Allbirds, Axios. BuzzFeed. Casper. Everlane. Giphy. Glossier. Warby Parker. All are household brand names. Less known is Eric Hippeau, whose firm Lerer Hippeau helped give those companies a start as an early-stage investor.
Hippeau this year is marking a quarter of a century as a top venture capitalist and he shows no signs of slowing down, having raised another new seed fund, the firm’s ninth. Hippeau started the company, which now counts 400 companies in its portfolio, with Ken Lerer and his son, Ben, all of whom came from the media industry. Ken Lerer at AOL, then AOL Time Warner, and Ben at Thrillist.
Hippeau was publisher of PC Magazine and chairman and CEO of its parent company Ziff-Davis. Hippeau was also CEO of The Huffington Post, where he was an investor. He was a managing partner at SoftBank Capital, serving on the Boards of Yahoo, GeoCities, Danger, and Buddy Media, among others.
Through the years, Hippeau has developed a unique lens on the investing landscape, not just in media but across all sectors, from robotics to defense to healthcare, a view that makes him much sought after by outlets like CNBC (and TheWrap!) to share his perspectives from time to time.
When asked about the secret to successful investing, he has always said it’s about the people, the founders. That, and “we make decisions based on a million small signals,” he said.
We were able to pin down Hippeau from his crazy-busy schedule to answer a few of our questions recently. The following interview has been edited for length and clarity.
This year marks your 25th year as a VC, and 15 years of Lerer Hippeau, the early stage fund you co-founded. Before that, you operated public and private media companies for several decades. How did your days as a media executive inform your successful early stage investing career?
In innumerable ways. I’ll try to keep the list concise. For one, media is, and always has been, about encountering new information, synthesizing it and condensing it. The core exercise for both media operators and venture capitalists is to parse the truly significant platform shifts from that which is merely novel — so it’s made me better at choosing the right companies and leaders with that filter applied. Further, media’s volatile, and has been especially in recent years. That’s taught me not to be surprised or perturbed by much — one just has to keep moving forward, stay laser-focused on tasks at hand, and bring a balanced, empirical mindset to what could otherwise be deeply stressful and emotional.
This perspective is hugely helpful in the business of early-stage company building. I’d also emphasize the importance of storytelling, which is obviously a component to any media business, and one whose importance in the VC world cannot be overstated. Founders must be able to tell their stories. They have to communicate clearly about what they are doing, why it matters, how it will reshape their markets, and how it solves a real human need — at scale. Finally, working in media has also made me significantly more comfortable with the unpleasant business of knowing when to cut bait. As VCs, we can’t be afraid to let our companies pivot, or close down and return money to investors. It doesn’t happen often, but when it does, it isn’t existentially scary. It’s a part of business and we all move forward.
Lerer Hippeau’s portfolio is much more than media companies. What is your formula for deciding which startups to invest in?
You’re right that we had some major wins in media and consumer in our early years at Lerer Hippeau, so we’re fortunate to be known for our prowess there. And, as you say, our portfolio of over 400 companies has always comprised many B2B businesses as well, across robotics, climate, fintech, healthcare and so many other critical sectors.
Choosing the right companies to invest in is an almost laughably challenging proposition, particularly at the earliest stages of investing, where our firm operates. More often than not, we’re looking at nothing more than a piece of paper and some rough projections. Sometimes our only task is to evaluate a founder and believe them when they say they are the right person to build whatever they’re attempting. “Formula” suggests a sort of science, and I would say that our business is equal parts art and science. We make decisions based on a million small signals. For us, it always comes down to the people. Do they have a sophisticated and proprietary sense of their market, product, and timing? Do we believe they’re equipped to build an enormous business? Do we trust them? These are the sorts of questions we consider, and the answers, typically, do not come purely from analyzing an early model. They come down to the founders in front of us.
M&A has been tepid so far this year, and IPOs aren’t much better. How has that affected your strategy on exits from your investments?
