Eric Tarczynski is the co-founder of Contrary, a venture fund that is solely focussed on backing the best startups and technologies coming out of universities across the USA. Some of their limited partners include the co-founder of Twitch, co-founder of Tesla (the one that’s not Elon Musk), founding engineer of Facebook, and co-founder of Reddit among others. They are working with 100+ Venture Partners across the nation like Stanford, Brown, Columbia University, Harvard, MIT among 95 others.
In 2016, he embarked on a roadtrip to visit 55 schools with one purpose: meeting the most connected students in the entrepreneurship communities at each university. The fund works with student investors at each university to find the best startups across the nation. After Eric started a couple companies in university, he worked as an early employee of YC alumni-company, Kamcord (which was later acquired by Lyft) before founding Contrary.
But why university-specific startups?
When embarking on his startup at Northeastern University, they were able to raise $15K or so in grants and they set on their way in growing the company. However, they came to the realization that there was a fundraising gap. Founders could get the $10,000-$25,000 easily but there was a huge gap between that bucket and the seed/Series A fund of $1-1.5 million. Contrary seeks out the best startups coming out of university and invests $50,000-$200,000 checks, helping companies make the jump to seed and Series A funds.
What are your reading habits like? How do you find the time to fit books into your life?
I wish they were better if I’m being honest. The only time that I get to read books is usually just on long haul flights across the USA or internationally. I find that this is still one of the few times in life, in general, where you can disconnect. I mean, now there’s Wi-Fi on a lot of flights so that’s even tougher to do but I’ll still take the time to turn off. It’s usually on longer flights where I dig into a book that I’ve been interested in reading. I mean I definitely think that I should do it more but there’s this push and pull.
It takes a lot of time to read a book and it becomes difficult to justify spending two hours reading a book or two hours building your company; that’s something where I don’t know the right decision. I’ve chosen to mostly just focus on building a company in the lieu of reading books but I don’t feel great about it. That’s the mental trade-off that I’ve had to think through at least.
You’ve mentioned in previous interviews that you don’t claim to know much about what it takes for startups past a Series A fund but you know what it takes at the university-level entry point. So what does it take? What is the difference between building a business specifically at the university level vs. when you’re outside of school?
In the US right now, there’s been just a tremendous growth and interest in all things university entrepreneurship over the past decade. If you’re someone who has an idea, it’s pretty easy now, to grow and get access to what some people call, prototype capital. This is the capital that you need to get up and running which is somewhere between $1-5K. That is all free from your university. Almost all of the major research universities in the USA have something like that and so, that should help you go from zero to one. It helps you get from having nothing to actually having something, getting some initial people to test it, having a physical product, or whatever it might be.
I think from there, it’s really a factor of how committed you are on the individual level and how much you really want to do this. I think college is unequivocally the best place to start a company. The opportunity cost is so low… it’s literally just not being able to hang out with your friends. That is the only opportunity cost.
For some people, that’s actually really valuable and for some, that’s why they don’t do it [pursue university entrepreneurship]. But for myself and others like me, why would I not try and start something in school? You have resources, you have stability. Someone is paying, whether it’s the US government or your parents, somebody is at least temporarily paying for your college so it’s perfect. It’s such a good testing ground.
Whereas, once you get out of school, the bar is a lot higher. All of a sudden, your peers and friends start getting jobs and you might be working as well. Then, it becomes a nights and weekends kind of thing. You find that people really start getting complacent.
If they’re working at Google or whatever, it’s like “Wow, honestly making $200,000 a year and working 10AM-5PM… I’m okay with that. I don’t know if I want to start going on the ramen diet.”
So those are some of the core differences and just things that we see. The ability and the opportunity to at least test and work on projects in school, is unparalleled. Whereas, once you get out into the real world, you really, really need to want to start something because all of a sudden, you have all these opportunity costs. Then, as you get older, the opportunity costs only increase; you have a family, or mortgage. At least in your early 20s, your opportunity cost is probably just saving.
Since you’re focusing on university students, what do you think about the notion of the split attention span with university founders. Like saying, maybe they’re not so committed because they have these academics to focus on as well. What is your perspective on that?
I think that’s number one, true. Number two, we need to filter for things like that.
There’s a lot more noise at the university level not only because it’s easier, but also because it’s more popular than it was 5-10 years ago. What I think that means for us as a firm that invests in university-started companies, is that we set the bar super high. We’re not looking to invest in someone who started working on something like two months ago or unless they’re truly brilliant and we’ve known them for a very long time.
For the most part, we’re investing in people or teams who have been working on this for a substantive period of time and have really proven themselves in some sense. There’s no set number of years.
Either they already have something out there in the market that people are using, maybe people are paying for it, maybe they have some really interesting core technology.
Let’s say it’s a space related company, or one of portfolio companies who are 3D printing rocket engines - in that case, they’re the first human beings to ever 3D print and launch a rocket, entirely. They had already been working on the technology and the idea for two years. They were still in school with the right checkboxes in experiences working as interns at SpaceX and Northrop.
It was very clear to us that we were probably going to have to drag them out on a stretcher before they stopped working on their company and those are the kinds of founderst that we typically look for. We’re not looking for the person who just put an idea together haphazardly and pitches us on it. We’re looking for real outliers and that’s art of the reason why we’re at 45 schools across the country because there aren’t too many like them [Additive Rocket Corporation]. So we need to find them and we need to invest in them.
Something that we’ve been reading a lot about with some of the other VCs that we have on Wisebooks who are female, like Melinda Gates and Ann Miura-Ko, is that there is a huge gender imbalance with a disproportionate amount of VC dollars going towards male founders because there are simply put, fewer female founders. So, what do you see in the space in terms of female founders in student environments? Does Contrary have any focus on female founders and VCs?
