May 15, 2024 · 1h 17m · news
Dan Siroker: Second-Time Founders Are More Investable & Why Not To Hire People Out of College |E1153 · 20VC with Harry Stebbings
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In this insightful interview, serial entrepreneur Dan Siroker shares his highly non-conformist views on startup execution, explaining why he prioritizes elite, senior-only teams, avoids over-valuation traps, and ruthlessly protects product simplicity.
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 20.2% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 4.3 Guest disagreement 1.9 Harry pushing back 2.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 48:47 Rising Arc Investors vs Established Legends
Dan directly rejects Harry's framing that founders should seek senior VCs who do not need internal firm consensus, forcefully arguing that 35-year-old VCs on the rising arc of their career offer significantly more value.
Hardest push from Harry ▶ 30:47 Challenging Dan's Outlier Advice for Average FoundersHarry directly confronts Dan's advice on demanding low dilution, arguing that Dan's massive track record makes him an exception and that ordinary founders who copy him will fail.
Biggest teaching moment ▶ 40:12 Demystifying the VC Valuation TrapDan breaks down the exact mathematical trick VCs use when asking 'how much are you raising?' to force a valuation anchor, educating founders on how to reframe the negotiation entirely.
Harry holds his own ▶ 56:48 Harry's 3-Point Venture Product PitchHarry succinctly articulates his own value proposition as an investor to test it against an experienced founder, winning immediate validation and agreement from Dan.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Coming Up: The Art of Fundraising | 1 | 1 | 1 | 1 | Harry welcomes Dan and asks foundational questions about his childhood, early exposure to computers through Hector Garcia Molina, and pivotal 'yes' and 'no' moments. The dynamic is polite, warm, and collaborative. | |
| When to Pivot vs. Stick | 3 | 4 | 1 | 2 | Harry introduces Marc Andreessen's view on bad ideas versus bad timing, leading Dan to share framework wisdom on pivoting from Elad Gil and Dalton Caldwell. Harry adds his own framework about running out of experiments. | |
| First-Time vs. Second-Time Founders | 3 | 4 | 1 | 2 | Harry shares his investment bias toward serial founders over first-timers, prompting Dan to explain the learned wisdom and nonconformist psychology of repeat entrepreneurs. The tone remains agreeable and peer-like. | |
| The Trap of Abdicating Responsibility | 3 | 4 | 1 | 2 | Harry cites background research from Dan's team regarding his hands-on approach, leading Dan to discuss the dangers of abdicating operational responsibility to senior hires. The exchange is introspective and conversational. | |
| Why Second-Time Founders Are More Investable | 4 | 3 | 2 | 4 | Harry challenges Dan's preference for serial founders by pointing to iconic single-company founders like Daniel Ek and the Collisons who made the business their lifelong mission. Dan nuances the point by highlighting base rate probabilities of failure. | |
| Dan's Biggest Leadership Mistakes & Gut Decisions | 3 | 5 | 1 | 2 | Harry asks Dan to detail his leadership mistakes at Optimizely, yielding an insightful breakdown of ignoring founder gut feelings and rushing into enterprise sales instead of sticking to product-led growth. | |
| The Hidden Cost of Handing Out Fancy Titles | 4 | 3 | 3 | 4 | Harry strongly criticizes early title inflation, specifically calling out terms like 'founding engineer' or 'founding marketer.' Dan offers a counter-perspective on retaining talent in competitive markets while agreeing title fixation during interviews is a red flag. | |
| Dan's Philosophy on Startup Compensation | 4 | 4 | 2 | 4 | Harry questions Dan on secondary stock sales, raising the risk of creating a 'tale of two cities' between early liquid employees and new unvested hires. Dan defends providing liquidity to increase employee retention. | |
| Why Dan Siroker Avoids Hiring College Grads | 4 | 5 | 3 | 4 | Dan explains why he avoids hiring college grads to maintain small team velocity. Harry then transitions to a previous Twitter dispute regarding whether elite VCs accept sub-10 percent dilution rounds. | |
