Oct 25, 2024 · 56m · news
Mark Goldberg: Why Politics is Rife & Decision-Making is Broken in Large VCs | E1219 · 20VC with Harry Stebbings
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In this episode of 20VC, Harry Stebbings interviews Mark Goldberg, co-founder of Chemistry, to dissect why modern, industrialized venture capital is broken and how Chemistry's boutique, "single-trigger" model restores genuine alignment with early-stage founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 28.4% of the talking time here. How this is scored →
Harry as informed peer 5.4 Guest teaching 3.7 Guest disagreement 2.6 Harry pushing back 4.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 6:53 Mark rejecting Harry's hands-off VC premise
Mark directly pushes back on Harry's assertion that founders just want money and silence, arguing that early-stage founders need trusted partner support during critical moments.
Hardest push from Harry ▶ 11:07 Harry and co-host challenging Mark on Sequoia's sizeHarry and his co-host refuse Mark's framing of multi-stage firm bureaucracy by pointing out that Sequoia's individual product funds remain tightly constrained.
Biggest teaching moment ▶ 45:30 Mark explaining the VC experience trapMark educates Harry on how domain over-knowledge can cause VCs to outsmart themselves, using East Coast FinTech funds missing monster West Coast deals as a case study.
Harry holds his own ▶ 39:11 Harry presenting his valuation 3x commitment ruleHarry demonstrates seasoned deal-making expertise by detailing a psychological negotiation tactic where founders set their own valuation provided they commit to 3x-ing it by the next round.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Welcome and Launching Chemistry | 3 | 2 | 1 | 2 | Harry opens with friendly rapport and asks why the market needs another VC firm. Mark responds with standard positioning about founder alignment and firm focus. | |
| Cutting Through Venture Bureaucracy | 5 | 4 | 3 | 6 | Harry presses Mark on why portfolio size naturally creates friction and asks him to define venture bureaucracy. Mark responds that portfolio services teams are a dirty secret built for VCs rather than founders. | |
| Early-Stage Support vs. Doing No Harm | 5 | 5 | 4 | 5 | Harry playfully pushes if Chemistry only takes common shares and asserts the 'do no harm / give money and shut up' philosophy. Mark directly disagrees for early-stage investing, arguing that trusted personal support in critical moments is essential. | |
| The Pitch of Undivided Hustle | 5 | 4 | 3 | 4 | Harry asserts that younger founders crave established brands while serial founders care more about the individual. Mark reframes the dynamic around insider versus outsider proximity to Silicon Valley networks rather than age. | |
| Boutique Venture vs. Industrialized Funds | 6 | 4 | 3 | 6 | Harry and the co-host challenge Mark's characterization of large platforms by pointing out Sequoia's constrained product sizes. Harry then drills down on Chemistry's $350M fund math for Series A checks. | |
| The Light Reserve Philosophy and Competition | 6 | 4 | 3 | 6 | Harry questions if Chemistry's light reserve model holds up in portfolio construction and cites conversations with Chemistry's LPs. Mark defends the light reserve model, arguing against peanut-buttering reserves. | |
| Competitive Markets and the Grit of Execution | 5 | 5 | 2 | 3 | Harry and Mark discuss competitive markets and why zero-to-one execution fails. Mark highlights founder resilience and learning velocity when taking adversity punches. | |
| The Case for First-Time Founders | 6 | 4 | 4 | 6 | Harry makes a structured case for serial founders based on hiring friction and forces Mark to pick a side. Mark chooses first-time founders, citing their clean-slate naivety and hunger. | |
| Tapping LP Sentiments and Raising the Fund | 4 | 3 | 1 | 3 | The conversation turns to fundraising mechanics where Harry shares shared empathy about sweating in awkward LP pitch meetings. Mark details their fundraising momentum and LP positioning. | |
| In-Person Fundraising and Co-founder Dynamics | 4 | 3 | 1 | 3 | Harry inquires about in-person meeting requirements and meeting volume statistics. Mark breaks down their LP screening criteria and partner travel dynamic. | |
| Constructive Rejections and the White Claw Incident | 4 | 3 | 2 | 3 | Harry asks if Mark sought real feedback upon receiving LP rejections. Mark shares a lighthearted anecdote about an LP meeting mix-up involving a White Claw. | |
| Early LP Conviction | 6 | 3 | 2 | 5 | Harry presses Mark on which specific LP check meant the most and asks about internal partner disagreements. Mark shares details on debating whether to hire a junior team. | |
| Capital Density and Liquidity Innovations | 6 | 4 | 3 | 5 | Harry challenges the extended private market timelines and directly asserts that most 2021 vintage funds won't return 1x. Mark acknowledges vintage challenges while anticipating capital market secondary innovations. | |
