Meet Karl: On Scaling Startups, Founder Red Flags, and Why He’s Not Afraid of Hype

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As a managing partner at M13, Karl is a bridge between operations and innovation, drawn to founders who are both teachable and teachers in their own right. He is a dynamic force in the world of venture capital, merging a deep technical background with a thoughtful, measured approach to investment.

Karl’s experience scaling businesses runs the gamut from founding his own tech companies to scaling DigitalOcean from a startup operation to a successful IPO on the NYSE. As an investor at M13, his philosophy emphasizes exciting founders building high-potential categories and active debate among the investment team. 

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An economically minded thinker, Karl is a vocal critic of reactive investment strategies, particularly when venture capitalists chase hype without true diligence—but he doesn’t overlook that “hype” stems from true innovation. His investing journey is one of calculated risks and enduring curiosity.

We sat down with Karl to talk about how venture fits into today's macro landscape, building M13 from the early days, green flags and red flags in founders, and more.

Karl’s recent publications

• 3 Myths About M&A and Innovation
• M13’s Guide to Building Your Early-Stage Fundraising Deck
  
• Investing in Zenlytic: Unlocking Business Insights with Agentic AI
• Propulsion, Not Just Platform: M13’s System to Help Founders Build Better Businesses
• M13’s Guide to OKRs‍
• Our 2024 Predictions

The macro economy and hype cycles 

How do you balance investing in new technologies and not getting caught up in hype? 

Hype generally comes from something. It's the result of a new technology or category that people deeply believe will be very dominant in the future. As an investor, you can't ignore that.

What you have to be careful of is excitement without due diligence. It takes good strategic thinking and a calm, stable team to navigate through false flags and identify the “needles in the hype haystack” that actually have meaningful potential. 

How does this play out for VC investors? 

When I say avoid the hype cycles, I'm really talking about avoiding bidding wars on companies that you don't actually know that much about. Sometimes when a sector is really hot, people do less diligence, because everyone’s just leaning on each other’s excitement and fighting for a seat at the table. At M13, we try to be more measured. It’s not about avoiding exciting spaces—it’s about executing in a very measured way, so you're not getting carried away into deals with high price points but little proven success. 

The best venture firms are more thoughtful and less reactive. Venture tends to react on a very short timeline, even though investments have a five- to ten-year time horizon. Sometimes it feels like the only way to compete with bigger firms is by being aggressive and overreacting to waves like AI and blockchain. As a result, valuations and the market become less efficient, and you get people competing on price, rather than people competing on value. 

I think that good venture firms are built on value and helping portfolio companies grow more effectively.

What’s a common misconception about venture or the wider economy that you’d like to clear up? 

I recently shared a blog about my perspective on antitrust and how its benefits to innovation and the wider economy have been misrepresented. I think some of the ideas behind regulations are quite good, but an all-encompassing execution can create massive limitations. It's a mixed bag: Although excessive M&A regulations can be very limiting for innovation and venture, I also believe the lack of formal regulation in blockchain and cryptocurrencies in the US is driving web3 innovation to happen elsewhere, which will be a massive disadvantage for this country. 

What other opportunities do you see that could help the national economy overall?  

The concentration of wealth in the US is a massive economic problem that could ultimately result in the downfall of the US as the leading economy in the world. 

I think the greatest wealth distribution mechanism in US society stems from how venture-backed technology businesses have employed the ESOP across their organizations. It seems to me that a wider-spread application of this methodology of distributed value creation across a large employee base can quickly broaden economic opportunity and help bring real balance into the US economy into the future. 

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Working with founders as a managing partner 

What is your favorite part of your job? 

As a managing partner, I have responsibilities across the whole business, but I particularly enjoy spending time with innovative, creative, and inspiring founders. 

That can happen at the investing stage, where we’re courting a company and brainstorming how we could work with them. It happens very meaningfully at the Propulsion stage, after we make an investment and are working alongside founders. And it can happen on the incubation side, where our Launchpad team works to help visionary people build exciting projects over time.

Is there a type of founder you tend to work with? 

Ability to execute is table stakes. Beyond that, I really value a symbiotic relationship. I want to work with founders who extend my range of thinking, so I learn and grow with them. I also want them to benefit from my specific experience and support. It’s an important balance to me.

Are there any red flags you’ve seen in founders? 

Hubris. If a founder is too arrogant, or thinks they already know everything, they’re destined to have problems in their business—and they’re going to be difficult to work with. So hubris is a huge red flag right out of the gate. 

