How I Invest with David Weisburd
00:25:14 · David Weisburd
[00:25:14] S1: The other thing that's maybe a little bit paradoxical is this concept of the right to win. So a lot of people look for this canonical right to win. But, of course, when you're a founder and you're looking to fill your cap table, you're looking to fill different needs on a cap table. So you might want somebody with brands, somebody with a lot of capital, and maybe you want somebody that could help recruit these types of engineers. How much does right to win matter in the context of a startup? And is there such a thing as the correct right to win, or is it as diverse as there are types of founders and types of industries?
00:25:51 · Brijesh Jeevarathnam
[00:25:51] S0: I do think there's a bit of a difference between the right to win, as you just said, in an earlier stage company, where it's more of a founder bet and compared to a later stage company where there are more metrics to evaluate and frankly more capital being raised, right? If I start with the growth or later side of the equation, the right to win, even taking a step back from that, even seeing those deals and being able to pick where they want to put that growth check. Nowadays, the growth checks are large, as you know, right? $5,100.500000000 checks. In the very best companies, which are raising a lot of capital per round, it is still a food fight to get on the cap table. The company may be raising $500,000,000 or more. There are companies raising tens of billions now, as you know. But it's surprisingly still a heavily subscribed round. I think in those cases, the right to win might include the brand of both the person and the firm in terms of not just kind of the patina of the firm, but also longevity, like how long they can kind of keep backing this journey. Because as we see, the private capital markets are really expanding and eating into what the public markets used to do. I want to come back to that point. I'm going to park it for now. So the brand matters. The check size or how deep the pockets are, I should say, really matters as well. Right? Can this investor back me not just now, but in six months or a year, but I need the next growth check? And then I think potentially as these companies prepare for exit, either M and A or IPO, they look for the right board member to draw from these institutions. So those all are attributes, not comprehensive by any means, of the right to win at that stage. If I go to the earlier stage, it might be a different sense of right to win. On the seeing side, it includes showing up at hacker houses these days in San Francisco or somewhere else, I don't know, and courting with the best of them or speaking the language, like I said, or just understanding at the very fundamental level what these often 20 in age or sometimes even younger, how they see the world and connecting with them. As you know, at that stage, it really is a founder bet.
00:28:23 · Brijesh Jeevarathnam
Somebody else said this better than me, which is a great founding team and a not so great idea will always beat a mediocre founding team and a fantastic idea because as we know, things evolve, things morph and pivot and so on and so forth. Being able to win the hearts and minds of those great founders often starting their first business, that's a very different kind of skill set. It's based on trust, based on empathy, based of course on technical skills. And as I said before, that's where the alchemy of venture is, where you can put a small check-in a company at that stage, and especially now, take out hundreds of millions, if not billions of dollars out on the other side in a few years.
00:29:12 · David Weisburd
[00:29:12] S1: The best example of the hacker house is Josh Browder, Browder Capital. And he has a one person accelerator. He only accelerates one person at a time. The reason for that is they live in his house. And part part of his secret sauce is he wakes them up at 3AM, middle of the night, and asks for more allocation, which I think is about the joke and actually serious. But the... This is, like, the ultimate thing that can't scale is these highly high value models. It's interesting that you keep on answering my questions at the early stage and the late stage. I just had Eric from, AngelList, and they have data from, I think, this point, 25,000 companies. And they figured out that they couldn't actually generalize or make any useful mathematical calculations or anything from the entire dataset. They had to actually divide it into what they call two asset classes, the early stage and late stage. It's not just some convenient way to divide the world. It's actually like two idiosyncratic, almost mathematically different parts of the market that to generalize, doesn't even compute mathematically.
00:30:17 · Brijesh Jeevarathnam
[00:30:17] S0: That's very true. And the funding round alphabet doesn't necessarily correlate with that, right? It's more company metrics and even the revenues because some spaces, let's take AI now, the revenue ramps are so steep in a very short time, right? And some of those companies keep just growing at that rate and some just plateau, I. E. There's false positives. But I agree with your point 100%. And one could argue that you could actually kind of micro segment and data is the challenge in doing this, maybe into not just two, but three or four kind of sub areas based on kind of the product market fit and early customers and reaching positive unit economics and so on and so forth. But it definitely is, and this is where I started, venture is not a homogenous asset class anymore. It is, once again, not huge in the scheme of financial assets in the world, but it's become much more
00:31:24 · David Weisburd
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