Nov 3, 2023 · 57m · news
Roundtable #5 with Jack Altman, Auren Hoffman, Jason Lemkin, Harry Stebbings | E1077 · 20VC with Harry Stebbings
Jason Lemkin · 16m spoken Auren Hoffman · 14m spoken Jack Altman · 11m spoken Harry Stebbings · 10m spoken
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Harry Stebbings moderates a dynamic roundtable featuring Jack Altman, Auren Hoffman, and Jason Lemkin, exploring the operational advantages, structural conflicts, and distinct communication styles of founder-led venture capital, alongside deep debates on employee retention and corporate culture.
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 19.5% of the talking time here. How this is scored →
Harry as informed peer 4.9 Guest teaching 3.9 Guest disagreement 3.1 Harry pushing back 5.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 36:21 Jack challenges host on employee productivity model
Jack Altman directly rejects Harry's framing that companies should squeeze every last bit of productivity out of employees, arguing forcefully that long-term retention far outweighs marginal extra hours.
Hardest push from Harry ▶ 28:34 Harry presses GP CEO fiduciary conflictsHarry forcefully refuses the guest framing that LPs are simply happy with founder-led funds, asking bluntly how a GP CEO can take LP fees while prioritizing their primary business during a crisis.
Biggest teaching moment ▶ 10:03 Jason drops 88% founder-CEO IPO datasetWhen Harry asks if VCs should return to firing founders more often, Jason reframes the topic by revealing that 88% of SaaS IPOs are founder-led, attributing founder replacement pushes to VC laziness and missing operational benches.
Harry holds his own ▶ 32:28 Harry details macro LP capital flowsHarry counters Jason's pessimism regarding LP appetite for emerging managers by demonstrating macro market knowledge, citing bi-weekly LP meetings and explaining how 20-25% of US LP capital previously bound for China is being redirected into Western venture.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Panelist Introductions: Balancing Operating and Investing | 4 | 3 | 2 | 4 | Harry introduces the panel and sets up the opening discussion on why founders prefer founder-led funds. Jason and Auren reframe the premise around orthogonal brand power rather than purely tactical operational advice. Harry offers a mild structured challenge before transitioning to institutional fund dynamics. | |
| Founder-Led Funds vs. Angel Checks | 4 | 4 | 3 | 5 | Harry questions why founder investors need institutional fund vehicles rather than angel checks and challenges their degree of empathy. Auren reframes the dynamic by claiming most successful founders have low EQ and pointing out that founder CEOs are systematically undercompensated. | |
| The Evolution of Founder Replacements and CEO Tenure | 3 | 5 | 3 | 5 | Harry asks provocatively if venture capital should return to firing founders more frequently. Jason schools the room with concrete data showing 88% of IPO'd SaaS companies retain founder CEOs, attributing historical founder replacements to VC laziness and lack of operational bench strength. | |
| Tough Love, Short-Term Nice vs. Long-Term Nice | 5 | 3 | 2 | 3 | Jack reframes founder tough love as being long-term kind rather than short-term nice. Harry contributes to the discussion on investor heuristics by citing the framework of evaluating founders against one's own operating baseline. | |
| Investing as a Team Sport vs. The Full-Stack Investor | 6 | 4 | 4 | 7 | Auren argues that venture capital is shifting from an individual full-stack discipline to a specialized team sport. Harry rejects Auren's framing that individual accolades are crazy by citing Alfred Lin's pivotal singular role on Airbnb's board. | |
| Sourcing Deal Flow and Managing the Power Law | 6 | 3 | 2 | 4 | The panel explores deal volume, top-of-funnel management, and power-law distribution. Harry quotes a top veteran investor's view on the simplicity of finding two to three iconic founders a year, pushing brand dominance as the primary funnel solution. | |
| Does Investing Hurt Your Performance as a CEO? | 4 | 4 | 3 | 4 | Harry asks whether dual-hat investing degrades CEO operating effectiveness, acknowledging his own difficulty context-switching. Jack explains that past 50 weekly operating hours, incremental time returns diminish, making market exposure through investing additive. | |
