Apr 10, 2024 · 1h 9m · news
Kevin Ryan: Are the Best CEOs the Best Fundraisers & Why Ownership Should Not Be a Focus in VC|E1138 · 20VC with Harry Stebbings
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In this comprehensive interview, AlleyCorp founder Kevin Ryan shares his seasoned insights on early-stage company building, venture capital dynamics, macroeconomic cycles, and the strategic advantages of B2B enterprise investing. He discusses the core capabilities of successful CEOs, the evolution of AlleyCorp's incubation model, and the psychological resilience required to navigate market volatility.
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 20.1% of the talking time here. How this is scored →
Harry as informed peer 3.5 Guest teaching 3.7 Guest disagreement 2.7 Harry pushing back 2.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 52:43 Calling out host's sample bias on preempted rounds
Ryan bluntly tells Stebbings he is 'being misled' by looking only at the top ten hyped deals rather than standard industry behavior.
Hardest push from Harry ▶ 33:02 Challenging the founder quality of venture studiosStebbings explicitly pushes back on Ryan's incubation model, asserting that elite founders will refuse to be 'hired gun' CEOs for studio-created ideas.
Biggest teaching moment ▶ 55:00 Refuting the 'any company can IPO at a price' claimWhen Stebbings quotes VCs claiming companies can always go public if they accept lower valuations, Ryan flatly states 'That is wrong' and explains structural public market barriers.
Harry holds his own ▶ 21:53 Articulating AI distribution advantages and enterprise moatsStebbings demonstrates deep market domain knowledge by outlining how distribution incumbents like Salesforce and Google erode thin application-layer AI startups.
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 Kevin's Early Years | 4 | 4 | 3 | 2 | Stebbings poses a specific thesis that top performers show early exceptionalism and questions the McKinsey path. Ryan reframes the thesis by offering a real-world counterexample from his portfolio (Pierpaolo Barbieri at Uala) to show exceptionalism isn't always crazy entrepreneurialism. | |
| Skill vs. Luck in Business: The Gilt Groupe Example | 2 | 3 | 1 | 1 | Stebbings asks open questions about luck versus skill and Ryan's career highs and lows. Ryan reflects on Gilt Groupe's market dynamics and lists MongoDB and DoubleClick as his major career milestones. | |
| The Strategy of Speed and Market Timing | 3 | 3 | 2 | 2 | Stebbings brings up the 'second mouse gets the cheese' counter-perspective on first-mover advantage. Ryan explains how aggressive international expansion at DoubleClick secured a permanent market lead despite early risk. | |
| Surviving the Dot-Com Crash | 2 | 4 | 2 | 2 | Stebbings admits he was too young to experience the dot-com crash as a professional. Ryan educates him on how severe 2001 was compared to recent market adjustments, detailing 70% client bankruptcy rates. | |
| Managing Market Timing and Long-Term Trends | 4 | 5 | 4 | 4 | Stebbings argues that he focuses exclusively on people over markets because founders can pivot. Ryan firmly rejects this framing, noting that a founder cannot pivot out of a fundamentally bad industry like online department stores into solar energy. | |
| Overcoming Past Investment Traumas | 3 | 3 | 2 | 2 | Stebbings notes his personal aversion to sectors like media and edtech due to past burn. Ryan acknowledges human bias in VC decisions and breaks down how CEO fundraising ability impacts capital raising speed. | |
| Insider Expertise vs. Outsider Naivety | 4 | 4 | 3 | 3 | Stebbings strongly asserts his view that consumer investments produce no returns while enterprise makes money. Ryan clarifies the fundamental structural differences between consumer and B2B founder backgrounds. | |
| The Distribution Advantage and Incumbent Power in AI | 5 | 2 | 1 | 3 | Stebbings articulates an informed thesis on AI distribution moats accruing to incumbents like Salesforce and Google. Ryan agrees entirely and expands with corporate switching cost dynamics. | |
| Do Investors Add Value? | 4 | 4 | 3 | 3 | Stebbings quotes Trey from Founders Fund asserting that investors add zero value. Ryan challenges this blanket statement, assigning 90% of value to CEOs but highlighting crucial early-stage board interventions like CEO replacements. | |
