The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:21:06 · Harry Stebbings, Venky Ganesan
[00:21:06] S1: When you say that, what's the most memorable past that haunts you? [00:21:11] S0: What is it? My most memorable past was that I was a young board member on a company called Plaxone, which had an incredible board. Mike Moritz, Ram Shriram, Tim Kugel from Yahoo, and little unknown me, and Sean Parker, and Todd Massanis, who was the founder, and Cameron Wren. Sean had some challenges on that board and was asked to leave that board because I was the only person within ten years of his age in that group. He was telling me he was going to Boston, and he was gonna work with this college dropout. And he's like, you should get involved. And I'm like, Sean, you just got booted out of this sport, and I have no idea what I'm doing, and I I didn't even take that meeting. And I probably had the opportunity to write a $50,000 check. Did that right? And those are... Those seed rounds were different. [00:22:01] S1: They were million dollar seed rounds. That's a tough one. What was Sean White back then? [00:22:05] S0: The way he described Plaxil, his vision worked out. He understood virality, network effects, his thought process around what happened at Napster. You know, so so my rule of thumb is I'm always looking for people incredibly good at communicating very complex concepts in a simple manner and just have insight. And Sean just had insight around human behavior and complex concepts and could boil it down in a simple way. He was a very good communicator. [00:22:33] S1: What a character. [00:22:36] S0: He gets to have Justin Timberlake play him, so...
00:22:36 · Venky Ganesan, Harry Stebbings
[00:22:36] S0: He gets to have Justin Timberlake play him, so... [00:22:38] S1: I mean, it's a pretty cool one. Drops are the. Love love it. And we actually did that. We were the twenty minute VC. Oh, was just twenty minute VC. Yeah. Yeah. Yeah. Thanks, dude. I was talking to Amy beforehand, speaking of kind of family back there. Amazing partner of mine. Amazing partner of yours. And she said that you care a lot about understanding what brought founders together. Hearing about you talking about Sean there made me think of this. Why do you care about what brings founders together? And are there any patterns or signals that excite you? [00:23:05] S0: I think the company you build is a team you build. And so much of the DNA of a company is set by its founding team. And so what brought them together, why they thought in a world of 6,000,000,000 people they should be the people to do this, how they think about each other's strengths and weaknesses. I think these things all sort of like minority report. They are like a precog that tells you around how they're going to make decisions, how they're going to build the rest of their team. So I think it gives you a clue about who are these people. And ultimately, I think the company's culture and DNA are going be shaped by the founders. [00:23:39] S1: You can ask one question that you find most revealing of a founder quality. Doug Leone's, to me, was the one I remember most, and he always says, what's your worst reference?
00:23:39 · Harry Stebbings, Venky Ganesan
[00:23:39] S1: You can ask one question that you find most revealing of a founder quality. Doug Leone's, to me, was the one I remember most, and he always says, what's your worst reference? [00:23:48] S0: So that's a great question. I generally ask your five best friends. Right? And imagine they're in a room. And if I had to ask them three words to describe you, what would that be? That's the question I normally ask people. I'll tell you, I I listened to Mike Moritz on the interview and he asked a question. And his favorite question is, if you could go back in your life and change one thing, what would that be? I think that that's a pretty interesting question. If I were to ask you what do you think about yourself, it's harder. But when you think about your friends, can sort of externalize it and then that gives you a clue about how the people around you think about you. And it also tells you your self awareness. Because usually, after I do that, I also do references, and I'm trying to see if the references match someone's self awareness. Right? It's actually okay. If you know your weaknesses, then you have a much better chance of managing them. It's the people who are blind to their weaknesses that usually have challenges. [00:24:38] S1: Don't mind my weaknesses are revealed in the comments section of every interview, so I see them glaringly. One thing that's been, I think, uniform across the industry is we've seen ownerships go down. Even the hailed benchmark now take less than 10%. [00:24:52] S0: Thought they said 20% or bust. Maybe