| The Art of Fundraising Negotiation | 4 | 5 | 3 | 4 | Harry pushes back on Dan's low-dilution fundraising advice, noting that average founders lack Dan's 120M ARR track record. Dan explains how he executed low dilution even on his first Series A by understanding VC trade-offs. | |
| Do You Actually Need a Board of Directors? | 3 | 4 | 1 | 2 | Dan critiques early-stage boards and outlines his unconventional public fundraising strategy for Limitless, which generated thousands of inbound investor offers. | |
| Why You Shouldn't Take the Highest Valuation | 4 | 5 | 2 | 3 | Dan explains why he turned down twenty-two $1 billion valuation offers to take $350 million from NEA. Harry probes the signaling risks of working with top multi-stage funds. | |
| How to Answer 'How Much Are You Raising?' | 4 | 6 | 3 | 3 | Dan educates the audience on the subtle valuation trap VCs lay when asking 'how much are you raising?' and shares how to run parallel 1-week fundraising calendars to maintain leverage. | |
| How to Conduct References on Your VCs | 4 | 5 | 3 | 4 | Harry asks whether transactional fundraising loses relationship depth. Dan counters by explaining that VC associates are inherently transactional and describes doing twelve extensive founder reference checks on Peter Fenton. | |
| Using Associate VCs to Hone Your Pitch | 3 | 5 | 2 | 3 | Harry asks if founders should waste time with associate VCs. Dan explains why he intentionally uses disengaged associate pitch meetings as a trial run to build bulletproof appendix slides. | |
| Why You Want an Investor on the Rising Arc of Their Career | 4 | 6 | 4 | 4 | Harry asks if top founders should avoid partners who must sell deals to a broader firm. Dan strongly disagrees, contending that hungry VCs on the rising arc of their career offer far more value than established legends. | |
| The Real Value of a Marquee VC Brand | 4 | 5 | 2 | 3 | Harry and Dan discuss marquee VC brands and liquidation preference landmines. Dan gives definitive advice urging founders to choose a clean down round over a dirty up round with stacked preferences. | |
| Why Founders Must Maintain Company Control | 4 | 4 | 1 | 2 | Dan highlights the necessity of maintaining company control via super-voting stock. Harry pitches his own concise 3-part investor value proposition, winning Dan's playful approval. | |
| The Most Memorable VC Question from Peter Fenton | 3 | 5 | 2 | 2 | Dan recounts a memorable question from Peter Fenton about staying excited 5 years in, then critiques AI founders who build 'technology in search of a problem.' | |
| Founder-Market Fit and the Power of Firsthand Pain | 3 | 5 | 2 | 2 | Harry asks about crowded AI markets. Dan explains founder-market fit born out of firsthand pain, drawing on his personal experience optimizing web pages during the 2008 Obama campaign. | |
| How to Keep Products Simple and Prevent Feature Creep | 3 | 5 | 1 | 2 | Harry asks about avoiding feature creep. Dan discusses CEO discipline in saying no, and candidly admits his biggest mistake was failing to acquire Amplitude and Segment early on. | |
| How to Craft a World-Class Product Launch | 2 | 3 | 1 | 2 | Harry praises the Limitless launch and segues into a quick-fire round covering Y Combinator regrets, dream board members, and the personal sacrifices of fatherhood. | |
| Tech Optimism, AI Regulation, and the Threat of Doomerism | 3 | 5 | 3 | 3 | Dan warns against tech doomerism and regulatory capture in AI. When Harry suggests AI progress is unstoppable regardless of regulation, Dan pushes back using the post-Space Shuttle era as a historical warning. | |
| A 10-Year Vision for Limitless and Augmenting Human Memory | 1 | 3 | 1 | 1 | Dan lays out his 10-year vision for Limitless, predicting ambient memory augmentation will make physical pen and paper notes look absurd. The conversation ends on a warm, appreciative note. |
Statements from this episode (54)
Siroker: Founders should either be fully in fundraising mode or not at all
“I very much believe you should either be in fundraising mode or not.”
