Mark Suster is giving a tour of the rooftop patio at Upfront Ventures. L.A.'s largest venture capital firm has just relocated from Century City to its new offices in downtown Santa Monica, on the top floor of a six-story art deco tower called the Telephone Building. Suster has to step around the construction workers who are scrambling to finish a conference room. With a panoramic view of the local skyline, it will be used for board meetings and as a place for people to gather and unwind. The idea is for the space to become a nerve center for L.A.'s tech community.

“I wanted it to be aspirational but accessible,” he says. “We have a beer keg, a massive flatscreen TV and an Xbox.”

Suster oversees a $280 million fund, which is small by Silicon Valley standards. But by concentrating about half of his investments in the Los Angeles area, Suster has become a key player in the development of L.A.'s tech scene. His ultimate ambition is to take on the big VC firms on Sand Hill Road.

He also happens to be one of the most influential voices in the industry. In part that's due to successful investments, such as Maker Studios, which sold to Disney for $700 million. That deal helped to position him as an industry leader on video, which he contends is the future of the Internet.

But Suster's real clout comes from his blog, in which he analyzes industry trends, offers business advice and occasionally crosses swords with other venture capitalists. He is pithy and provocative. For anybody in tech, he's become a must-read.

“There were times when we'd go out to dinner in San Francisco,” says Jonathan Strauss, CEO of, “and people would come up to him and want to shake his hand and say, 'I loved your blog post.'”

As he's giving the tour, Suster is getting ready for the Upfront Summit, which will be held the following week at the Dolby Theatre in Hollywood. The firm has invited 700 people — entrepreneurs, investors, journalists — in an effort to promote L.A.'s burgeoning tech community and establish Upfront Ventures as its focal point.

Since 2009, the tech industry has been on an incredible run, with the age of mobile computing bringing wave after wave of new billion-dollar companies. The bull market has been unlike anything since the dot-com boom of the late 1990s. According to CB Insights, 2015 was a record year for the industry, with $128 billion in worldwide venture deals. Los Angeles has boomed as well. Snapchat, the messaging app based in Venice, is now worth $16 billion (at least on paper).

At the summit, Suster will be meeting with his investors — university endowments, banks, insurance companies — and presenting his outlook on venture capital for the coming year. He's already given a preview of it on his blog, Both Sides of the Table. It's not optimistic.

For more than two years, Suster has been warning that companies have become overhyped and overvalued. He believes a correction is coming. On his blog, he wrote that “outsiders” — hedge funds, mutual funds, crowdsourcing — have poured too much money into the industry. He declared a period of “mourning for the days of rational behavior.”

More recently, his premonitions have become more dire. With the stock market dropping and troubling news out of China, Suster went on Facebook in early January and predicted a “bloodbath” for angels — the amateur investors who put $25,000 or $50,000 into a startup company.

He's not alone. More and more people in the industry are sensing a shift in the landscape. The era may be ending when any Caltech grad who could put together a PowerPoint deck could get a $1 million seed round.

Suster doesn't know how bad things will get. It could be a mild correction or it could be something worse, like the dot-com crash of 2000 or the financial crisis of 2008. He's still optimistic about technology over the long run — that's why he's still investing — but in the near term, he sees a powerful storm brewing.

In an interview, he says he has surveyed venture capitalists, and they are all pulling back.

“I'm telling you what my intuition is from the conversations I've had,” he says. “I want to say to entrepreneurs, 'If you knew the meetings I was in, you would be cutting costs right now.'”

On his blog, Suster likes to summarize his thoughts in catchphrases, a trick he picked up from Swim With the Sharks Without Being Eaten Alive, a business book that was an early influence.

His best known phrase may be “lines, not dots,” which is shorthand for his philosophy of investing only after he's seen an entrepreneur's trajectory over time. He says his next catchphrase will be “Everyone's a winner.”

He's talking primarily about angel investors, many of whom have fallen victim to unreasonable expectations based on recent history.

“Everyone's been a winner since 2009,” he says. “Every deal gets funded. I write a $20,000 check and I get to tell all my friends it's worth $2 million. There's a false sense of how easy it is and how everyone's winning, until it all turns pear-shaped. And it does turn pear-shaped.”

Venture firms will not be immune from the coming bloodbath, he says. His own firm is preparing by making sure that portfolio companies have enough cash to withstand a difficult environment. He also says he's prepared to bail out his companies in case of a crisis.

