The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:28:49 · Harry Stebbings
[00:28:49] S1: I think it's an amazing point that there was a willingness to wait before that's now gone. I think that's absolutely right and very pertinent. Can I ask you, though? I speak to so many LPs. As we said, they love to talk. And every LP wants one category of venture. We want the pure play seed investor in Silicon Valley, small fund under a 100,000,000 pure play seed. And I go, that is the single worst fucking segment to be in. That's the one segment you don't wanna be in. And they all kind of look at me rather horrified. What advice would you give an LP when they look at the segments today and go, ah, I want pure play seed in San Francisco as my bucket?
00:29:27 · David Tisch
[00:29:27] S0: I'm gonna answer your question in a roundabout I think there are three different stakeholders in our industry and their incentives and current conditions are very decoupled. Like we're in a founder world. I think GPs are struggling to have a very static and focused strategy because of we're in a founder friendly world. And I think LPs are frustrated because they want certain versions of exposure or portfolio construction that basically aren't available. And I don't think there's an easy solve for the LP problems. And I don't think there's a clean way to operate as a GP in a ever changing market that is very complicated right now. And so I think founders get the leverage. They get to raise capital from people they like at prices that they like. And you as a GP can say yes or no. And on the LP side, they're gonna look at your portfolio construction, your entry point, your ownership. And then a lot of the multistage funds have multiple products that LPs will tell you and me that they don't like to do, but yet it's gonna be the majority of their allocation into venture is going to go to the multistage firms that are established. It are a way to get scaled capital into the industry. And frankly, like exposure to some of the best companies in the industry through that. So your question is around like the LP conditions. I believe my relationship with our partners is one of truth. We invest out of a $275,000,000 seed fund right now. It will invest in around 150 companies. So we are pure play seed with lack of a focus on ownership and concentration. There is a large cohort of LPs that are confused by our math and doesn't think it works, and that don't believe in our model.
00:31:25 · Harry Stebbings, David Tisch
[00:31:25] S1: You do 50 companies a year? [00:31:27] S0: A little more, probably. [00:31:29] S1: David, do you remember them all? [00:31:31] S0: Yeah. I don't know what the other people who do one to two deals a year do all day. Podcast. [00:31:36] S1: Podcast. Sounds [00:31:40] S0: lovely. But there are LPs that don't believe in our math. Our math works. I know our math works. I see our math and I think our partners also believe our math works and that's awesome. Because our model's terrible if the mouth doesn't work. [00:31:54] S1: From a liquid returns basis, what has been the single best investment? [00:31:58] S0: We were fortunate enough to have met Cursor sort of before they were working on the business that scaled, and my partner, Claire, got to know Michael when they were investing on Dorm Room Fund together, and we were in the earliest round [00:32:14] S1: of Cursor. Did that return the fund? [00:32:16] S0: Yes. Multiple times. [00:32:18] S1: Yeah. I told you this model doesn't work, David. I know. You didn't listen. [00:32:22] S0: I know. I gotta I gotta do better math. Well, our Excel sheet broke. I tried to update it one day and Do do you [00:32:29] S1: know what's astonishing with that? And I'm really pleased you chose that actually as an example, which is the speed to that enterprise value. At four years. I thought thought every LP was moaning that Venture's taking too long. Now we're seeing OpenRuder. Was OpenRuder one of yours? It was not. Oh, bugger. It wasn't my one. Know. [00:32:45] S0: Next time.
00:32:45 · David Tisch, Harry Stebbings
[00:32:45] S0: Next time. [00:32:46] S1: Next time. But, like, you know, this was, whatever, two two years to $8,000,000,000?
00:32:46 · Harry Stebbings, David Tisch
[00:32:46] S1: Next time. But, like, you know, this was, whatever, two two years to $8,000,000,000? [00:32:51] S0: Yeah, I think the speed of company creation, growth, explosion is different. And I also think underlying, like, blessed to have been an early part of the Cursor story. And I think, you know, what they did and accomplished is truly sensational and it's generational outcome. It's the biggest venture M and A deal in history. We were just lucky to have been there early. Underlying, like in the fund that Cursor sits in, in the early stage fund that Cursor sits in, for me, what I love is there's 10 other companies that are fascinating, and they're just taking a slightly more reasonable timeline to grow and compound. Do I think any of them will get to the accomplishment of how big and great Cursor was? I don't know. And that's not like a binary, they did it or didn't. But I think what you have to appreciate in this early stage investing is that things take time. We were the earliest investor in a company called Clay. Clay is a bumpy four year road to explosive growth and now is growing and compounding what they're doing in an amazing way. But it's not a clean, story. And I think it takes learning and it takes iteration and developing their go to market that got them to where they're at today. We're in the seed round of Baseten. You needed inference to sort of become a space. And Baseten today is a full outlier company, and they're running at full speed and sort of hitting that hockey stick fully. But it wasn't this just start up into the right.
00:34:29 · Harry Stebbings
[00:34:29] S1: Do you think the best companies are generally immediately obvious? Or do you think actually the value is generally actually in the messy middle and the ones you don't expect?