0:00

The CEO specifically, their

0:02

job is to become great at fundraising. The

0:04

multistage firms have a product

0:07

for seed that changed the

0:08

market. That signaling risk I feel is the

0:10

single most overstated part

0:13

of the ecosystem. This is twenty VC with me,

0:15

Harry Stebbings. And if that's one criticism of twenty

0:17

VC is that I do not push back enough.

0:19

Well, today, that ends with this fantastic

0:21

and really quite fiery debate. There's no

0:23

one that has joined me for a debate on portfolio

0:26

construction. The Nadir and long term

0:28

friend in the form of David Tisch, managing

0:30

partner of Box Group, of the leading early

0:33

stage venture firms over the last decade,

0:35

having invested in over five hundred seed

0:37

stage startups, including planned, ramp,

0:40

strip, flat sport, air table,

0:42

and more. Now David and I have very different

0:44

views on portfolio construction, and so this

0:46

is a real discussion I would love to hear

0:48

your thoughts. Let me know what you think if you like the

0:50

spicier, more debating Harry coming

0:52

out. Huge thanks also David for putting

0:54

up with me in this episode. But before we dive

0:56

into the show day, Secureframe is the leading

0:59

all in one platform for automated security

1:01

and privacy compliance. Secureframe simplifies

1:04

and streamlines the process of getting

1:06

and staying compliant to the most rigorous

1:08

global privacy and security standards

1:11

like SOX two, ISO twenty seven

1:13

hundred and one, HIPAA, GDP, and

1:15

others. Secureframe's industry leading

1:18

compliance automation platform paired

1:20

with their in house compliance experts and

1:22

former auditors helps you get order

1:24

ready in weeks, not months.

1:27

So you can close more deals faster.

1:29

Secureframe makes it fast and easy

1:31

to achieve and maintain compliance so

1:33

you can focus on serving your customers and

1:36

growing revenues. Automate your security

1:38

and privacy compliance with secureframe.

1:41

Schedule demo stay at secureframe dot

1:43

com. So if compliance is one thing you

1:45

always have to prioritize, you also always have

1:47

to prioritize your team and work

1:49

Well, it's truly global today. And

1:52

until now, there's been no AHR platform

1:54

that's been able to handle everything for

1:56

everyone. No matter where they are in the

1:58

world, well, deal does exactly actually that.

2:00

It handles all things for global

2:02

teams. It allows you to easily consolidate

2:04

contractors, EOR employees, and

2:07

local workers in one platform with

2:09

tool build to evolve with every stage

2:11

of your company's growth, no matter who,

2:13

how, or where you want to hire. So whether

2:15

you want to comply finally work with a contractor or a project

2:18

in Argentina, hire an employee where you don't

2:20

have an entity or run payroll for a direct

2:22

employee overseas. You can do just

2:24

that and so much more with deal.

2:26

It's way less HR and admin and a

2:28

whole lot more peace of mind. Simplify global

2:31

team management payments and HR,

2:33

so you can hire faster, streamline

2:36

more processes and stay compliant always

2:38

to see how deal can scale with your team.

2:40

Visit deal dot com for slash

2:42

20VC. And finally, now we

2:44

have this amazing global team. We want them

2:47

to work amazingly well together, and retail

2:49

helps you work more effectively, most

2:51

teams build custom software to make

2:53

business processes work better. But

2:55

building these internal tools from scratch takes

2:58

time and engineering resources. And

3:00

that's why it teams at thousands of companies

3:02

like Amazon, DoorDash, and NBC,

3:05

build internal tools using retool

3:07

and retool is a very different way of building

3:09

custom internal software. Instead of waiting

3:12

months, you can now build out five to

3:14

ten apps in just an afternoon using

3:16

a bit of Java up to an SQL. That's

3:18

a game changer for your business. Retool

3:20

is free to teams of up to five,

3:22

and startups now get twenty five thousand

3:24

dollars. In free credits twenty five

3:26

thousand dollars, just get started at

3:28

retool dot com forward slash 20VC.

3:31

That's re tool dot com forward slash

3:33

20VC. You

3:40

have now arrived at your destination. David,

3:44

I am so excited for this. This is one

3:46

of the favorite discussions I write

3:48

a schedule. I'm like, I don't know really why I'm writing

3:50

it because I know we're not gonna say to it at all, but

3:52

thank you so much for joining me, David. Thanks

3:54

for having me

3:55

back. Harry, excited to do this. Are we sparring

3:57

today or we're just gonna have a light fun

3:59

conversation? Oh, no. I'm ready for

4:01

Jew. This is like a fight for the death. Okay.

4:03

Ready to go too. Tell me, for those who

4:05

missed all first sure. How did you make your

4:07

way into van share in a super sick about

4:09

sixty seconds?

4:11

Yeah. I I grew up loving the Internet,

4:13

and that's what I fell in love with as a kid.

4:15

And I never under stood what the career

4:17

path into this world is. And I actually

4:20

don't think there is a traditional one. I

4:22

think everybody finds their own way. And my

4:24

way was I joined an organization

4:26

called Techstars early on. And when I did

4:28

that, I signed up to be an investor in

4:30

Box Group. At that time was my side hustle.

4:32

And then in twenty twelve, left Techstars

4:35

to do Box Group full time. So now I'm

4:37

eleven years into that full time

4:39

Box Group

4:39

journey. So I'm old in this I absolutely

4:42

mourn your newer portfolio for audio construction. I

4:44

wanted to do a little bit of on chat psychology.

4:46

And so I believe there were all functions of our history,

4:49

David. And so what are you running from

4:51

do you

4:51

think? You're getting deep parry

4:53

really quickly. I feel like I've seen

4:55

the Internet evolve and out

4:58

of vision for what was gonna happen and a

5:00

lot of that ended up

5:01

happening. And I feel like I watched

5:03

it and wished that I

5:05

participated in some of it and I think

5:07

the history of being

5:10

the AGIM and watching the evolution

5:12

of this pushes me forward. Can I ask

5:14

a personal one again? Someone asked

5:17

this and they said, your family is very

5:19

successful. And they said, were you running from

5:21

the perception of being one of the family

5:23

members and wanting to strike out on your own? There's

5:26

a lot of nuance in that answer.

5:28

I'm an individual. And have my own ambition

5:31

and desires and goals

5:33

that are not necessarily a touch to

5:36

the history of my family. At the same time,

5:38

I have an immense appreciation for

5:40

the blessings of coming from

5:43

a group of people that worked really hard and

5:45

found success. And so it's not this

5:47

rebellion or desire to strike out

5:49

on my own. I love what I get to do and

5:51

it happens to be in a different world

5:54

than what other people have

5:56

done. It's not negative lens

5:58

of it versus a positive final

6:00

one for

6:01

you, dig deep

6:01

on portfolio. The success has many different

6:04

kind of connotations and meanings. What

6:06

does success mean to you Yeah. I

6:08

think I take the personal perspective

6:10

of successes building a life that you're

6:12

content with and whether that's family

6:15

or or friends or the people that surround

6:17

you the core of that answer is

6:19

there. And then on the work side, our goal

6:21

is to be part of other

6:23

people's journeys. This is a job

6:25

that actually isn't about us, but really

6:28

about the founders were fortunate enough

6:30

to have the opportunity to work with.

6:32

And watching them succeed brings

6:34

us both emotional and

6:36

psychological

6:37

success, but also financial success. So I think

6:39

there is real alignment in the

6:41

success of the people we're able to work totally

6:43

agree with you that I always say for me it's I wanna

6:46

be seventy five and in an arm chair and

6:48

have grandchildren running around and I want

6:50

them to point at companies and me to be able to say,

6:52

oh, box group or twenty v thing. Is

6:54

there a word? Right? That's mine. I wanna

6:56

move to the fund itself. So you raised a hundred

6:58

and twenty seven and a half each. I think two hundred

7:00

and fifty five total. Between two funds in

7:02

twenty

7:03

one. Can you just walk me through the portfolio

7:05

construction in terms of how many companies

7:07

per fund for each

7:09

one? Don't think the details are

7:11

as interesting. I think the model is what's

7:13

probably more interesting. And so our

7:15

goal is to work with the best

7:17

founders were able to have the opportunity

7:20

to work with. And I think more than anything

7:22

that's not putting our business in

7:24

front of the founder and not making our

7:26

needs important enough

7:28

to stop us from investing

7:30

in a company. And so it really is about

7:32

agility and flexibility as we

7:34

think about deploying capital. At the

7:36

sea fund level, our goal is to back

7:38

people at the company formation or

7:41

soon after. So in a traditional seat round,

7:43

we're happy to be the second third biggest

7:45

check on a cop table. Pre seat

7:47

around. We're happy to lead it. And so I

7:49

think the goal is to say

7:52

how much money are you looking to

7:54

raise how much money is available for

7:56

us to put

7:57

in, and let's find a place

7:59

where we're both content with that arrangement.

