The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:54:16 · Harry Stebbings, Venky Ganesan
[00:54:16] S1: Are you a better investor now you're richer? [00:54:19] S0: Yes. You're not afraid as much. You're not afraid of failure. You're willing to go all in and go to the hilt. And so I I just think you can go for broke more easily. It's not like... Think about it on a poker table. The guy with the big amount of chips has so much leverage to win. Right? They they can see more cards than theirs. And so ironically, and this is why I think, you know, like the way our capitalism system is set up, the rich are gonna get richer because they just have more opportunities to be the bully in the poker table. [00:54:48] S1: Does that mean emerging managers are just in the old stacked against some game? I don't see... And forgive me for this, Ben. I don't like binaries, but fuck your own media, so you kinda have to do binaries. It depends. Doesn't sell. 30 to $100,000,000 funds are just the worst place [00:55:03] S0: to be. Yes. They are today. That's a tough place to be because you're playing in a poker table where people have such high chip stacks. [00:55:09] S1: I think they were five years ago, dude. [00:55:11] S0: I think what happens is if you are lucky enough, right, and I don't know if this true, but I'm sure if you were to go and look at the cap table, there was some small investor who wrote a check. Oh, Arginine wrote a check into Anthropic. Now, maybe he didn't have a fund then, but like you wrote a check, you were a 30,000,000 to $50,000,000 check, you wrote a check into the Anthropic round, not the $4,000,000,000 round we did, but much earlier. You're doing fine.
00:55:11 · Venky Ganesan, Harry Stebbings
[00:55:11] S0: I think what happens is if you are lucky enough, right, and I don't know if this true, but I'm sure if you were to go and look at the cap table, there was some small investor who wrote a check. Oh, Arginine wrote a check into Anthropic. Now, maybe he didn't have a fund then, but like you wrote a check, you were a 30,000,000 to $50,000,000 check, you wrote a check into the Anthropic round, not the $4,000,000,000 round we did, but much earlier. You're doing fine. [00:55:32] S1: Yeah, but he was an angel not competing for rounds. And so what I'm saying is the 30 to $100,000,000 funds where they need to move like a million, 2,000,000, 3,000,000, it's kind of a pain to fit them into rounds. No. I'm actually putting in 100 ks or 200 ks shows. [00:55:45] S0: I mean, I would... Yes. I'm I'm just... Your principle is right, but I'm just trying to think about counting. I try to be intellectually honest. Right? Think about conviction. How how did Sarah and... Well, how big was Sarah's fund? I wanna say 200 [00:55:56] S1: fund was [00:55:57] S0: $200,000,000 fund, and she found a way to be in some of the most interesting companies early. Can be done. [00:56:02] S1: And then you've got Dave Tisch, I think, would be a really good example actually as well with BoxGroup. Yeah. Like, it goes against the portfolio construction that all LPs love, which is high ownership, concentrated portfolio.
00:56:02 · Harry Stebbings, Venky Ganesan
[00:56:02] S1: And then you've got Dave Tisch, I think, would be a really good example actually as well with BoxGroup. Yeah. Like, it goes against the portfolio construction that all LPs love, which is high ownership, concentrated portfolio. [00:56:13] S0: I think there's always people who figure out how to play agency art. Right? And so... But they are the best of the best, and and so you don't wanna extrapolate. But in general, those are tough places to be unless you're exceptional. And and I think I think like I was reading a tweet between Sarah and Patrick Grady, and Patrick Grady, like she was like... Sarah was telling LP, like, my strategies are just gonna work harder. That's probably the truth. Right? The truth is everybody wants to have some magic strategy that you're gonna do that nobody else is gonna do. There's no magic strategy. Everybody in the venture industry is smart. You have to out hustle and have grit to make through, and Sarah definitely has to. [00:56:47] S1: Final one before we do a quick fire. We mentioned PE being challenged in a lot of ways by a lot of AI companies. We're seeing the keys being handed back at companies like Medallia. You're seeing, apparently, a lot of struggling companies in a lot of these PE providers' books. Is PE pretty structurally fucked?
