The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:15:28 · Venky Ganesan, Harry Stebbings
[00:15:28] S0: I feel like in every cycle, you get the innovators, then you get the imitators, and then you eventually get the idiots. And I think the innovation of the tranche financing was the notion that I can get build with me money and then use that build with me money at a lower valuation to get just money at higher valuation. And then eventually transition to just pure dumb money. And I think that's the logic of this. And so I don't need like money, all money is not the same. I will bring in some investors who are going to actually build the company with me. And then I will bring in some capital along and then eventually I'll bring in some very low cost of capital. That was the intention. But again, like everything else, now people everyone's doing it. And it's not tied to the quality of the company anymore. It's become another technique for people to do. So I find like these things start initially with some... The core of the idea is actually a good one. Okay, I want to actually raise capital, but I want to distinguish between capital that adds value and capital that doesn't add value. [00:16:27] S1: Will you do it as a firm if you're coming in in the latter tranche? [00:16:30] S0: Absolutely. Depends on the situation. We have been on both sides of this situation, and I think if the company is interesting, the founders are special, absolutely. Really? Yeah. At the end of the day, I never care about what other people invest, what they do. I'm looking at this round and say
00:16:30 · Venky Ganesan, Harry Stebbings
[00:16:30] S0: Absolutely. Depends on the situation. We have been on both sides of this situation, and I think if the company is interesting, the founders are special, absolutely. Really? Yeah. At the end of the day, I never care about what other people invest, what they do. I'm looking at this round and say [00:16:44] S1: Are you not hurt by the fact that they are saying you're legitimately less valuable than Peter Fountain who were letting in at half the price? [00:16:51] S0: Peter is amazing. I think the biggest thing I've learned over time is you never want to let your ego come in the way. My only ego is to make money for my investors. If I can make money for my investors, who the hell cares? [00:17:03] S1: Have you let your ego ever get in the way? I have done. 100%. What happened?
00:17:03 · Harry Stebbings, Venky Ganesan
[00:17:03] S1: Have you let your ego ever get in the way? I have done. 100%. What happened? [00:17:07] S0: I think you get caught in ways of around negotiating for valuation or being in a syndicate, or sometimes you're offered the opportunity where you think you're offered a small piece and you're like, Well, I'm too big for that piece. I think in this business, you have to have a high degree of humility because every week I get hit, I get punched in my face by things I don't know. The biggest mistakes are when we get too caught in our ego. Look, the reality is simple. We raise money from institutional investors with one and one new goal, which is to return more of them back. If there's an opportunity to make money on investment, we should do it. The rest of this is all noise. And I think too often, because venture capital tends to be dominated by personalities, people get caught in this. Probably don't know a lot of people like Goldman. Everybody can say David Salmon, who's a CEO. But the idea is Goldman makes a ton of money, and those people just go and do their job. Too often, venture capital, end up... Because there's so many personalities and people, it becomes more about who and our ego as opposed to just do the job.
00:18:07 · Harry Stebbings, Venky Ganesan
[00:18:07] S1: I think that's forced by the fact that we are fighting for constrained supply though. You're If looking at, say, Goldman's public team, you can buy NVIDIA. I can buy NVIDIA. They can buy NVIDIA. It is a free market. Here, we are both competing for Mattis at Legora, and our check, if he takes yours, he won't take mine because there's one lead check. And so we have to have personality. We have to sell ourselves because there is a constrained supply. No? [00:18:34] S0: Yes. What you say is absolutely true, which is that you have to have these two dualities and manage them. One is you have to have a personality. You have to be able to project a sense of differentiation, right? Because why does someone choose Harry and not me? It's because they like Harry. [00:18:50] S1: My good looks and charm. [00:18:51] S0: I see that in person even more so. But I think if you get caught in that and you get so immersed in it, then you lose a sense of what the core purpose is. Right? The core purpose of having that personality and charm is to make money for your investors. That's why it is. Right? And if there's a time for you to make money for your investors where you have to let your ego take a backseat, you should do it. And that's the right thing to do. Now I'm not saying it's easy to do, I'm not saying I've done it, but it's the right thing to do. It's kind of like, I know I gotta eat right and exercise. I know that. I don't do it often, but I know it's the right thing to do.
00:18:51 · Venky Ganesan, Harry Stebbings
[00:18:51] S0: I see that in person even more so. But I think if you get caught in that and you get so immersed in it, then you lose a sense of what the core purpose is. Right? The core purpose of having that personality and charm is to make money for your investors. That's why it is. Right? And if there's a time for you to make money for your investors where you have to let your ego take a backseat, you should do it. And that's the right thing to do. Now I'm not saying it's easy to do, I'm not saying I've done it, but it's the right thing to do. It's kind of like, I know I gotta eat right and exercise. I know that. I don't do it often, but I know it's the right thing to do. [00:19:25] S1: Yeah, but Jim Conn is so good. Some things in life are worth it, like butter chicken. I'm a deshum. [00:19:33] S0: Oh, you are? [00:19:33] S1: Oh, well done. Well, don't don't worry. I I like a deshum too. We said about price kind of, hey. We're a little bit less focused on it when it's early. There comes a time when it does matter with the greatest of respect. Say it. Say it, man. Men that kinda pay up. [00:19:49] S0: And for all you entrepreneurs out there, we definitely pay up, So definitely call us. [00:19:53] S1: Yeah, you do. And every time I'm like, Man, like paying And you prove me right. Like you're right. And I'm proved wrong when I'm like, God, they're not disciplined on price. And so I guess I'm questioning, do we just need to completely reshape how we think about TAMs and market sizing? Let's think about when people pay up. People just sometimes pay up to be able to
00:19:53 · Harry Stebbings, Venky Ganesan
[00:19:53] S1: Yeah, you do. And every time I'm like, Man, like paying And you prove me right. Like you're right. And I'm proved wrong when I'm like, God, they're not disciplined on price. And so I guess I'm questioning, do we just need to completely reshape how we think about TAMs and market sizing? Let's think about when people pay up. People just sometimes pay up to be able to [00:20:17] S0: win the deal. I think some... Sometimes people pay up because they're able to see a bigger TAM than the other investor. And in those cases, you're not actually paying a higher market price. You're able to see that the opportunity is bigger and therefore you're willing to see that possibility. Now sometimes you're to be right, sometimes you're going to be wrong. So to me, I don't necessarily think it's just price. Sometimes you don't see the TAM, you're just trying to win the deal and that's what the price it takes, and you're just a clear price taker. And that happens too. The promise, venture is an asymmetric game. You lose the dollars you invest, but you can make 10x if you're right. And that asymmetry means that the sense of omissions are way higher than the sense of commissions. What I mean by this is, you only see the deals we do, right? You don't see the deals we pass. But the most expensive mistakes venture capitalists make are the deals they passed, not the deals they did. [00:21:06] S1: When you say that, what's the most memorable past that haunts you?