Feb 27, 2023 · 1h 10m · news
David Tisch: The 3 Most Important Variables When Raising Your Seed Round | 20VC #983 · 20VC with Harry Stebbings
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In this episode of 20VC, host Harry Stebbings sits down with BoxGroup co-founder David Tisch to discuss the mechanics of seed-stage fundraising, the priority of relationships over transaction speed, and strategies for navigating a cooling venture market.
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 21.4% of the talking time here. How this is scored →
Harry as informed peer 4.5 Guest teaching 4.4 Guest disagreement 2.9 Harry pushing back 4.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 18:41 Explicitly admitting to dodging reserve questions
David openly acknowledges he is dodging Harry's direct question regarding reserve management details, stubbornly rejecting the premise that abstract fund math rules matter.
Hardest push from Harry ▶ 18:33 Calling out dodging and comparing guest to a politicianHarry refuses to accept David's deflection on reserve planning, bluntly asking 'Are you a politician?' and insisting that reserve management is vital portfolio discipline.
Biggest teaching moment ▶ 22:54 Statistical breakdown of seed graduation rates vs shutdownsDavid corrects the common narrative around down rounds by walking through historical seed-to-A and A-to-B graduation percentages, showing why widespread startup deaths are the real upcoming mathematical reality.
Harry holds his own ▶ 15:13 Citing venture research on reserve management impactHarry brings empirical rigor to the conversation, citing historical fund studies to demonstrate that intense portfolio management and reserve discipline differentiate 1x funds from 2x funds during bad times.
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 David's Non-Traditional Path into Venture Capital | 1 | 1 | 1 | 2 | The segment serves as a light introductory icebreaker. Harry asks playful armchair psychology questions about what David is running from and his family background, which David answers smoothly and diplomatically. | |
| Redefining Success: Personal Contentment and Supporting Others | 3 | 3 | 2 | 3 | Harry questions BoxGroup's model of writing $100k checks out of a $127M fund, asking if it breaks fund math or invites other VCs to push them around. David politely rejects rigid fund math rules, arguing that flexibility and founder-centric relationships matter more than strict formulaic check sizes. | |
| Valuations and the Reality of Outlier Returns | 5 | 4 | 3 | 5 | Harry runs quantitative scenarios on check numbers and fund sizes to argue that BoxGroup's deployment ratio leaves insufficient reserves. David counters that market conditions dictate valuation and that outlier returns naturally resolve portfolio math. | |
| The Debate on Venture Math, Macro Economics, and Reserves | 7 | 5 | 5 | 7 | Harry aggressively drills David on fund math, citing studies that show disciplined reserve management distinguishes top-performing funds in downturns. When David explicitly avoids giving specific numbers, Harry calls him out directly for dodging questions like a politician. | |
| The Reality of Startup Failures and Down Rounds | 5 | 6 | 3 | 4 | Harry brings up market commentary from Tom Loverro and Albert Wenger regarding down rounds. David provides a detailed breakdown of historical seed-to-Series A graduation statistics, clarifying that startup shutdowns rather than down rounds represent the true unplayed market math. | |
| The Three Critical Variables in Raising a Seed Round | 6 | 5 | 5 | 6 | Harry takes a strong stance against founders opening seed rounds at $25M valuations and argues that Big Tech spin-out founders raising large rounds perform poorly due to slow execution. David pushes back firmly, stating Harry is overly generalizing and that market clearing prices dictate reality. | |
| Debunking Signaling Risk and Incentive Misalignment | 5 | 4 | 2 | 3 | David and Harry find common ground debunking signaling risk as overstated. Harry articulates the incentive misalignment when multi-stage funds lead seed rounds, which David validates. | |
| The Art of Fundraising: Coaching Founders to 'Make Their Own Movie' | 5 | 6 | 4 | 4 | David critiques generic VC content machines for giving harmful blanket advice to founders, prompting Harry to ask if David hates content creators like him. David offers memorable coaching, advising founders to build relationships long-term and 'make their own movie' rather than copy others. | |
| Lessons from the Frothy Market & Transitioning Back to Relationships | 4 | 4 | 1 | 2 | Harry candidly reflects on his own past mistakes regarding secondary liquidity in winners. David discusses the transactional speed of the 2021 market and the necessity of returning to deliberate relationship building. | |
| Responsible Deployment Cycles and Purging Tourist Investors | 5 | 5 | 3 | 5 | Harry presses David on deployment pacing and forces him to define who 'tourist investors' are. David highlights firm consistency and praises USV as the benchmark for non-tourist, long-term venture behavior. | |
| Quickfire Round: Predatory VCs, Consumer Social, and the Future of BoxGroup | 4 | 5 | 3 | 3 | In the quickfire round, David warns about predatory VC behavior in deep downturns. When Harry admits he has never seen such behavior, David explains how low-tier VCs attempt to personally bankrupt founders during distress. |
Statements from this episode (23)
Tisch: VC market pricing is simply whatever an investor says yes to
“Everybody can ask for whatever they want, and everybody can say yes or no. That's the way this business works. If somebody says yes, that's the price.”
