The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
00:27:00 · David Tisch, Harry Stebbings
[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. [00:27:05] S1: I I do think it is a fact. Like, we have lost to, like, a GC of the world, and with respect, a junior there. And I don't mean that disparagingly, but someone who is more junior because they offer treble the price and treble the check. I agree with the founder for taking it. Like, wholly within your right to do it, but that's why.
00:27:23 · David Tisch
[00:27:23] S0: Yeah, but it's an offer in the market, a free market, and I think they take the majority of the air out of the room if you're trying to compete for, I'm gonna lead, sit on your board or not sit on your board, but I need 10% to 15% of your seed company. I just think there's a greater efficiency to access the multistage firms and the multistage firms are happy to do those deals. I also think like what you've seen happen is it used to be a lot of firms would be like, okay, I'm not going to do this. I want to wait to see this at the A, or I'm not going to do this at the A, I want to wait to see this at the B. And what's happened is they don't get to see it. That might have been your only shot to do the deal because there's an efficiency in the market and there's other people that also want to do it at the B and you might lose there and you might lose at the C. And so what you're seeing is if Sequoia wins, it might mean that, you know, Andreessen or Kleiner or someone else needs to immediately come into the next round because they know that that's the best probability they have of getting a real check into that company. And they do it quickly and they do it aggressively. And I think that if you lose head to head in a seed and an a and a b, you can either put your tail between your legs and call it a day, or you can try to figure out a new entry point with minimal progress and minimal developments to get your check into that company, if you believe that was an important one.