| Fiduciary Responsibility, LP Agreements, and Side Hustles | 6 | 4 | 4 | 8 | Harry delivers strong pushback on fiduciary duty, asking how GP CEOs can justify prioritizing their operating company over institutional LP capital during a crisis. Jason explains that LP side letters accommodate these edges because LPs prioritize differentiated access over undifferentiated full-time managers. | |
| LP Fundraising Trends and Market Pessimism in 2024 | 8 | 2 | 2 | 7 | Jason questions whether LP appetite for emerging and non-traditional managers still exists in 2024's tight market. Harry demonstrates authority by citing his conversations with two new LPs weekly, explaining how capital formerly allocated to China is being redistributed into Western venture. | |
| Employee Side Projects and Retaining Top Talent | 5 | 4 | 5 | 7 | Harry takes a strict view on employee focus, asserting he would not allow staff side projects because extra hours directly generate output. Jack firmly disagrees, arguing long-term employee retention far outweighs squeezing marginal daily work hours out of staff. | |
| Correlation Between Working Hours and Employee Performance | 4 | 4 | 3 | 4 | Auren notes that top impact correlates strongly with high working hours, though getting 40 true productive hours weekly is rare in most corporate settings. Harry probes why companies fail to get full productive output from employees. | |
| Drivers of Employee Retention and Winning Company Dynamics | 5 | 3 | 3 | 4 | Harry brings up Amazon's executive model where appreciating stock value drives retention without side activities. Jason counters by questioning why employees leave winning hyper-growth companies like OpenAI despite massive tender offers. | |
| Scaling Limits of Solo GPs and Founder-Led Funds | 5 | 5 | 4 | 6 | Auren claims solo GPs hit a ceiling because venture is a competitive commodity business. Harry challenges this ceiling by suggesting solo GPs can scale by concentrating capital into fewer, larger checks at late stages, which Auren counters by pointing to firm-level diligence requirements. | |
| The Founder-Led Fund Advantage: Not Sweating the Small Stuff | 3 | 4 | 2 | 3 | Jason argues that founder-led funds offer an advantage because wealthy founder GPs do not panic over minor operational misses or throw shoes at monitors during board meetings. Auren adds that founder VCs are far more reasonable regarding contract terms that do not affect fund returns. | |
| Governance, Diligence, and Oversight in Venture Capital | 6 | 5 | 5 | 7 | Harry challenges solo and founder-led funds for abandoning governance responsibilities and board seats. Auren dismisses the criticism, arguing governance in early-stage venture barely impacts returns compared to power-law deal selection. | |
| Portfolio Strategy: Spending Time with Winners vs. Those in the Middle | 4 | 5 | 3 | 4 | Harry asks whether managers should focus time on winning portfolio companies versus struggling ones. Auren and Jason reframe conventional advice by stating winners succeed regardless and losers fail anyway, making committed middle-tier founders the highest-leverage focus area. |
Statements from this episode (44)
Altman: Founder-investors deliver tougher feedback than traditional VCs
“A lot of founders give much tougher love or whatever you want to call it than I've seen investors do.”
Hoffman: Founders who exited 10 years ago lack modern tactical execution skills
“Almost everything in running a company has changed over the last seven years. So if you sold your company 10 years ago, you don't know anything about how customer success works, how new types of sales works, how product led growth works, how even like all the …”
Lemkin: Sequoia and Kleiner Perkins historically demanded 20% valuation discounts
“When I started in the old, old days, there were only two brands in venture. I knew of there was Sequoia and Kleiner, right? And you had to take a discount for both of them, right? You'd go out and you'd get your term sheet from somebody else, and then Kleiner …”
Lemkin: LPs increasingly allocated capital to micro funds and top angels
“One of the things that changed the last four or five years is LPs wanted to put more and more money into angels and micro funds that performed.”
Altman: Investor help does not scale proportionally with check size
“I do think that when people invest more, they naturally end up being closer to the companies. So I think if somebody does half of your seed round versus if they are a small angel, you will generally get more time, but it's not proportionate. And to your point,…”
Hoffman: Most successful startup founders have low emotional intelligence
“Well, most good founders have low EQ.”