00:24:52 · Venky Ganesan, Harry Stebbings
[00:24:52] S0: Thought they said 20% or bust. Maybe [00:24:57] S1: that's it to that message. I love the benchmark guys. That... Absolutely. But does ownership matter as much anymore? Of course it does. Ownership always matters, but [00:25:06] S0: I think you have to think of that relative to the opportunity. Right? What what I mean by that is, yeah. Would I love to have 20% of a company? Sure. But I'd rather take 2% of a trillion dollar company than 20% of a $100,000,000 company. Right? [00:25:19] S1: So you'll do deals now for 2%, 3%? [00:25:22] S0: We do. Anthropic, we own less than 2%. My point is that I think when you think about ownership, you can't think of that in isolation. [00:25:30] S1: But I think you're either in the ownership game or you're in the money movement game. [00:25:33] S0: I disagree a little bit. I I think when you're getting your option bet, you want to have ownership because it's not clear. So let's say you know it's an outlier. If it's an outlier company, then you are in the capital invested game. Prior to being an outlier company, you have to be in the ownership game. Your best situation is you are in the ownership game, in an outlier company, and then because... Then you go into the money movement game. [00:25:57] S1: No. I thought you you... The the ownership doesn't matter pre it being an outlier because you're there for the information. When it does become known, it becomes a money concentration game.
00:25:57 · Harry Stebbings, Venky Ganesan
[00:25:57] S1: No. I thought you you... The the ownership doesn't matter pre it being an outlier because you're there for the information. When it does become known, it becomes a money concentration game. [00:26:06] S0: You wanna have enough ownership, though. I mean, you look at Hicksfield, my partner Amy, she killed it. She got 15% of the company for a $5,000,000 check. You had Alex on your podcast, incredible entrepreneur, incredible business. So in that case, we got the ownership and then we also have the opportunity to then size up. Did you? Yeah. We invested. [00:26:27] S1: Do you get my rationale though for actually it doesn't matter if you have ownership in the first place, what you're buying is the information to size up? I get that. [00:26:35] S0: If you're asking me, is it better to be in the company regardless of ownership or not be in the company? Yeah, it's better to be in the company. But it's even better to be in the company with ownership because now you actually have gotten your ownership that's going to drive real returns. Because the problem is, once there's an outlier, everybody knows about it. It's no longer a selection game. It's just, okay, can you get access and can... It's a position sizing game. There's no alpha there. And then that's the truth. In the AI greatest hits, everybody knows these companies. [00:27:05] S1: How much of your fund will you put in a single company? [00:27:08] S0: I don't think we would put more than 20% of [00:27:11] S1: Have you gone up to 20% before?
00:27:11 · Harry Stebbings, Venky Ganesan
[00:27:11] S1: Have you gone up to 20% before? [00:27:13] S0: We have hit 20 on one company. Woah. What company? Anthropic. I mean... Yeah. It's [00:27:20] S1: I'll tell [00:27:20] S0: you now. Yeah. [00:27:21] S1: It's it's [00:27:22] S0: gotta be an exception. Right? [00:27:23] S1: But that was a hard conversation. We 10 x this. Yeah. We 10 x last year. Okay, Venky. Let's do it. [00:27:30] S0: But I I do feel that you have to think about the question of ownership and concentration as when. What I mean is that where was the company? What information do you have? How much conviction can you have as an outlier company? Because the the thing about position sizing is you want to position sizes when the data is there. And if you position size it ahead of the data, then you're taking a lot more risk. So the question is not, did you put 20% of the fund of the company in one check at the beginning of the fund, or did you ladder up to 20% on the basis of new data? Obviously it's much better to ladder up on the basis of new data. And I think in an era where venture capitalists are going to have ownership come down, right? I mean, I wish we could get 10. Even 10% is hard, right? Now the way you're going to win is you're going to establish a position and then size up as a company does well so that you have sized it commensurate to the outlier opportunity.