Feb 5, 2024 · 1h 38m · news
David Tisch & Terrence Rohan: Biggest Misconceptions & Hardest Truths About Seed Investing | E1112 · 20VC with Harry Stebbings
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In this deep-dive episode of 20VC, veteran seed investors David Tisch and Terrence Rohan join Harry Stebbings to dissect the myths, structural shifts, and operational realities of early-stage venture capital, arguing that success relies on deep human relationships, individual conviction, and navigating the Power Law rather than institutionalized metrics or consensus-driven voting.
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 11.5% of the talking time here. How this is scored →
Harry as informed peer 4.7 Guest teaching 4.6 Guest disagreement 3.2 Harry pushing back 3.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 1:17:55 Signaling debate clash
Tisch provocatively declares signaling to be a fake word that does not exist in venture, prompting Terrence to directly refute him.
Hardest push from Harry ▶ 20:43 Multi-stage seed timeline challengeHarry repeatedly refuses Tisch's premise that multi-stage seed checks are an old product, pressing whether 20+ firms have truly done it for 5 years.
Biggest teaching moment ▶ 29:08 Roger Ehrenberg thesis dissectionWhen Harry brings up Roger Ehrenberg as evidence of seed picking skill, Tisch reframes Ehrenberg's success as Series A thesis-driven investing in an entirely different market era.
Harry holds his own ▶ 1:27:23 HubSpot CEO counterexampleHarry hits back against the guests' unanimous claim that VCs cannot make a company by citing HubSpot CEO Brian Halligan praising Sequoia's game-changing impact.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Introductions: The Origins of BoxGroup and Otherwise | 2 | 1 | 1 | 0 | Harry introduces the guests and asks standard background questions. David and Terrence give straightforward overviews of BoxGroup and Otherwise in an agreeable environment. | |
| Why Founders Choose an Investor: Relationships vs. Commoditization | 4 | 5 | 4 | 5 | Harry quotes Keith Raboi and asks if intro capabilities prove value ahead of time. Tisch dismisses VC value-add platforms as a commoditized head fake. | |
| Early-Stage Failure, Emotional Alignment, and Investing Styles | 5 | 3 | 2 | 2 | Harry shares personal reflections on trying to be a specific type of investor early in his career. Tisch and Terrence detail the emotional realities of seed startup failure. | |
| Post-COVID Accessibility, Speed, and Seed Market Randomness | 6 | 6 | 5 | 5 | Harry cites Doug Leone's thesis that massive funds turn VC into a low-margin transactional industry. Tisch immediately shuts down the premise, asserting that seed is inherently random. | |
| Multi-Stage Cash, Pricing Sensitivity, and the Power Law | 5 | 7 | 6 | 6 | Harry repeatedly challenges Tisch's claim that multi-stage seed checks are nothing new. Tisch and Terrence firmly correct Harry, telling him with certainty that he is wrong about the market timeline. | |
| The Two Eras of Venture Capital: Art vs. Math | 4 | 5 | 2 | 1 | Harry asks when valuation price actually matters, prompting Tisch and Terrence to explain why pre-Series B investing is art rather than math and power-law dynamics override entry price sensitivity. | |
| Venture Hard Work vs. Twitter Content Marketing and Luck | 6 | 6 | 4 | 5 | Harry challenges the claim that seed picking is mostly luck by citing IA Ventures' Roger Ehrenberg. Tisch reframes Ehrenberg's success as Series A thesis-driven investing in an entirely different era. | |
| The Loss of Comprehensive Deal Coverage in Fragmented Tech | 4 | 4 | 2 | 2 | Harry links content marketing to deal flow, prompting Tisch to tease Harry about using 20VC for self-promotion. Terrence and Tisch outline how deal coverage shrank dramatically over the last decade. | |
| Consensus Voting Fallacy and the True Cost of Omission | 5 | 5 | 3 | 4 | Harry asks about internal voting dynamics, but Tisch reframes the premise by clarifying that BoxGroup does not vote because consensus destroys non-linear edge. | |
| The Fragility of Early Ideas and Protecting Instinct in Seed Decision-Making | 5 | 4 | 2 | 3 | Harry asks if partner discussions generate doubt in decisions. Tisch explains BoxGroup's strict rule against throwing grenades during deal evaluations. | |
| The Pros and Cons of Founder-Led Seed Investing Models | 4 | 4 | 2 | 3 | Harry questions whether founder-investors actually need to win deals if they aren't competing directly. Terrence details why founders have an unfair advantage in seeing and winning rounds. | |
| The Great Debate: Reserves, Follow-Ons, and Seed Fund Mechanics | 6 | 6 | 4 | 4 | Terrence argues strongly against reserves, asserting follow-on strategies depress DPI. Harry probes reserve mistakes, leading Tisch to detail recycling realities and over-reserving pitfalls. | |
