(Founder Stories) Instagram-Backer Steve Anderson: Forget The Billion-Dollar Exits

Steve Anderson’s Baseline Ventures has invested in startups that include InstagramHeroku, and Weebly.  (Earlier this month, Baseline took part in a $1-million seed round for Crashlytics.) It took him only four weeks to raise $100 million for his curernt fund.  In this episode of Founder Stories with host Chris Dixon, Anderson discusses investing in Instagram and what led him to become Baseline’s founder in 2006.

Anderson tells Dixon that after working for companies including Microsoft, eBay and Starbucks he was ready to strike off on his own. However, he lacked the roughly half-million to start his company and was not interested in trading a sizable chuck of his ownership (40-50%) to secure financing from a Sand Hill Road VC.

Anderson says “the reality also was on Sand Hill Road everyone talks about the billion-dollar exits, and if you look at the history of the last 15 years, there has not been that many billion dollar exits … it turns out that the average exit over the last 10 years on average has been $100-million, and so I was thinking to myself well if I owned 10% of a $100-million outcome that is real money for me, and my co-founders and anybody else and so why isn’t there anybody whose capital was aligned and incented for that outcome?”

Recognizing a fertile revenue stream, Anderson started investing in companies while allowing founders to maintain more ownership than they otherwise may have with traditional VC. Dixon tells Anderson, “you were, I think, ahead of the curve.”

One of the companies Anderson attached himself to early on was Instagram.

In the below video, Anderson tells Dixon that during Instagram’s infancy, “we didn’t know exactly how tight to be, but we knew directionally we were going to head towards photos and location and social network.”

The initial idea though wasn’t nearly as important as who was behind it. Anderson continues, “I was really involved with betting on Kevin (Systrom) early, helping him recruit Mike Krieger who is his co-founder and those two guys have just run with it.”

Anderson notes, “this is why I am in business, to find people like Kevin, to start at the earliest of stages.”

Make sure to check out the entire video for additional insights, and watch Kevin Systrom’s Founder Stories interview here.

Past episodes of Founder Stories, including interviews with Eric Ries, Kevin Ryan and Dustin Moskovitz are here.