People are always asking Ross Buhrdorf when he’s going to quit his day job as chief technology officer of HomeAway to focus on his side interest — investing in startups.
But Buhrdorf, who arrived in Austin from Lincoln, Neb. in 1985 to study engineering at the University of Texas, says he has no desire to leave HomeAway, which he joined in 2005, when it was five months old.
Since then, the Austin-based company has become the leader in the online vacation home rental industry and went public in a successful IPO two years ago.
Meanwhile, Burhdorf has become a go-to mentor for Austin entrepreneurs. He has invested in nine companies including Outbox, an online manager of postal mail; Crowdtilt, a group-funding platform used by individuals and nonprofits to fund projects and Embarkly, which runs an online marketplace for pet boarding.
He’s also a partner and investor in Austin tech incubator Capital Factory, where he advises startups on turning their ideas into viable businesses. We recently caught up with Buhrdorf to get his thoughts on today’s Austin startup environment.
American-Statesman: You have invested in nine startups. What do you look for?
I look for three things:
1) A good idea. Is it an idea that consumers and I can easily understand and use because it adds obvious value?
2) The founder(s) and the team. Are they folks without egos and willing to accept feedback who I can easily work with? Are they hardworking and capable of turning passion, knowledge and experience into a business? Can they go out and get the initial customers needed to validate the market and further shape the product based on feedback?
3) Finally, I want to know what other investors think of the business idea. It’s a good litmus test if there are other investments in a particular startup. However, this is not the most important factor for me, and if I am the only one making an investment it’s because I’m very passionate about the idea and convinced of No. 1 and No. 2 above.
What’s your advice for entrepreneurs who are raising money? Where do you start?
I believe entrepreneurs need to start with incubators and also seek funds from friends and family. Angel investors are increasingly easy to find, but the ease of raising money is going to be directly correlated to the number of customers and revenue you generate.
The trickiest part is raising not too much and not too little capital so that you don’t have to give up a lot of equity. Then once you have a proven business model, you can ask for larger sums of money at a better valuation and/or fund it yourself.
This approach to funding is possible now because it does not take a ton of money to start a company. Early in my career it took millions to get a startup off the ground. Now it takes less than a million to start almost any idea; primarily because of the access to cloud-based computing and a multitude of open source and SaaS (software as a service)-based services that you can build a company on.
One topic that frequently comes up in startup circles is a lack of early-stage capital in Austin. Do you see that? What can startups do to leverage the resources that are here?
I don’t buy it. There is plenty of money in Austin. Apply to Capital Factory or Techstars, or join Tech Ranch or any of the other groups that meet every week in Austin and you will gain exposure to investors looking for great ideas backed by smart entrepreneurs.
How do you decide who to mentor and how does the relationship work? Is it a formal weekly meeting, or more on-the-fly advice?
I only mentor those who come seeking my advice. And sometimes if I invest in a company and the team comes to me for guidance, I decide if I can actually help. I recognize that there are times when I am not the most qualified person to give advice but I can certainly connect an entrepreneur with someone who is stronger than me in a certain area and better suited to mentor the team. If, however, I’m the best fit for the team, both personally and in terms of the experience I bring, then I will set up a regular visit and consistently provide feedback.
Much of the mentoring I do is centered on answering one-off questions or connecting entrepreneurs with the right people who can help. Many times I end up giving folks what I call directional advice: go in this direction and do not go in this direction (often based on personal experience, positive or negative).
You’ve said that your best talent is building teams. What makes a good team?
Honesty, passion, humility, intelligence and dedication. The leaders of my teams must model these traits. If they do not, the team becomes dysfunctional over time.
The process for building a team starts when I am recruiting. By modeling the traits I look for during the interview process, it’s easier to identify like-minded people. The questions I ask are also important for filtering for those personalities.
For example, I ask candidates to tell me about one of their greatest work experiences and one of their worst work experiences, in an attempt to have them recreate those moments. By having them tell me about experiences from their job history I can better understand what really makes them tick.
What’s happening in Austin tech that’s exciting to you?
I continue to see growth in the Austin tech industry and think there are many interesting trends, including cloud. This is the single biggest change in technology in my lifetime and it is still at its infancy. Everything will be in the cloud and everything will be networked. It’s a scary yet invigorating development. And then there is mobile. There will be more mobile phones on the planet than people in 2014 — enough said.
There is a renaissance of startups in Austin. I am seeing more startups than in any other time in my 30 years in Austin and it seems there are an increasing number in the consumer space.
However, the biggest differentiator for Austin’s tech scene is the city’s culture and creativity. Austinites reserve time in their schedules to play music and create art; their ability to think creatively translates to their jobs. For example, at HomeAway half of my direct reports are rock stars – literally, real rock stars who are in bands that perform in Austin. Ultimately, the city’s vibrant culture is what makes the tech scene unlike any other.