The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:17:24 · Harry Stebbings, David Tisch
[00:17:24] S1: I get that. And you know what worries me though so much, and I'm asking here, but it worries me is I completely agree with you in terms of that supposed win rate. What happens now though is they just say, David, okay. Fuck it. I lost to Sequoia and Box Group. Let's do another round. I'll I'll do it at eight 100. I know David just did the first tranche at 400, but I'll do it at 800 today. And for the founder, it's like, well, good deal. Nothing's changed in the company. I get more money at double the price. I think it distorts companies and really [00:17:53] S0: Who are you worried about? [00:17:54] S1: I'm worried about founders losing focus and becoming distracted with way too much money way too quickly.
00:17:54 · Harry Stebbings, David Tisch
[00:17:54] S1: I'm worried about founders losing focus and becoming distracted with way too much money way too quickly. [00:18:00] S0: That is like a babysitting problem. It is. Sometimes that's going to happen for sure. But to attribute that fear to every founder, some founders are going to tremendously benefit from having more runway, higher valuation, more momentum, more buzz in order to recruit people, order to show that there are believers that think this can be huge so that they can justify to customers to get early partners. If you are a great founder, and it doesn't mean all of them are going to do it properly, you have to take all the conditions that you've chosen to take on. So if you took on two tranches, if you took on high valuations, if you took on a lot of money, you're gonna have to use those variables and execute your company building in a different way than if you're super capital constrained. I think the lean startup was a total fake. It was a stupid brainwash that happened for ten years with professors and books and tweets and blog posts that was just totally awful. And I think it sent people, like, the wrong message. [00:19:02] S1: Like Why why was it totally awful? [00:19:04] S0: Just Because name a company that actually ran the Lean Startup Playbook that worked. One, every company, if you're going to be actually successful, needs a lot of money, especially today. [00:19:14] S1: But like 37 signals is is one that's not.
00:19:14 · Harry Stebbings, David Tisch
[00:19:14] S1: But like 37 signals is is one that's not. [00:19:17] S0: There's some bootstrap companies, but if you if you wanna get on the venture flywheel, lean is not the answer. Inevitably, you're gonna be fat. You're not gonna be lean. You have to be. It doesn't mean undisciplined. The difference between the word, like, lean and the word well funded is not lack of discipline. It's just not automatically attributable. Does that mean that every company that raises a ton of money is gonna be well disciplined? No. There's gonna be, again, back to where we started, bad companies. [00:19:45] S1: Will you do tranche drowns if the founder said [00:19:49] S0: I don't like them. But, like, again, there's the, like, emotional reaction and the business decision, and those are very decoupled. [00:19:57] S1: But you will do the second or [00:19:58] S0: third tranche? On it. I don't want founders to know that we'll just rip checks into tranche rounds. But, yeah. Whenever I I I I don't want to. I would like to invest at this... At the lower price. [00:20:08] S1: I'm too... I'm... Fuck off. This is a partnership. I get it. [00:20:12] S0: But that's your problem. Get a shrink. [00:20:14] S1: This is a partnership, and you're saying you're inherently less valuable than them. Well, fine. Just don't take me then. [00:20:19] S0: Okay. That's their choice. And and guess what? They're not gonna take you. And you can go back and you can choose. That company is not gonna be... That's a yes, no decision. That's it. [00:20:29] S1: But you're happy then to just to take
00:20:29 · Harry Stebbings, David Tisch
[00:20:29] S1: But you're happy then to just to take [00:20:31] S0: that I didn't say happy. That's now an emotional attribute. [00:20:34] S1: But you will, though. [00:20:35] S0: I will be sad and take it. That's a... That's like a different thing. You will succumb to it. Will you will just admit that this is sad and fall in line. But like, I think it's our responsibility to earn the right to do what we want to do versus what a founder is offering us. And so again, you can beg to have a entrepreneur do what you're asking them to do. So if there's two tranches, I would like to enter in the lower tranche, I need to convince the founder to allow me to do that. And if I don't, it's a me problem. [00:21:11] S1: I would like the low entrench, please. Yeah. Cake or death. Cake, please. And [00:21:16] S0: they say no. And then you're like, pretty please. And then they say no again. And then you have to like, beg differently. [00:21:23] S1: Come on, please. I'm just a little seed fund. Right.
00:21:23 · Harry Stebbings, David Tisch
[00:21:23] S1: Come on, please. I'm just a little seed fund. Right. [00:21:27] S0: You have to use all your little sale tactics, and then you get rejected. But like, is that an enjoyable market condition that's been emerging more and more in the past couple years? No. If I am sitting there and I view it as like not the founder that tranched us, but the other VC, it's good to know. I also have a long Scathing, but it is, right? Like you have decided that I will pay another price, not the founder. You've created the structure of this deal such that I am not sitting on the cap table with you. I am pushed to a different product than you get to invest in. That means when we have early stage investments and are going out to market to help them raise capital, if I get to be a voice in the ear of a founder, I have opinions too. [00:22:13] S1: Remember, was on your side, David. Was always on your side. Was on your side. Come on. [00:22:18] S0: But I mean it, right? Like, there's people to me right now, and this happens in hot market conditions, that are playing a short game, and there's people that play a long game. [00:22:28] S1: And sorry, just they're playing a short game because they're cutting people out, they're pushing them into second trundies.
00:22:28 · Harry Stebbings, David Tisch
[00:22:28] S1: And sorry, just they're playing a short game because they're cutting people out, they're pushing them into second trundies. [00:22:32] S0: I just think like there's a set of relationships that you build in this business because we're all dependent upon each other in very different ways that ebb and flow in different times, in different conditions, in different companies. If you're in the business of maintaining and building long term relationships, you're gonna choose certain behaviors over others in different moments. And the thing that we've done at Box Group that I think is different than a lot of other firms as they've built is we've stayed very true to who we are. We do early stage investing. We try to be there on day one. We don't take our problems and put them in front of founders. We try to be as helpful as we can be, and we try to be founder friendly in every step of the way. Does that work perfectly every time? No, but that's the intention. So we write checks that are not needing of ownership. We don't sit on boards. We don't write competitive term sheets. We are happy to lead a deal. We are happy to help a founder get in business with some money. We're happy to be totally creative in how we invest, but it's oriented around early stage and getting in at that dream level. [00:23:41] S1: What is the average ownership? [00:23:43] S0: I don't know. I have to... That's a math question. [00:23:45] S1: But, like, Jenny, is it, like, 5%, 2%?