“We have deep pockets,” he says. “If you don't have deep pockets, good luck.”

Though Suster is known for video, his firm also has invested in wireless charging, a high-tech home gardening kit and a company that makes a $249 gluten detector. But Suster invests in only a couple of companies per year. His effect on the industry is more a function of his blog. He's one of a small handful of VC bloggers who drive the conversation around issues in the industry and set the terms for debate.

“His appeal is nationwide,” says Yves Sisteron, a founding partner of Upfront and a mentor to Suster. “Our brand, outside of Los Angeles, is the result of his blog.”

Suster's personality has also come to define the culture of Upfront. When he joined as a junior partner nine years ago, it was called GRP, which stood for Global Retail Partners. Once upon a time, the firm backed big-box stores such as Costco and Office Depot.

Suster pushed for a rebranding, eventually persuading the partners to switch to Upfront. The name was an indication of the firm's focus on early-stage investing, but it was also a reflection of Suster's approach — blunt, direct, no bullshit.

Mark Suster works the crowd at the recent Upfront Summit, held at the Dolby Theatre.; Credit: Photo by Ted Soqui

Mark Suster works the crowd at the recent Upfront Summit, held at the Dolby Theatre.; Credit: Photo by Ted Soqui

Suster has been an entrepreneur since childhood. He grew up middle-class in Sacramento. His father was a doctor and his mother operated bakeries and a restaurant. Suster worked in the restaurant and also ran his own business selling personalized T-shirts. A friend had a truck, and they went into business together throwing keg parties.

He attended UC San Diego, where he studied economics and political science. He was charismatic, and for a while thought seriously about a career in politics. After school, he ended up taking a job at Andersen Consulting and spent a few years working in Europe and Japan.

In 1999, he quit Andersen to start his own business. He was in London, and the dot-com boom was nearing its peak. He started a company called BuildOnline, which enabled construction companies to manage large projects over the Internet.

At the time, this was a brand-new concept. Suster raised a massive $16.5 million from investors like Goldman Sachs.

The company was hot. It was featured in Time magazine as one of the top Internet companies to watch in Europe. Suster was invited to Versailles for a Fortune CEO conference, where he sat alongside tech superstars like Jerry Yang and Michael Dell. He was 31, not far removed from doing PowerPoint presentations at Andersen, and he thought he'd made it. He was offered $150 million to sell the company and turned it down, thinking BuildOnline would soon go public.

“We were throwing great big parties and employing as many people as we could and thinking we were gonna be billionaires instantly,” says Stuart Lander, who was the company's chief operating officer.

Paul Wilkinson, a British tech consultant who worked for one of Suster's competitors, argues that BuildOnline was overhyped and that it got too much press attention before the software was ready. Suster does not disagree.

“I drank my own Kool-Aid, I really did. I really thought we were changing the world,” Suster told Sarah Lacy of PandoDaily in 2013. “We went from being celebrities … to overnight being frauds.”

The dot-com bubble burst in the spring of 2000. Suster was trying to raise $40 million of financing, and all of a sudden couldn't get his calls returned. He tried to save the company by merging with a competitor, but that fell through. The company's cash reserves dwindled so low that he was weeks from bankruptcy.

He had taken prime office space in London, much more than he could use. He owed the landlord $800,000 and didn't have it. The landlord refused to let him out of the lease, so in the middle of the night, he and three colleagues snuck in and removed the computers. The landlord threatened to sue for unpaid rent.

“Stuart picks up the phone, practically in tears, telling them how he's about to lose his life savings,” Suster says.

The landlord ultimately settled for $125,000. They repeated the process with all of their creditors. They were ultimately able to raise $10 million to stay in business, but Suster had to cut the staff from 129 people to 33 in one week.

Sisteron, the founder of GRP and an investor in BuildOnline, says he advised Suster to hunker down.

“He took my advice,” Sisteron says. “His company survived, as opposed to many, many companies that didn't make it.”

Suster and the remaining staff made a fetish of cost-cutting, staying in the cheapest possible hotels outside Frankfurt.

“We stayed in a hotel where we had separate rooms, but the bathroom was shared for the whole floor,” Lander says. “That was a low point.”

Suster stuck it out for six more years. In 2006 the company was sold to a French conglomerate for a modest sum.

“I write a $20

For Suster, the dot-com crash was a life-altering experience. It supplied much of the hard-won knowledge that he passes on to readers of his blog, and it informs his perspective on the current market. He says he tries to be as objective as possible, and to not project the past onto the future.