| Backing Serial vs. First-Time Entrepreneurs | 4 | 5 | 4 | 4 | Stebbings pushes his preference for serial entrepreneurs who have made past mistakes. Ryan uses empirical top-25 consumer company data to prove that almost zero top consumer CEOs were repeat founders. | |
| Why Startups Run Out of Cash | 4 | 3 | 2 | 4 | Stebbings calls bullshit on the saying that startups die of indigestion rather than starvation, pointing out that companies literally die from running out of cash. Ryan agrees with the cash reality but explains the root cause as product-market fit failure. | |
| The Mechanics and Metrics of Venture Incubation | 4 | 5 | 4 | 5 | Stebbings directly challenges Ryan's studio model, arguing that top founders will not act as hired guns for incubator-generated ideas. Ryan forcefully responds by citing MongoDB and Business Insider as massive successes built on that exact model. | |
| Capital Efficiency and the Milestone Method | 3 | 3 | 1 | 2 | Stebbings asks about resource allocation and milestone-based funding in incubations. Ryan explains $1.5M seed check allocations and 40-45% founder equity structures. | |
| Price Sensitivity and VC Ownership Traps | 4 | 4 | 3 | 3 | Stebbings quotes Peter Fenton on price being a mental trap and asks about dilution fears. Ryan argues that fixed ownership targets are foolish because outstanding teams in top markets merit higher prices. | |
| The Appeal of "Non-Sexy" Investment Sectors | 4 | 3 | 3 | 4 | When Ryan regrets not building a bigger fund earlier, Stebbings pushes back that doing so would have diluted his personal attention. Ryan clarifies that team delegation made scale possible. | |
| Capital Concentration and Reserve Strategies | 3 | 4 | 1 | 2 | Stebbings asks about liquidity management and selling timing. Ryan details the turn-around of Meetup, going from $20M losses under WeWork to profitability and a 7x sale. | |
| Coping with the Disappearance of "Paper" Wealth | 3 | 3 | 2 | 2 | Stebbings asks about Ryan's largest financial losses. Ryan explains how $100M+ paper valuations in DoubleClick and Gilt evaporated during market shifts. | |
| The Evolution and "Commoditization" of Seed VC | 5 | 4 | 4 | 4 | Stebbings quotes Doug Leone regarding VC becoming a commoditized low-margin industry and notes multi-stage firms commoditizing seed. Ryan rejects this, explaining the destructive negative signaling risk when multi-stage firms invest at seed and decline the Series A. | |
| The Signaling Trap of Preempted Rounds | 4 | 5 | 5 | 4 | Stebbings counters that preemptive rounds negate signaling risk. Ryan directly shuts this down, telling Stebbings he is being misled by the top 10 hyped deals rather than looking at the broader market reality. | |
| The Broken Path to IPO and Private Market Plateaus | 4 | 5 | 4 | 4 | Stebbings cites VCs who claim any company can go public if they just lower their valuation expectations. Ryan explicitly rejects this, explaining structural private market illiquidity and why middle-market companies plateau. | |
| Relationship with Money and Motivation to Work | 3 | 4 | 3 | 3 | Stebbings asks about Ryan's relationship with money and challenges New York City's tech standing compared to Boston and San Francisco. Ryan forcefully defends NYC's massive growth trajectory since 1996. | |
| AI Centralization and Geographic Talent Trends | 3 | 3 | 2 | 2 | Stebbings raises concerns regarding AI talent centralization in San Francisco. Ryan acknowledges SF's advantage in deep AI science but provides a model explaining why talent gravitates toward NYC over secondary hubs. | |
| Quick-Fire: Economic Outlook and Government Management | 2 | 2 | 2 | 2 | In a quick-fire segment, Stebbings asks about macro trends, political outcomes, and startup advice tropes. Ryan praises recent US economic management and Bidenomics. | |
| Quick-Fire: Luck and the Story of MongoDB | 3 | 3 | 3 | 3 | Stebbings asserts that government corruption has become normalized. Ryan pushes back, differentiating the clean record of recent US White House cabinets from UK political scandals. |
Statements from this episode (75)
AlleyCorp Does Not Prioritize Target VC Ownership Percentages
“Here's the thing that I don't think about, which is our ownership. Sometimes we're paying a big price, and we're paying a big price because it's an incredible team and an incredible opportunity.”