| Secondaries and Liquidity: Why Seed Investors Choose to Hold | 7 | 5 | 3 | 5 | Harry pushes back against Tisch's absolute refusal to sell secondaries, quoting Brian Singerman on the power of the next double. Tisch defends holding long-term because late-stage compounding produces ultimate returns. | |
| The Panic of Staying Relevant and the Power of compounding Networks | 5 | 5 | 2 | 3 | Harry asks if AI efficiency threatens the necessity of seed rounds. Terrence reframes the argument, explaining why initial startup capital remains essential regardless of AI advancements. | |
| Quick-Fire Session: Investment Secrets, LP Realities, and Biggest Regrets | 5 | 4 | 3 | 3 | During quick-fire questions, Harry attempts to get Tisch to rank top LP fund choices, but Tisch refuses to rank peers. | |
| The Potency of VC Brand and the Debate Over Signaling | 4 | 4 | 8 | 2 | Tisch triggers a sharp clash between guests by calling signaling a fake word. Terrence forcefully disagrees, arguing that multi-stage firm posture directly determines deal heat. | |
| The Myth of VC Impact and 'Coaching' | 5 | 6 | 5 | 5 | Harry attempts to defend mentorship, but Tisch and Terrence reject VC coaching as intrusive nonsense, asserting that outsiders cannot dictate company success. | |
| Can Venture Capitalists Truly 'Make' a Company? | 7 | 6 | 4 | 6 | When both guests insist VCs cannot make a company, Harry hits back by citing HubSpot CEO Brian Halligan praising Sequoia's transformational impact. Tisch reframes HubSpot as a rare top-tier exception. | |
| Founder-VC Misalignment and the 'Bad Investor' | 4 | 5 | 4 | 3 | Harry asks if forwarding competitor news to portfolio companies is helpful. Tisch sarcastically mocks low-value VCs who forward TechCrunch articles all day. | |
| The Art of Cold Inbound and Pitch Decks | 3 | 2 | 1 | 1 | Harry asks tactical questions regarding cold emails, pitch decks, and uncapped SAFEs, with guests offering collaborative responses. | |
| Predicting the Seed Investment Market in 2034 | 3 | 3 | 1 | 1 | Harry asks for 10-year market predictions. Tisch and Terrence conclude that seed investing will remain an inherently human, messy, and inefficient craft. |
Statements from this episode (58)
BoxGroup recently closed a $212 million early-stage venture capital fund
“We are a, as of recently we just closed our sixth fund, so it's a two hundred and twelve million dollar early stage fund.”
Tisch: All VC firms offer the same commoditized product
“I think at the end of the day, for the most part, all VCs offer the same product. We are giving money and we are taking equity. What comes after that is obfuscated in a sales pitch.”
Tisch: BoxGroup refuses to compete directly with multi-stage VC firms
“No, I, we don't try to compete. I think if we tried to compete, we would lose our ability to work well with others. And I don't think our value proposition is to say, pick us instead of somebody.”
Rohan: Venture value-add is commoditized and short-lived post-investment
“I tend to agree with David on this, that a lot of this value add is commoditized, and it's also, also often when you talk to founders, it might be like a couple quick motions to try to win the check, and then people kind of fade into the background.”
Tisch: Founders prefer 'favorite' VCs over transactional 'best' VCs
“I think best is this, what did they do? What, like, name the things that they did for you. Favorite is, I would work with them in a heartbeat because I like them, and they are a friend. They are somebody that we go to when we want to talk to an investor withou…”
Tisch: Investors won't last long without human alignment with founders
“And if you as the human investor Aren't aligned with that journey on the down and on the other side, aligned with the journey on the up as a human. I don't think you're going to be in this business for very long.”
Rohan: Venture capital power dynamics have flipped to favor founders
“Everything and what you're really having is like, I think the founders went from, or the VCs kind of went from the customers to now the founders of the customers.”
Rohan: Seed and venture capital face major disruption within two years
“So I think in, like, two years, like, you mush that all together, it's, yeah, it's ripe for incredible disruption, or I'd say there's a lot of opportunity there for funds and managers to really take leadership positions because it's, there's just so much chang…”
Tisch: Early-stage speed advantage has been equalized across VC
“I think speed was an advantage before 2019 for early stage investors that has been sort of equalized by all firms across the entire spectrum.”
Tisch: Seed rounds have shifted from $1M–$3M to $5M–$8M
“Seed has shifted, the word seed has shifted from a million to three million dollar round to a five to eight million dollar round.”
Tisch: Seed investing cannot be indexed or made low-margin
“I don't think you can index seed, and I don't think you can aggregate seed into a low margin product.”
Tisch: Multi-stage funds writing seed checks has existed for years
“That's been around for over six, seven years now at a, like, infrastructure level across the entire seed market. That isn't new.”