“I acknowledge that my conservatism comes a little bit from having seen that,” he says, before noting that there are unmistakable parallels. “All the same things I heard back then, I hear now.”

Suster learned from some of his earlier mistakes. He turned around and started another company, Koral, which offered a document management platform to businesses. The company spent a couple years developing the software. Shortly after it launched, Suster got an offer to sell to Salesforce. This time, he took it.

Sisteron, whose firm had invested in both of Suster's companies, was looking around for a younger partner who could bring new energy to the firm. He saw Suster as a skilled operator who had a gift for marketing and sales.

“I had an instinct that there was a lot he could do,” Sisteron says. “He was very social.”

In 2007, Sisteron persuaded Suster to move from Palo Alto to L.A. to take the job. A venture capitalist lives or dies by the strength of his network. Suster knew no one in L.A. and was looking for ways to get connected. At the time, a few venture capitalists had started blogging. Suster was a big fan of Brad Feld, who was using his blog to demystify the venture business for young entrepreneurs.

At a lunch, Suster told Sisteron he was interested in blogging as a way to broadcast his opinions and attract deals to the firm.

“It seemed like that might be the new world of connection between investors and entrepreneurs,” Sisteron recalls. “Not everybody can do that.”

Suster often wrote posts at 11 p.m., after a full day of work, or first thing in the morning. He churned out several posts a week and wrote in an approachable style, often using profanity to hammer home his points. In a recent post, titled “Why I Fucking Hate Unicorns and the Culture They Breed,” Suster blasted away at “the entire bullshit culture of swashbuckling startups who define themselves by hitting some magical $1 billion valuation.” He writes as an investor who once was an entrepreneur, so he can give both perspectives on the issues (hence “Both Sides”). The blog began as a good way to market the firm, but it became more than that.

“It's pretty scary starting your own company,” says Alexia Tsotsis, the former co-editor of TechCrunch. “If you can become a trusted point of view, it's almost like a lifeline for people.”

The blog, which now gets about 400,000 unique visitors a month, quickly put Suster in the same league with famous Silicon Valley investors such as Marc Andreessen and Paul Graham. It takes years to develop a track record as an investor, but the blog gave Suster a platform right away.

“Mark's blog took off, but Mark's investments didn't,” says Evan Rifkin, CEO of Burstly, an Upfront portfolio company that eventually sold to Apple. “It was amazing he was taken at the level that he was.”

Having a blog posed some obvious risks. Suster might say something that would offend one of his firm's investors. He also could piss off other venture capitalists, most of whom came from the old-school banking world, where blogging was simply not done.

“They're just jealous,” says John Greathouse of Rincon Venture Partners in Santa Barbara. “I was at a basketball game and somebody said, 'I heard he paid somebody to write his blog articles.' I said, 'I'm pretty sure Mark writes 'em.'”

There was also a real risk of offending the companies in which Upfront invested. Suster's posts often were based on real conflicts that he was seeing as a board member of various companies. Though he left the names out of it, sometimes it wasn't hard to figure them out.

“Most of the entrepreneurs who have had Mark as an investor can probably tell you a couple blog posts they know are about them,” says's Strauss.

Strauss points to a post from 2011 — in which Suster said he had rewritten a company's press release while everyone watched because the first draft was “crap” — that was about him.

“We had a rule that nothing that happens in our board meetings can end up in a blog post,” Rifkin says.

Sometimes, companies would accuse Suster of writing about them, and he would deny it.

“It was a big joke between us, like, 'Oh, Mark's writing about us again,'” Rifkin says. Even if the posts were not about his own company, Rifkin says he recognized elements of his own experience. “He wrote about things that were spot-on. You felt like, 'I really did do that.'”

At some point, the influence of a venture blogger can go beyond merely guiding the career paths of Stanford undergrads or the future of certain sectors and enter the realm of political thought. In general, Silicon Valley capitalists tend to be libertarian and somewhat utopian — tech is transforming the world and government needs to get out of the way.

Mark Suster; Credit: Photo by Ted Soqui

Mark Suster; Credit: Photo by Ted Soqui

Graham, who founded Y Combinator, the most influential startup accelerator, offered a version of this argument in an essay on income inequality in early January. In it, Graham defended income inequality and argued that those who decry it are bent on preventing people from getting rich. He compared them to hunters and himself to a hunted animal.

