Nov 17, 2023 · 41m · news
Roundtable #6 with Rebecca Kaden, Nicole Quinn, Eurie Kim, Harry Stebbings | E1083 · 20VC with Harry Stebbings
Rebecca Kaden · 11m spoken Nicole Quinn · 11m spoken Eurie Kim · 10m spoken Harry Stebbings · 4m spoken
0:00 / 0:00
▶ Watch on YouTube →
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this high-energy 20VC roundtable, host Harry Stebbings sits down with leading VCs Rebecca Kaden, Nicole Quinn, and Eurie Kim to debate the resilience of early-stage valuations, the practical integration of AI, and the harsh realities of the downstream funding crunch. The panel provides deep insights into structural shifts in venture capital, offering advice on how founders and emerging managers can navigate down rounds, prioritize capital efficiency, and build enduring businesses.
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 12% of the talking time here. How this is scored →
Harry as informed peer 4.3 Guest teaching 4.2 Guest disagreement 3.6 Harry pushing back 3.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:54 Rebecca calls out Nicole on AUM fees
Rebecca directly challenges Nicole's assertion that Lightspeed only focuses on carry, mockingly asking if anyone can get into the carry on a $7 billion fund.
Hardest push from Harry ▶ 12:28 Harry calls Nicole's carry claim a crockHarry forcefully rejects Nicole's assertion that large venture firms ignore AUM fees, explicitly calling her framing a crock.
Biggest teaching moment ▶ 18:25 Eurie proves Harry overpaid using portfolio AGM dataEurie presents concrete benchmark data from Forerunner's LP report, demonstrating to Harry that his portfolio deal valuations were significantly higher than real market averages.
Harry holds his own ▶ 4:25 Harry drills on aggressive multi-stage seed pricingHarry demonstrates deep market knowledge by citing exact round terms (6 on 30 vs 3 on 15) to challenge the guests on how seed funds can compete with multi-stage firms.
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 Panelist Introductions | 1 | 0 | 1 | 0 | Harry welcomes the panelists and sets up the roundtable format. The guests introduce their funds and investment strategies cordially with no conflict or pushback. | |
| The Viability of Traditional Seed Funds | 5 | 4 | 5 | 6 | Harry introduces a provocative premise that multi-stage funds are pricing traditional seed funds out of top deals. Rebecca and Nicole immediately disagree, prompting Harry to push back using specific pricing examples like 6 on 30 rounds. | |
| Multi-Stage and Seed Fund Collaboration | 4 | 4 | 3 | 3 | The panel discusses co-investing dynamics between multi-stage and seed funds. Harry questions whether seed as an asset class is immune to macro cycles, leading Nicole to share internal data on valuation lags. | |
| The Hypothesis for a Seed Price Correction | 6 | 6 | 6 | 6 | Rebecca takes a contrarian position, arguing seed valuations will fall due to bad fund vintages and LP pressure. Harry counters that large multi-stage firms are too entrenched with institutional LPs for capital deployment to slow down quickly. | |
| The Mechanics of Scaling Large Funds | 7 | 5 | 7 | 8 | Harry directly challenges Nicole's claim that Lightspeed ignores AUM fees, labeling it 'a crock.' Rebecca joins in to challenge how a $7B fund can optimize purely for carry, forcing Nicole to defend their global scaling costs. | |
| Unified Partnerships vs. Franchise Models | 4 | 3 | 3 | 2 | Eurie contrasts Forerunner's unified portfolio structure against large franchise firms with mini-portfolios. Harry transitions to Series A pricing dynamics, where Rebecca provides an analytical overview of momentum deals versus messy cap tables. | |
| Early-Stage Valuation Data Trends | 3 | 6 | 4 | 1 | Eurie presents AGM valuation data showing historical Series A and seed averages. When Harry admits his deal prices were much higher, the guests playfully educate him on overpaying for heat. | |
| The Practical Implementation of AI | 5 | 5 | 4 | 5 | Nicole outlines Lightspeed's heavy AI deployment stats. Harry shares a counterargument from a top VC claiming AI entry pricing is currently untenable, which Eurie and Rebecca reframe by distinguishing application layers from underlying infrastructure. | |
| AI as the "Lottery of Time" | 4 | 4 | 2 | 3 | Nicole articulates her 'lottery of time' framework for AI application efficiency. Harry highlights elevated seed pricing (8 on 40) and asks if a Series B crunch creates hesitation at Series A. | |
| Clean Terms and the Reality of Repricing | 5 | 5 | 3 | 4 | The panel discusses valuation resets and repricing over-valued companies. When Harry asks if down rounds are too painful for founders, Nicole cites Klarna's 90% down round as an example of prioritizing clean terms over structure. | |
| Founder vs. Employee Options Alignment | 4 | 4 | 3 | 3 | Eurie and Nicole point out that while founders accept down rounds, underwater option packages create severe employee turnover. Harry asks whether startup mortality rates will surge. | |
| The Cold Reality of M&A and Corporate Dev | 4 | 5 | 2 | 2 | Harry asks if struggling startups will be bought out or simply die off. Rebecca and Nicole explain that M&A is largely stagnant because big tech is disciplined and corporate dev teams remain hesitant to transact. | |
| Creative Solutions for Secondary Liquidity | 4 | 4 | 4 | 2 | Nicole explains secondary liquidity options through firms like New View Capital. Harry asks for final spicy takes, prompting Rebecca to predict the downfall of consensus-driven heat chasing in VC. |
Statements from this episode (42)
Quinn: OpenAI's app store will become a major new search channel
“If OpenAI really do the, like, app store of AI, then that's gonna be, like, a new search.”