Rohan: Venture conviction is rarer than favorable pricing
“One undisputable law, empirical law of a venture is the power law, right? And so the rare thing is not price. The rare thing is conviction and the company. And so if you've got conviction and you found the company, you write that check, 10,000,020 million, a h…”
Tisch: Investors should pay any valuation for generational seed companies
“If you fund a generational company and the outcome is insanely enormous, you should say yes to whatever that number is at the seed stage.”
Tisch: Pre-Series B investing is art, post-Series B is math
“I think venture is two different jobs. There's the pre-series B job, and there's the post-series B job, and I don't think they have any relation to each other. I think at pre-series B, you are doing more art, and at post-series B, you are doing more math.”
Tisch: No seed investor is ten times more accurate than peers
“I don't think there's a seed investor that you can find who is figured out how to be right 10 times more often than another seed investor.”
Rohan: VC Twitter is just content marketing to seem smart
“I think a lot of the things that plays put out on VC Twitter, it is content marketing to make the person seem smart, but if you really get them, whatever, two beers deep, they're going to be like, I don't know.”
Rohan: Seed investors had 50% to 75% deal coverage around 2010
“When David and I started, like, this ecosystem was so small, like, the seed deals would almost pass through everyone's inbox, like, almost everyone, it was like, you almost had, like, 50 to 75% coverage of any given deal.”
Tisch: Tech expanded from a vertical industry to a horizontal category
“Tech shifted from a vertical to a horizontal. So the places, the types of businesses that venture and early stage tech venture capitalists were funding fundamentally expanded at a huge level too.”
Rohan: Group decision-making is the wrong way to make seed investments
“I think, I believe actually a group decision is the wrong way to make a seed investment.”
Tisch: Any BoxGroup team member can individually approve an investment
“So we're a team of nine. Everyone on our team can say yes in an individual meeting. We don't need, we don't vote. We don't try to find groupthink.”
Tisch: The cost of omission at seed is far more expensive than commission
“And the cost of omission at seed is so much more expensive than the cost of commission. And if you say no to the wrong company, you blow your returns. If you say yes to the wrong company, it's a rounding error in your model.”
Tisch: BoxGroup forbids team members from 'throwing grenades' on deals
“We structurally push our group to not allow that. We have vocabulary internally. We say, like, throwing a grenade. You're not allowed to throw a grenade on some deal. It doesn't help.”
Tisch: Internal negativity leads to safe play that fails at seed
“And so the more that you allow for negativity to creep into conversations amongst the firm, I think less variance you will have in outcomes and the safer you will play, and I don't think that that model works at Seed.”
Tisch: Changing strategy every fund cycle prevents VC firms from improving
“If we, instead, every fund cycle changed our strategy, changed how we operate, where we invest, like the style of investing, you have no ability to actually get better and to try to find that zone of clarity To make investments.”
Rohan: Founders invest in domain networks rather than YC Demo Day hype
“Most founders are just investing in people they know or in things they know. And then I, that I do think that because they're either investing in their networks. Or they are being sought out by someone building an analogous company, or that's someone in their …”
Tisch: All founders see seed deals better than VC investors
“I don't think all founders are inherently great pickers. And I don't think all founders are inherently great investors. I do think all founders see better than investors.”
Rohan: Reserve allocations for follow-ons depress seed fund DPI
“On balance, I don't think reserves and follow ons, I think it actually hurts seed investing and it hurts seed investing in two ways. One is it depresses DPI.”
Rohan: Post-Series B venture investing relies on access, not picking
“Post series B, these things become not only like, they become painfully obvious and it's picking is not the thing. It's just access, right?”
Tisch: Venture power law ensures top incumbent firms stay dominant
“The best firms in venture have the highest probability of being the best firms in the future, because brand matters, the quality of investors at that brand matter, and they're going to see and win better than the challengers are.”
Tisch: Scaled pattern recognition does not work in seed investing
“I truly don't believe in pattern recognition at scale. I think there's nuanced pattern recognition, but I view each one of those companies as an individual relationship, as an individual journey”
Tisch: Over-reserving capital in seed funds is worse than under-reserving
“So when I think about reserves, I would say over-reserving is the bigger mistake than under-reserving.”
Rohan: Secondaries will become a robust liquidity option if M&A contracts
“I do believe the secondaries are going to be a really robust option.”