Kevin Ryan was the first investor in Argentine neobank Ualá
“I was the first investor in Walla, which is a mobile bank in Argentina.”
Kevin Ryan states Argentine neobank Ualá is valued at $2 billion
“It's currently worth about two billion dollars.”
Kevin Ryan: Billion-dollar founders consistently display prior track records of success
“Is a surfer for five years, and then at 26, all of a sudden launches a billion dollar company. That doesn't happen as much. They showed drive and focus and success before.”
Gilt Groupe Hit $175M Revenue in Year Two and $500M in Year Four
“I started a company called Gilt, and Gilt, after four years, was doing five hundred million dollars in revenue. So, crazy success. We did a hundred and seventy-five million dollars in revenue in our second year, which I don't think anyone in New York City's ev…”
Gilt Groupe Reached $1B Valuation Before Selling for $250M
“After four years, we're worth a billion dollars, and at the time, you know, everyone invested a billion because they thought it was worth two to three billion, and we ended up selling it for two hundred and fifty million dollars, despite having an incredible p…”
Only Two NYC Startups From the Last 30 Years Hit $25B
“The monetary answer is Mongo by far, you know, Mongo's worth twenty five billion dollars. There's only two companies started in the last 30 years in New York that are worth twenty five billion dollars.”
Kevin Ryan Predicts MongoDB Will Eventually Reach a $50B Valuation
“And still growing, and I think we'll be a fifty billion dollar company someday.”
Ryan: DoubleClick dominates ad tech today because it won its first five years
“The reason today, which is literally more than 25 years later, that DoubleClick, which is part of Google, dominates the world in ad technology is because we won the battle of the first five years.”
MongoDB Lost $1B Over 10 Years Before Reaching Profitability
“Mongo, we lost a billion dollars before we had a profitable quarter. Over 10 years.”
Investors Will Only Fund Billion-Dollar Burn Rates in AI Today
“Today, I don't know that many companies outside of AI that where people will give you a billion dollars to lose. But today, you know, that exists in AI. It doesn't exist in a lot of other areas.”
DoubleClick Conducted Seven Layoff Rounds During the Dot-Com Crash
“We did, by the way, we did seven rounds of layoffs. We went from 2000 people back down to a thousand, ah, doing layoff after layoff. 70% of our clients went bankrupt.”
Kevin Ryan: VCs will deploy existing dry powder over five years
“There's another characteristic in our business is there's actually a lot of VC money. You know, there's tons of cash sitting on the sidelines. That money is not going to be given back. That money is going to be spent. We're only debating whether people are goi…”
Kevin Ryan: Psychedelic industry will be 20x larger in 10 years
“We're big investors, for example, in the psychedelic industry. Is the psychedelic industry gonna be 20 times larger 10 years from now than today? Absolutely.”
No Online Clothing Department Store Startup Has Succeeded in 10 Years
“Not a single one of those has worked in 10 years.”
No Net Value Has Been Created in E-Commerce Over Five Years
“E-commerce, there's been probably net, you know, no value created in five years.”
Almost No Media Venture Investments Have Succeeded Recently Except Podcasts
“Same with media you know, with the exception of actually podcasts, hardly anything has worked. In the last five years in media.”
