The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:53:07 · Harry Stebbings, David Tisch
[00:53:07] S1: What did you believe about Vanisher that you now no longer believe, David? [00:53:11] S0: Well, it just took a while to see. Right? Every firm thinks they're in the top decile. Right? I mean, I've [00:53:17] S1: never heard any firm be like, no. We're bottom bottom quartile. [00:53:21] S0: Right. So I'm I'm, like, waiting to meet all the bottom three quartile firms in the in the venture industry. When you hear all the LPs explain that... And you look at the the data and it says, you know, all the returns in venture are aggregated to the top five, 10% of firms. I haven't met the the others yet. [00:53:38] S1: Do you think we'll have more or less VCs five years' time? [00:53:41] S0: There's less noise in the venture market than ever before, and there's more competition. [00:53:47] S1: What do you mean less noise and more? [00:53:48] S0: There's less new firms. [00:53:49] S1: Really? It feels like there's more spinouts than ever before.
00:53:53 · David Tisch
[00:53:53] S0: I think they're less. Like, think on it... I think if you actually look at the data, you know, it takes a long time for firms to go away, even if they're still alive. They become irrelevant. They're not investing a lot. They might not have raised a new fund. Nobody's sort of taking them off the map. So the names remain, but the activity goes away. You know, you had asked before about like sub $100,000,000 in San Francisco concentrated seed funds. I think I like didn't answer that fully. I don't think very many people get into venture and want to stay consistent in doing what they do. Meaning, the starter VC is a seed fund. Right? You get, like, if you're new, if you're sort of unproven, you'll get a $20.40, $80,000,000 fund, whatever it is to start. But your goal is to raise a way bigger fund one day. When you raise a bigger fund, when you scale your business, when you have partners and scale AUM, your investment style, your stage, your concentration, your check size is all going to fundamentally change. So when I meet new investors, I always ask like, what's Fund IV look like? Because Fund IV is actually your vision. It's the same as when you meet a founder and you ask, what's the big vision? So I wanna know not what fund one is doing today. I wanna know where you're going with this. Because to me, the advice that you give that person should be in line with how do you get to your actual ambition, not how do you execute your starter fund. And I think what you see in the new firms today is a big ambition. They wanna start with something small and get bigger and do something different really quickly. And I think what's I love about what we do here is this is who we are. This is who we've always been. We are an early stage firm. We write checks at the very early stage, and we don't have any ambition to do anything else.
00:55:45 · Harry Stebbings, David Tisch
[00:55:45] S1: To be clear, you did just raise, what, $5.50 across two funds. I mean, the scale Yeah. The scale has changed. [00:55:53] S0: Sure. But the same exact investment style. And I think we see founders today come to us and say, you're doing the same... Like, you're you're exactly where you were ten years ago when I started my last company. Maybe the check size is different, but we are not... We as a firm, our DNA, our craft is oriented towards being there at the very beginning, at the dream stage. And that to me is, like, what I wake up and get excited about. And I think that when you look at new venture firms, their ambition is to be a multistage firm for the most part. And that's a very competitive part of the market. [00:56:25] S1: It is. I don't actually think they know what their dream is. And I know I know... And what I mean by that is, like, you know, one thing I would say to young people, I sound really old, is, like, be careful what you wish for because you might just get it. And I think the truth is if you know the people at the multistage firms, a lot of them are not happy, the ones who are running it, and wish they were the smaller firms.
00:56:44 · David Tisch
[00:56:44] S0: Yeah. But I think I think I think there are different form factors of the multistate firm. I think you see benchmark scaled today, USV scaled today, and the DNA inside of those firms and the relationships inside of those firms are very different than some of your other scaled firms. I think what Conviction has done is amazing and skilled. I think what Ribbit's done is amazing and skilled. And then you go to Thrive. Like, Thrive has created a generational venture firm in a different flavor, in a rapid amount of time, and challenges at the very top of venture. And I think the way that they've built that firm is so different than, again, your traditional multistage firms. And so I don't think it's as simple as categorizing every firm is the same. I think you have to look at each firm individually and the execution of how they've done it. I think like what Daniel and Nat had done for the moment that was incredible. And what Allot has done is incredible. All those firms I just mentioned are new in the grand scheme of things, I guess Benchmark and USV are not, but the other ones are new. And the speed at which they've gotten to where they've gotten is incredible. And the quality of what they've built is incredible. And that was ambitious. And I think when you look at the new firms today, I think the ones that are great are going to execute great and have real ambition and make a real space for themselves in this industry. And the rest of them are going to go away.
00:58:08 · Harry Stebbings, David Tisch
[00:58:08] S1: When you think about finding, picking, and winning, if I were to ask you to review yourself, one through three, one being best, two being mediocre, three being worst, how would you review yourself? [00:58:20] S0: I just think we're mid constantly. No. That's what the kids say. Our obsession at our firm is to see things. We all wake up every day and try to see. I think we see somewhere between 5075% of what we wanna see. That's my guess. Hard to know, but we can always be better there. There's like always something out there that we didn't see that we want to see. Getting in front of people, finding a way, not just to get in front of them, but for them to take you seriously. That's like what we wake up and obsess over. Winning, when you don't win, it hurts. That's like a, what could we have done better? It is the area in venture I think you can tactically work to improve. You can try different things. You can, like, figure out what you can do better. And I think we spend a lot of time on that. [00:59:13] S1: What has that led to? You spent a lot of time on that. What have you changed as a result?
00:59:18 · David Tisch
[00:59:18] S0: Everything. I mean, you you have to know what tactics to bring to the fight. That's like reading a room and guessing which playbook of really relationship building that you want to use. What does a founder want from you? What are they looking for? And how do you convince them that you are the answer to what they're looking for? And it really is so founder dependent. Like there are certain founders that don't want to talk a lot. There are certain founders that want transactional help. There are certain founders that want a friend, that wanted a set of experience, that want somebody who is around all the time to bounce things. Like, it's a services industry. And so the win condition to me is selling your service to the point where a founder wants it. And that's complicated, especially in this market. The picking is the art of this business. And it's so hard. You can look at our firm from afar and assume we say yes more than other firms. We don't. We are hyper focused on saying yes when we should. But that's a really, really hard thing to do at the early stage in real time. And I like want to tell you I know how to get better at that, or we can get better at that. And yet, like, there comes a point when you're in your career and you've seen enough reps that your taste is your taste. And you're gonna say yes. You're like butterflies show up. You're gonna say yes. They don't. You're gonna say no. You can convince... We think about how to make the right decision a lot and don't know the tactics to get better at it.