Hoffman: Firing founder CEOs was commonplace in the 80s/90s but rare today
“Every VC today is founder friendly, right? It's pretty rare nowadays for a founder to get fired. Whereas like in the eighties and nineties, that was commonplace for a founder to get fired.”
Hoffman: Founder CEOs are paid 5x less than external CEO hires
“Founder CEOs are very undercompensated. Like the go forward comp for a founder CEO today, once you, let's say you're there for over four years, your go forward comp is probably five X lower than if they hired an outside CEO.”
Altman: Replacing an early-stage founder CEO fails 90% of the time
“In the early days of a company, the replacement move is more likely to fail than succeed nine times out of 10 before the company's got a certain amount of, like, stability to it.”
Lemkin: 88% of SaaS companies have their founder as CEO at IPO
“88% of SaaS companies that have IPO'd have the founder as CEO at IPO.”
Altman: Polite early customer feedback during PMF search is a disservice
“When you're like trying to find product market fit, a customer who's like nodding and saying like, oh yeah, that looks really interesting. Like keep building. We'll check it out because they don't want to tell you it's not interesting. Like they're, that perso…”
Lemkin: Data shows operator VCs do not outperform professional venture investors
“I remember a few years ago, I forget whose analysis was, there was no advantage, like, to being an operators were no better than professional. That may not include pre-seed, right, or other things. But it wasn't, when I wrote this up a few years ago, that what…”
Lemkin: Founder-investors possess an innate ability to recognize superior talent
“That's the superpower that everyone on this on, on this podcast has, which is everyone knows who's better than them, right? That is one superpower that successful founders have that, that money investors, when I say they had, they don't even know what it means…”
Hoffman: Venture capital firms will increasingly specialize team roles
“You're going to start to see different firms start splitting the stack a bit, and they're going to have certain people who are going to be good... You're going to start to see that much more so with investing, where if you're going to have a team anyway, and i…”
Lemkin: Operating as a full-stack solo VC is not optimal for scaling
“I started off completely full stack, right? I started off working at a third party VC firm all on my own loan guy, no help, right? Doing everything. And I've done that. And now I've seen after 10 years, it's not optimal, right?”
Lemkin: Early-stage VCs must evaluate 10x more startups than five years ago
“If you want to see ever those one or two, I actually think it helps to see 10 times more startups than it did five or six years ago. 10 times.”
Altman: Early founders shouldn't invest until business can run without them
“I think it does when time constraints are the dominant force. And for that reason, I think early stage founders spending real time investing is it's just too expensive. And so when, like, there are definitely things to be learned from your investing that poure…”
Jack Altman: Working over 50 hours yields diminishing returns at scale
“My experience with it was that once we got to a certain size, I found that incremental hours on Lattice were not that valuable past a certain number of reasonable hours past, let's say, 50 hours at some point. It just doesn't, more hours doesn't do you good th…”
Hoffman: Any time a CEO spends outside of work hurts the business
“I would say really any time a CEO is not spending on their company, it's bad for the business. But that's true. If you're dating, it's true. If you're being a spouse, if you're parenting kids, if you're working out, You're spending time with friends. If you're…”
Hoffman: LPs should prefer venture funds led by active CEOs
“It is actually, they're generally not happy when someone in the fund is like also a CEO, but they should be because that fund's going to end up doing so much better. You're going to get into better deals, et cetera.”
Lemkin: LPs prioritize differentiation and edge over conventional VC habits
“The last thing, and they'll, they'll cut corners, and they'll invest in someone that didn't finish high school, and they'll invest in the 10,000th, whatever, but if they're, if they perceive an edge, they'll take the risk at the, rather than the person that sl…”
Stebbings: Institutional LPs are downsizing venture commitments but keeping top-tier managers
“I'm not really seeing them drop great names. Some of them are downsizing significantly where they've got, you know, mandated outflows in the case of endowment funds or hospital institutions, but they're not dropping great names. They're still open for business…”
Hoffman: LPs will cease re-upping with non-performing VC fund managers
“Well, I do think there were a lot of VCs with subpar returns that were still raising their third, fourth, fifth, sixth, seventh funds. That is very unlikely going to happen in the future. So I think you're the, sorry, VCs that were doing that from LPs. And so …”
Stebbings: 25% of US venture capital has migrated away from China
“What also no one's talking about is the migration of LP capital that was going to China, which was I'm forgetting the stat, but it's about 20, 25% of US venture dollars used to go to venture in China. Well, that's migrated. Yeah, that's over, and that's over. …”
Jack Altman allows Lattice employees to pursue outside work and board seats
“I have never also been one to ask our employees not to do Other work. A lot of our employees are also angel investors sit on other boards. And I think that's great for them.”
