What do CIOs bring to the world of venture capital? Two CIOs-turned-VCs discuss

in collaboration with with Brian A. Hoyt , Partner and COO, Parkway Venture Capital

In the right roles, former CIOs have the potential to make a significant impact on the next generation of technology. In today’s environment, where customer experience is paramount, there exists an obvious and natural path for CIOs to make the jump from enterprise leader into venture capital. Good CIOs constantly have their hands on technology, both emerging and established. Their success is predicated upon understanding the problems modern businesses face, and how they can be solved by new tech. They have leadership experience, strategic skills, and first-hand insight into pain points and new trends. CIOs are, in many ways, the ultimate voice of the customer.?

My own experience making this move has been well documented here, but I am by no means the only one. Brian Hoyt, another CIO-turned-VC, spent ten years serving as CIO for companies like AppDynamics and Unity Technologies before making the move into the startup world. His interest in the space was fostered further by working with founders in advisory roles before he eventually became a partner at Parkway Venture Capital, where he also serves as COO. Today, Brian is based in New York, and is especially passionate about fostering the city’s burgeoning start-up scene.?

I sat down with Brian to get his perspective on the move from CIO to VC, his impressions of the job and how others like himself might make the same transition.?

When did you officially join Parkway as a partner, and what are your overall impressions thus far?

I’ve now been fully in the world of VC for about six months. I joined my current firm in an advisory role a year and a half ago before coming on board full time. I found that I had a real passion for interacting with founders, exploring new technologies, and solving problems, and that my experience in the CIO role was an advantage in doing so.?

So far it’s been a positive experience, and a very different working environment than I’m used to. In the last few years I’ve had a big team and now it’s a smaller group of people working very close together. It’s an interesting change.?

Do you think the shift to VC is a natural progression for CIOs in general, and what advice would you offer someone looking to start that journey??

I think a lot of CIOs have the potential to be really good at this. You have to really think about yourself, of course, and know that it’s a challenge you want to take on. One thing I didn’t really know going in, and maybe people were too polite to tell me at the time, is you need to have a pretty significant amount of financial skin in the game to do this type of job. So you have to really look inward at how entrepreneurial you are as a CIO. You’re taking on some personal risk, not just career but financial, when you come in as a partner. That’s something people might not know, and certainly something I didn’t know.?

The VC network, especially when I was living and working in Silicon Valley, where people bring in VCs and CIOs to get to know new companies and get to know the investors, that’s a great way to get involved. The team I’m working with, we’re a startup ourselves; we had a good connection together and work together very well. Just like any team, you want to look for that.?

What are your areas of focus and personal passion when it comes to investing??

There are a lot of interesting opportunities right now in the world of optimization for sales and marketing. My background before I went into the management side was in the Customer Relationship Management (CRM) space, where product management, sales technology, and finance teams intersect. It is still very painful for organizations to scale these systems up, as there are a lot of moving parts and a lot of people with competing priorities.?

The product people want to move it as fast as possible, sales people want to hit their quotas and get buyer features prioritized, and finance people just want to close the books and get home at a reasonable hour. That’s something that’s really a challenge for a lot of businesses – as they scale, how do they bring their products to market in a more elegant way? Looking at and fostering solutions around this pain point is something I’m really passionate about.?

What aspects of your experience as a CIO prepared you for working in VC, and what's the dynamic like when you're working with your partners to identify the right investment strategies?

The ability to bring the buyer’s perspective into the investment process has been something people have reacted very well to – not only internally, but with a lot of our portfolio companies. I’ve had many very productive calls about how to scale infrastructure, operations, and deciding the right move at the given size and scale, so I’m able to draw on that operational experience to build out our portfolio companies.

Internally, when we’re making an investment decision, that ability to answer customer-centric questions is immensely valuable. What would this look like to a buyer? What does the market look like? What are typical problems tech leaders face? As the voice of the customer and a voice on the leadership team, the CIO perspective offers a uniquely in-depth view across the business to understand where problems are, and how to solve them with specific pieces of technology.

At our firm, the team dynamic is very collaborative. We’re a small enough group that we can sit down together and talk things through. A strategy I always advocate for is reaching out to companies doing similar work for their perspective. We’re at a scale where there’s open discussion with other VCs on where the market is going and where tech trends are headed. It’s tremendously helpful to get those different voices in the mix. ?

What has been the biggest challenge for you in making the transition from CIO to VC work?

It’s a different business entirely. I’ve been working as an operator in SaaS for a while, so I have some broad expertise in how SaaS works, but that is night and day from how accounting and operations work in the VC world. I’ve been fortunate to have other leaders in the field to turn to for their perspective and guidance.?

Having worked with a large team before, delegating a lot, having a lot of people involved, I’ve had to transition back to really managing my own time and prioritizing personally what we can get done. With a growing team, resources are more constrained.?

This is very much a startup environment. Not only working with them, but being one ourselves. We are somewhat in the same boat as our portfolio companies, led by entrepreneurs and operators and people with experience. It’s very different, but I’m enjoying learning something new.

What do you look for in a potential portfolio company??

There are very specific performance questions that I like to utilize. How are you managing to get your product through security review? How are you getting it through procurement? How are you thinking about growth, and talent acquisition? In my experience bringing in startups as a buyer, those nuts-and-bolts essentials are the hardest thing to get them to commit to. How they’ve organized themselves around executing on their sales machine is really important.?

And on the other side of the equation, what should founders look for in identifying a good VC?

For founders looking for money, it’s important to look at the value the investor can add, and not just the dollars and cents. How involved can they be with your business, is it in their wheelhouse, do they know something about this, what introductions can they make commercially or advisor wise? These are things you really need to think about, it’s a small community out there with IT buyers, especially at the CIO level. Beyond just the check, if you’re looking to scale something, what can that investor add for you long-term??

What final advice do you have for other CIOs looking to make this transition??

You’ve got to build a strong network beyond your company. You’ve got to build a strong network with founders, and a good reputation with the founders that you work with. You want to build a team, and a reputation for your team as early adopters, so take some risks. Try something new that may not work. If it doesn’t work, you may lose some time – but not a lot of money. Build that reputation, network with other investors. And, finally, reach out to people who have done what you want to do in the future. Having those sounding boards is incredibly helpful.