Quinn: Higher valuations for AI startups are worth paying
“The valuations are gonna be slightly higher, but honestly, that's worth paying for.”
Kaden: VCs are highly hesitant to lead down rounds and reprice startups
“We are seeing across the board, investors are very hesitant to come in and reprice things, and to do the down round, and deal with the anti-dilution, and navigate the mess.”
Quinn: Lightspeed's fund sizes grew from $700M to $7B in ten years
“When I started a decade ago, we were raising seven hundred million dollar funds. They're now seven billion dollar funds.”
Kaden: Dedicated seed funds can beat multi-stage firms by finding founders early
“A dedicated seed fund that can be focused on meeting people before it's obvious when they're just getting started and put all the energy there can absolutely get in it.”
Kaden: Non-consensus ideas will drive future venture capital returns
“We are increasingly back to an era where the returns are going to be created through outsized and better ideas and hypotheses versus then consensus.”
Stebbings: Andreessen Horowitz outbids seed funds with $6M on $30M offers
“I've had many rounds around, like three on 15, and then Andreessen come in and go, here's six on 30.”
Kim: Smart founders accept lower seed valuations for dedicated investor support
“If you're a founder that understands what you're building and what type of people you want to partner with, then you do see that people are taking a lower price point valuation in the beginning with the understanding that they want help. They want the help tha…”
Kaden: Union Square Ventures' best investments came from non-mainstream bets
“In many of the best examples that I studied from USP's history, it was very much not the case, and so I think a lot about where can I develop strong perspective that may not be the hottest thing of the moment.”
Quinn: Seed stage startup valuations have not dropped in over ten years
“Like the valuations in Seed have not dropped. And we've looked at this data really over like 10 plus years.”
Kaden: Seed-stage startup valuations will decrease in the near future
“I think seed valuations are going to go down.”
Kaden: Multi-billion dollar venture funds writing $2M seed checks does not work
“The strategy of very large funds writing two million dollar checks does not work.”
Kaden: LPs say some recent seed funds will fail to raise again
“Some seed funds won't be able to raise another fund given the vintage we just left. We're hearing that from LPs”
Kim: Long fund return lags obscure underperformance and shorten LP memory
“The lag is long. By the time you've had a bad fund, you might've had another good fund. You know, start to return. And so it all gets mixed in where, you know, the returns are happening from funds that are earlier than the bad ones that we have yet to see play…”
Kim: Multi-stage funds write seed checks primarily to train junior partners
“And it's a, it's candidly, it's an effort for their earlier partners to get some experience because they're not going to be able to put growth in dollars to work because growth is harder. The traction needs to be higher. Now you're like, okay, well, why don't …”
Kaden: General Catalyst bought a hospital system to expand its platform
“You see that with General Catalyst buying a hospital system, right?”
Kaden: AI startups with momentum command massive Series A valuation multiples
“We are seeing this obviously things in high flying categories, things that touch AI and have momentum, right? Massive multiples right now.”
Kaden: Slower Series A startups face severe fundraising difficulty
“On the other hand, I think anything with a complicated story, things that are figuring it out and are seeing some growth curve, but it took a while for that to figure it out, so maybe they had to spend some of that seed money, so their, you know, ultimate reve…”
Kim: Average Series A valuations hit $35M in both 2021 and 2023
“Meeting last week or two weeks ago, and essentially a valuations are at 35, which was the same as 21. And now we all know about the spikes and the 20 on a hundred and all of that, but like as an average, it was 24 in 2020 thirty five million bucks and 21 forty…”
Kim: Average Series D valuations fell from $740M in 2021 to $340M
“So you aren't seeing the drop that you are in the series D, which kind of ballooned to Seven hundred, forty million in 20, 21, and now it's back down to 340.”