8:01

Okay. So you have a hundred and twenty

8:03

seven and a half million in one. I have this conversation

8:06

with you. My pre seed pawn often where I saw we

8:08

can only get hundred. Now I have a thirty

8:10

three million dollar seed and a hundred and ten

8:12

million euros growth fund. There's no point in me writing

8:14

a hundred k checks. Doesn't make sense.

8:17

Where is that barrier fee of not

8:19

letting business get in the way and

8:21

a too small

8:22

check. don't have one and

8:24

I don't necessarily walk

8:26

in and say this doesn't make sense

8:28

if the core of the

8:30

decision is this is a company that

8:32

we want to be part of. And

8:35

can I build a portfolio of

8:37

only a hundred k checks that feels

8:39

like a bad decision? Can I build a portfolio

8:42

where there are exceptions to

8:44

the norm throughout in different ways?

8:46

Yes. And are individual

8:49

exceptions capable of creating

8:51

venture returns on a individual

8:54

company basis? Probably not.

8:56

Now there's exceptions to that role. If you

8:58

put a hundred k into the best company

9:00

of a generation, it was likely

9:02

a good decision. So you can

9:05

fake rationalize the mouth version

9:07

of that answer, and you can

9:09

logically rationalize a handful

9:11

of other direct actions as to why

9:13

that is a logical decision. I

9:15

think it's easy to put up

9:17

rules. It creates consistency and

9:20

it aligns to fund math, and

9:22

I appreciate that. But we truly

9:25

hold to the idea that we wanna invest

9:27

in companies we're excited about And if

9:29

what we're able to invest is

9:31

not in perfect alignment with

9:34

the

9:34

math, we're willing and able to make

9:36

exceptions. Do you worry that by having

9:39

that stance and being open in that way,

9:41

I can say to founders, and everyone else

9:43

can say to founders, your Frankles of the world,

9:45

your IAs of the world, We love Damien.

9:48

He's awesome, which I'm sure we all

9:50

do, but he'll take a hundred k. Let's

9:52

push him down. We can get him down to And

9:54

so the messaging means that you're saying

9:56

I will be able to go

9:57

down. And that's something that I'm always very

9:59

careful. I'm asking your adviser on statement. I'm

10:01

not asking, do I worry about everything? But

10:03

I'm focused on founders

10:05

more so than other VCs. And I think

10:07

if we can build a brand and a reputation

10:10

with the founders that were enough to work

10:12

with, their goal is gonna be to

10:14

give us an aligned amount of

10:16

allocation and around and not treat

10:19

us in that pushy way.

10:21

And I think there's a history

10:24

that's thirteen years deep of

10:26

box group building great relationships with

10:28

founders where people want to work with

10:30

us and won't take that

10:32

approach to it. It tends be when we're late

10:35

to company and there's not a lot of allocation

10:37

left that flexibility matters more

10:39

so than other VCs pushing

10:41

us around.

10:42

One thing that I think is troubling is almost

10:44

hundred k or two fifty k in the generations

10:46

of when you were a little bit before me, but I was

10:48

doing this eight years ago. You know, it was like that,

10:50

yeah, five to ten million preseeds and

10:52

seeds. For the last five years, we've seen twenty

10:55

five million seeds. And then the hundred and

10:57

two fifty is really very different. How

10:59

do you think about price sensitivity at

11:00

precedency? Do you take the same less if,

11:03

hey, it's fine? Or are you much

11:05

more sensitive that. Our goal is to invest

11:08

as much as we can in the

11:10

company that we're excited to invest

11:12

in, and it's not maximizing checksized.

11:14

So we write a five hundred k, seven

11:17

fifty k million dollar check.

11:19

We do that as the core of our business.

11:21

It is a target in

11:23

the majority of companies that we're

11:25

able to work with. Valuation is

11:27

the second piece of that. So you get

11:30

to ownership in each company

11:32

through those two basic numbers. Is

11:35

there a strong rule on

11:37

any of this? No. But on a

11:39

port Folio basis, we

11:41

find a balance of all these

11:43

things. Valuation is

11:45

not something that is in a

11:47

investor you actually control. I

11:50

just don't believe that the market as whole

11:52

controls that. So if a founder gets

11:54

enough optionality, for their

11:56

round that they're able to raise at a valuation

11:59

that you as an investor don't like.

12:01

You've two options. Invest or don't

12:03

invest. If you get the opportunity to

12:05

invest and this is the deal. You can say yes

12:08

or no. I can sit here and complain

12:10

about evaluations, but if I'm

12:12

a founder, My job is to build a

12:14

company that is a lot bigger than

12:16

whatever valuation I'm raising, my

12:18

seat and pre seat. My job is

12:20

to take the capital and create immense

12:23

value so that the next round and the next round

12:25

are bigger. If a company goes

12:27

well, the precede the seed, those are

12:29

the lowest points you're ever

12:31

going to be able to invest in a company

12:33

hot. Would I like to own

12:35

more of the best investments we've ever

12:38

made? Would I like for us to have ridden

12:40

a bigger checker evaluation to

12:42

have been cheaper? Sure. But that's

12:44

not realistic. You have

12:46

to be more than anything patient

12:49

and long term and consistent. And when

12:51

I look at our business, those are the three

12:53

things that we hold true to. And

12:55

on a deal by deal

12:56

basis, valuation is a

12:58

fact and not a pain. I

13:00

think I love this debate and you

13:02

don't.

13:04

I I don't know if it's a debate. I just

13:06

debate because five hundred to seven fifty

13:08

David means that if you write a hundred

13:10

checks at seven fifty, which

13:12

you're not. You're at seventy five

13:15

million

13:15

deployed. Okay. So say one twenty seven

13:17

takeout fees where, say, a hundred

13:19

just like total. And so you've got a hundred companies

13:22

and you're only at seventy five million for it and what then

13:24

you've got twenty five percent left for reserves.

13:26

Is the fund not too big? My fund's too

13:28

big if I can't produce outlier

13:30

returns. That's my job. So

13:33

I need to produce outlier returns.

13:35

That's my responsibility to

13:37

our investors, our LPs, is

13:39

to produce outlier returns. The

13:41

way that we're able to do that is

13:45

funding companies that have

13:47

amazing outcomes. And the

13:49

math works itself out. So I

13:51

don't obsess over the

13:54

ownership and the portfolio construction

13:56

in a way that I think it matters

13:59

on a deal by deal basis. I think it

14:01

matters on a portfolio basis. If

14:03

the perfect alignment is we own

14:06

the most ownership in the

14:08

best companies in that given

14:10

font. That's the goal. I'm with you, but then

14:12

I'm also looking at a lot of

14:14

outcomes. And bluntly, you have a billion

14:16

dollar

14:16

outcome, a two billion dollar outcome. And actually,

14:19

when you only return ten million or twenty

14:21

million really just doesn't make a difference.

14:23

Our belief is that if a founder is able

14:25

to build a company from the MultiStage to

14:27

a billion or two billion dollar outcome, there's

14:29

gonna be a lot of people that's a life changing

14:32

outcome for. And those are the

14:34

journeys that we're signing up to be part of.

14:36

I don't view it as a dismissive

14:39

outcome. Can I build an entire

14:41

fund off of billion two

14:43

billion dollar outcomes? If there's a high

14:46

enough percentage of the companies that we invest

14:48

in that end there. Sure. But is

14:50

that the ambition when we set

14:52

out to deploy capital? That's

14:54

the target outcome for every company?

14:57

No. We need to have and hope to have

14:59

some outcomes that are bigger than that. And

15:01

you're investing whether in your world

15:03

and your numbers at twenty five at fifty

15:06

million dollar entry points are at five

15:08

or ten million dollar entry points. That

15:10

founder that embarks on that journey, exiting

15:12

at a billion two billion dollars as long as they

15:14

didn't raise an egregious amount of capital

15:16

and get offensively diluted along

15:19

the way, they're gonna have a wonderful day.