The essay was applauded in some corners of the tech industry. Suster, however, had a different reaction. He is a capitalist and shares some libertarian impulses. But Graham's tone struck him as unhelpful. It came off like a rich person punching down. In a blog post, Suster argued that inequality is not something to be celebrated and listed some of the unfair advantages that come from wealth. In a Jan. 8 follow-up interview on Bloomberg TV, he took off the gloves.

“Go cry in your own beer, Paul Graham,” Suster said. “You're not the hunted. No one is after you. There's no bogeyman.”

Suster tells the Weekly he can understand how tech industry people who live in the Bay Area, where demonstrators occasionally throw eggs at Google staff buses, could feel besieged.

“But if you aren't compassionate enough to realize that the great gains that we have in wealth creation for the tech industry come at the expense of urban people who are struggling to afford housing, and if you don't want to be part of trying to problem-solve to make things better, at least shut the fuck up,” he says.

Suster says he had no interest in picking a fight with Graham. In fact, he says a few days after the controversy erupted, they met for 90 minutes and smoothed things over.

Graham concurs. “I think we're on pretty good terms now,” he says via email.

But around the industry, a lot of people took notice. And many of them admired Suster for being willing to take on one of the tech world's most powerful people.

“That's really brave,” says Jerry Jao, CEO of Retention Science, an Upfront company. “If Paul disagrees with him, he probably won't get invited to YC Demo Day.”

Suster is not a fan of demo days, but the broader point is surely true. Speaking out carries risks, but he's comfortable with that.

“Because (Graham) is so influential, when he writes stuff, I worry that young people hear one voice and gravitate toward it,” Suster says. “And I think we have a responsibility as members of society, if we don't agree, to challenge it.”

Sisteron, the firm's founding partner, has no problem with Suster's habit of getting into public controversies.

“It's healthier to have a take-no-prisoners approach,” Sisteron says. “You don't succeed in the VC world by being consensus-based.”

In the recent interview on Bloomberg TV, Suster was asked for his take on the market. It's become the hot topic in the industry: Is this a bubble? When will it pop?

“Private investors have been overpaying in terms of valuation for companies for the last three or four years,” Suster said. “You're gonna see a correction, and the correction is already happening.”

On Feb. 3, Suster took the stage at the Avalon Hollywood to make his case in detail. It was the first day of the Upfront Summit, and hundreds of venture capitalists had gathered to hear Suster's forecast for the coming year.


He posted an image of a White Walker, one of the frozen zombies from Game of Thrones, next to the words “Winter is coming.” He showed results of his survey of 150 VCs, indicating that 90 percent of them expect valuations to fall in 2016. Venture capitalists are no longer afraid of missing out on a hot company, and so deals are taking longer.

“The belt-tightening is happening across the board,” Suster said.

Not everybody thinks a crash is coming. Dave McClure, a venture blogger who is a good friend of Suster's, says he's overstating things.

“Everybody's talked about the bubble so fucking much it's deflated quite reasonably,” McClure says. “I don't see a nuclear event on the horizon. I see continued slow re-evaluation.”

“If he's wrong, look how far he put himself out there on this,” Rifkin says. “If we go into a bull market, he looks like an ass.”

Despite Suster's warnings, the conference had a buoyant, world-conquering spirit. It was a celebration of the firm, of Los Angeles, of technology. The hallways overflowed with swag. There were iPad games and luxury bedding and plenty of free food and drink. A company called Navdy raffled off 15 heads-up display modules, and then a magician came on and did some sleight-of-hand with audience members' iPhones.

On the second day, at the Dolby Theatre, Mayor Eric Garcetti declared Los Angeles to be the center of the tech industry. A slam poet came out and challenged the audience to get “excited for now.” Then the curtain went up, and the audience was invited on the stage where the Oscars will be handed out, to eat dinner and get drunk as a jazz band played under lights that spelled out “UPFRONT.”

Whatever happens in the industry, Suster will keep making bets on new startups. He just signed a 10-year lease for Upfront's new offices. Suster argues, in fact, that the best companies are built in downturns. That's when the dumb money leaves the stage, companies get efficient and practical, and innovation flourishes.

“What to make of the uncertainty?” he asked at the summit. “We know storms bring a lot of bad things, a lot of destruction. We also know about storms that they clear away the old and make way for new seedlings.”

LA Weekly