Can pre-seed investing unlock the next wave of transformative startups? What does it take to lead a firm that embraces diversity, first-time founders, and bold ideas in a competitive venture landscape?
In this episode of Driving Alpha, Steve Brotman sits down with Charles Hudson, Managing Partner and Founder of Precursor Ventures. With over 15 years in venture capital, Charles has made a name for himself as a champion of pre-seed investing, having raised over $200 million and backed more than 400 companies. Charles shares his inspiring journey from an entrepreneur and early investor to leading one of the most respected pre-seed firms in Silicon Valley.
Charles dives deep into his investment philosophy, emphasizing the importance of diversity and inclusion in venture capital. He discusses the hurdles faced by founders from underrepresented backgrounds, how Precursor Ventures evaluates early-stage opportunities, and the unique challenges of investing in the AI landscape. Charles’ insights offer a fresh perspective on navigating today’s venture ecosystem and building meaningful relationships with founders.
With a strong belief in making venture capital accessible, Charles shares the lessons he has learned over the years, from his time at In-Q-Tel to leading investments in standout companies like Bobbie Baby, The Athletic, and Juniper Square. Whether you’re a founder, VC, or just curious about how to break into the world of venture capital, this episode offers valuable takeaways.
TRANSCRIPTION:
Steve Brotman: Hi, I’m Steve Brotman, the host of Driving Alpha, a podcast that delves into the personal histories and investment strategies of venture capitalists. I’m excited to introduce our guest today, Charles Hudson. Charles is the Managing Partner and Founder of Precursor Ventures, an early-stage venture capital firm based in San Francisco.
With over 15 years of experience, Charles has established himself as a prominent figure in the seed-stage investing community. He also served as Chair of the Board of Directors for the NVCA in May 2023. Before founding Precursor Ventures in 2015, Charles was a partner at SoftTech VC, co-founded Bionic Panda Games, and began his technology investment career at In-Q-Tel, the strategic venture arm of the CIA.
At Precursor Ventures, Charles has raised four funds and manages over $175 million in assets. The firm specializes in early-stage institutional funding, investing between $250,000 and $500,000. Some notable investments include Shippo, The Athletic, Incredible Health, and Modern Health. Charles is also renowned for his commitment to diversity, supporting underrepresented entrepreneurs in the tech industry.
And I’m thrilled to have him on the Driving Alpha podcast to discuss his personal history, investment highlights, and the edge he brings to the world of venture capital. So, thank you, Charles, for joining us.
Charles Hudson: Thanks for having me, Steve! I’m so excited to be here. I’ve really enjoyed following the podcast journey, and I loved some of the recent episodes.
Steve Brotman: Thanks, Charles! That’s kind of you to say. It’s been fun, and we have a unique role working with over half of all VCs. I’ve enjoyed getting to know you over the past few months. I felt that some of our conversations were too good to keep private, so I’m glad you agreed to join us!
Charles Hudson: It’s an honor.
Steve Brotman: Let’s dive in! Many folks know you for your success in venture capital, but could you share more about your backstory? You started your career as an entrepreneur, right?
Charles Hudson: I did. I was an entrepreneur in high school and college. My first big tech role was at Excite, one of the early search engine pioneers. While there, I met some incredible folks, including Gilman Louie, who ran In-Q-Tel at the time. That was my introduction to venture capital.
At the time, I thought I wanted to be a public equities portfolio manager. I was one of those college kids who loved trading stocks—way before Robinhood or E*TRADE existed. But then I got caught up in the tech scene because I was at Stanford in the late ’90s, early 2000s. It felt like if you weren’t in tech, you were missing out.
Steve Brotman: Did you meet Joe Kraus while you were at Excite?
Charles Hudson: I did! I worked in Joe’s group. He was an incredible entrepreneur and one of my first up-close experiences with someone so talented. We had many brilliant people in that company—Sam Shank, who started HotelTonight, Raj Kapoor, who was at Lyft and now runs a climate fund, and Jeff Donaker, now a partner at Burst Capital. Being surrounded by those people made me realize just how transformative the internet was going to be.
Steve Brotman: And that led you to venture capital?
Charles Hudson: Exactly. I kept asking myself, “Who funds these companies?” At Excite, we’d meet startups looking for homepage placements on our shopping channel, and I got fascinated with how these businesses worked. A friend from Excite introduced me to Gilman Louie at In-Q-Tel, and that’s how I got started in VC.
Steve Brotman: What years were you at In-Q-Tel?
Charles Hudson: From 2000 to 2004. It was an incredible experience working on technology that bridged Silicon Valley innovation with government needs. But after four years, I realized I wanted more hands-on experience before advising founders. So, I went to business school at Stanford to learn about the broader ecosystem.
Steve Brotman: What did you do after business school?
Charles Hudson: I joined IronPort Systems, an email security company, as a product manager. I wanted to try my hand at building products. While I wasn’t great at product management, the experience was invaluable and helped me realize where my strengths truly lay.