| Valuation Framing and Pricing Strategies | 7 | 3 | 3 | 5 | Harry shares his tactical framing strategy where founders set their price if confident they can 3x it next round, which Mark praises as mental jujitsu. Harry then disagrees with Mark's claim that AI valuations are cooling down. | |
| Single-Trigger Decisions and the Miss on Chime | 6 | 5 | 3 | 5 | Harry questions Chemistry's single-trigger decision model and asks why Chime is a third of Revolut's size despite a larger US market. Mark credits Revolut's product velocity superpower. | |
| Betting on Founders Over Markets | 6 | 6 | 4 | 5 | Harry dismisses categories like recruitment and edtech as bad markets. Mark cautions that domain over-knowledge can be a trap, citing how East Coast FinTech funds outsmarted themselves out of huge deals. | |
| Hype Fatigue and Constructive Rejections | 7 | 2 | 2 | 4 | Harry offers an astute observation on Mark's transition from multi-stage optionality preservation to single-stage focus, which Mark strongly validates as an insightful point. | |
| Concentration and Brand Deal Externalities | 7 | 3 | 3 | 5 | Harry quotes Brian Singerman on capital concentration limits and advises Mark not to fear low-ownership brand deals for positioning. Mark agrees that several LPs offered identical advice. | |
| The Startup Grind and Wealth in Venture | 5 | 4 | 3 | 6 | Harry poses a provocative final question on whether personal wealth makes investors better due to lack of downside fear. Mark reflects on the premise and notes that elite performance stems from love of the craft. |
Statements from this episode (54)
Goldberg: VC portfolio services teams benefit investors, not founders
“I think one of the dirty secrets of multi-stage investing is that portfolio services teams are not for founders. They're for the VCs. They are a way to make something unscalable scale.”
Goldberg: Automatically exercising pro rata reserves harms founders
“Peanut buttering all of your reserves and every pro rata round that gets done is not a good thing for a founder.”
Goldberg: Early-stage consensus decision-making creates mediocre consensus funds
“The biggest mistake is when you try to make consensus decisions at the early stage, I think you end up with consensus funds.”
Goldberg: Experienced VCs at large firms have the least time for new deals
“And I think there's a paradox at a lot of the larger legacy institutions where the most experienced VCs have the least amount of time to spend on new deals. And I think that's a problem for founders.”
Goldberg: Large multinational VC funds suffer from heavy administrative tax
“When you're running, I think when you're running an organization that is That is hundreds of people, that is multinational, like many of the large funds are today. I think there's a lot of time spent on people management, on administrative work, and that, that…”
Goldberg: Andreessen Horowitz's platform model has become a crutch for VCs
“If you go back to the innovation from 1015 years ago, when Andreessen Horowitz started, it was a great idea. It was this sense of, you know, excitement and innovation for venture. But I think where we are now is it's become more of a crutch to these organizati…”
Stebbings: 90% of VCs don't add real value to startups
“Generally, 90% of VCs don't really add value.”
Goldberg: Growth founders should only prioritize price and non-interference
“The other thing I would agree with is that the later stages, that's all that matters. When you're doing it, when you're picking what growth investor you want to work with what you should care about is the price and them staying out of your way.”
Goldberg: Distracted incumbent VCs create opportunity for boutique funds
“Our view with chemistry is that the idea of having a small team, clean slates, this playing offense at a moment where many people are distracted is a really interesting idea for founders that want that, that kind of relationship.”
Stebbings: Serial founders pick individual partners over VC brands
“I find the second tier serial founders have had the multi-stage product before. They've seen that it's not all it's cracked up to be, and they actually go for the person the second time around.”
Goldberg: VC has shifted from boutique partnerships to high-AUM platforms
“The direction of the industry, and I'm sure everybody who observes the industry would say the same thing, has been one of industrialization in the last decade. And when I say industrialization, what I mean is the boutique experience of, hey, there's going to b…”
Goldberg: Making over three investments a year in 2020-2021 was a mistake
“There were years that, you know, in 20, 21, I did far more and, you know, which was the wrong decision at that point.”
Goldberg: Chemistry will make about 25 investments over three years
“It's about a three-year fund, and we'll have, you know, about 25 investments in each fund.”