15:21

And they're gonna have a wonderful life changing

15:23

moment in that

15:24

journey. That's what I'm here for. I get

15:26

you. I didn't mean it dismissively, but

15:28

I do mean it mathematically for fun returns.

15:31

I'm a seed investor. We're here for

15:33

the dreams. Erika,

15:36

I hate me reserves wise. From the fund,

15:38

how much do you have in reserve? You wanna

15:40

put as much money as you can into

15:42

the best companies in the portfolio. The

15:45

math has to work. It's my job

15:47

to make the mouth work. Somebody is

15:49

investing in our firm because that doesn't

15:51

think we need to make the mouth

15:52

work. It doesn't seem too much math other

15:54

than just let's just invest in the best fan of

15:56

what? Yeah. But actually, also Dave, the

15:58

thing he studied in Vancouver, which you know this,

16:01

I'm sure, is in the good times yeah,

16:03

let's invest in the best founders. And

16:05

that works when you're shooting in

16:07

good times is ten x funds and everything

16:09

is great. But in the bad times when

16:11

you do the studying, actually the

16:13

intense portfolio managers are

16:15

the difference between one x

16:17

or naught seven x and two x.

16:20

Because they've religiously managed a huge

16:22

amount from reserves, liquidity, and

16:24

everything in

16:25

between. But are we in the bad times right now

16:27

from a seed investing standpoint? I think

16:29

we will be. Yeah. From seed investing.

16:32

Yeah. I think twenty my my job is

16:34

to fund a ten year journey. And

16:36

so the macro change

16:38

in the environment impacts our

16:41

prior investments much more

16:43

so than our future investments. To

16:45

see around tomorrow becomes relevant

16:48

in the customer side of the market

16:50

in the next one to four years.

16:53

It becomes relevant in the venture market in

16:55

the next one to three years to

16:57

raise another round. So the macro

16:59

of today doesn't have this

17:01

immediacy in terms of

17:03

its impact on our seed

17:05

business and our deployment of

17:07

the font. What was it? How And

17:10

we have on the reserves that I have

17:12

to deploy into the preexisting the

17:14

prior investments? Okay. Is it for

17:16

sure? How does it? We have to

17:18

use the capital thoughtfully, and we

17:21

have to back again the

17:23

companies that we are most excited

17:25

about. And I just don't believe in

17:28

evaluating venture,

17:30

especially seed venture on

17:32

a minute to minute year to year

17:34

basis. It is an incorrect use

17:37

of energy and mind.

17:39

If you're investing over our

17:42

fund life is a ten year plus

17:44

fund, our companies are

17:46

going on a ten plus year journey.

17:48

In a moment in time, you can make up illiquid

17:51

private valuations. You can mark things up.

17:53

You can mark things down. It's a snapshot

17:55

in a business where snapshots make no

17:57

sense. And so I don't

18:00

operate on short term. My

18:02

whole life is oriented around

18:04

long term. And I'm super content

18:06

living there and actually trying as

18:09

hard as possible to both

18:11

live there in a Zen like consistency

18:14

and get greater what we do.

18:16

Our job is to back amazing

18:18

people. In good times, in bad

18:20

times in times where every

18:23

series b is punishing, our

18:25

job is to help people navigate that,

18:27

not obsess over our business

18:29

because we believe that our business is going

18:32

to work out over the long

18:34

term. If we back great

18:36

companies. I love you, David. I don't think

18:38

planning reserves is minute

18:40

to minute over manipulation of our

18:42

model. I think it's bite

18:44

bluntly. I am dodging your question

18:46

and not getting into the details because

18:49

I believe you're a politician.

18:52

You don't, but I foolily don't

18:54

think how we go about

18:56

managing that is that important

18:59

in the abstract, which is what our

19:01

conversation is gonna remain in. It has

19:03

to because you're not sitting inside

19:06

of the decision room looking at

19:08

each decision that we have to make

19:10

and understanding why we say yes and

19:12

why we say no to specific company. Our

19:14

job is to deploy follow

19:16

on capital into ideally

19:19

the best places we can. And it's the same

19:21

with the Opportunity Fund, the follow on

19:23

the Growth Fund. Our job is to lean

19:25

into investments that

19:28

have the chance to have outlier

19:30

returns to that single investment

19:33

in on a portfolio basis to

19:35

the whole portfolio. If I was trying

19:37

to build this business to what you said before,

19:39

1X2X funds, I should go do something

19:41

else. I I totally agree. I think, Bonnie,

19:43

if the majority of any funds over five hundred

19:46

million return, one action in the last vintage, that'll

19:48

be heroes. So I think there's a little bit of

19:50

a restructuring going on in terms of how people

19:52

think about upside. On growth, not so

19:54

much Friday. You said about us, is this

19:56

the crash I think so. At the

19:58

twenty one, twenty two entry prices

20:00

that we saw, David, I'm being honest online.

20:03

Yeah. I'm in good companies. But they

20:05

were not cheap. And then on top of that, gonna

20:07

be go I mean, like mine are lucky, but many

20:09

aren't bluntly. They're gonna be going out raising

20:11

in twenty three, some in twenty four.

20:13

I would say we're in the mid of the shit we got

20:16

in high, a Stebbings down the

20:17

tubes. And I'm with you on the ten

20:19

year view. But actually some great companies

20:22

take time to build some need a lot

20:24

more cash to build, and the cash has gone.

20:26

So in down rounds, in

20:28

sideways rounds, in so

20:31

many of the long lasting

20:34

great companies of prior

20:36

vintages as well. It is not

20:38

catastrophic that Tisch

20:40

is hard and there are bumps in the road for

20:42

a company to build. It's not this

20:44

gigantic net negative for founder

20:46

that they raised at a high valuation. If

20:49

they can power through a

20:51

bump in the road. It's a net negative if

20:53

they don't build a good company. If you

20:55

don't build a product, you don't build

20:58

a business model, If you don't build revenue

21:00

growth, that the market views

21:02

as good enough, that's the

21:04

problem. The valuation to me

21:06

is the investor's problem. And I

21:09

just don't like I don't

21:11

believe that my sympathy

21:14

sits for all the VCs that overpaid

21:17

on things that they did. Again,

21:19

back to this, you could have said no.

21:21

If you thought something was too expensive, you

21:24

could have said no. So if you said yes,

21:26

am I losing sleep over

21:28

the fact that people's portfolios are too

21:30

expensive? don't know. Not my problem.

21:33

Okay. When you think about downarounds, that's

21:35

you said that. I see everywhere. I'd be like, oh, like, there's

21:37

gonna be a wave of downarounds. We wave of downarounds.

