The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
01:00:55 · Harry Stebbings, David Tisch
[01:00:55] S1: David, how many companies do you meet a week as a firm? A lot. [01:00:58] S0: 50 to a 100. [01:01:00] S1: So people are meeting 20 companies a week? [01:01:02] S0: Yeah. At least. [01:01:03] S1: And then every Monday you come for an IC and you talk about the five best? Tuesdays and Thursdays. Twice a week. [01:01:11] S0: We use Mondays for work. No, we are agile with our decision making. I think group think is terrible. We don't vote. Somebody here has to want to do a deal if we're gonna do it. Somebody needs to be like, this is something that I am excited about and I think we should do. And so I think decisions start with a human on our side being excited about something. Whether that happens inside or outside our meeting is not important. If we get to our meeting and one of my partners is like, I did a deal yesterday. Great. And equally so, like, I'm leaning into this. I want to talk through it. Great. We internally don't allow negativity in making early stage decisions. [01:01:55] S1: What do you mean by that? [01:01:56] S0: If you aren't the person that has spent time with the founders, you aren't allowed to be negative about it. [01:02:03] S1: But what if you know something about the market that you feel the- I don't think anybody knows anything about markets at the
01:02:03 · Harry Stebbings, David Tisch
[01:02:03] S1: But what if you know something about the market that you feel the- I don't think anybody knows anything about markets at the [01:02:08] S0: early stage. Markets evolve. If you know something about the founders, but we probably diligence that before we're taking meetings and leaning into something. Like if there are ethical issues, if there's reputational issues with a founder, I think that is an important thing to share. We don't allow grenades at early stage. You're not allowed to throw a grenade on someone else's deal. Our job is to get to yes. If you name a company at early stage, I can tell you why it's gonna fail. Any company. Here are the five risk conditions, and here's why it's gonna fail. The easiest thing to do if you've done this for, like, a year, you can guess why a company's gonna fail. Your memos that every firm writes are very obvious why it's not gonna work. That's not the job. And by the way, on a probability basis, it's not gonna work. Because 70, 90, whatever the number is, percent of early stage companies don't work. So you explaining why something isn't gonna work is incredibly obvious and incredibly irrelevant. The magic of our business is is squinting and seeing why something is going to work. By believing in the thing that you see that the founder sees that you are aligned with the founder and seeing is going to work and saying yes. Our job is to say yes to the right things, not to be fearful of saying yes to the ones that don't work.
01:02:08 · David Tisch, Harry Stebbings
[01:02:08] S0: early stage. Markets evolve. If you know something about the founders, but we probably diligence that before we're taking meetings and leaning into something. Like if there are ethical issues, if there's reputational issues with a founder, I think that is an important thing to share. We don't allow grenades at early stage. You're not allowed to throw a grenade on someone else's deal. Our job is to get to yes. If you name a company at early stage, I can tell you why it's gonna fail. Any company. Here are the five risk conditions, and here's why it's gonna fail. The easiest thing to do if you've done this for, like, a year, you can guess why a company's gonna fail. Your memos that every firm writes are very obvious why it's not gonna work. That's not the job. And by the way, on a probability basis, it's not gonna work. Because 70, 90, whatever the number is, percent of early stage companies don't work. So you explaining why something isn't gonna work is incredibly obvious and incredibly irrelevant. The magic of our business is is squinting and seeing why something is going to work. By believing in the thing that you see that the founder sees that you are aligned with the founder and seeing is going to work and saying yes. Our job is to say yes to the right things, not to be fearful of saying yes to the ones that don't work. [01:03:29] S1: Totally get that and understand that. I always love that Google will just build it or the OpenAI or Apple.
01:03:29 · Harry Stebbings, David Tisch
[01:03:29] S1: Totally get that and understand that. I always love that Google will just build it or the OpenAI or Apple. [01:03:36] S0: Whatever it is. But but, like, you can't hire. You don't know how to hire. You're not gonna get... Like, it's not big enough. All these things, they're just not factors for the win. Why is it gonna work? [01:03:46] S1: You said that 17 to 90% don't work. Keith Rabois said before that's dramatically overestimated. And in fact, if you're investing in great people, your loss rate, in other words, it actually really not working, being a zero or close to a zero, is much lower than people think. [01:04:02] S0: I think at Series A, that's true. I think at Seed, it's some real scale of numbers. [01:04:08] S1: You do. [01:04:09] S0: But I think you go one stage ahead and that number is dramatically lower. I also think Keith is a generationally talented investor, and if his loss rate is, I don't know, a tenth of everybody else's, that wouldn't surprise me. [01:04:22] S1: Yeah. Listen, David, I wanna do a quick fire. So I say a short statement. You give me your immediate thoughts. How sure. Sixty seconds per one. [01:04:29] S0: Let's go. [01:04:30] S1: I'm gonna set a timer. You can choose one seed fund, one series A, and one growth fund to be an LP in. Which one?
01:04:30 · Harry Stebbings, David Tisch
[01:04:30] S1: I'm gonna set a timer. You can choose one seed fund, one series A, and one growth fund to be an LP in. Which one? [01:04:40] S0: I think Y Combinator has invented the only product in our industry. And I think for all the people that say anything critical about them, it's probably just rooted in some version of jealousy. I think what they've built is a world class brand, a world class attractor of great talent, and I think run the best business model in our whole industry. So seed fund, like YC. [01:05:05] S1: Fantastic. Completely agree with you. Series A.