Tisch: Scaling $1B to $5B is more predictable than $0 to $1B
“The path from zero to one billion Is impossible. The path from one billion to five billion is more predictable, and it's more easy to see at a given moment”
Rohan: Initial seed funding rounds will permanently remain essential for startups
“I think the seed round is like, if there's one round, and I think this is like an interesting topic, like how funding dynamics and whether you need BC, but I think if there's one round that is Will be essential for forever. It is that first round, right? And i…”
Rohan: Founders should aim to make venture capital optional after seed
“I think it's the right way to look at venture is like, you know, raise, raise that initial capital. And if you get to the point where venture capital is optional and you can dip in and dip out, that's the ultimate. And you've, you know, you choose your own des…”
Rohan: AI will make companies significantly more capital efficient long-term
“And if AI will do anything, I think it'll just make companies that much more capital efficient in the longterm.”
Tisch: Investors should give founders capital and stay out of their way
“Our job is to say yes, not to say no. And our job is to communicate that decision to a founder in a transparent and quick way. And our job isn't to waste people's time and our job isn't to mislead people. And I think as I've looked at this business for years, …”
Rohan: Raising a debut fund normally takes 12 to 18 months
“Realize that fundraising, especially fun ones, can take time, and you have to be patient. 12 to 18 months is fine. People not meeting with you for a couple months is fine. People taking, you know, months if not sometimes a half a year to reach a decision is fi…”
Tisch: Top venture firms retain dominance until destroyed by self-inflicted errors
“I think there's a power law dynamic in venture that is very hard to break. And I think the best firms will continue to be the best firms until they are suddenly not, mostly on internal errors and unforced errors.”
Tisch: Second and third-tier venture capital firms suck and are harmful
“I think the second The third tier VCs are uninteresting, and I think the third tier VCs are harmful, but I think the best ex-firms at each stage are good enough to not need to overly rank them. But I think the second and third tier VCs suck.”
Rohan: Brand is the most potent currency in venture capital
“I think the more interesting point as opposed to naming names is, I think brand is a very interesting, like not well discussed, not well understood, but probably the most potent currency in venture.”
Tisch: VC signaling is a fake concept that does not exist
“I don't believe in signaling. I think it's a fake word and I don't think it exists in this market.”
Tisch: Outside VCs rarely wait to see if insider funds follow on
“If you have a multi-stage firm on your cap table that can lead your next round, and a new multi-stage firm shows up to explore your next round, very rarely are they like, will you get the answer from the other firm?”
Tisch: Outside the top 25 VCs, investors are commodities or net negatives
“I don't think outside of the top five to 25 VCs, individuals, that VCs can magically impact a company. I think most of those investors join your board at series A or B, and they, those five to 25, whatever the number is, and the rest of the investment Sort of …”
Rohan: VCs should act like patrons, not hands-on coaches
“I actually believe like the best investors, like for a company to truly be incredible, the founder actually, it has to come from the founder. It really does. It's like a real creative process, like analogy I've been kind of playing around recently. It's like y…”
Tisch: Company success depends entirely on founders and early employees
“The success of a company is dependent upon employees one through 10, 10 through a hundred, and the founders. Like, that is what will make or break a company. The investors, the outsiders, the advisors, the mentors, the coaches, that part of a company building …”
Tisch: VCs never cause startup success, only failure
“The company's either going to work or not work. And you are not the reason for either of those two things. If anything, you're the reason it's not going to work.”
Rohan: Forwarding public news on competitors to founders is useless
“I don't think it's valuable. I think it's a strike. I mean, I, first of all, I think founders have such an awareness of the market. Like you might get to them like, 12 hours, maybe a few days before, but they're gonna see it, right?”
Rohan: Competitor updates to founders are only valuable if non-public
“Very, very, very asymmetrical knowledge of this of like, Hey, listen, this one raised or this one raised this much. And that's like not general knowledge, but it's known because of what you do. That's helpful.”
Tisch: BoxGroup has repeatedly missed great deals in their cold inbox
“If I looked back at the quality deals that showed up in our inbox that we missed in that, like, and sometimes we see it a year later and it comes through a warm source and we're like, oh my God, it was sitting there. Like, this is an interesting deal. Or like,…”
Rohan: A great cold email is a form of founder hustle
“A great, not, not a bad, but a great cold email is a form of hustle. Absolutely. One that's like, Human. Snaps your attention. Personable. Boom. That a hundred percent is a form of.”
Tisch: Pitch decks are valuable for articulating founder thinking
“I think a deck or a product is a way that a founder can articulate the thing in their head. And it takes the idea and puts some picture around it. And I think it's really valuable to understand thinking.”
Rohan: Will invest in uncapped SAFEs with time-bound conversion provisions
“Yes. I put certain provisions around them that they, if they don't raise at a certain point, that, that, that, that it would, like, convert at something at some point, but I generally, generally would do it.”
Tisch: BoxGroup will invest in and catalyze uncapped SAFEs
“We will do an uncap safe. We will catalyze an uncap safe.”
Tisch: Large VC firms will become larger and fewer by 2034
“I think 10 years from now, the bigger firms are bigger. There are In, in many ways, less big firms.”