21:40

And then we mentioned Albert Banga before this when I

21:42

said about much I enjoyed having him on the show. He

21:44

tweeted that I've been in Bancha for eighteen

21:45

years, and I've only had two down rounds. They're

21:48

much rare than people think. They destroy

21:50

company morale. And where

21:52

do you say Jean will see a load or Jean

21:54

Albers riding actually, they're much rarer. Well, there's

21:56

just the thing that has not

21:58

happened over the past three to four

22:00

years, and it's really before twenty one

22:02

and and twenty two, is that companies

22:05

have shutdown. And that's going

22:07

to happen. And that's actually the

22:09

math that hasn't played out over

22:11

that four year period in that when you

22:13

see seed to a graduation rates

22:16

and a to b graduation rates. They

22:18

went from a historical consistent

22:21

set of numbers, call it, if you're great at

22:23

this seventy percent c to a. And

22:25

if you're great, fifty to seventy percent

22:28

a to b. And over that nineteen

22:30

or eighteen to twenty two period,

22:33

it went to basically a hundred percent of companies

22:35

that raised the seed got an act. Maybe it was ninety

22:38

ninety five, but that's inevitably

22:40

going to mean that certain companies don't

22:42

work out. And they're gonna not work out

22:44

when they're later and bigger. And that

22:47

is going to happen in the next

22:49

eighteen to thirty six months. As

22:52

runway runs out, as companies come back

22:54

to market, as the businesses didn't

22:56

work. And there's not an M and A market

22:58

to do aqua hires or small

23:01

acquisitions, companies are gonna shut

23:03

down. That founder dream is gonna

23:05

come to an end and there's gonna be a bunch of people that

23:07

work there that believed in the

23:09

company that had equity in the company that hoped

23:11

for economic returns from the company

23:13

that are not gonna get it. And those

23:15

are not downroads. That is the death

23:18

of a startup that we just haven't experienced

23:20

over the past four years. And

23:23

I assume we're gonna have that throughout

23:25

our portfolio, and I assume that's gonna happen

23:27

in everybody's portfolio, although everybody

23:29

likes to say that's going to happen, but my

23:31

companies are great. It's unrealistic that

23:34

the mouth skews out. Downrounds are

23:36

to Albert's point, right, they're

23:38

going to be traumatic on company

23:40

morale. But if you can figure

23:42

out how to rally around that and a founder

23:45

can figure out how to compensate the

23:47

people that work there in a way that makes

23:49

them reenergized to go build

23:51

and tighten and move forward. It's

23:54

just like a bump on a long

23:56

journey. think USV is also world

23:58

class and they have an amazing ability

24:00

to select unique quality companies

24:03

and have been long term

24:05

partners for almost every investment they've

24:07

ever invested in to see them through the

24:09

tough times in a unbelievably

24:11

supportive way. And it's why they're world

24:14

class VCs. I think the thing that worries

24:16

me is actually the misalignment in

24:18

expectations on pricing. I mean, you

24:20

said our pricing, oh, like, we're not the ones

24:22

that that and whatever. We disagree on

24:24

a lot, David, but we'll just go with this. Founders

24:27

are coming in still and they're going, I want

24:29

twenty, twenty five and it's

24:30

like, are you seeing the market. If

24:32

somebody gives them not, then the market

24:35

is that. Everybody can ask for whatever

24:37

they want and everybody can say yes or no. That's

24:39

the way this business works. If somebody says

24:41

yes, that's the price. Sure. But it's

24:43

bad advice. I would not want people

24:45

to hear this and

24:46

go, oh, wait. What I would say

24:47

the founders is actually, hey, go out with twelve

24:49

and half or fifteen. And you know what if

24:51

me and Dave both want it and so does

24:53

Albert and so does if you're gonna get twenty

24:55

five, you're gonna get twenty five, but don't

24:58

start at twenty five because I'll say thanks so

25:00

much. No. But that's the choice

25:02

you made, and that's the choice the founder makes. And if the

25:04

founder wants to go talk to two hundred, three

25:06

hundred, four hundred seat funds, which there

25:08

are these days, And one of them says yes and

25:10

gives them money at twenty five. So

25:12

there's three variables. Right? It's how much

25:14

money are you raising, at what price and from

25:17

who. And you can optimize try

25:19

to optimize all three. You can try to optimize

25:22

one or two. I think each founder

25:24

takes an approach that's specific to

25:26

them. To each one of those variable.

25:28

If I were starting a seed company,

25:31

I would try to optimize all three.

25:33

I'll get as much money as I need can

25:35

at whatever price I can from

25:38

the best people that I can raise

25:39

from. And I think that is The job of a

25:41

founder in each round is to

25:44

think about those three variables and try to optimize

25:46

the ones that are most important. David, which one would

25:48

you let slip? Can I have too? It matters

25:50

the gap between who if you're

25:52

talking about my top choice versus

25:55

my fifth choice. That's a

25:57

fine compromise. My top choice versus

25:59

my hundredth choice, that's not a

26:01

fine compromise. So I think figuring out

26:03

who you wanna work with is vital. I'd actually

26:05

put that as the most important, but I think

26:07

a bit fluid in you don't

26:09

just pick one person. So I would not over

26:12

optimized for a single person, but

26:14

I would put that first. The second is how much

26:16

money is vital. You need enough

26:18

money to make enough progress. To

26:20

hire enough people to use that capital

26:23

effectively to build your company and the

26:25

third is price. So I think you end up

26:28

having and should compromise on price.

26:30

You can get the other

26:31

two. It's not

26:32

opinion basis. It's pure stats. Are

26:34

you seeing prices reflective of the change

26:36

of market? Because I'm not seeing seed and

26:38

pre seed pricing go down in the way

26:40

that people would think or expect. I agree

26:43

generally with that. I think there's too

26:45

much sound bites on Twitter saying I'm seeing

26:47

crazy cheap valuations. We're

26:50

seeing bifurcation of the market. I

26:52

think the biggest thing that happened and really

26:54

happened again. I think people are trying to isolate

26:56

twenty one. The first part of twenty two is

26:58

equally frothy as this standalone

27:01

period, but it started before that. So I would

27:03

go back to two thousand eighteen, nineteen, and

27:05

then into twenty, which was this weird year

27:07

with COVID and the shift to Zoom,

27:09

but the multi stage firms have a

27:11

product for seed that change

27:13

the market. They write a five million dollar

27:16

check at a twenty to thirty million dollar

27:18

valuation per your post, and that five

27:20

million dollar check could be seven. So you're seeing

27:22

rounds of five to seven at twenty to thirty

27:24

per year post, and that's a product

27:26

that hasn't changed. And I don't think it's going to

27:28

change. And I think it totally evolved

27:32

the seed market to say, are you raising

27:34

from a multisage fund? If so, that's

27:36

the style standard deal that

27:38

you can go get. And if you're not raising from

27:41

a multistage fund, there's a different deal

27:43

on the table. That's a two to four million

27:45

dollar round, maybe you can stretch it to five,

27:47

and that's being done at a ten to

27:49

fifteen million dollar valuation. But

27:51

single digits, it's not the norm. Now

27:53

at the same time, if you're early

27:56

enough and at the sort of

27:58

friends and family as it's called are the

28:00

angel round, there's a different

28:02

structure of that round, but it comes back to this.

28:04

How much money? Price oh. And I think

28:06

if you Tisch have those angel and friends and family

28:08

rounds. When I see people spin out of any ratters,

28:11

oh, not that person who's spinning out

28:13

of a company with a great reputation.

28:15

In reality, Canon should go get

28:18

bit more money because they have a

28:20

different track record than the person

28:22

who is totally unproven and

28:24

needs to get some capital to

28:27

show their idea and their ability

28:29

to build the thing they wanna build is

28:31

realistic. And so there is a cohort

28:33

of companies that come out of big companies

28:36

that raise very healthy seed rounds

28:38

that are gonna build great companies and

28:40

there are a lot of companies in that

28:42

category that are not gonna be great. That's

28:44

the inevitability of the world

28:46

that we invest into where there's

28:48

going to be more failure

28:50

than success. There will be more failure

28:53

than success. In each of those journeys,

28:55

there's a team of people that had a

28:57

dream that had to do work out. And I think

28:59

the venture conversation removes

29:02

that emotional and psychological

29:05

hit the founders and the early employees

29:08

take from a failed journey. And I

29:10

try very hard in our business not

29:12

to trivialize that because I think it's important

29:14

to not

29:15

again, take my business and make

29:17

it a founder's problem. Do

29:18

you think that one thing that's different is I'm speaking to

29:20

a lot of GPs at multistage funds and they're

29:22

going, I'm underwater with board commitments

29:24

my series a's. My Riyadh's

29:26

Stebbings them from ripping those

29:28

seljets. You know exactly, but what they're

29:30

doing David in Europe at least from my perspective

29:32

they're saying to their principles, I'm underwater.

29:35

You go write the seed checks. I'm watching

29:38

doing that for a long time. This

29:40

is not new

29:40

behavior. It seems like you've being much more

29:42

aggressive now. It's safer and easier to

29:45

deploy a seat check if you have a huge fun than

29:47

it is to write a series a or a b check

29:49

at this moment. Exactly. Is

29:51

it gonna get worse with their intrusion and

29:53

deceit? It's not even worse. It's been

29:55

this way. I think the idea that it hasn't

29:57

been this way and this is a net new thing

29:59

is just told incorrect. Since

30:01

twenty eighteen, multisage firms

30:04

figured out that the competition

30:06

for series a is so steep.

30:08

And there's only one winner that

30:10

if you don't take risk on seed,

30:13

you might not have a shot at the eye.

30:15

And so there they've been slanting

30:17

earlier for a long time. And if you talk

30:19

to each one of these firms, whether it's dedicated

30:22

capital, whether it's dedicated people,

30:24

whether it's a certain amount of time firm

30:26

wide. They've been writing that five

30:28

million dollars seed round for

30:31

long before the twenty one period

30:33

and long after this new downturn

30:35

weren't. So you said there's two variables there

30:37

in terms of seed around totally agree with

30:39

you. How would you advise founders that listen,

30:41

may have hundreds of thousands Which one's

30:43

right for

30:44

me? Amount of money, valuation. And

30:47

if you go to a multisage firm

30:49

and feel like they are the

30:51

right fit for you in terms of who?