Altman: Long-term employee retention outperforms squeezing extra work hours
“What I've also seen, though, is things like employee retention for long periods of time is extremely valuable. And so a company that retains employees for five years instead of one and a half on average, those employees are going to be so valuable in years thr…”
Harry Stebbings opposes his employees having outside side projects or activities
“Yeah. Yeah, I would actually.”
Auren Hoffman: High employee impact strongly correlates with working the most hours
“The people I've worked with who have been the most impactful people, it is extremely high, highly correlated that they also put in the most hours.”
Auren Hoffman: Most companies get far less than 40 weekly productive hours per employee
“Most companies are not getting anywhere close to 40.”
Jason Lemkin: Employees work the same amount today but are present less often
“I think sometimes I think people work less than they used to. I think they work the same. It's just, they're not present nearly as often.”
Jason Lemkin: Absolute Compensation Is Not the Biggest Retention Driver
“It's not today. There's no way it is today that that that absolute comp is the biggest driver of retention.”
Hoffman: 22 of Facebook's first 25 employees left within four years
“I think 22 out of the first 25 people at Facebook left after, within the first three or four years.”
Auren Hoffman: Employee Retention Rates Do Not Reflect Company Performance
“Just because everyone's leaving, like in Facebook's case, where so many of the first 25 people left early doesn't mean that's a bad company. It turned out to be an amazing company. Just because everyone's staying doesn't mean it's a good company.”
Hoffman: Venture capital is more competitive than any SaaS business
“Venture is just like, is incredibly competitive. It's way more competitive than any type of SAS business that's out there. It's one of the most competitive, you're basically selling a commodity. You're selling money.”
Hoffman: Insight Partners deploys a 20-person team to evaluate deals
“If you think of like an insight which is one of the more successful late stage. Like they have like a 20 person team evaluate a deal. They don't just have like one person do the whole thing.”
Lemkin: Founder-Led VC Funds Perform Less Diligence and Detail Checking
“If we define founder-led funds broadly, maybe not include this team, I definitely believe less diligence is done. There's more hip shooting going to Oren's point. There's more pattern matching. There's less checking, checking on stuff, right?”
Hoffman: Board Oversight Matters Little Compared to Securing 10x VC Winners
“I also don't, I don't know how much oversight matters in the, if it's really power law driven, like the bad ones are bad. And, you know, so yeah, maybe you could have got a one X and you get a .5 X or something out of this thing. If you, if you're really in it…”
Lemkin: By the Time Startup Exponential Growth Is Obvious, It Is Too Late
“I haven't found I can see it early enough to take action. You can see who the winners are. There's time to see who the winners are, right? No question. But that, that edge of the curve, right? The inflection, the exponential growth It's beyond, it's too late i…”
Hoffman: VCs should focus their time on mid-tier portfolio companies
“The winners don't really need you. So spending time with them doesn't really change the outcome. The losers don't really need you either. Cause they're going to lose. So it's actually kind of the people in the middle that probably need you the most”
Jason Lemkin: Startups with committed founders and customers never fail
“If the founders are truly still giving it a hundred percent for real. I mean, a real 100%. I'm I'll never be out for a variety of reasons. Also, I've never seen those ones actually fail if they're a hundred percent committed and they have any customers.”
Jason Lemkin: Drops support when founder commitment drops below 100%
“As soon as it's less than a hundred, I decided I'm out. I'm immediate. I'm either quietly out or I'm introducing you to my board partner, Harry.”
Auren Hoffman: Fully committed founders never lose investor capital
“If you ever see a scenario where a founder is putting more than a hundred percent in, I have never seen that company do less than a one X ever. That company has always been successful.”