So it’s funny that you mention Ann. She’s actually been a super helpful mentor to me.
To answer your question though, the dynamics from a male to female founder ratio are probably exactly the same in the university ecosystem compared to what they are in the “real world”. It’s almost entirely male-started companies and that’s the sad reality. It’s beginning to change and I think a lot of it is very structural and cultural so it’s going to take a lot of time. The place that we can help and do our part is with our Venture Partners - so our scouts on campuses.
Most people learn about VC for the first time when they’re in college. Most people know of entrepreneurship when they’re younger like the lemonade stands and garage sales and things like that. The entrepreneurship concept is taught younger but most people, including me, had no idea what venture capital was until college.
I think we have a very real responsibility and obligation to make sure that a large percentage of our venture partners are women because we are in some sense training the next generation of venture capitalists who will be VCs in 5, 10, 15 years from now. So if they’re all white dudes, like me, then in 15 years, it’s just going to be the exact same thing with most VC dollars going towards white males.
Right now, about 25% of our venture partners are women which is not great, but we have an internal goal of getting that to some 25-40% by the end of this year’s recruiting. Then, of course, we’d like to get that to 50% as soon as we can. We’re being really, really deliberate about that internally and doing our part. I think if there’s one thing we’ve learned over the past couple years is that it’s tough to change the entire system. That is going to take several years.
What would you say is the best and worst piece of advice that you’ve received that you can remember off the top of your head?
I think the worst advice that I received was the many, many people who told me not to do it or that I should do it this way or that way. All of which are very different visions from what we’re actually doing now. Thankfully, I just ignored those people. I think the hardest part with advice is you actually need to know what advice to take and what not to take.
It comes back to having tremendous conviction in what you’re doing and deeply understanding the space. And be weary of passive bystanders who are giving advice because people love giving advice. I think most advice is pretty bad so I generally don’t seek advice on big broad topics.
What I will do, for example is I’ll go to Ann and ask her, “what do you think about this specific thing that’s in this specific space, that you know about? What do you think about this specific aspect of portfolio construction?” She can give me great advice on that, which is what I value.
However, the high-level advice from questions like, “what do you think about crypto? What should I do there?” Those answers are just awful advice. It’s not advice, it’s just talking.
I think the best advice I’ve learned along the way is…that if you’re working on something that you truly, truly believe in (and maybe this is cliche and far easier said than done), literally never give up. Like do not stop working on it.
I’ve come to believe pretty strongly that, if you work hard enough, persist, and just continue to exist, not only will you outlast the competition but you’ll also find a way to make your business succeed. I also think that definition of success is very relative. Frankly, maybe you would have been, over a 10-year period, better off as an engineer who would have made roughly the same amount of money without working nearly as hard. But let’s say I succeed and build something that exists, then that’s mine. I strongly believe that you can do that primarily through grit and the inability to give up.
I think a lot of large success also has to do with externalities like timing and factors that are just outside of your control. The difference between, maybe a $10M company and a billion-dollar company, can be a lot of luck.
It is a bit cliched, and I also think it’s far, far easier said than done. And when I say never give up, I mean literally. It’s been 2 and a half years for me and I pretty much still work 12 hours a day, every single day, including weekends and I feel like I’m just willing something into existence. It’s something that I don’t think most people have in them but fundamentally, that’s what it takes, in the early days at least.
What happens when you hit those bouts of failures? Regardless of conviction, it can be hard to be convinced that the idea is still good, if after a year or so, things just aren’t working as you planned them to. You start thinking, “maybe this is not such a great idea.” How did you get past those points if you had them at all?
In some sense, the model of a fund and a startup is a little bit different. We got lucky in the sense we raised the capital and executed the model. Then we’ve continued to experience these secular tailwinds with the continued interest and growth of university entrepreneurship.
Those were bets that we placed in the right place. I started this fund because I thought this was a trend that was going to continue, but going back to what you said, I also think persistence is really important in those scenarios. The best entrepreneurs, pivot their way into successful outcomes.
One of our LPs was telling me how in the late 90s, Accel was just looking at the top venture funds. They were trying to figure out characteristics or traits of successful companies. One of the biggest indicators they came up with and of course (I’m not sure they had a lot of computing power then so maybe it’s changed) but, it was that most successful companies had made name changes at some point throughout their life.
They made name changes because they no longer reflected the initial business they started out with and that is what I’m trying to get across: the absolute best entrepreneurs will make something successful. They’ll flounder around until they find something and when they find something, they’ll just step on the gas.
I’ve seen this a handful of times now, executed by people that I really respect. They’re not university entrepreneurs per se, but just other friends in the industry. I think it’s their brilliance to be able to understand what’s working and what’s not, and their ability to continue to flounder. As long as you have capital in the bank until you find what sticks, then having the patience to commit, go 0 to 100 and just blow it up (in a good way). The best founders do that.
The bad founders are the ones who pick one idea, are super stubborn and headstrong about it. They’re the ones that say, this is an idea that’s going to work, let me tell you why, then try to shove it down their customers’ throat. Their customers respond with “no thanks” and then the company runs out of money by still trying to jam it down their throat, then the company dies. That’s a bad entrepreneur.
Biography sourceshttps://www.forbes.com/sites/alexkonrad/2017/09/18/this-25-year-old-just-launched-a-university-focused-vc-firm-out-of-a-rental-car/#4aaa31af5db2, https://impulse.coreatcu.com/eric-tarczynski-life-of-a-vc-startup-87a1b501b9a4
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