From Founder to VC Leader: The Journey of Ben Lerer with Lerer Hippeau
From backing category-defining consumer brands to navigating the complexities of today’s AI-driven investment landscape, Lerer Hippeau has established itself as one of New York’s most influential early-stage venture capital firms. What sets them apart isn’t just their track record; it’s their philosophy of being a founder’s “first and most aligned institutional partner.”
In this interview, Ben Lerer, co-founder of Lerer Hippeau, shares insights with Eqvista drawn from over a decade of investing and his experience building Thrillist and Group Nine Media. Ben discusses the art versus science of early-stage investing, the transformation of New York’s tech ecosystem, and what it takes for founders to build enduring businesses in an era where technical barriers have never been lower, but competitive moats have never been harder to establish.
Whether you’re a founder navigating today’s fundraising environment or simply interested in the evolving venture capital landscape, Ben’s perspective offers valuable lessons on building great companies and making smart investment decisions.
Ben, you’ve gone from being a founder to an investor, can you touch on your founder story and how does having both perspectives change your investment decisions? What operational insights do you bring that pure investors might miss?
Many folks on our team have deep operating experience, and without that, we wouldn’t be nearly as effective in advising our portfolio companies. The first company I built was Thrillist, which we grew and then combined with several other media companies to create Group Nine. That journey was existentially challenging and interesting every day, and helped me build an invaluable foundation for how to build great companies and work with our founders now. I also had the advantage of investing while operating Group Nine (we started Lerer Hippeau in 2010, long before we sold Group Nine in 2022 and I came over to LH full time), so I’ve benefited from the perspective of being on both sides of the table.
People underestimate how difficult it is to build a company from zero and turn it into something lasting. I’d be hard pressed to think of a company that hasn’t had to make hard decisions about where they are headed. We’re able to tell our founders that we’ve been in their shoes. We know from experience that things aren’t always going to go the way you expect, and I think founders feel our empathy – it’s one of the things that makes them want to work with us.
Lerer Hippeau built its reputation on consumer brands like Warby Parker, Casper, and Allbirds. Now your investments are split about evenly between consumer and enterprise. What led to that change?
In a market as dense as ours, we joke that we’re very glad to be so well known and so positively associated with anything at all, even though our strong consumer reputation comes from a lot of early success backing category-defining DTC breakouts, and doesn’t necessarily reflect the historic breadth of our portfolio. We’ve always loved consumers and continue to invest actively in consumer businesses. But we’ve also always been equally focused on enterprise businesses – across fintech, healthcare, robotics, hardware, climate, defense, crypto, logistics, and, of course, AI. The great benefit of our generalist approach is that we’re able to work with founders in the areas most interesting to them and to us, industry agnostic.
Looking at thousands of companies over the years, what patterns do you see in your best investments? Beyond clear indicators like strong founders and large markets, is there a subtler signal you’ve learned to spot that’s harder to define?
This gets into the art-versus-science conundrum. At the early stage, where we play, investing is much more art than science. We evaluate fundamentals, market dynamics, industry expertise, financials, etc., but at the end of the day, we make investment decisions based on a great many intangibles. There is no one way to build a big company, but there are lots of small things that help enormously.
NYC’s tech and venture scene has evolved rapidly over the past decade. What are the key changes you’ve observed, and what advice would you give to new founders eyeing the New York ecosystem?
Back when we started Lerer Hippeau in 2010, New York’s tech ecosystem bore little resemblance to how things look today. Over a 15-year period, we’ve observed the rise and pervasiveness of smartphones and cloud computing, experienced a complete reorientation of society around tech and social media, lived through a pandemic, and witnessed the extreme scaling of the venture market and private markets generally. Now we’re going through another large-scale sea-change with developments in AI. We’re thrilled to be able to be a central node in the ecosystem.
New York has always attracted top talent across a huge variety of industries, so it’s not surprising to see a steady drumbeat of the best and brightest wanting to build tech companies here. Our advice to a great many founders looking to build has been to do it in New York. We’re biased, of course, but it’s the most important city in the world, and the most critical conduit to Europe and the rest of the globe. Having strong connectivity in New York may have once been optional for tech businesses – now, it’s nonnegotiable.
You’ve invested in iconic consumer brands and scaled media ventures. In your experience, what distinguishes a “good” business from a truly “great” one?