30:53

I don't think it's a general wrong

30:56

thing to do. There's not a generic answer

30:58

to any of these questions. It's so founder specific.

31:01

What are you working on? What are the capital needs?

31:03

What's the background of the investors

31:06

that you're working with? I do think it's

31:08

important to surround yourself

31:10

with a group of people, group, not

31:13

individual people that can

31:15

be a bit different in their perspective. So

31:17

what we do at box group and what

31:19

we hone ourselves in on is

31:22

being aligned with founders. We

31:24

say we wanna be a friend of the founder, and

31:26

we mean that in the longest

31:28

term, most authentic way possible.

31:30

So if you work with a multisage firm,

31:32

and they write the lead check, we're happy to

31:34

be the second biggest check-in the round. If you wanna

31:37

work with a seed lead, a traditional seed

31:39

firm, we're also happy to be the second biggest

31:41

check-in that if you wanna do a pre seat

31:43

or a small seat and you want us

31:45

to write a term sheet and write a adorably

31:48

nice check alongside a group of amazing

31:51

angels, we're also happy to do that.

31:53

And our job is to help you get to the next

31:55

round. And then help you get to the next round and

31:57

the next round. And in doing so, there's

31:59

some operational stuff that an

32:02

investor can help with, but that is always

32:04

overstated. What we are world class

32:06

at is helping companies raise money. Because

32:08

we live there and we've been doing that for long

32:10

time. And it doesn't necessarily mean

32:12

if you raise your mom a multistage farm, it's gonna

32:14

be harder or easier. And doesn't necessarily

32:17

mean if you raise from a seed firm, it's gonna be harder,

32:19

easier. How great are you

32:21

building your

32:22

company? That is the horror variable

32:24

of what's gonna make your next round easier.

32:26

Do you agree with the signaling words to everyone

32:28

place? Is everyone No. Why? Because none

32:30

of the next set of investors really

32:33

care every investor thinks that they

32:35

have their own opinion, and they're right, and

32:37

they're not really looking for someone else's opinion

32:39

to create their opinion. And the firms

32:42

don't care about the other multistate firm.

32:44

That signaling risk I feel is the single

32:46

most overstated part of the ecosystem.

32:49

I think series b and later

32:51

signaling risk matters maybe series

32:53

a to b, it matters a little bit. If

32:56

your series a lead is not doing their

32:58

pro rata in your b, that is a material

33:01

data point. But if your seed

33:03

lead multistage firm is not

33:05

doing

33:06

it, there are ways to navigate that as

33:08

a founder and we are very happy to help

33:10

you do that. Actually totally agree with you on that.

33:12

The one that I do say which I do believe is the

33:14

incentive misalignment which is me and

33:16

you both warned a great next

33:18

round with a great price. For

33:20

the company. If a multistage firm

33:22

come in and lead the seed and it works

33:24

well, they don't want to have a

33:26

super high price on the natura and they want to close

33:29

it in. And then take it into the trees themselves

33:31

and get a good price. Correct. Do you

33:33

agree with that? Correct.

33:35

Yeah. And look, there's also a reason sometimes

33:37

multistage firms are not gonna follow on. Let's

33:39

that by fifteen percent of accompanying the seat

33:41

around, that's a lot. Keeping pro

33:43

rata at fifteen might

33:45

be good enough versus needing

33:48

to get to thirty, which is a lot

33:50

of the company. Or fifteen to

33:52

twenty two isn't this necessary SARY

33:54

Optimization. I don't think it's black

33:56

and white. What I've struggled with in

33:58

my venture career is watching investors

34:01

put out generic advice. And founders

34:04

read generic advice and assume

34:06

that it applies to them. Every single

34:08

company is very different

34:11

and each specific variable

34:13

in that company drives to

34:15

how to build. And I think our

34:18

job as early stage investors

34:20

is to provide a customized

34:23

service to founders. At Box

34:25

Group, we spent a ton of time trying

34:27

to under and all the dynamics at

34:29

play and give very nuanced

34:32

specific advice and tactical

34:34

advice how to achieve

34:37

that specific company's goals.

34:39

The hardest part is when it's not

34:41

gonna work. And I'm not

34:43

here to kill

34:44

companies. I'm here to provide as

34:46

best as I can honest advice and

34:49

do so with a goal of

34:51

achieving success in whatever the

34:53

next thing you have to do as a company. You mentioned

34:55

about being the best at getting into the next

34:57

round. I love that in terms of simplicity. We seem

34:59

to be agreeing more and more. My question too

35:01

is, when you look at the companies that do

35:03

graduate, I find there's this disparity

35:06

between ones that I think will do very well in fundraising

35:08

markets. And then those that do run, like, wow. I

35:10

wasn't expecting that to do well in fun.

35:13

Because when it comes back to this generic thing, every

35:15

investor in the market has

35:17

a different view of the types of people

35:19

and the types companies they're looking to back.

35:21

Venture gets viewed as an

35:23

asset class and it's not. These

35:25

are all very small businesses with

35:28

independent investment styles

35:30

and independent investment beliefs.

35:33

And in some way, the best thing a company

35:35

can do is go to as many investors

35:37

as they can get in front of because

35:40

everybody's totally different. Just because you're

35:42

a series a or series b or a seed firm,

35:44

there's such uniqueness to

35:46

each approach that the idea

35:48

that we can predict perfectly, of

35:50

course, is just a stretch. I do, at

35:52

the same time, think what the meme

35:55

and the sort of content world has done

35:57

a disservice to founders, and I think we're

35:59

past this, is telling founders, put your head

36:01

down, build a prod don't worry about fundraising.

36:03

It's distracting in Illinois. The CEO

36:06

specifically, their job is to

36:08

become great at fundraising. And they need

36:10

to view that as a core competency

36:13

that they should take responsibility

36:15

for getting better at learning

36:17

and be world class at. And to

36:19

your point, sometimes when

36:21

you see companies raise a lot of money

36:23

at crazy valuations, It's

36:26

because the CEO became

36:28

great at fundraising and pulled

36:30

the company forward. Is that a

36:32

net positive or negative? It's not

36:34

black and Tisch. a net negative if

36:36

they can't execute and build a great company.

36:38

It's a net positive if they can because

36:41

you've done your job. You got your company

36:43

money at a valuation that was not

36:45

punishing

36:46

to the dilution of not just you as

36:49

a founder, but to your employees as

36:51

well. And that's a good thing. I'm again

36:53

pretty much in agreement with

36:54

you. It's starting to feel nicer again. I normally

36:56

only agree. It's only because I we know each other

36:58

that I feel like out. I would like you to

37:00

disagree. I came here to

37:02

spark, but I know I really but what'd you advise

37:04

founders? You said me five because I also don't

37:06

want my founders to man, we both have whole companies,

37:08

so you get like fifty in pounds. I don't want

37:10

them that distracted. I want like a

37:12

home type messaging Don't give away

37:14

to

37:14

you. But like, how do you advise them? How many

37:17

the right way to play it? So I think first

37:19

off is just listening to that.

37:21

What do you want? How much time

37:23

do you wanna spend on this? How much

37:25

risk do you wanna take in this process?

37:28

Understanding their psyche is

37:30

super important and so a lot of the time

37:32

the beginning is what's your style?

37:34

Where are you going to excel? Are you

37:37

distracted by fifty conversations? There

37:39

are certain founders that are not, and that's

37:41

a strength for them. It's a weakness

37:44

for other people that then you shouldn't push

37:46

them to do. And so I think it's

37:48

really helpful for us to again view

37:50

each journey, each company, and

37:52

each step in the process is very

37:54

specific. I believe very

37:56

strongly, founder should consistently

37:59

be building great relationships at

38:02

every step of the way on their journey

38:04

in every single category. So

38:07

long term potential customers, long term

38:09

potential partners, long term potential

38:11

acquirers, and long term potential investors.

38:14

Mark Suster wrote that blog post years

38:16

ago, invest in lines and not dots.