The short answer is that our focus is on finding great companies — rather than exiting them—agnostic of market conditions, so our core business of being a founder’s first and most aligned institutional partner is largely unaffected by later-stage market machinations. That said, we take an active role in helping our founders generate liquidity for early employees, investors, and themselves, through later-stage transactions, M&A, and IPOs. Everyone in our business wants to see a more robust IPO market, which typically spurs more M&A activity as well, and we feel strongly that we need to adjust several factors that are currently making it difficult for companies to go public. Adjusting regulatory and compliance requirements, for instance, for mid-cap public companies will encourage more activity and lower financial burdens that make the option unattractive. There isn’t a silver bullet for this issue and a lot of small changes will accumulate to make a big difference, but what’s non-negotiable is that we must have public markets that are robust and accessible to maintain our place as the world’s most innovative country.
Let’s circle back to media and entertainment. We’ve been reporting a lot on Hollywood’s slow embrace of AI but there are still lots of skeptics. How do you look at AI in this space and what have you invested in?
We think AI will play a critical role in media and entertainment in a manner akin to how it will change other key industries — that’s to say, we’re bullish on companies using AI to augment and complement human ability rather than replace human ingenuity. AI should be used as a tool that unlocks new efficiencies. In the case of Hollywood, we are looking at opportunities that use amazing AI tooling for production alongside human creative and artistic talent. We’ve recently invested in a company — more on that soon — that marries AI and human talent to produce studio-quality movies at a fraction of the cost — allowing independent filmmakers to compete and get their stories told. I’ll call out a couple of other interesting early stage investments we’ve made in media and entertainment as well: TollBit is a tool to help companies monetize the AI agents scraping their content; Mother Games is an emergent gameplay media and entertainment studio soon to broadly debut its first title.
Besides AI, name two trends in media and entertainment that excite you in the next year or two? And on the other side of that, what worries you the most?
We think it is difficult at this stage to disentangle AI from the future of media and entertainment. Ultimately we believe that most companies in this space will to some extent be AI companies, much like how every media company today is also an internet or streaming company. So we are deeply interested in the ways AI can be applied to positively shape quality content generation. At the risk of repeating myself, I would also note here that we aren’t interested in AI that aims to replace human talent. We are bullish on the application of AI as an augmenting factor for the processes involved in content production. But to hone in on your question a bit more, two trends we are beginning to see emerge are, (1) an emphasis on individual talent and, (2) hyper-personalized content. We think that media and entertainment will continue to shift more and more toward smaller, independent teams or individual talent and solo creators. The result will be twofold: continued fragmentation, but also hyper-personalization. Consumers flock to content that speaks directly to them. One additional consequence of this will be that loyalty to big brands will fade away — and that pattern has already started.
We think that media and entertainment will continue to shift more and more toward smaller, independent teams or individual talent and solo creators. The result will be twofold: continued fragmentation, but also hyper-personalization. Consumers flock to content that speaks directly to them.
Now, we see a particular downside to this, which I’ve already briefly touched on. We are concerned about what will happen to the quality of content with uncontrolled AI bot scraping. We believe creators and publishers need to be compensated for the writing and content they produce — or we’ll all experience a complete dearth of quality content sooner than we can possibly imagine. Companies like TollBit are working hard to ensure publishers are able to monetize AI bots scraping their content. We are hopeful that an increased industry focus on this space will result in a sustainable solution.
How does the creator economy evolve from here?
There remains tremendous upside in the creator economy. It’s a natural corollary to our thesis that content production will continue to shift to individual talent and solo practitioners. In other words, AI will serve to amplify what social media started. More and more creators will feel empowered to produce the sort of high-quality, hyper-personal content that commands a returning, sticky audience.
Lerer Hippeau recently raised a new fund. Can you talk about your plans for it?
With our ninth seed fund, we’ll do what we’ve always done: support early stage founders by serving as their first and most aligned institutional partner. Fund IX is $200 million focused expressly on early stage companies (pre-seed and seed), which we’ll deploy with a singular focus on “finding the best founders before they’re famous,” as we like to say. Though Lerer Hippeau remains well known for our success in early consumer investments, we have always invested across the enterprise and consumer landscapes. With Fund IX, I expect us to invest more in healthcare, fintech, dev-ops and infra tooling, robotics, climate, defense and a number of other sectors. As always — if you’re building something interesting and early, we’d like to know you.