Siroker: Asking for the highest valuation is almost certainly a mistake
“Always saying the highest price is almost certainly going to be a mistake.”
Siroker: VCs ask round size to implicitly negotiate valuation at 20% dilution
“When an investor asks, how much are you raising? More often than not, they're actually asking, how much do you think you're worth? Let's start the negotiation on valuation right now, because a 20% is what they want.”
Siroker: Successful startups show glimmers of hope very fast
“Things that work tend to work really fast. You know, it was kind of this anti-pattern. Most people would say, well, you got to stick it out and be perseverance and, you know, keep, you know, banging your head against an idea and you have to keep executing it. …”
Siroker: First-Time Founders Brag About Headcount; Serial Founders Brag About Lean Teams
“First time founders brag about how many employees they have, second time founders brag about how few employees they have.”
Siroker: Only Three or Four Key Decisions Determined Optimizely's Success
“I have 10 years I put into my last company and I can recognize that really Only three or four things that we did made the difference in the success or failure of the company.”
Siroker: Second-time founders can recruit far higher-caliber talent
“The caliber of person that I can hire today is far, far better than the person I could have hired, you know, when I started optimizing. So I do think that's a huge factor as well. You can hire much better if you, and certainly if your first company did okay, d…”
Siroker: Optimizely moved to enterprise too fast and abandoned solving churn
“Many, many examples of this, you know, from moving to the enterprise too quickly, to sort of not recognizing the core of what we had, to sort of abandoning The core problem of solving churn”
Siroker: Starbucks adopted Optimizely via self-service for $79 a month
“But Starbucks, you know, Starbucks.com, a guy there who's in charge of optimization and conversion for Starbucks.com, had that experience, and he saw forgiveness, not permission to put, you know, to run our product. For 79 dollars a month, he put our A-B testi…”
Siroker: Sales reps should expand organic product pull, not do cold outbound
“I would say when you feel market pull, when you feel the market, like I gave the example of Starbucks, you know, they're going past all of the processes, they're going past all, like they're seeking forgiveness, not permission to use your product. You're seein…”
Siroker: Giving early VP titles triggers company-wide title inflation
“Titles they're a bit weird because they're both kind of free to give in one sense, that it doesn't cost you more money, but they're expensive in that it creates this sort of, like, mutually assured destruction. You know, as soon as you give out that first VP t…”
Siroker: Using founding engineer titles reduces early employee turnover risk
“To be a founding engineer is so much more meaningful to somebody, both in terms of their, you know, if, for example, if 80% of your friends are founders of companies and you are just a software engineer, but you started in your first employee, like that just p…”
Siroker: Job candidates bringing up titles in interviews is a red flag
“One thing I'll say about titles that I unequivocally believe is that if this is a something that a candidate brings up early or even during the interview process at all, it is a pretty red flag. It shows you kind of what their values are. The best people I've …”
Siroker: Startups should compensate employees at the 75th percentile in cash
“You can still pay, you know, 75th percentile in, in terms of cash, and it shouldn't be a huge lifestyle change just because they're joining a startup. I think that's a, you know, 10 years ago, that was this idea that you're exchanging, you know, risk for rewar…”
Siroker: Limitless raised existing salaries after hiring an engineer $30k higher
“We hired somebody, a great software engineer. We thought, wow, actually the market is showing that this person should be 30 K more than the other folks on the team. And so not only did we hire her at that price, but we also raised everyone else's salaries to m…”
Siroker: Limitless let employees sell 25% of vested equity in Series A
“In our series A, we're way oversubscribed. We actually have, we raised our series A over a year ago and we haven't even started spending it. So we had far more investors who wanted to invest than we had you know, capital to sell them. And so I gave our employe…”
Siroker: Limitless has not spent any of its Series A capital
“We actually have, we raised our series A over a year ago and we haven't even started spending it.”
Siroker: Why Limitless refuses to hire candidates straight out of college
“Like we don't hire people straight out of college. We hire people with experience.”
Siroker: Limitless ships faster with 20 people than Optimizely did with 120
“With 20 people today, I feel like we're having a greater impact and ship faster than we ever could with a 120 people and software engineers at Optimizely.”