30% of VCs Reject Pitch Decks Unseen Due to Prior Sector Losses
“I see it all the time when we have a company going out and we approach 10 VCs and three of them will say, I invested in this sector eight years ago and I lost all my money. They haven't even read the deck yet”
Kevin Ryan: Every portfolio company quadrupling revenue successfully gets funded
“I don't have any companies going out that have quadrupled their revenues in the last year that don't get funded.”
Kevin Ryan: The best CEOs are usually the best fundraisers
“Generally, yes, because if you can raise a lot of money, it increases your odds of doing well dramatically and allows you to make some mistakes.”
Kevin Ryan: Each funding round shifts focus from CEO to business metrics
“In the long run, people will figure out if you're, you know, every round that goes along, it's more about the business and a little bit less about the CO.”
AlleyCorp almost never backs corporate executives lacking startup experience
“So I would say that a lot of the people we back are first time founders. We would never, almost never back someone who comes from Procter and Gamble, a large company and seems like a smart person, but they don't know startups.”
Most top consumer internet founders were industry outsiders from other startups
“I once looked through the top hundred consumer internet companies. And the one pattern was that most of the people Who are very successful, had actually not come from that vertical, but they had come from another startup.”
Enterprise software founders generally require prior enterprise experience
“I will tell you that in the B to B space, there aren't that many people that come into enterprise software And weren't in enterprise software. So it's a little bit harder there.”
Investors rejected MongoDB initially over founders' adtech background
“And actually, when we started Mongo, the reason we had trouble raising money, even though we had already had a very successful company, was because people said, you've never done a database before. You have, you, three of you have ad tech backgrounds. It's not…”
Ryan: MongoDB grew revenue from $50M-$100M to $2B under Dev Ittycheria
“When he took over, we had 50 to a hundred million dollars in revenue, and today there's two billion in revenue.”
Ryan: AI disruption could displace Google as top search engine within 5 years
“We don't know five years from now if Google's gonna be the number one search engine. There's a chance that's a disruptive technology that allows it to change.”
Ryan: New consumer e-commerce and media startups are unlikely to succeed today
“Media and e-commerce are both sexy and accessible industries. So, 50,000 entrepreneurs have gone after them, and so the next guy right now just probably isn't gonna come up with a good idea.”
Ryan: Salesforce will incorporate AI and defend market share from startups
“Salesforce is going to incorporate that in and, you know, a large company with a thousand person Salesforce is not going to easily switch off. To a startup company. And so I have confidence that Salesforce will incorporate AI into their product. Maybe it's six…”
Ryan: Pierpaolo Barbieri's Argentine neobank Ualá will become a $10B company
“Pierpolo, starting a mobile bank in Argentina, guess what? We didn't have as much competition, but there was geopolitical risk, you know, all kinds of risk. And he's been remarkably successful, but that's why it's going to be a ten billion dollar company, beca…”
AlleyCorp evaluated 1,000 robotics deals in a single year
“We saw a thousand robotics deals last year.”
Almost None of the Top 25 Consumer Tech Companies Had Serial Founders
“So in, again, if we look back at consumer businesses, you know, out of the top 25 companies, how many were serial entrepreneurs? Almost zero. Almost zero.”
Kevin Ryan: Enterprise software founders tend to be older repeat entrepreneurs
“You'll see in enterprise software more of a pattern of repeat entrepreneurs, also on average slightly older.”
Kevin Ryan: 24-year-olds rarely succeed in starting enterprise database companies
“You don't, 24 year olds have trouble starting a database company and building up an enterprise sales force Meeting with the CEO of, or the CTO of Goldman Sachs to close that deal. It really doesn't happen that often.”
Kevin Ryan: Speed is not the most important factor in product-market fit
“No, no, I don't think that speed is the most important thing. You do need to get out your product, you know, pretty quickly. But it has to be pretty good.”
MongoDB Generated Zero Revenue in Its First Three Years
“We had no revenues after three years at Mongo.”
Kevin Ryan: Early MongoDB downloads grew in a straight line globally
“What you could see is that if I showed you one chart, which is how many people are downloading the Mongo database, that was just a straight line going up to the right. All over the world.”
