The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:05:18 · Nick Shalek
[00:05:18] S1: Yeah, it's really pretty amazing to me in retrospect that I got to have one of the all time great investors as my first boss. Obviously, it's not the usual path from endowment investing to tech investing. But a lot of what I took from Yale has really influenced my thinking. In my view, the LP and the venture business are actually similar in a lot of ways. Both are fundamentally about backing amazing people often with limited controller data as an LP, you know, you're mostly putting money in blind pools. So you learn to really fixate on how to underwrite people and how they might think or act in future scenarios. On lessons from Dave specifically, I'll riff on a few things. Yeah, first, I learned from him that the foundation of great investing is really about getting the incentives and relationships right. So if I were to summarize the Yale algorithm, it would be something like find remarkable people, put yourself on the same side of the table as them, then build rapport so they let you invest. So And they'll call you in the middle of volatility, which is when you find a lot of the best investment opportunities. The second thing, I guess I'd say is sort of ignore the received wisdom and try to approach investment problems from first principles. And when you're confused, come back to them. And people throw around this term first principles a lot these days. But Dave, you know, he actually lived it, he really reimagined what institutional investing should be with a few core ideas like that liquidity was overrated, or that you should pursue active management in areas of inefficiency, or that, you know, you should be equity oriented over long periods of time. These things sound really obvious now, but they were totally unconventional then. And third, you know, being around Dave showed me the relevance of the truism that people won't remember what you say, but they'll remember how you made them feel. He was this legendary intellect, but he had so much impact on me and I think so many other people, not just because of his enormous brain, but because he had enormous heart and wore it on his sleeve. I think about that, you know, quite a bit in our business, because there's so many smart people out there.
00:07:00 · Nick Shalek, Harry Stebbings
I mean, know this, Harry, who are chasing every deal, and you can't win just by being smart, you need to be passionate and authentic and consistent or some other set of personal things that really set you apart. [00:07:10] S0: I mean, I love that in terms of it's not what you say, it's how you make people feel. And I I always think back to that actually. It was a friend of mine, Mark Evans, who told me that one. But I do wanna ask, you know, we take this forward, you know, you obviously have the Yale experience. And then when it comes to joining Venture and joining Mickey, you said to me before, why I tell people not to do what I did when they called to ask about being part of a new fund. Help me out here, Nick. What's the thinking on this? And what did you mean by it?
00:07:10 · Harry Stebbings, Nick Shalek
[00:07:10] S0: I mean, I love that in terms of it's not what you say, it's how you make people feel. And I I always think back to that actually. It was a friend of mine, Mark Evans, who told me that one. But I do wanna ask, you know, we take this forward, you know, you obviously have the Yale experience. And then when it comes to joining Venture and joining Mickey, you said to me before, why I tell people not to do what I did when they called to ask about being part of a new fund. Help me out here, Nick. What's the thinking on this? And what did you mean by it? [00:07:34] S1: Yeah, I just think the odds of a new fund working are extremely improbable. You know, the reasons to be in the venture business is to have a chance to work with the best entrepreneurs. And it's very hard for most people to get in venture because there are these amazing storied institutions and legions of angels and VCs with every sort of angle and specialty. And I don't think you can learn the venture business the right way if you don't see what great companies and founders look like. And you're just at very high risk of that happening with new funds. So you need a really realistic appraisal of the situation. So I knew that and I knew the probabilities, but what, you know, why did I do it? Can I push back on you that? Like, there's a ton of firms that have technical debt. It could be in strategy. It could
00:07:34 · Nick Shalek, Harry Stebbings
[00:07:34] S1: Yeah, I just think the odds of a new fund working are extremely improbable. You know, the reasons to be in the venture business is to have a chance to work with the best entrepreneurs. And it's very hard for most people to get in venture because there are these amazing storied institutions and legions of angels and VCs with every sort of angle and specialty. And I don't think you can learn the venture business the right way if you don't see what great companies and founders look like. And you're just at very high risk of that happening with new funds. So you need a really realistic appraisal of the situation. So I knew that and I knew the probabilities, but what, you know, why did I do it? Can I push back on you that? Like, there's a ton of firms that have technical debt. It could be in strategy. It could [00:08:10] S0: be in structure. It could be in team that is bogging them down, that is slowing down investment decision making processes, that's reducing the quality of processes. I would actually posit a different opinion and say that actually a new firm can start with a completely real time thesis that works for today with no existing politics, no existing people debt, structural debt. And actually, you could put that in a poll position over the storied firm.
00:08:36 · Nick Shalek
[00:08:36] S1: I think that's right, Harry. But hundreds or thousands of people who try to get into venture business, very few of them managed to figure out how to stick around. And the reason I'd say it and the reason I joined Micky, despite what I told you earlier, that what he wanted to do, what we were talking about broke the rules of venture as I learned them. My gut feeling from spending time with him very quickly was that he passed this sort of simple litmus test. And I think it's the key one to answer your question, which is, say it this way, a friend of mine has a theory that any decision or any investment can be whittled down to like one single most important question. And for me, in venture capital, that's like, will great entrepreneurs consider working with us? Know, there are lots of good people with smart ideas like you talked about. But if you can't get the best entrepreneurs to consider giving you a meaningful slot on their cap table, then it's not worth it. And after spending time with Micky, I thought that could be true at Ribbit. And I thought I'd have a lot of fun and learn a lot working with him. So we got started trying to make that true. But this is the other thing I'd say, like, even with all that, a lot had to go right for us. Like we've been able to track a brilliant team of people who work exceptionally hard from our partner, Nikolay, who was the first person to join us to our partner, Jordan, who recently joined just about everyone who's landed at Ribbit's been extraordinary. But even with the right people, we just benefited enormously from timing, like the wind being at our back in tech and FinTech, and even more from getting to back entrepreneurs like Fred and Brian at Coinbase, or Ken at Credit Karma, Vlad and Pedro at Robinhood, you know, early on, and that gave us the right to play further and find the next set of great founders. My comments are really about trying to build a firm that establishes a presence and lasts. And I just think that's a really hard thing to do. It requires a lot of luck and a lot of good timing and hustle.
00:10:04 · Harry Stebbings
[00:10:04] S0: No, listen, doing it today, I totally understand and agree. It's it's challenging, but I totally understand the perspective there. I wouldn't wanna say because you mentioned there about kind of the fundamental question being, will founders pick you? On the flip side of that, obviously, you also have to wanna invest. You said first principles being, like, thrown around a lot. The other one is conviction. Conviction and everyone has conviction on this investment. So when we chatted before, you said conviction is critical, but certainty will kill you. Can you unpack this one for me? What did you mean when you said that?