Steve Brotman: And eventually, you founded Precursor Ventures. How did that come about?
Charles Hudson: After IronPort, I worked in business development at Google and later on several ventures in the gaming space. But I missed venture capital. While consulting for other funds, I realized that seed-stage investing was evolving into something much larger. Founding Precursor Ventures was my way of focusing on pre-seed investing—a space I felt was underserved at the time.
Steve Brotman: Tell me about the challenges you faced when starting Precursor Ventures.
Charles Hudson: When I started raising our first fund in 2014, there was a lot of resistance to the idea of a single-GP fund and the portfolio construction model I wanted to implement. I envisioned investing in 75-100 companies per fund, which made sense to me from a diversification standpoint, but it wasn’t the norm.
LPs were skeptical about the size of the portfolio and the solo-GP structure. Many believed in concentrated portfolios or partnerships, so I had to spend a lot of time convincing them. Luckily, I found just enough early believers—founders and LPs—who trusted the vision to make it work.
Steve Brotman: That sounds like a tough lift, but rewarding. What do you think helped you persevere?
Charles Hudson: Honestly, the founders. Many of them kept coming back to me and saying, “If you can raise the money, we’d love to work with you.” Their enthusiasm fueled me. On the LP side, I found some family offices and institutional partners like Virtus who understood the math and deeply believed in the portfolio construction.
Steve Brotman: And how has your strategy evolved since then?
Charles Hudson: I’ve learned a lot. One key lesson was around selling. We didn’t sell enough in 2021 when valuations were soaring. It was a painful but valuable reminder to take chips off the table when opportunities arise. Now, we’ve adopted a more balanced approach, selling small portions of our position once companies reach significant valuations.
Steve Brotman: That’s a great takeaway. Let’s shift gears a bit. How do you approach evaluating founders at the pre-seed stage?
Charles Hudson: We focus on two main things: the quality of the founder and their assessment of the market opportunity. Most of the time, we’re investing before there’s a live product or tangible traction, so we rely heavily on qualitative signals.
We’ve developed a checklist of attributes we evaluate, such as leadership ability, recruiting skills, and problem-solving capacity. Interestingly, we’ve found that founders who have prior startup experience—whether as a founder or as an employee—tend to perform better. Operating in a zero-to-one environment is a unique skill, and it’s tough for people without that experience to adjust.
Steve Brotman: That’s a thoughtful framework. Do you think geography plays a role in the success of early-stage startups?
Charles Hudson: It can. About half of our investments are in the Bay Area, and when you add New York, it accounts for two-thirds to three-quarters of our portfolio. There’s a density of talent and capital in these regions that makes it easier for first-time founders.
That said, we do invest outside those hubs. But when teams aren’t co-located—especially if they haven’t worked together before—it can make things more challenging. Being in the same place helps build rhythm and trust, which are critical in the early days.
Steve Brotman: Let’s talk about diversity and inclusion in venture capital. How does that factor into your approach?
Charles Hudson: From the start, I wanted Precursor Ventures to be open and accessible to everyone. The data shows that female founders and founders of color receive a disproportionately small share of venture funding. I didn’t believe that was because they had worse ideas—it was about access and bias.
We focus on supporting underrepresented founders, but we’re not exclusionary. We fund a wide range of entrepreneurs, including many who fit the traditional mold, but we make a conscious effort to back those who don’t always have easy access to capital. Entrepreneurship has the power to level the playing field, and I want our firm to play a role in that.
Steve Brotman: That’s inspiring. What are your thoughts on AI? It’s a hot topic in venture right now.
Charles Hudson: AI has been one of the biggest challenges we’ve faced as a firm. Two years ago, I wrote a blog post questioning the defensibility of many AI startups. The pace of change in the AI ecosystem is so rapid that it’s hard to assess long-term viability.
We decided to avoid chasing the hype and focus on founders with a clear, thoughtful vision. It’s not tenable to do zero AI deals, but we’re very selective. AI reminds me of the early days of the internet or mobile revolutions—many great ideas will eventually work, but timing is everything.
Steve Brotman: What’s your take on the tension between multi-stage and seed funds?
Charles Hudson: The dynamics have definitely shifted. Multi-stage funds now have dedicated seed vehicles, which weren’t common a decade ago. They’re not just tourists anymore; they’re here to stay.
For founders, this creates competition. They might get bigger checks at higher valuations from multi-stage funds, but they have to weigh that against the personalized support and focus that smaller seed funds like ours can provide.
Steve Brotman: How can entrepreneurs connect with you if they want to pitch an idea?
Charles Hudson: I read all my emails, so they can reach me at charles@precursorvc.com. We also accept submissions through our website, and a human reviews every single one. If it’s a fit, founders can go from submitting online to having a meeting with me in about two weeks.
Steve Brotman: That’s fantastic, Charles. Thanks for sharing your story and insights. It’s been great having you on the Driving Alpha podcast.
Charles Hudson: Thank you, Steve! I really enjoyed it.