The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
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.
01:05:05 · Harry Stebbings, David Tisch
[01:05:05] S1: Fantastic. Completely agree with you. Series A. [01:05:08] S0: I think there are five to seven equally impressive multi stage firms that just continued to find themselves in the best companies. You can choose Benchmark. You can choose Sequoia. I think the machine Andreessen's built. I think what Thrive has done. You know what Lee Fixel does in addition is fascinating and off the radar in an interesting way and sometimes is a great series a investor. So I think, you know, I think what Ribbit has built over the years, if you look at what they've done is incredible. And so I don't think... And then you have Founders Fund, which operates in their own world and is incredible. And I think, know, we we said Keith Keith at Cursor has done generational level investing. So I I actually don't think it's series a. It's easy to isolate because you're looking at this combination. If you put your LP hat on of, like, fund size accessing early stage versus growth, these blended products. And I don't think it's a black and white answer. Like, I think the two funds that were just very narrow focused for Series A over a historical period were USV and Benchmark, and I think they've changed their fund size today, but not really the partnership dynamic. [01:06:20] S1: Okay, fine. Yeah, absurd punting there. [01:06:23] S0: Yeah. Growth? I weaved in and out of your forced question. [01:06:27] S1: Growth fund? You got one growth fund.
01:06:27 · Harry Stebbings, David Tisch
[01:06:27] S1: Growth fund? You got one growth fund. [01:06:29] S0: Again, like, I think there... Like, I think Spark Growth comes to mind as an amazing, slightly off the radar, unique outlier decision making. I think what Meritech did for a while, I think what Menlo's done, these are new names in my weaving of your answer that I wanted to get in. I think what Coatue's doing or Dragoneer's doing right now, I think are interesting. [01:06:51] S1: You're in Switzerland. [01:06:54] S0: I am Switzerland. [01:06:56] S1: Why are you... Show us your Toblerone, David, come on. [01:07:00] S0: But I mean it. I think there's a tier... Green Oaks, right? I could easily just say Green Oaks is the answer to your question. [01:07:06] S1: No, because I'm asking you, I want money, dollar for dollar. Where am I gonna make the most money? [01:07:12] S0: I think it changes in every market. [01:07:13] S1: But I can give you mine. YC, I agree with you for ownership. No one gets the ownership they get. [01:07:17] S0: But I think YC is the only differentiated product in venture. [01:07:20] S1: And then I think Benchmark for Series A, and then I think Sequoia for Series B and beyond. [01:07:26] S0: So you're discounting Sequoia's early stage investing? [01:07:29] S1: I'm suggesting I would rather be in YCs than Sequoia seeds, yes.