00:56:47 · Harry Stebbings, Venky Ganesan
[00:56:47] S1: Final one before we do a quick fire. We mentioned PE being challenged in a lot of ways by a lot of AI companies. We're seeing the keys being handed back at companies like Medallia. You're seeing, apparently, a lot of struggling companies in a lot of these PE providers' books. Is PE pretty structurally fucked? [00:57:05] S0: Look. They're smart guys, and they know how to figure out and operate these companies. Right? They also have majority control. In some ways, the venture backed companies, SaaS companies where people pay at high multiples, they add tables and mirrors, and they got spooned, as I say. And I think those are in a tougher situation. Don't be right. Think PE is a challenge too. But the reason why I say the venture backed companies are even tougher situation. At least PE, you have a majority owner who controls the company, can do things. You have a lot of zombie SaaS companies where nobody owns enough to be able to do anything, nobody cares. And so how would you actually land that ship? At least it's PE, they can do some stuff to it. Now landing that ship is gonna be hard for everybody. But I think in that class of twenty twenty one SaaS companies, the best outcome is getting spooned, which really means getting your capital back. And the worst outcome is gonna [00:57:59] S1: be zero. Good old bending spoons. European. Just just gonna put it out there. So the Quakefire is a combination of mine and Joff [00:58:07] S0: Okay. [00:58:08] S1: On your team. Joff. Yeah. Yeah. He came back with some bangers. My partner, Why do you love pocket squares?
00:58:08 · Harry Stebbings, Venky Ganesan
[00:58:08] S1: On your team. Joff. Yeah. Yeah. He came back with some bangers. My partner, Why do you love pocket squares? [00:58:14] S0: When I was growing up, I didn't care about how I dressed and I did not take any effort into it. And I had this one conversation with my dad when he said, listen, when you dress, you're not dressing for yourself, you're dressing for others. You're showing them that this is an important meeting, that you're expressing the importance of what you're doing to them. And so to me, and I know my partners make fun of this, I dress up for partner meetings because it's like it's a self message to me about the people I'm meeting are very important and what I'm gonna do is important. I need to take that very seriously. [00:58:46] S1: Well, now I feel guilty. Oh, Christ. Wait a minute, Neil. Yeah. Jeff teed me up for that one, didn't he? Gosh. I like that. It's really nice. Yeah. I... Yeah. Fuck. Good. Well done. I should probably think about that more. You can invest in one seed fund and one growth fund. It's not Manley. Which fund do you invest in? [00:59:05] S0: I have tremendous respect for the Bessemer folks. I I was a cofounder with Byron and I've known David Khan. And and I think they are super disciplined. So if I could invest outside of Menlo, I would invest in Bessemer. [00:59:17] S1: That's for the growth fund? What about the seed fund?
00:59:17 · Harry Stebbings, Venky Ganesan
[00:59:17] S1: That's for the growth fund? What about the seed fund? [00:59:19] S0: You know, so I'm looking for people who are gonna be interesting AI companies. There's this group of guys called E14 out of MIT, and I find them to be interesting AI companies, and they seem to really understand their IT ecosystem. So... Who, when you hear you're competing against them, are you like, oh, fuck? I think of more people than firms, but I I would say benchmark, super hard to beat. [00:59:48] S1: Are Benchmark harder to beat than Sequoia? [00:59:51] S0: I think so. I mean, I I I... Obviously, they're both great firms, but, like, Benchmark, I think, is super hard to beat. And whatever they do, combination of Eric, Chetan, and Everett, and Jack, they are just they are just a beast. [01:00:05] S1: What would be your single biggest piece of advice to an LP allocating intervention in this time? [01:00:11] S0: Look at the windshield, the rearview mirror. The results and financial performance are rearview mirror calculations, and they're good about telling you what they did in the past. They don't tell you how some firm's gonna do. Performance is a lagging indicator, and it's actually a five to seven year lagging indicator. So my advice would be call a bunch of entrepreneurs or successful AI companies and ask them who are the partners they respect. And my email didn't take the money. And if the firm you're talking to doesn't have a few of those partners in the mix, then that's your that's your windshield.