38:18

Right? And it's dot core

38:21

view of how the world works. In

38:23

twenty twenty one, that frothy moment

38:25

that we love to isolate, everything

38:28

became transactional. You could

38:30

show up one day, meet six

38:32

firms and have six term sheets. And

38:34

everybody spent about eighteen minutes

38:37

making that decision. The transactional shift

38:40

happen because of speed and

38:42

power. Is that how life

38:44

should work? Probably not. Not

38:47

how our business should work. It's to

38:49

disservice the founders because they

38:51

don't get to know the people that

38:53

they're transacting with. Other than

38:55

by back channel reputation. And

38:58

that's challenging. So in a

39:00

world where you're not optimizing for

39:02

purely speed, the more

39:04

you get to know somebody, the higher probability,

39:07

if both sides like each other, there's

39:09

a deal to be had. And I view that the

39:12

same way invention. So I don't overly

39:15

arc orient towards don't talk to

39:17

investors until you're raising or

39:19

ignore all the inbound and play hard

39:21

to get. If you wanna get to know somebody, get to

39:23

know them. And if it's not gonna be this massive

39:25

distraction to you to have breakfast one

39:27

day, which you're probably gonna have anyway.

39:29

Have breakfast. Oh, okay. Do you think you you

39:31

spoke a lot about kind of the generic nature

39:33

of content? I am a producer of such

39:35

generic nature of

39:36

content. Yeah. You probably hate this.

39:38

Do I have to listen to nothing to

39:40

eat it? I think it's risky for founders

39:43

to listen to things that are not specific

39:45

to them and believe them and take them to heart

39:48

and act upon them. That's totally

39:50

decoupled from you building

39:52

a business, a content machine machine and

39:54

creating content. The value of

39:56

that content creation for

39:58

the investor is enormous. You

40:00

get brand recognition. You

40:02

get deal flow. You get people

40:04

valuing your distribution channels.

40:07

They wanna let you get into companies

40:09

that are hard to get into because you

40:11

can help them grow audience,

40:14

those are incredibly valuable

40:16

things. Again, we decoupled

40:19

the message from the value.

40:21

I played hockey in high school and

40:23

my hockey coach was a amazing man

40:25

who taught me a lot of lessons and there's a quote

40:27

that live

40:28

on, which is don't believe everything you read in

40:30

the newspaper.

40:31

Tony Negruth. And I view

40:33

TikTok. I view podcasts. I

40:35

view blogs and Twitter. As

40:38

in essence a newspaper. And I

40:40

think it's important just not to believe everything

40:42

you read a newspaper. And I think it's hard when you are

40:44

a operator and you see someone in a space

40:46

or someone raise some crazy round and

40:48

some frothy price and you're like, look

40:50

at what they did, let's get to the details.

40:53

There's probably more more about story to

40:55

whatever you

40:55

read. No. I totally agree. I think it's about having the self

40:57

awareness. Actually,

40:58

that bit was really helpful. The rest,

41:00

not so much, and that was probably a little bit

41:02

too much in that. Here's what I will take.

41:04

I will apply to me and I will take and

41:07

not just do it, but I will process it

41:09

and do it in my way, in my style

41:11

that's customized to me. Like the

41:13

other line that I talked to founders

41:16

a lot about is make to watch the Facebook

41:18

movie, which is inspiring. And

41:20

people can say it's a good movie, Madam. It's

41:22

amazing. Doesn't

41:23

it? Everybody wants to do it. And

41:24

that's why I became a VC. I was thirteen

41:26

and I told you to hear an ambassador face from

41:28

us. To me, it's the most magical

41:31

story of our industry. And

41:33

you can be overly critical, but

41:35

that's the goal, but make your own movie. You

41:37

know what you're not gonna do, you're not gonna

41:39

replicate that movie. You're not gonna replicate

41:42

anyone else's movie. So figure out

41:44

what movie is yours and make

41:46

that. And do that for minute one.

41:48

So you are taking such a bet when you

41:51

start a company on yourself. You're saying,

41:53

I know Stebbings, nobody else knows,

41:55

or I'm gonna do something better than everybody

41:58

else. And then you start listening

42:00

to outsiders, and you start

42:02

hedging that risk. You already took

42:04

the risk. Don't hedge it. Just keep

42:06

compoundingly betting on yourself. Take

42:09

advice, learn, iterate, but

42:11

don't compromise to bet on yourself

42:13

because that's the binary thing that you did

42:16

that you should lean

42:16

into. David, one of my biggest things that lost me,

42:18

I think, probably many years was the

42:20

work with investors who have not chosen me. When very

42:22

brilliant investor, but I thought I had to

42:24

be like them. I spent hours doing

42:26

cap table construction and doing all

42:28

the skills of cohort analysis is just

42:30

know me, David. You know, I spent the first

42:32

half in this podcast telling me why my

42:34

model sucks because everybody else's model

42:37

is different. And so in that dumb one Hey,

42:39

your model sucks. To zeta and have a model.

42:41

In some way, I am doing what

42:43

I believe is my way

42:46

of building this business. And if

42:48

everybody else does something else.

42:50

Awesome. I'm not judging them. I

42:52

hope they're successful. I'm gonna do it

42:54

our way. I need to be successful to

42:57

our stakeholders. And to myself

42:59

and our team. I have three amazing

43:01

partners. I have three

43:03

other amazing investors on our team where

43:06

seven person investment team. I owe

43:08

them immense responsibility just

43:10

like they owe me to all of us

43:12

seven do great work together. Our

43:15

job is to return as

43:17

much capital as we can to

43:19

our investors that's who we

43:21

work

43:21

for, but we work in service

43:24

of the companies that we invest in

43:26

and the reason we do this job

43:29

is because we get to work with people

43:31

who have dreams and help them achieve

43:33

those dreams. That's the package. We've

43:35

mentioned at trying to be other

43:37

people. I also made mistakes in last years

43:39

with liquidity. I

43:40

could have and should have sold in some big

43:42

winners. How do you think about Wednesday

43:44

cash off the table? Carefully, we

43:46

try hard and really align ourselves

43:48

with founders long term. And so our goal isn't

43:50

to look at the secondary markets constantly

43:53

in private companies. At the same

43:55

time, my job is not to manage public

43:58

stock. I have investors who are very

44:00

capable of making their own decisions

44:03

in the public markets that I don't feel

44:05

the need to try to say, I know better.

44:07

That's an easy lesson. Let

44:09

your LPs

44:11

own the thing that they own when you can't.

44:13

And in between there is all this gray. I

44:15

don't have a sound bite for you that you can

44:17

put on TikTok. Trust me. That will be Manny

44:19

from this show, my friend. But

44:22

if you wanna ask in terms of other

44:24

lessons, the last years we've learned a lot.

44:26

If that was and this is personal, so this is

44:28

not anecdotal, tonight, but this is just you

44:30

to can say. Is there any lessons that

44:32

you have from seeing how you invest over the last

44:34

years and what you've taken from that

44:36

period? As entrepreneurs founders, I think

44:38

the lessons is Stebbings a company's heart.

44:41

It's hard in every single market

44:43

because the market isn't consistent. And so even

44:45

if you start a company in a hot frothy market

44:47

where you're getting overfunded and high valuations,

44:49

it doesn't mean that's gonna be the status quo

44:51

for the extent of the company and things change.

44:54

And it's really hard. You're going to go

44:56

on those ups and downs, going in eyes

44:58

wide open to knowing what you're signing

45:00

up for is important. And just because

45:02

you can a company doesn't mean you should start

45:05

company because that's something you're gonna see

45:07

through all the way. It became very easy

45:09

to raise seed funding and to start a company.

45:11

And everybody got to do that.

45:14

I don't think people went in his eyes wide open

45:16

to the challenges that they were signing up for,

45:18

and I think it'll end in a lot of

45:20

a failure. On the investment side, it was

45:22

very hard to not be transactional.

45:25

Speed became a core

45:27

tenant of the market and it was at every

45:29

round. And so seed a, b

45:31

were happening in hours to days

45:34

versus weeks. And we

45:36

participated in that because that's

45:38

the game on the field, but the

45:40

transactional nature of

45:43

the industry. It's not the

45:45

most filling way to do this

45:47

business. It doesn't lead to

45:49

relationship building. It's not that

45:51

if we wanna be best friends with every

45:54

company that we invest in. It's that

45:56

we want to get to know you so we can try

45:58

to help you. And we want you to get to know

46:00

us so you can know how to

46:02

ask us for help. And when you're doing

46:04

things so quickly, a

46:07

lot of that authentic, actual

46:09

deep relationship building that I think

46:11

is

46:11

fulfilling. It's fulfilling either promotionally

46:14

or psychologically, but actually long

46:16

term it it allows you to feel support

46:18

that got removed from the industry for a bit. You

46:20

mentioned the transnational nature. Did

46:22

you raise the law set of funds? Two thousand

46:24

twenty

46:25

one. How fast will they be deployed to your

46:27

fund cycles? We are trying to be

46:29

super responsible with our LP's

46:31

capital. So three,

46:33

I think we, the hardest part

46:36

of a seed model and

46:38

a non concentrated seed model,

46:40

is the reserves. We've come full circle.