Do you have any stories of founders who impressed you within the first five minutes? 

One that comes to mind is Mike Chime from Prepared, which today is disrupting the public safety category across the country. 

I was giving a talk at an MBA class at Yale, and at the end of it, Mike asked if he could walk me to my car. I didn’t realize at the time he was still an undergrad auditing the class. In that short conversation, he presented this idea to me with incredible energy, passion, and kindness. While it wasn’t fully baked into a business yet, it illustrated a true clarity of thought around the public safety problem he was trying to solve. I agreed to stay in touch as a mentor, and about a year later, M13 made our first investment in Prepared. 

Today, Prepared is available to over 180 million people through a partnership with Apple and within the latest iOS update, bridging the real-time data gap to make 911 callers and responders safer. That first meeting played a role in our desire to support his team—although I will say, it’s important to dig in deeper, even after a very impressive first pitch. 

What have you learned about supporting founders? 

When I joined M13 eight years ago, I actually don’t think I was a great investor. Here’s what I mean by that. 

Back then, I led with an entrepreneurial mindset, where I would hear an idea and create the opportunity in my mind of what it could become, rather than focusing on what the founder wanted to make. Since then I’ve learned to never feed a founder what your ideas are. You have to make sure that you're investing in the ideas that they are presenting. 

Maybe an investor has a great idea, but if the founder themself isn’t presenting that vision, then that idea isn’t what’s ultimately going to come to light. 

Lessons on culture, hospitality, and building something different 

Share a valuable career lesson you’ve learned. 

In my early days at Digital Ocean, I observed a lot of cultural volatility, the result of which was the loss of some of our best talent. However, in the process of turning that around, I learned a valuable lesson about how good culture drives great performance and helps you retain amazing talent. As a result, we’ve built M13 with an operational mindset that puts culture at the forefront. 

It’s crucial to surround yourself with good, trustworthy humans that have your back. Personally, I feel like if there is one key highlight  to building M13, it’s that the people who work here are all great humans. Everyone here can rely on each other implicitly.

Your journey spans multiple fields, including hospitality. How does that intertwine with your tech career? 

It’s funny to think about how we survive as we fight to build our early careers. I started my first tech company in 1997, and with no other income I had to figure out a way to make money to live. My partner and I decided to put on a series of events in LA in some extreme locations, like the Disney-owned Masonic Lodge on Hollywood Boulevard. These produced a good income for us for about six to eight months as we experimented and tested the early iterations of building our business.  As we secured early investors, we were then able to focus fully on the company.

History repeated itself a little later, when I moved to New York for business school. Following graduation, as I began to ideate my next startup, I was presented with the opportunity to oversee the build out and launch of three nightclub venues over a period of 18 months in support of a partner that was heavily integrated into that industry. It might seem unrelated to the journey of a technology founder, but it supported me through my build effort, and as with everything, taught me some great lessons along the way.

The irony of the role I played was that although I agreed to oversee the back office and watch the books, I was also obligated to be in the club until at least two a.m. every night. In the meantime, I was building a fintech company with offices in London, New York, and Shanghai, so I had to be up early for international conference calls. I’d sleep for a few hours, get up for calls and a full day’s work, then go back to sleep. It was a journey, but as soon as the company began to show traction, I had to refocus and dedicate myself fully to that.

What is something that most people don’t know about you? 

Over the last 20 years, every company I’ve operated has been co-founded by two brothers. Having grown up in a household with two sisters and a mother, and now living in a household with a wife and two daughters, maybe I’m subconsciously trying to add some brotherly love to my life? 

What is a daily practice of yours? 

I have kids, so my daily hack is I get anything health-oriented done first thing in the morning, early. I’ll usually play tennis or soccer—I enjoy competitive but friendly sports. But I have to do it before the kid responsibilities kick in for the day, because after that, it’s over. 

Lightning round 

First job? 

In-home catering, when I was about 16. 

Guilty pleasure? 

Typical foodie stuff. I like to indulge in a specialty tasting menu sometimes—something that just blows your taste buds away.

Which city has the best food scene, New York, Miami, or London? 

It’s a tough one, but I’d have to say New York. (Though that might just be because I know it better.)

Book rec? 

Dark Matter by Blake Crouch—which is also a TV show now—is fantastic science fiction. 

Music rec?

I like this Belgian artist, Stromae. His last album is fantastic. 

Movie rec? 

I recently watched the HBO documentary Wild Wild Space. It’s about the business battle between companies trying to go to space, and I really enjoyed it.

Favorite app?

…TikTok.