a really great relationship and a great return on that coaching. They don’t have to do everything well but they have to see where the weaknesses are so they can augment the team with other great hires.
ML: You’ve built companies in some really different eras like the 90’s boom time and then the early ots, how do you keep yourself relevant and what trends do you think are really exciting in technology now?
MS: I try to study every market that we’re looking at to take away what I can. Not only to help make better investment decisions but to be a more supportive board member and a more supportive adviser to the CEO.
Now, on what sectors that I think are interesting, I’m a business process person. I happen to really be interested in vertical industries like healthcare education and finance. I’m very focused on sectors of fintech and in particular with my business process orientation, gritty operational parts of fintech, like back office and sales channels and processing environments that are underserved by technology. And where there’s some really great opportunities.
I have an operational orientation. So, I’m really interested in operational use cases for robotics and AI. That’s an area that I’m investing time. I’m very interested in manufacturing and logistics in distribution opportunities for robotics and I’m spending time there. And with my healthcare background and with the under-penetration of technology and healthcare, I’m always looking for opportunities in healthcare.
ML: This has been a hot topic for some time now but how do CEOs create a workplace in which everyone feels included and people behave appropriately and how do you be the prime example and also chief enforcer of a healthy culture that makes sure that everyone’s behaving well and that it’s a great place to work?
MS: This is something I’ve thought a lot about. The companies that I led were nearly 300 people each and when you have organizations of that size, things come up. I’ve lived firsthand what confusion and action and inaction can happen and what happens when you handle it well and poorly.
So, I’d say this, it starts with you as the founder and the CEO. It really is your responsibility at the culture setter and the establisher of the norms, what’s acceptable and unacceptable to be incredibly clear. And when I say it starts with you, it should start with your own assessment, including studying your own biases, conscious and unconscious, so that you’re aware. Number one, make sure that you understand where you are. Number two, that you’ve established a set of policies that are clear, communicated and are absolutely followed up and reinforced inside the company. So, that means, for example, if something comes to your attention and it seems even minor, you investigate and you ensure that there’s a process and a program for looking to make sure that, number one, you get to the bottom of it.
Every party feels that it’s been fair and it’s been transparent, irrespective of the outcome from it and you let nothing go by that doesn’t follow that process. You have to live it and reinforce it. Then finally, should something occur that’s a violation of the standards that you set inside your company, you absolutely act on it. It doesn’t matter if that person who you’ve now learned has done something that’s inappropriate is super valuable to the company, you act. Those are the sorts of things that are your responsibility and really matter.
ML: You’re a drummer in your copious spare time, in addition to being a father of three. I remember this came up at one point when you were assessing one of the CEOs saying like this guy’s a drummer, and that meant something to you. What do you look for as signals and what does something like that give you that someone else might miss?
MS: The role of a drummer in a band is to be the establisher of tempo and to make sure that the downbeat, the one in every measure, is really firm. It’s much like setting the culture in a company. The second role of the drummer is to establish the feel of the song. Drummers can do really subtle things and it can feel really differently and it’d be invisible to people in an audience. So, you can think of the drummer conventionally as the backbone. That is a model for being a CEO that I really believe in.
ML: When someone’s meeting you for the first time and they’re like oh, what’s my icebreaker with Mark, besides drumming, what else should they talk to you about?
MS: If someone wants to pique my interest they should ask me about music and drumming for sure. But, mostly ask me about company building cause that’s what I am all about. I’m not so much a trend picker when it comes to venture capital. I care intensely that it’s a good idea in a good market but I really believe if you pick good product fit and good market and you’re the one that builds the best company there, that’s the model that can really prevail. And that’s why I’m here — to do that.