The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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%?
00:23:45 · Harry Stebbings, David Tisch
[00:23:45] S1: But, like, Jenny, is it, like, 5%, 2%? [00:23:49] S0: There are deals we do where we own at the initial check 1%. There's deals we do at 10% and everything in between. [00:23:57] S1: But there's no too low? [00:23:58] S0: Again, that's an emotional thing, not a business thing. I'm sad if we have to write a really small check, but it comes down to like, yes or no. When does that happen the most frequently? When we get to a deal late. When you meet a founder and the deal's in process, you're now begging for scraps, as you should. That's our fault for getting to something late. And that's something we can do better as a firm, meet founders earlier in their journey. And if we didn't do it, we need to figure out internally what could we have done better to meet a founder before there was a company. [00:24:31] S1: Can I ask you, what's your win rate?
00:24:31 · Harry Stebbings, David Tisch
[00:24:31] S1: Can I ask you, what's your win rate? [00:24:33] S0: So different market conditions, it ebbs and flows probably between 7090%. And I think the single factor that causes us to lose the most is getting to something too late. Like speed of our decision making and accessing the opportunity are the two factors that we control that hurt us the most. There's a subset of companies that just meet us and don't want us. But that's harder to course correct because you almost don't know why they didn't like you. It's like a EQ emotional outcome, or they didn't think you were valuable enough, or maybe they referenced you and they got something that said, Not as good as you need them to be. I think we care a lot about those situations, but I think that happens sometimes. The ones that I think we organizationally can work on is how do we get to everything before everybody else? And I think that's the obsession. We're a team of 10 investors. There are six partners at the firm. We've all worked together for a long time. We all like each other and we all do the work. Like, our job every day is to wake up and meet the next founder that we're excited about.
00:25:41 · Harry Stebbings, David Tisch
[00:25:41] S1: I think both of us having flexibility to not have to be lead. Like, again, I I admitted my wrongdoing. I I turned down great businesses over time because of ownership, and it was terrible decisions. And so now we invest very differently. We will absolutely do the 1% or 2% if we think it's an unbelievable founder and it's an amazing opportunity. So great. That means I I never lose because I will just do a smaller check. Well, not never, but you know what I mean. Rarely lose because you... But if I had to only lead, that would come down dramatically. And so my question to you is, do the pure play lead only seed funds still have a business? [00:26:21] S0: What are the pure play lead only seed funds left? [00:26:24] S1: I mean, I think you've got your, like, uncorks, your floodgates, your... I mean, too certain no. First round? [00:26:33] S0: I think they've moved into a different style of investing and more flexible and play it a little bit later when necessary, unlike strategic purpose. [00:26:42] S1: So what you're saying is that business doesn't exist anymore. [00:26:46] S0: I don't want to be in that business. [00:26:47] S1: And why is that? [00:26:48] S0: Because I don't think you can compete against the greatest firms in the world who are running that strategy as part of what they do. [00:26:57] S1: With much less price sensitivity and much bigger checkbooks. [00:27:00] S0: Yeah. I don't even think that's a factor. They're great at what they do. I like very much pedestal.