Kim: Average seed valuations hovered around $10M to $11M recently
“We were joking just before we started that, you know, I had a two on seven back in the day that, you know, I'm still working with now and is doing really well, but we're talking to 10 and 11 of the last two years as your average seed price.”
Quinn: Facebook paying 10% of its market cap for WhatsApp was justified
“Was it worth 10% of Facebook's market cap to buy WhatsApp? Absolutely.”
Quinn: Lightspeed has deployed over $1B across 54 AI startups
“We've invested at lightspeed in 54 companies in AI. We've spent, we've invested over a billion dollars in AI, but big, but that was not all this year. That is not all generative AI, right? That's been over the few years, over the last few years”
Kaden: AI's biggest impact comes from existing companies integrating the technology
“Impact in the portfolio has actually come from existing portfolio companies application of it, which has for many of them changed trajectory or meaningfully evolved their business.”
Kim: AI drastically lowers costs for previously impractical consumer applications
“AI is something that can actually change consumers' lives. Things that could not be delivered because it took too many human hours, that was too expensive, are now conceivably being delivered for fractions of the cost.”
Quinn: AI tools will save users two to three hours per day
“I would say AI is akin to winning the lottery. And what I mean by that is it is the lottery of time. So in your, like, say, 10 hour working day, you spend maybe an hour writing a newsletter. Well, that could get compressed down to 10 minutes, right? You have B…”
Kaden: AI application-layer tools will capture significant market value
“If you believe all of the value is going to aggregate in a very small number of underlying models and platforms, that may be correct, but I think what you're hearing here is there's a tremendous amount of excitement around application layer and point solution …”
Stebbings: Top seed startups are raising $8M on $50M valuations
“And for those that are good, I'm just seeing eight on 48 on 50 for any seed round.”
Quinn: Startups growing 2x to 5x year-over-year will continue getting funded
“There is a crunch in terms of valuation. Definitely that is coming down, but I do still believe the best teams and the ones that are growing, you know, two, three, four, five X year on year, they will continue to get funded.”
Quinn: Startups should accept significant down rounds over structured deal terms
“I would much rather take a significant down round than having structure on that. And so that's what I'm really encouraging our portfolio companies to do.”
Quinn: Klarna chose a 90% down round over heavy deal structure
“I think Klan is a good example in Europe, right? And they do a 90% down round rather than taking like a lot of structure because that structure then sticks with you for multiple rounds.”
Kaden: Startup founders acknowledge their peak funding valuations were inflated
“Also, I think a lot of, some of the founders understand that the last rounds, they never, they don't think their companies were really worth that at the last round.”
Kim: Underwater stock options trigger high employee turnover at startups
“You do see a lot of turnover on the employee side, because it's better to just start fresh With a new package than to try to hope that you can get out of, you know, the underwater.”
Kaden: Seed-stage startup mortality rates will rise significantly
“I think we have way increased mortality rates.”
Quinn: Startups die more often from indigestion than starvation
“Companies die from indigestion rather than starvation.”
Kaden: Most struggling startups will die rather than be acquired
“I think we might see a little bit of M&A, but I actually think that M&A is really hard right now. I think you're just going to see a lot of them unfortunately die because M&A works if some other piece has a lot of cash, right? Or has a lot of asset and you're …”
Kim: Startup M&A multiples are capped at 1x revenue at best
“And whatever the sell might be, the market multiple and the clearing price is going to be based on public comps. And so you're down to a very paltry one X at best for a lot of assets.”
Kaden: LPs are overallocated to venture capital amid a liquidity drought
“They've been over allocated to venture. The liquidity cycle isn't really there. They're nervous about these vintages.”
Kaden: LPs will reshuffle allocations rather than exit venture capital
“I don't think it's like there's going to be a massive retreat also because innovation is exciting and it will always be, and this is at the heart of it. And Long-term such a believer in it, but I think you're gonna see at least a little bit of a reshuffling an…”
Quinn: The IPO market is looking miserable
“The IPO market is looking miserable. That window is not exactly wide open to say the least.”
Kim: Forerunner Ventures invested in an auto body shop chain
“My partner invested in one that's a, it's an auto body shop, a chain of auto body shops. And you're like, how is that venture? Well, it's venture because a lot of the technology that goes into powering that can then start to create a digitally native franchise…”
Quinn: Venture investors will return to syndicate co-investing across rounds
“I think we spent far too many years with the multi-stage funds and then suddenly realizing, wow, now I'm the only one on the cap table. There's no one else to turn to. There's no one else around to like help support this company with me. And so I think we're g…”