Goldberg: Typical Series A round sizes grew from $15M to $40M
“You know, I think I'm seeing deals in the market that are 30 to forty million dollars Series A's, and I think one thing you have seen or I've observed in the industry Is that A's that would have been fifteen million, you know, five years ago could be 30 to for…”
Stebbings: Passing on Suno and ElevenLabs were my biggest mistakes
“So I look at like my biggest mistakes this year have been Suno, And 11 labs, and both of them I didn't do because they were small checks, probably like one percent each, and that didn't fit the model, and that was my lack of mental plasticity.”
Goldberg: Investors should pay up for category winners over #2 or #3 players
“Yeah, so I think one of the lessons I learned from Index Ventures, and certainly two of my mentors, Mike Volpe, Ilya Fushman, was you want to be in the category winner, and when you need to pay up to be in a category winner, that's something that I think a lot…”
Goldberg: OKRs do not work well for early-stage software companies
“He was saying, why were they lifted from the manufacturing industry and plopped down into the software world? And I would very much agree with that.”
Goldberg: Bad executive hiring is the main bottleneck in startup scaling
“And the folks that I've seen take longer to get from that one to 10, 10 to a hundred, Are the folks that tend to make the wrong decisions around hiring in their leadership teams.”
Goldberg: First-time founders' hunger outweighs serial founders' experience
“First time founders. I think the ability to think from a clean slate to do foolish, potentially foolish, but on the other side, potentially visionary and transformative things, the hunger and the naivety that you described and a first time founder, I think out…”
Goldberg: Founders seeking redemption make great investment targets
“So a founder who feels like they gave it a shot, but ended in a place that they weren't happy with, and they have a chip on their shoulder, I think is a great profile.”
Goldberg: Less excited to invest in financially independent repeat founders
“A founder who has done so well that, you know, they are financially independent, or they might not have the same level of hunger that they brought to their first business. I I'm less excited about that.”
Goldberg: Legacy VC brands drive follow-on funding, not customer growth
“I don't think it helps with customers. I think it helps with funding. You know, when Sequoia does a deal, there's going to be money that follows it. And that's great. That's a feature of, The brand equity they've built over a long period of time.”
Goldberg: LPs are frustrated legacy VC funds became asset managers
“Some of the venture funds that they had invested in 10 years ago, 20 years ago, they felt like had become asset managers. And the idea of being able to invest in a pure play venture fund that had experience, but also a lot of hustle was something that we think…”
Goldberg: Chemistry capped individual LP stakes near 10%
“We wanted to keep enough diversity in the fund where we didn't get anybody, you know, kind of much over 10%. And that was kind of where we adhered to. So we wanted about 20 LPs and that's pretty close to where we landed.”
Goldberg: Every VC should be required to fundraise to build founder empathy
“First off, I feel like every VC should have to fundraise just to be like table stakes as a VC.”
Stebbings: Tokyo test determines co-founder and partner compatibility
“The Tokyo test is, can you fly to Tokyo with someone and be engaged fully in conversation throughout the duration of the flight? And if you can, that is either the sign that you should marry them or start a company with them.”
Goldberg: LPs cited co-founder team risk as main rejection reason
“The biggest reason we heard was the three of you haven't worked together. And there's a lot of teamwork, team risk and a new fund at this size with three people.”
Goldberg: LP diversity should focus on independent thinking over institution types
“One of the best piece of advice we got was build a diverse set of LPs and not in terms of the institutions you just described Fund to fund family office you know endowments and foundations, but people that, you know, think differently and think independently.”
Goldberg: Chemistry mandates in-office work five days a week
“In office every day is a really important tenant of how we think about building. You know, we're a new team. We're a startup, right? Like we need to be shoulder to shoulder.”
Stebbings: Lost deal after rival VC doubled valuation and accepted common shares
“I lost a deal this week and I lost it because the competition doubled the price and accepted common shares.”
Goldberg: Capital markets will innovate new secondary liquidity products
“First off, I think products will evolve to create liquidity for those late stage private companies that give liquidity options to early stage investors. So I think the market will evolve. So just because companies are staying private longer, doesn't mean I thi…”
Goldberg: Venture capital funds rarely close in less than 15 years
“Even when I started fundraising, I thought the duration of a fund was 10 years, and I was surprised to learn that many of the LPs said, we rarely see closed funds before 15 years.”
Stebbings: Most 2020-2021 vintage VC funds will fail to return 1x
“I don't think many of the 20, 21 vintage funds will return one X.”