AlleyCorp raises $250 million in its first outside venture fund
“We've been investing really my money in a different structure for the last decade, and, you know, we have a 120 companies in the portfolio have made many investments, started over 20 companies, but we just announced that we, it's the first outside fund with ou…”
Kevin Ryan says AlleyCorp has never had an incubated company CEO resign
“We've never had a CEO resign.”
Kevin Ryan claims Transcend is among the most valuable US psychedelic startups
“My psychedelic company, I think, is one of the most valuable psychedelic companies started in the last four years in the United States. Transcend.”
AlleyCorp incubates six to eight new companies per year
“So it's bottoms up, but we historically last couple of years, we're doing somewhere between six and eight Eight companies a year, but we have multiple industry groups and multiple people.”
Ryan: AlleyCorp invests $1M–$1.5M in incubations; 80% raise follow-on rounds
“When we start a company, We don't bail out on the company, but we put a million, million and a half dollars in. We hire a CEO. If we've made the decision to go forward now, then the market decides because nine months later, they're going to go out to raise mon…”
AlleyCorp Retains 55% to 60% Equity in Its Incubated Startups
“It depends, but, you know, roughly the team and CEO are probably going to get around 40, 45% of the company, and then we will have the rest because we came up with the idea, put in the money, did all the work, ah, and everyone gets paid from day one.”
Kevin Ryan: AlleyCorp avoids healthcare investments outside the US
“We, you know, we don't do any healthcare outside of the United States because the U S Healthcare market is both enormous and terrible, which is what you want when you're an entrepreneur.”
Kevin Ryan: AlleyCorp Should Have Scaled Startup Incubation Much Earlier
“If I knew now what I knew then, I would have been much more aggressive early on in starting more companies, building up more of a team, because sometimes it takes five to seven years to know that things are going really well.”
Ryan: AlleyCorp caps investment in any single company at $10M-$15M
“We generally don't put more than ten million, might go to fifteen million in any one company, and sometimes we'll leave some money on the table and other people will take it.”
Ryan: AlleyCorp stops investing in portfolio companies once valued at $1B
“You know, when our companies are worth a billion, we're just not investing in them at that point.”
Kevin Ryan refused early acquisition offers for MongoDB targeting $10B-$20B valuation
“We were never open to selling Mongo, no matter what, because we really thought we were building a 10 or twenty billion dollar company, and so we had confidence.”
Kevin Ryan Sold Business Insider for $450M on $40M in Revenue
“I sold Business Insider not because I wanted to, because we were doing forty million in revenue, and someone offered me four hundred and fifty million dollars for a media company, and so I said, yes.”
Kevin Ryan acquired Meetup from WeWork for $10M during early COVID
“Three years ago, I bought the company Meetup for ten million, because WeWork was getting rid of it, and had panicked, and COVID had just started.”
Kevin Ryan Sold Meetup for 7x to 8x His $10M Purchase Price
“And, you know, I just sold it was announced in January. So, sold it for seven or eight times that amount.”
Meetup Pivoted From $20M Loss to $6M Profit After WeWork Buyout
“We also went from a 130 people the day I bought it to 90 people a week later, which is the right amount. Today it has probably 80, or when we sold it had 82 people, and it went from a twenty million dollar loss on thirty-two million in revenue, the, when we wo…”
Kevin Ryan's DoubleClick Paper Wealth Dropped From $100M to $10M
“In 2000, I had probably a hundred million dollars worth of double tick stock on paper, which ended up being ten million.”
Kevin Ryan's Gilt Groupe Paper Stake Fell From $165M to $10M
“We were a year and a half, a year away from going public at Gilt, where Goldman Sachs said, Kevin, you've got about one hundred and sixty five million dollars. We're feeling really good about this. And that ended up being ten million.”
Kevin Ryan sold all eligible DoubleClick shares in 2000
“I did sell all the shares I could at DoubleClick in 2000.”