Siroker: Top VC funds will break ownership minimums for hot startups
“Yeah, the best investors benchmark and recent, they will invest less than their supposed minimums for the right company.”
Siroker: How he negotiated 8% Series A dilution with Benchmark in 2013
“My very first Series A, I got, you know, I got benchmarked to agree to, you know, I think it was maybe eight percent or something.”
Siroker: Founders should concede on valuation in term sheet negotiations
“I think it's fair to give on valuation.”
Siroker: Why Limitless operates without a board of directors
“I've been lucky not to have a board for Limitless.”
Siroker: Early-stage board members struggle to gain enough founder context
“I do think boards as a company gets bigger and bigger and closer to going public are really important for governance and accountability. But when the company is so early on, it's very, very hard for a board member to get up to speed. You know, they're showing …”
Siroker: NEA Buys Portfolio Stock at IPO Rather Than Selling
“They're often buyers at the IPO. They're not sellers.”
Siroker: Limitless rejected 22 $1B offers to accept a $350M Series A
“We had offers, actually, we had 22 offers at a billion dollars. We turned them down and took 350.”
Siroker: Cap ownership sold rather than giving raise targets to VCs
“So instead of answering the question how much you're raising, The best answer is, you know, we don't need to raise, so we don't have a budget we're driving. We want to sell no more than this percentage of the company, and we're letting the market decide the va…”
Siroker: Saying 'yes' to raising money creates a dangerous signaling clock
“Are you raising money? And my answer almost always is, is never yes or no. They want just a yes or no. Usually it's some version of, well, no, but if over the next week we get a term sheet you can't say no to, we're probably going to take it. So that's somethi…”
Siroker: Limitless ran all first investor meetings within one week
“Last year, when we did this fundraise, I we did this kind of in public. We put the deck out, and then for any of the people we felt were good finalists, we gave them a calendar link for the first meetings, and those meetings are all one week, so no more than o…”
Siroker: Fast term sheets are designed to force lower valuations
“The investor who's giving you that term sheet wants to preempt it. They want to get in early. They want to get a better price, and so they know that if they do it before you're getting information from everyone else, that's going to help them.”
Siroker: Peter Fenton gave direct contact info for 12 portfolio founders
“Peter Fenton, when I asked for references on him at the time, he was this amazing luminary. I asked him for references. He gave me 12 founders and CEOs, their phone number, their email. He didn't even introduce me, just to just reach out. And then I got this g…”
Siroker: Hone pitches via 30 back-to-back associate investor meetings
“When you have like, 30 back-to-back associate investor meetings where you're practicing your pitch and tweaking the deck every single meeting, by the end of that, you have this really, really honed product, like a stand-up meeting.”
Siroker: Tough questions from junior VCs signal intent to pitch partners
“Oftentimes, especially I found this too, when you very quickly can tell the person you're meeting with, they just, they have an inclination. They want to invest almost from the beginning and all of their questions you'll find out. I actually, I think are often…”
Siroker: Founders should target VCs on the rising arc of their career
“I think the best investor you can have for your company is somebody who's on the rising arc of their career. You want a Peter Fenton when he's 35, not 45. You want, not, not going to be ageist, but you want somebody before they've had their first IPO, and you …”
Siroker: Investors' job is just capital and doing no harm
“The one thing that really kills me is when I see a founder playing the victim here and say, well, my investors didn't help me enough. Like, That's not their job. Their job is to give you money and hopefully do no harm.”
Siroker: Marquee VC brands mainly benefit talent recruiting
“I think it helps with recruiting. I think that's probably the biggest benefit. You know, great, great talent can work anywhere, and if they had the choice between a company that's got, you know, great marquee investors who, you know, who've done their homework…”
Siroker: Limitless raised from hundreds of investors, hindering competitors
“One of the benefits side, unintended side benefits of the round we raised I do think kind of made everyone else's job. Who's a founder trying to compete with us much, much harder because first of all, we had hundreds of investors.”