46:42

So how much of the fund

46:45

makes sense to reserve when

46:47

the initial dollars are deployed

46:49

up to that percentage is when we

46:51

need a new fund. And so what

46:53

I've seen happen over the past couple of quarters

46:56

is there's been a slowing of

46:58

what we've view as like opportunities that

47:00

we're excited enough to invest in at the

47:02

MultiStage. And so our deployment capital

47:05

per quarter has gone down, I need to

47:07

see a play out over the next couple quarters

47:09

to know when it makes sense to switch to the next set

47:12

of

47:12

funds. For the opportunity fund, how do you

47:14

do the upside scenario plan that? Is it If

47:16

we can project out A5X,

47:18

then we'll

47:19

engage, is it a three every

47:21

every single investment out of our opportunity

47:23

fund needs to be able to have

47:25

a outlier outcome because

47:28

it's a net new

47:28

investment. It's not attached to the

47:30

pro rata of the seed fund.

47:32

And so when outlier investment plan. Is that

47:34

a fund no time? Or is that A5X? It

47:37

matters what the risk profile is. It meets

47:39

up upside. The whole fund can't be

47:41

built off of underwriting a company to

47:43

A3X outcome because you're not

47:45

gonna be perfect, and it that's

47:47

out to three x, and that's not the inherent

47:49

goal. And it needs a real upside. In certain

47:51

ones, you have unknown exponential

47:54

upside and other ones that are probably later

47:56

and more established in, you know, industry

47:58

where you can get to a more predictable

48:00

outcome. Are gonna have more confined

48:03

upside. Did you make LPs invest in

48:05

the two alongside each other? The word

48:08

make is such a strong word, Harry.

48:10

I don't make anybody do any Tisch is

48:12

invest in both the long side each. Our investors

48:15

are aligned with the strategy that

48:17

we go after at the biz this with. And

48:19

I feel very much our job

48:21

is to have a business and a

48:23

structure

48:24

that aligns with LPs and

48:27

find LPs that feel a lot aligned

48:29

with.

48:29

Okay. But you said that alignment. There are some

48:31

areas where VCs and founders

48:33

are not aligned. And think it's important founders

48:35

know that where do you think the most prominent

48:37

areas those would

48:38

be. My job's to work for founders. We

48:40

get upset when founders are

48:43

dishonest or renegotiate

48:45

agreements Those are the areas that

48:47

I find to be upsetting and

48:50

not what I signed up for. We are

48:52

honest with who we are how we

48:54

work. We put our word first and we

48:56

try to live up to that. I like to work

48:58

with people who do this. I agree. I always

49:00

say life, liquidity is is sometimes not

49:02

my problem. Now, on a portfolio basis,

49:05

it's my problem. On an individual deal basis,

49:07

it's their company, and I'm here to support them.

49:09

And we truly live by those

49:12

words. Can I give them advice? Yes.

49:14

Is advice meant to be listened to?

49:16

No. It's not my job to tell a

49:18

founder what to do. I can gives

49:20

strong advice, but it's

49:22

their company. I respect that

49:25

structure of the

49:26

relationship. Final one for if the mistake

49:28

is gonna be much more costly to them

49:31

than it is gonna be to me. I I think not enough

49:33

easy to talk about the portfolio approach versus

49:35

the single company approach. Final one for the

49:37

Great Fire because David I could talk to you all day.

49:39

What does Vancha look like in five years in

49:41

your mind in the early stage? Do we see the

49:43

even further product as of multistage

49:45

found money at seed. Do we see tigers

49:47

and co2s come there as well and do it

49:49

also? Yeah. Do the boutiques survive?

49:52

How I thought the crossover funds were

49:54

coming to seed imminently if

49:56

the market maintained the

49:58

up moment that it was having. So

50:00

I think if you didn't have the turn

50:03

of the market in twenty two, you were going

50:05

to see enormous amounts of capital.

50:08

Pointed at seed, whether that was

50:10

good, bad, or right or wrong,

50:12

we didn't get to see that play out. I think

50:14

the multisage firms have, as I

50:16

said, been doing seed for a while, will continue

50:18

to do it. There will probably be less investors

50:21

because what this has

50:23

done is push out the tourists. And

50:25

think the tourists were dangerous, and the tourists

50:27

were not here for the long term.

50:29

And that was capital that doesn't make sense

50:32

for founders who are here for the long term

50:34

to be working with. Who were the tourists? Whether

50:36

the tourists were cross over funds

50:38

that came in just because the

50:40

numbers looked good and wanted to

50:42

grab onto that. It's people that are I

50:44

go back to USB. USB is the opposite

50:47

of a torus. They are so focused

50:49

and long term in every single thing

50:51

they do. They're consistent. They're loyal.

50:53

They live by their commitments. I

50:56

have immense respect for the long

50:58

term nature of their business.

51:01

When I look at what we wanna do at box

51:03

group, we are who we are, we are who

51:05

we say we are and we're gonna continue to be that.

51:07

And that's the business we wanna build. And

51:09

that, to me, aligns with the

51:11

timeline of starting and building

51:14

a company. And so investors who are

51:16

here, whether that's early stage

51:19

funds that started, and then

51:21

fund did things because they were going up and now are

51:23

getting nervous and questioning Or

51:25

it's crossover funds that

51:27

showed up at the last minute.

51:29

Think you pointed out Tiger and co too. They're

51:31

easy to criticize, but they've been

51:33

investing in tech for a long time. They've changed

51:35

their model. They've changed their velocity. They've done

51:37

things differently at points, but

51:39

they have been investing into

51:42

private startups at a consistent

51:44

basis for a long

51:45

time. I think for their capital base and for their LPs,

51:47

will actually still perform to an

51:49

averagely good level given

51:51

they have different expectations, which is great. It's

51:53

for their investors, but I'm not sure on them. I

51:55

think they'll be okay. Yeah. The tourists

51:58

to me are the ones who came in because it was

52:00

hot and they felt that Vancha was crummed.

52:02

And if we're I've taught you an idea how to do portfolio

52:04

construct and they wanna go to every drinks party with

52:06

every VC in

52:07

LA. They wanted to And there's there's it

52:09

more depth to that too if it came in because

52:11

it was hot and they're not gonna stick with

52:13

it. And I think when you have investors

52:16

who, you know, two years into your company's journey

52:18

are no longer doing this business. It's

52:20

not the best group of people to have

52:22

around the table. We are going to run whether

52:24

you like it or not the same model

52:27

for a long time. And I think what that

52:29

does is it aligns us with founders who

52:31

are also going to build their business

52:33

for a long time. We are consistent. We're not gonna

52:35

suddenly be a series a lead next year,

52:37

we're not gonna scale the

52:40

size of an entry

52:42

point and where we focus our business

52:44

because our view is if we hold true

52:46

to who we are, we're actually maintaining

52:49

that relationship with the founder for the extent

52:51

of the journey. David, I wanna move into a quick

52:53

file. I could talk to you all day. We had a mixture

52:55

of that. That was some degree. We did great. It was

52:57

awesome. Right? Okay. Ready to rock and

52:59

roll? Yeah. What would you most like to change about

53:01

the world adventure? I would like that

53:03

the ability for founders

53:06

who are treated unethically by

53:09

venture capitalists to be able

53:11

to confidently discuss

53:13

that publicly. Not casual

53:15

bad behavior, but actual bad behavior

53:17

gets policeed out. I think it's really important

53:20

that we find a way to

53:22

expose preparatory behavior.

53:25

And that's not aggressive valuations.

53:28

That's not structuring rounds. That

53:30

is harmful intent

53:32

to hurt founders, behavior, by

53:34

VCs. I've seen that. When a company

53:37

and a tier three shitty

53:39

VC come together, bad

53:41

things can happen. I saw a VC try

53:43

to personally bankrupt a founder.

53:45

That is unacceptable to me. And

53:47

there are tactical ways did they do

53:50

that? And when that happens, my

53:52

view is I don't care if that company failed.