That’s the billion dollar question, and if we knew the answer all the time, we’d be infallible. Some truths are fairly universal across all great businesses, though – founder excellence, a large enough market, product-market fit and ensuing momentum, strong GTM know-how, an org-wide willingness to make tough decisions. Though we evaluate a broad set of qualitative and quantitative considerations with all investments, at our stage, the founder will always matter most.
You wrote a piece in 2016 called “If You Want My Money, Make Me Jealous”, about investing in companies where you think ‘I wish I’d built that.’ The Casper story is a great example. When you get that initial feeling, what comes next? How do you determine if a company can become a category-defining leader?
That statement, “I wish I’d built that,” boils down to a gut feeling, and I usually have it during or shortly after a conversation with a stellar founder. We do our diligence before writing a check, of course, but a strong gut reaction always accompanies an eventual investment decision. The potential to become a category-defining company is in the founder and their idea, it comes down, again, to people. That’s who we are investing in.
Earlier this year, you observed that mid-sized venture firms face new challenges, with capital gravitating toward the largest funds or smaller specialists. How do you see that trend playing out now, and how does Lerer Hippeau position itself within that dynamic market?
I think that bifurcation will continue, and we’ll see that gap between large and small funds spread wider. In today’s market, LPs want to invest either in funds that are participating in some of these AI mega-rounds or in funds that are focused exclusively on (and expert in) the early stage or in a particular sector. When you’re somewhere in between with split focus, you’re less likely to do things exceptionally well. LH has always been focused exclusively on the early stage – it’s what we know and what we do very well. Our track record speaks for itself with LPs, and our disciplined approach has been an asset.
AI is clearly the focus right now. For founders developing AI-powered products, what do you believe will create enduring value? What differentiates products that will remain relevant in five years from those that won’t?
I think the key questions are, “Does the solution or platform address a real gap in the market, is AI making a business like this possible in a new way, and is the team building it the absolute best in the game?” It’s never been easier to build a business (technically speaking) and so the bar must be exceptionally high. The enduring AI businesses will likely be those that address massive portions of the market and employ unmatched operational and GTM excellence.
You’ve supported founders in making smart exit decisions, like Mirror selling to Lululemon for $500 million rather than always pushing for more. How do you advise founders as they navigate tough exit or hold decisions? In your view, when does selling make sense versus continuing to build?
Our focus is on finding founders and being their first and most aligned institutional partner, from the day we write an initial check until exit, and beyond. Given our stage, it usually takes a while for a company to reach exit-worthy maturation. Any exit opportunity for a company must be considered in isolation, as all companies’ situations are vastly different. Our universal advice, though, is for founders to know their potential buyers extremely well. Be acquainted with the universe of relevant folks so you’re not getting to know anyone for the first time in a tangible deal negotiation scenario. What’s always good about our stage and approach is that our incentives are most closely aligned with our founders’ incentives – so what’s good for them is good for us. That’s not always the case with later-stage investors so the dynamics can get more complicated.
In your Fund IX announcement, you mentioned that dozens of portfolio founders have become investors in your funds, and called it ‘one of the best data points’ about your community. What do you think those founders valued most about working with you that convinced them to invest their own money back into Lerer Hippeau?
We’re proud of that data point because we think it best reflects our mission: to be a founder’s first and most-aligned institutional partner. We aren’t in this business to make a quick profit or to drive growth at all costs. We’re here to help founders build strong and enduring businesses and stay in their corners for the long haul. We’re encouraging and optimistic, and willing to offer tough love when we need to. These relationships come down to mutual respect, and a strong foundation of trust and partnership. I think founders value that approach hugely, and they’ve seen its benefits in their own companies, so they’re eager to be around our broader table as we meet the next generation of builders.
The fundraising landscape has changed: rounds take longer, and investor diligence has increased. For founders raising seed capital today, what do you find truly resonates with investors? What makes a compelling case now compared to several years ago?
It’s worth pointing out that in some corners of our industry, investor diligence has never happened more quickly. For a certain set of founders, some (primarily) west coast investors will throw down exorbitant term sheets extremely quickly. That said, for less buzzy or more “normal” AI deals, good tech isn’t the MOAT it used to be, given how much easier AI has made building a tech business, so a founder’s deep vertical knowledge is absolutely necessary. Today’s most compelling founders marry deep vertical experience (and knowledge of deep vertical issues and opportunities) with GTM chops, and move leanly with urgency.