Siroker: Founders should never accept over 1x non-participating preferred liquidation preference
“Never take more than One X non-participating preferred liquidation preference.”
Siroker: Founders should always choose a down round over a structured up round
“If you're a founder listening to this and you're contemplating an up round with a liquidation preference more than one or a down round, do 100% of the time do the down round.”
Siroker: Founders must maximize company control to protect common stockholders
“You as the founder of the company are actually As a fiduciary responsible to represent the interests of the common stock and that's your employees, you know, and so if you want to do best for your employees, you want to rationally control as much as you possib…”
Siroker: AI investors should prioritize problem-obsessed over tech-obsessed founders
“I think the most important thing to do if you're an investor today is find founders who are obsessed with problems, not solutions.”
Siroker: Google Wave, Buzz, and Glass were technology in search of problems
“Google's notorious for building products that are technology in search of problems. Google Wave, Google Buzz, Google Glass, like, all of these products were basically some smart engineer or technologist starting the sentence with, Wouldn't it be cool if, dot, …”
Siroker: He would abandon Limitless hardware if software alone solved the problem
“We're building a hardware, we're building a wearable, If I can solve the same problems I want to solve without them, all for it. I'd be happy to do that. Hardware is hard. It's expensive. It's painful. I would happily give up hardware if I could solve the prob…”
Siroker: Back founders excited about smaller problems rather than social trends
“In some ways, actually, you kind of want to choose founders who are excited about smaller problems, because it tells you that they're not just falling in love with what they saw on Twitter or social media, that there's actually something they care about.”
Siroker: Ideal AI support startup CEO began career in customer support
“The best CEO for a AI customer agent is somebody who started their career answering customer support calls.”
Siroker: Pitch decks opening with market map slides are immediate red flags
“You know, like that's what you're looking for is this founder market fit around the problem, not somebody who's like a McKinsey consultant who said like, if their first slide is here's the market map and here's the market size and, you know, here's the niche w…”
Siroker: Shipping features creates ongoing maintenance commitments, never single tasks
“I've never seen a situation where we'll ship a little feature and we're done. It's always like, oh shoot, now there's this edge case we didn't think about it. And then, oh, this other person wants to do this other thing. So you, it's like opening a commitment …”
Siroker: Optimizely tried to acquire Amplitude when it had four employees
“I tried to buy Amplitude when there are four people. In fact, they were about to raise their, I remember we're sitting at, I think at Chipotle and Soma with Spencer. And I, to this day, I'm so impressed with, I just, I was offering him insane amounts of money,…”
Siroker: Optimizely could have built product analytics and beaten Amplitude
“That is the one where in that moment I should have just said, okay, we're going to crush them and do product analytics. I think too much of my ego is associated with that. I should have been more Zuck like and just said, okay, they didn't accept our offer. Let…”
Siroker: Optimizely tried and failed to acquire Segment
“Another example is segment. That's something, another area where it was adjacent to what we're doing. We tried to acquire them. They were later stage. Then they said, no, they ended up being successful.”
Siroker: Why he regrets not doing Y Combinator for his second startup
“I probably should have. I kind of regret not doing it. I think I was maybe too much pride and ego that I didn't need it. But YC has a lot of gifts to keep on giving, even if you're a second time founder, like work at a startup like office hours. So I am very i…”
Siroker: Why cutting hobbies and social life yields peak personal happiness
“I've cut out basically most of my, I don't spend much time with friends. I have basically no hobbies. You know, I, I'm reminded of this Rick Rubin quote. He's like, I have no technical skills. It's like that, but for my life, like all I do is spend time with m…”
Dan Siroker: Doomerism and regulatory capture risk stalling AI innovation
“Doomers plus regulatory capture, I could see creating a world in which a lot of AI innovation is, is stalled.”
Dan Siroker: Technology does not automatically progress without ambitious founders
“Technology doesn't get better by itself, by the way. We could look at, you know, here's a good analogy, we could look at AI today the same way that Before SpaceX, people looked at the Space Shuttle. Like, hey, we had the Space Shuttle, then we retired it, and …”