Ryan: Late-Stage VC Has Become Price-Competitive Private Equity
“What is true is that when you are a late stage investor writing fifty million dollar checks, that you are what we used to call private equity. So you're competing on price. There's already an established board. You're not adding that much value.”
Ryan: Apple Raised Only $9 Million in Its IPO
“When Apple went public, when they went public, they raised nine million dollars in the IPO.”
Ryan: Top Multi-Stage VCs Rarely Compete in AlleyCorp's Seed Deals
“No, we don't see in the last, you know, 20 seed deals they're not in there very often.”
Ryan: Multi-Stage Seed Signaling Risk Kills Startups
“If a huge fund puts a million dollars into your initial round, and if they don't lead the next round, your company's dead.”
Kevin Ryan: Vast majority of venture rounds are not preempted
“There's, I think you're being misled by the 10 supposed hottest deals who get preempted. That's not where the industry is. The vast majority of things are not being preempted. They're going out. They're raising good rounds. They take a couple of years to be re…”
Kevin Ryan: VC Funds Hold 4x More Capital Than in 2017
“Look, the reason one should be concerned about venture today Is that there are, there's probably four times as much money in funds today as there was in 2017.”
Kevin Ryan: Newly Raised VC Funds Will Shrink in Size
“So you'll see new funds being smaller, but that takes time to work through the system.”
Ryan: Companies cannot easily go public merely by taking price cuts
“That is wrong. If your company's growing at 60% and profitable, yes, you can always go public. But at the margin, it is not easy to take companies public. There's not a lot of appetite.”
Stalled $50M Revenue Startups Are Worth $200M, Not 10x Revenue
“So one, if they've plateaued their growth, they're not worth 500. You know, they're not at all. I mean, 10 times revenue for a company that's not growing that much is, is not going to fly in today's market. That company's worth, you know, maybe 200 if they're …”
Ryan: New York tech ecosystem grew faster than any other city
“New York has grown faster than any other city.”
Ryan: NYC will be the top tech startup hub in 15 years
“New York is killing it and will be the number one company clearly 15 years.”
Ryan: Five years ago, NYC had zero $3B+ public tech startups
“Five years ago, there was not one publicly traded company in New York City startup that was worth more than three billion.”
Kevin Ryan: AI talent will become more geographically distributed
“Many of the smartest people are doing AI, and it will distribute more.”
Kevin Ryan: Tech hub success depends on graduate preferences, not tax policy
“It has nothing to do with tax policy, has nothing to do with anything. I say people who went to the top 20 universities in your country, where do they want to live? Where are they going to move? That's going to be your tech center.”
Kevin Ryan: Miami Lacks Tech Talent and Will Not Become a Major Hub
“But I'm not seeing the tech talent in Miami, and I don't think it's going to get there.”
Kevin Ryan: Biden administration and Fed economic management has been remarkable
“The combination of the stimulus, the fiscal stimulus, What the Biden administration has done, which doesn't get credit for combined with the Federal Reserve, has been remarkable management.”
Kevin Ryan: Not a single economist predicted current economic resilience
“No one, there's not a single economist that thought this was gonna happen.”
Ryan: A Trump victory would result in Ukraine concessions and corruption
“The single thing that I'm concerned about is Trump winning on multiple dimensions, giving away Ukraine you know, Supreme Court justices, very, very, very poor execution of every aspect of government a level of corruption. That I think would follow.”
Shorts cut from this episode
▶ Will Trump win the US election? 🇺🇸 · 20VC with Harry Stebb (@1:04:44)
▶ $80M off a WeWork flop 🤑 · 20VC with Harry Stebbings (@45:34)
▶ $1BN lost before profit 🤯 · 20VC with Harry Stebbings (@8:46)
▶ You don’t need experience to be a success 🚀 · 20VC with Har (@18:25)
▶ The largest risk of taking VC money 💰 · 20VC with Harry Ste (@51:41)
▶ This billionaire doesn’t care about money 💰 · 20VC with Har (@57:06)