BoxGroup leads pre-seed rounds and co-invests in seed rounds
“In a traditional seed round, we're happy to be the second, third biggest check on a cap table. You know, pre-seed round, we're happy to lead it.”
BoxGroup will make check-size exceptions to fund math for promising startups
“We truly hold to the idea that we want to invest in companies we're excited about, and if what we're able to invest is not in perfect alignment with the math, we're willing and able to make exceptions.”
Tisch: BoxGroup targets seed checks between $500,000 and $1 million
“So we write a 500 K, 750 K million dollar check. We do that as the core of our business. It is a target in the majority of companies that we're able to work with.”
Tisch: VC ownership targets matter for the portfolio, not individual deals
“So I don't obsess over the ownership and the portfolio construction in a way that I think it matters on a deal by deal basis. I think it matters on a portfolio basis.”
Stebbings: Active reserve management separates 0.7x funds from 2x funds
“In the bad, bad times, when you do the studying, actually the intense portfolio managers are the difference between one x, or naught .7 x, and two x, because they've religiously managed a huge amount from reserves, liquidity, and everything in between”
Tisch: Macro shifts impact prior venture investments far more than future ones
“The macro change in the environment impacts our prior investments much more so than our future investments.”
Tisch: Evaluating seed venture capital year-to-year is fundamentally incorrect
“I just don't believe in evaluating venture, especially seed venture on a minute to minute, year to year basis. It is an incorrect use of energy and mind.”
Tisch: VCs who overpaid deserve no sympathy; valuation is their problem
“The valuation to me is the investor's problem. And I just don't like, I don't believe that my sympathy sits for all the VCs that overpaid on things that they did. Like, everybody could, again, back to this, like, you could have said no. If you thought somethin…”
Tisch: Seed-to-Series A graduation rates hit 90-100% between 2018 and 2022
“And over that 19 or 18 to 22 period, you went to basically a hundred. Hundred percent of companies that raised the seed got an A. Maybe it was 90, 95.”
Stebbings: Big tech spinouts raising $5M-$7M seeds are my worst investments
“And so they're my single worst investments. Those are my worst ones when they've spun out of any great company and they've raised five to seven. Because they're inherently slower because they're used to the processes of Twitter, of Facebook, the HR, the polici…”
Tisch: Signaling risk is the single most overstated concept in startup financing
“The signaling risk, I feel like is the single most overstated part of the ecosystem.”
Tisch: A Series A lead skipping pro rata in Series B is material
“If your series A lead is not doing their pro rata in your B, that is a material data point.”
Tisch: Venture capital is a collection of small businesses, not an asset class
“And that's the, like, venture gets viewed as an asset class, and it's not. These are all very small businesses with independent investment styles and independent investment beliefs.”
Tisch: A startup CEO's core job is becoming world-class at fundraising
“Telling founders, like, put your head down, build a product. Don't worry about fundraising. It's like distracting and annoying. The CEO specifically, their job is to become great at fundraising, and they need to be, like, view that as a core competency that th…”
Stebbings Regrets Passing on Secondary Liquidity in Top Portfolio Winners
“I could have and should have sold in some big winners that were winners and probably now are not winners.”
Tisch: Venture Deals Closed in Hours to Days During Bull Market
“And so seed A, B were happening in hours to days versus weeks and months.”
Tisch: Crossover funds would have flooded seed without 2022 downturn
“I think if you didn't have the turn of the market in 22, you were going to see enormous amounts of capital pointed at seed.”
Tisch: BoxGroup will not expand into leading Series A rounds
“We are we are going to run whether you like it or not, the same model for a long time. And I think what that does is it aligns us with founders who are also going to build their business for a long time. We are consistent. We're not going to suddenly be a Seri…”
Tisch: A tier-three VC attempted to personally bankrupt a startup founder
“I saw a VC try to personally bankrupt a founder.”
Tisch: Consumers are bored with today's software because none is fun
“The trend to me that's most interesting is that people are bored with today's consumer products. None of them are fun.”
Tisch: Patrick and John Collison are tech's most underrated angel investors
“I think the Collison brothers have, you know, built a investment portfolio that's probably quite unique and doesn't get sort of discussed as much as some of the louder operator angels out there.”
Tisch: Startup location is overrated and geography does not matter
“I don't think geography matters for startups. And I think you know, we're based in New York because we live here and we want to live here. And just cause we're based in New York doesn't mean that we invest only in New York and Greg, our partner lives in San Fr…”