53:54

I don't care how much money we as a fund

53:56

lost. My job is to protect that human

53:59

from bad

54:00

actors. And I wished that

54:02

all of those examples got exposed.

54:04

That's fascinating because one of my problems is

54:06

CCs are actually willing to do the work because they're worried

54:09

about poor MPS. I've had things where the

54:11

company is actually doing terribly, and

54:13

we need to step in and help the founder

54:15

I'm talking way past the

54:17

performance and into truth analysis

54:20

ever. Gene will see that come back in the next cycle.

54:22

Yes. What's the trend that you were seeing

54:24

that others are ignoring,

54:25

David? The trend to me that's

54:27

most interesting is that people are

54:29

bored with today's consumer

54:32

products. None of them are fun. What's

54:34

fun on your phone today? The fun

54:37

has moved to content. Content

54:39

is TikTok, content is YouTube,

54:41

and content is if you're

54:43

into certain things Discord or

54:46

Reddit or Twitter or whatever

54:48

those niches of the world

54:50

and you can call them communities and

54:52

sometimes they are, but sometimes they're

54:55

just content. And in reality, content's always

54:57

been fun. People have always watched TV.

54:59

People have always watched movies. That time

55:01

is actually still pretty consistent. It's just shifted

55:03

into more diversified places

55:06

where you are consuming content. And then you

55:08

go back to the early days of mobile

55:10

and the early days of the Internet around connecting

55:12

with people and whether it's photos,

55:14

sharing or different versions about

55:16

the social part of the Internet, it feels

55:18

like it's become very boring. And I

55:21

long for the days when not

55:23

gets exciting again. We are open

55:25

for consumer social businesses.

55:27

We would love to fund them. We get excited

55:30

about them. I think you're at a point where

55:32

the generation, the twelve to

55:34

eighteen year olds, and then separately, the

55:36

eighteen to twenty five year olds have

55:39

not experienced native products

55:41

for them built by their generation

55:44

that are

55:44

fun. I did the Prestige be real.

55:46

I would give them you did a great job there.

55:48

Thank you very much. What I thought was interesting was

55:50

you have Antoine Martin and Sami who's obviously

55:52

now starting a new

55:53

company. You have a mic and Kevin in

55:55

Instagram and then you have Chad too. Because then

55:57

there's renaissance of the 0GV ones

56:00

who are

56:00

coming back with v two's, which I think is interesting.

56:02

Oh, see the v ones too. So if if there

56:04

are new people out there who are starting something

56:07

that are v one, please. Stop with

56:09

the v two is it's at a hundred. Tell me who

56:11

if they send you a deal, do you take it most

56:13

seriously? You feel like Oh, yeah. They're good

56:15

at this business. Oh, it takes a question.

56:17

We take most founders

56:19

in our portfolio who send us

56:21

things very seriously because

56:24

they know who we are and they're choosing to

56:26

send things to us. And we appreciate that, and

56:28

that to us is as strong of a sort of

56:30

feedback loop as it gets. What's the nicest

56:32

thing anyone's ever done feet? My wife

56:34

married me. That was nice. What's the secret

56:36

to a happy marriage, David? Mutual respect

56:39

and trust. It's trust. Loyalty

56:42

and trust. And it's pretty simple.

56:44

What's the hardest element of your role with books

56:46

today? Weaking up tomorrow and finding

56:48

the next deal. That's my job. How do

56:49

you I I remember

56:50

when New Mexico. Yeah. And I obsess over

56:53

tomorrow, and I spend less time on

56:55

yesterday. Does

56:56

the firmware help? Because sometimes it can't

56:58

really not, but I Our job

57:00

is to make an investment tomorrow. And

57:02

that's gonna be our job hopefully for the

57:04

next thirty years. What's the best investment

57:06

advice you've ever received? Investors invest.

57:09

Bradfeld said that to me when was

57:11

just starting my career, and it

57:13

stuck with me. appreciate that line.

57:15

My job as an investor is to invest.

57:17

Pretty simple. Who do you think is most underrated

57:20

engine in the ecosystem? I don't know if they're

57:22

underrated. I think the Karl's and brothers

57:24

have built a investment portfolio

57:27

that's probably quite unique and

57:29

doesn't get discussed as much

57:31

as some of the louder operator angels

57:34

out there. It feels like they just like

57:36

in building stripe do things at this unique

57:38

quality that extends to all portions of

57:40

their life. What do you believe that fear around do you

57:42

believe? I don't think geography matters

57:45

for startups, and I think we're based

57:47

in New York because we live here and

57:49

we wanna live here just because we're based in York

57:52

doesn't mean that we vest only in New York.

57:54

And Greg, our partner lives in San Francisco

57:56

because he wants to live in San Francisco. I think

57:58

geography gets overrated. Final one,

58:00

my friend. What are the next five years hold for

58:02

you? Where's Box Group in twenty twenty eight?

58:05

I truly hope Box Group

58:07

is exactly where we are today. We

58:09

don't want to be different

58:11

than who we are today

58:13

because we have immense belief that

58:16

staying consistent is the best way

58:18

to hone in on being world class at

58:20

your craft. And so this is our craft.

58:22

Our craft is seat. We wanna be world

58:24

class at pre seat and seat investing in

58:27

people with dreams and ambitions who

58:29

are going out to build ten, fifteen,

58:31

twenty year, and much longer term

58:33

companies, and we would like to be there day one. And

58:35

so five years from now, I hope the answer

58:37

is the exact same. David, listen, it wasn't

58:39

quite a jewel or a fight to the death, but it was

58:41

a discussion for

58:42

sure. We had a great time here.

58:44

I can't thank you enough, my friend. Thank you

58:46

so much, and you're a star. Thanks

58:47

for having me. Well,

58:50

there you have it a more debating Harry

58:52

you like it, then you can see more on YouTube by searching

58:55

for twenty v c or going to twenty v

58:57

c dot com. But before we leave you today,

58:59

a secureframe is the leading all in one

59:01

platform for automated security and privacy

59:03

compliance. Secureframe simplifies

59:06

and streamlines the process of getting

59:08

and staying compliant to the most rigorous

59:10

global privacy and security standards

59:12

like SOP two, ISO two thousand seven

59:14

hundred and one, HIPAA, GDPR

59:17

and others, Secureframe's industry

59:19

leading compliance automation platform paired

59:21

with their in house compliance experts and

59:24

former auditors helps you get audit

59:26

ready in weeks not months.

59:28

So you can close more deals faster.

59:30

Secureframe makes it fast and easy

59:33

to achieve and maintain compliance. So

59:35

you can focus on serving your customers and

59:37

growing revenues. Automate your security

59:40

and privacy compliance with secureframe.

59:42

Scheduler demo today at cureframe

59:45

dot com. So if compliance is one thing

59:47

you always have to prioritize, you also always

59:49

have prioritize your team and work,

59:51

well, it's truly global today. And

59:53

until now, there's been no HR platform

59:55

that's been able to handle everything for

59:58

everyone. No matter where they are in the

1:00:00

world, what deal does exactly that. It

1:00:02

handles all things for global teams.

1:00:04

It allows you to easily consolidate contractors,

1:00:07

EOR employees, and local workers

1:00:09

in one platform with a tool build

1:00:11

to evolve with every stage of your company's

1:00:14

growth no matter who, how, or where

1:00:16

you want to hire. So whether you to complying

1:00:18

the work with a contractor or project in Argentina

1:00:20

are an employee where you don't have an entity

1:00:22

or run payroll for a direct employee overseas.

1:00:25

You can do just that and so much

1:00:27

more with deal. It's way less HR

1:00:29

admin and a whole or more peace of mind.

1:00:31

Simplify global team management payments

1:00:34

and HR so you can hire

1:00:36

faster, streamline more processes and

1:00:38

stay compliant always to see how

1:00:40

deal can scale with your team. Visit

1:00:43

dot com forward slash two OVC.

1:00:45

And finally, now we have this amazing global

1:00:47

team. We want them to work amazingly well

1:00:49

together, and retail helps you work more

1:00:52

effectively, most teams build custom

1:00:54

software to make business processes work

1:00:56

better. But building these internal tools from

1:00:58

scratch takes time and engineering resources.

1:01:01

And that's why teams at thousands of

1:01:03

companies like Amazon, DoorDash, and

1:01:06

NBC build internal tools

1:01:08

using retool