Uncapped with Jack Altman
· Jack Altman, Ev Randle
[00:00:00] S0: If you’re hoping to win the next round, you don’t want to piss them off because next month you might be writing a term sheet. There’s the references piece. There’s the “I want to put more money into this company” thing. There’s just the “I don’t want to fight” type of stuff. I do think it leads to that. I think the best version of being founder friendly is not comfort all the time, obviously. [00:00:00] S4: There was a recent example of this. I recently led an investment that’s still unannounced. We actually had the founders over for dinner in the dining room where we’ll have lunch in about an hour. During the dinner they showed a demo. We were going through their commercial strategy and we gave them a lot of very direct feedback. A lot of it was constructive. It was a really productive conversation. But not every founder responds super well to that. So I called the founder afterwards and said, “How was that for you? How would you respond to that?” In that call he said, “You as a team are going to make us better founders. I can tell that right away.” Because of that, he really wanted to work together, because it wasn’t just going to be slaps on the back and congratulations. It was going to be a relationship where we really pushed both the founders and the whole team to be a better version of themselves. [00:00:00] S0: Does it feel structurally different to you than KP and Founders Fund in any way?
· Jack Altman, Ev Randle
[00:00:00] S0: Does it feel structurally different to you than KP and Founders Fund in any way? [00:00:00] S4: I think maybe the biggest difference is with Founders Fund, because Founders Fund really leans on this kind of Hippocratic Oath of VC, which is “do no harm.” In doing so, we’re going to be completely hands off, that’s kind of the pitch, and if you need something, call us.” I think that sells really easy. But in practice, I think it sometimes materializes as… I don’t want to say laziness, but it is more passive. It’s like, “We should back founders that are going to figure it out all on their own and don’t need help and don’t need any VC assistance.” Sometimes that works out, and maybe there are founders like that. But I think the vast majority of the time, almost every single founder could use feedback, a sparring partner, any of these things. [00:00:00] S0: Even Tiger Woods has a coach. [00:00:00] S4: A hundred percent. Having that position is a great soundbite and goes over really well on Twitter, but when it comes down to it, there are very few practitioners, even the Tiger Woods of the world, that don’t benefit from something like that.
· Peter Fenton
[00:00:00] S2: Ultimately, the highest accolade of a firm that it seeks is a manifestation of its value system. Everyone in this room—I’ve heard this and I know I’m going to hear this on your newest investment—is that if we’ve really done our job, and you’ll hear this in our references, they feel like a co-founder. Benchmark feels like they were a co-founder. What does that mean? It wasn’t a conditional transaction. It wasn’t a one night stand where “they gave us money and then we could brag about the brand.” It was that they were proximate with me. What a co-founder does, it’s a bit like being in a partnership where you have a child. There’s something existentially deep that’s permanent in that relationship. I believe most companies with single founders end up finding proxy co-founders because they need support systems. They need a relational balance with the ups and downs of being an entrepreneur. If we’ve achieved that— You could say it’s not for everybody. Some firms might want more of just the money and the brand. Or they want services delivered by people who work at the firm. Those are different facets. But the depth that can occur when you have that kind of proximate relationship ends up taking you through troughs that would otherwise leave companies to be sold early or to have a destitute founder who’s just tired.
· Jack Altman, Eric Vishria
[00:00:00] S0: There’s also a through-line to it. I felt this as a founder where even a longtime exec might be four or five or six years, but then you have a board member who’s there through the first round, and the second round of execs, and the third exec team. So you’re working many more hours per day with people on your team. But when you look back over a decade, there was somebody who was with you the whole time and it’s hopefully your co-founder and your board members. There’s something about the long arc of it too that is special. [00:00:00] S3: I have moved away from talking about it as guidance or advice. I loved your “sparring partner” thing because I think that’s what it is. That’s what the co-founder thing is too. Startups are hard. They’re really hard. The most successful startups are doing things that are new, innovative, and haven’t been done before. Therefore, you’re figuring things out for the first time. They’re things that are challenging and hard and no one knows the answer. A huge part of the co-founder thing… We should be careful about using it, but that aspiration or that idea is: we’re asking each other questions that sharpen our thinking. We are trying to figure things out together. That’s a very specific way of working. I’m thinking of a very specific example from last week. Oftentimes, the entrepreneur knows what she wants to do and it’s in there. You’re asking questions to help them realize it and have it surface or get clarity on it. That’s very different from getting advice. That isn’t advice. That’s a sparring partner and a sounding board.
· Eric Vishria, Peter Fenton
[00:00:00] S3: I have moved away from talking about it as guidance or advice. I loved your “sparring partner” thing because I think that’s what it is. That’s what the co-founder thing is too. Startups are hard. They’re really hard. The most successful startups are doing things that are new, innovative, and haven’t been done before. Therefore, you’re figuring things out for the first time. They’re things that are challenging and hard and no one knows the answer. A huge part of the co-founder thing… We should be careful about using it, but that aspiration or that idea is: we’re asking each other questions that sharpen our thinking. We are trying to figure things out together. That’s a very specific way of working. I’m thinking of a very specific example from last week. Oftentimes, the entrepreneur knows what she wants to do and it’s in there. You’re asking questions to help them realize it and have it surface or get clarity on it. That’s very different from getting advice. That isn’t advice. That’s a sparring partner and a sounding board. [00:00:00] S2: Part of what I feel is—forgive me, this is where I have to be the older person in the room—the degradation of our industry. It really has been a degradation. The system has shifted to winning. Our goal is to win. [00:00:00] S3: Right, because there’s capital supply now.
· Eric Vishria, Peter Fenton, Jack Altman
[00:00:00] S3: Right, because there’s capital supply now. [00:00:00] S2: You have these large sums of capital that need to be deployed. The system is built to create, in the mind of the entrepreneur, a selection criteria. The old saying: if you’re doing POCs, you want to design the criteria of the POC so you win it. What’s happening is that the industry is programming entrepreneurs in a way to select for things that I think are off target. They’re aligned with the target of the firms and the capital basis they’re deploying, but they’re off-target relative to the quality of the relationship the entrepreneur seeks. [00:00:00] S0: So what are the big ones?