How Jon Staenberg Nets 35% ROI with Search Funds

Jon: Don't go into venture until you've actually got a skill. If you ask a venture capitalist what's their favorite deal, it'll be the last deal they did.
There's often a misconception of finding funds and the devil dipping your fees and what is search?
People thought, let's work our butts off. Let's change the world. That's insane. Don't go and do a search fund if you want to go to a cocktail party and have the sexy conversation. Buying a company is hard. Getting a seller to sell is hard. It's messy. And so one thing I would say to founders is,

Jason: Everyone welcome back to Fundraising Demystified. Today we have Jon Staenberg with us, founding partner of Agate Hound Fund—also short for Always Having Fun, as I just learned. Welcome to the show, Jon.
Great to be here, Jason.

Jason: So Jon, you join us from back in the day coming from Stanford Business School, going early days into Microsoft and just accelerating your career, then going into venture. And now, last couple of years here, transitioning more towards search funds. So you have a very interesting story, background. And I think one thing that I want to start with for our audience is: you were in the early days of Microsoft that gave you access to probably all kinds of different things. Like, you always talk about PayPal mafia and Airbnb mafia—here, essentially kind of Microsoft mafia. Just give us a little insight into those early days of Microsoft and how that led you to going into venture.

Jon: Well, it's interesting coming out of Stanford Business School where I had a lot of exposure to Silicon Valley and entrepreneurship in general. I kind of knew that I always wanted to do venture, but someone gave me great advice. They said, don't go into venture until you've actually got a skill. Work at a company for a while. Get beat up a bit. Learn to live with your decisions.
I've had to hire and fire, etc. He said, do that for five years and then go into venture and you'll be a better venture capitalist. And I thought that was terrific advice. And five years—almost to the day—always knowing that my eyes were on that prize, I left Microsoft...

Jon: ...But Microsoft was, I would use the word thrilling, adventure for me. It was way beyond, wildly beyond my expectations in terms of engagement and inspiration and exciting. And today, 50 years after Microsoft was founded, Microsoft is as relevant as ever and continues to be an unbelievably influential and outperforming big company. And it's kind of amazing to think about those early days. It's funny to think also how they hired back then... ...which people don't seem to do as much of—although with AI maybe we will go back to this, that's my prediction. They hired not by skill set, they hired by saying: how competitive and tenacious is this person? What's their critical thinking skill? How do they attack problems? Because if you get that combination, you'll figure stuff out.
And as we go into the world today, looking forward, figuring stuff out is maybe our greatest asset. They want to look at: where have you succeeded? Where have you failed? Where have you been on teams, etc. But coming in to say, "I'm a sales leader"—I don't think that's going to be as important going forward.

Jon: One thing I would say to founders is: constantly work on your ability to be curious, to figure things out, to try and understand the world where it's going. And that's what Microsoft was about. I mean, I didn’t really know much about computers. I didn’t really know much about marketing. But we figured it out. The other piece was, and this is still from day one when I was a kid, I do think about entrepreneurship and founders and drive. The retire early movement for the young kids is a thing, but at the end of the day, I’m sure if you look at any successful great leader or founder, they didn’t work 40 hours a week... ...I have lots of friends who are at these big companies. They’ve kind of checked in, checked out. Got the free meals. Don’t work weekends. Come in a couple days a week.
And I don't think that's what it takes to be a founder, an entrepreneur, or to make a startup work. We'll see what happens going forward. But another prediction here, because I’m thinking about AI so much: companies are going to start assessing employees differently. Cultures are going to change. People will be called on to do the work of two, three, four people as tools scale.
That won’t take less time—it’ll take more. Because it'll be fewer people. So what I’m talking about is, I went from Silicon Valley to Microsoft to venture capital. And venture, three decades ago, was also a place where people thought: let’s work hard, change the world, create value. That felt like a natural extension from Microsoft to venture.

Jon: For 30 years I did it and felt like I had the best job in the world...

 

Jason: Well, let’s talk about some of the bets that you made in the early days. The late 90s, dotcom boom—what are some of the big bets you’re most proud of from that period and your venture career?

Jon: I’ve done a number—300 plus, I believe, is the number. And honestly, I’m not sure. If you ask a venture capitalist what their favorite deal is, it’ll be the last one they did. It’s new, shiny, hopeful. But it also means it’s hard to know for sure which deals will work. I’m happy with some of the notable outcomes, but there were plenty I backed that didn’t return capital.
I hope I learned from the ones I didn’t invest in too. Someone told me on a flight this week they passed on Amazon at a $5M pre. I said, “Don’t worry. Me too.” I had a check written. Didn’t do it. People say, “That must kill you.” And I say: it doesn’t. I’ve been lucky. Just the fact I had the chance is pretty amazing. And hey, we could all have bought at IPO or after it crashed and done well...

Jason: What’s the best way for people to reach you if they want to talk about this more?

Jon: agathound.fund is the site. Agate is a gem, and I grew up with Irish wolfhounds—hence the name. Email is john@agathound.fund. And you can share my contact info. I'm enthusiastic about this and think the next decade will be really fun from this perspective.

Jason: Thanks again for joining, Jon.
Jon: Thanks, Jason.
Jason: And thank you all for tuning in. I’m Jason Kirby, Managing Director at Thunder. If you’re raising capital or selling your company, check out help.thunder.bc. And if you liked this episode, subscribe and share it. See you next week.