Goldberg: 2020-2021 VC vintages will be challenged but exceed 1x
“What I would say is I don't think those funds will do very well. I mean, the vintage is going to be very, very challenged. Will it be a one X? I don't know. I think it'll be better than a one X. Maybe. You know, but it's, they're gonna be tough funds.”
Goldberg: Inflated valuations hurt employee morale and company performance
“When the employees know that the valuation isn't realistic, I think really hurts the morale and hurts the ability of the company to kind of do its best work.”
Stebbings: Forcing 3x growth projections lowers seed valuation asks
“Smaller. Cause they're like, oh shit, the 25, I don't know if we'll be 75 when we're one million in ARR. And so, especially at seed, I'm seeing the 25 go to 15. Cause they're like, I could do 45, but really confidently predicting 80. It's quite hard.”
Goldberg: Milestone-focused pricing shifts valuation talks away from founder ego
“I think it at least changes the tone of the conversation from one of, this is a zero sum game where the valuation is a reflection of my self-worth and kind of a scoreboard win to one of, let's put this in the perspective of a long-term journey.”
Goldberg: Branding as '.ai' no longer commands previous valuation premiums
“Just calling yourself a dot AI company is no longer tacking the same premium onto your business as it would have a year and a half ago.”
Stebbings: Met three pre-product AI startups valued above $750M
“No, honestly, I see it being more crazy than ever. I mean, I've met three companies that raised it north of seven 50 pre-product.”
Goldberg: Chemistry uses a single-trigger model for investments
“So we are a single trigger model, which means that any one of the three of us can make a decision on an investment and go with it.”
Goldberg: Revolut's product velocity is unparalleled in any market
“Revolut's product velocity is, is just unparalleled in really any market at this point, including new bank.”
Goldberg: Revolut is the closest candidate to a $100B neobank
“Actually, the last time I was on your show, I think I predicted a hundred billion dollar in Neobank coming out of, you know, somewhere. And I think we're a lot closer. I think Revolut's the closest we're gonna see to that.”
Stebbings: Revolut is more likely to win the US market than Chime
“I would actually place a lot bigger bet on Revolut taking the US than Chime.”
Goldberg: Great companies expand TAM by increasing product surface area
“I mean, if you look at, you know, I was very fortunate to see some amazing companies from index from the early days, whether it was a Figma, whether it was a whiz, whether it was a data dog companies that, you know, have been able to build TAM by just increasi…”
Goldberg: Knowledgeable East Coast funds missed the biggest fintech wins
“In fintech, the most knowledgeable people were a bunch of the east coast funds that knew that had come, had spent two decades inside of financial institutions and knew the market way better than the west coast funds. And they outsmarted themselves from every m…”
Goldberg: Matt Harris is the best fintech investor in venture capital
“Matt Harris is, is probably the smartest and best fintech investor out there. I mean, you know, Ribbit's obviously incredible as well, but Matt Harris, I think, you know, has kind of set the direction of fintech for a very long time.”
Goldberg: Knowing too much domain information can ruin Series A investing
“If you know too much, because the crazy ideas are crazy, right? Like they, You can out think yourself from any good series A by overthink. I've done it myself. I've seen other people do it. And I think knowing too much can actually be dangerous.”
Goldberg: Multi-stage VC optionality dilutes focus and conviction
“Because it focuses you in a way that I had not done before where the date, the danger of the optionality of being able to do every stage at every time is you have to keep so many doors open. There is something that, that focuses the mind by saying, this is the…”
Goldberg: Chemistry will limit fund concentration to 10% per company
“I can't remember what legally we have as the concentration limit, but certainly we don't want more than 10% of the fund in a single company.”
Stebbings: VCs in AI era should take low-ownership brand deals
“Don't be afraid to do brand deals where you do get into brand names with tiny ownerships. The most important thing is that you align yourself with incredible founders and incredible companies in this new era, especially in this new era of AI, just get into som…”
Goldberg: LPs advised Chemistry to accept low-ownership brand deals
“We had some LPs say exactly the same advice, which was one of our more surprising moments from our fundraise where some of the LP said, you know, listen, it's that important that you're in some of these brand deals to be able to establish yourselves and don't …”
Goldberg: Series A funds offer the best risk-return profile in venture
“I'd take the Series A fund. I think it's the best risk return on the market.”
Goldberg: Investor wealth does not diminish hustle in top venture capitalists
“My gut reaction is to say the opposite, which is that, you know, The wealth level correlates with a lack of hustle and therefore, but it's, that's actually not in practice what I'seen. I think there is a correlation less about the money and more about the peop…”