Jan 13, 2023 · 57m · news
Jason Lemkin: WTF is Going On in VC? Are LPs Investing in New Funds? | 20VC #965 · 20VC with Harry Stebbings
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In this highly candid conversation, SaaS investor Jason Lemkin joins host Harry Stebbings to dissect the dramatic macro reset in the venture capital ecosystem, detailing the death of bubble-era valuations, changing LP expectations, and the psychological and operational discipline required for founders and VCs to survive a post-bubble economy.
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 16.2% of the talking time here. How this is scored →
Harry as informed peer 5.5 Guest teaching 6.5 Guest disagreement 3.8 Harry pushing back 3.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 25:50 Jason slamming VCs buying public stocks as losers
Jason forcefully dismisses venture capitalists who pivot to public equities, arguing that buying public shares like Shopify makes them losers compared to doing the real work of finding early-stage gems.
Hardest push from Harry ▶ 5:55 Harry pushing back on the Postmates effectHarry directly rejects Jason's core premise regarding the Postmates effect, arguing that multi-billion dollar exits for late-place market competitors were an artifact of artificially inflated macro stimulus rather than a sustainable reality.
Biggest teaching moment ▶ 4:05 Jason reframing the long-term SaaS growth benchmarkJason educates Harry on the fundamental math of SaaS investing, laying out the strict decade-long revenue targets, triple-triple-double-double trajectories, and capital efficiency requirements needed to reach IPO scale.
Harry holds his own ▶ 47:32 Harry dissecting LP re-up dynamics and DPI expectationsHarry demonstrates deep industry expertise by breaking down exactly how LPs evaluate fund managers based on 2021 liquidity distributions, deployment pacing, and continuous relationship building across market cycles.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Macro Reset in Venture Capital | 4 | 6 | 2 | 2 | Harry sets up the macro topic with grounded observations comparing WhatsApp GP chatter to Twitter company claims. Jason provides detailed context on resetting venture expectations and deal flow standards following the 2021 peak. | |
| What Early-Stage SaaS Founders Need to Focus On | 5 | 6 | 4 | 7 | Harry directly challenges Jason's 'Postmates effect' thesis, pointing out that multi-winner market dynamics were artificially inflated by stimulus. Jason defends his view while outlining the decade-long milestones SaaS founders must hit. | |
| Current SaaS Buying Patterns and Private vs. Public Markets | 4 | 7 | 4 | 2 | Jason aggressively counters apocalyptic Twitter narratives, pointing to strong performance in healthcare, B2B e-commerce, and mobile infrastructure. Harry guides the segment with questions on private vs public multiple impacts. | |
| Avoiding the Trap of Over-Cutting Marketing and Sales | 5 | 7 | 3 | 2 | Harry brings his perspective as a media company owner to query marketing budget cuts. Jason warns against repeating historical mistakes by cutting sales and marketing capacity ahead of an anticipated pipeline drought. | |
| Realistic Target Setting and the Delusion of Later Rounds | 6 | 7 | 5 | 6 | Harry presses Jason on downside protections, late prefs, and equity dilution for employees joining late-stage unicorns. Jason offers a stark assessment that joining unicorns at peak valuations leaves employees with little equity value. | |
| Why VCs Should Focus on Early-Stage Gems over Public Markets | 5 | 7 | 6 | 3 | Jason delivers a sharp critique of VCs speculating in public markets instead of focusing on early-stage startup gems. Harry prompts the discussion by asking why SaaS OGs do not aggressively buy discounted public tech stocks. | |
| How Startups with Decade-Long Runways Will Survive | 5 | 6 | 3 | 3 | Harry questions how fund managers should handle startups holding ten-year runways at peak valuations. Jason explains his markdown criteria and notes the rarity of meaningful M&A exits. | |
| Shifts in Startup Talent and Screening Out the Bullshit Artists | 6 | 6 | 4 | 2 | Harry and Jason strongly agree that mainstream hiring in tech diluted employee talent and led to an influx of low-quality executives. Harry highlights personal frustrating encounters with startup marketing heads. | |
| Passion, Persistence, and the Risk of Endless Strategic Retreats | 5 | 5 | 3 | 2 | Jason warns against startups entering perpetual 'strategic retreats' under the guise of expense cutting. Harry connects this to his own persistent mindset and drive as an operator. | |
| The Chill LP Outlook and the Decimation of Micro-Funds | 7 | 7 | 4 | 3 | Both speakers exchange insider fund manager perspectives on LP sentiment, distribution lags, and the collapse of first-time micro-funds raised during the bubble. | |
| Recognizing Winners Early & The Founder's Investing Superpower | 7 | 6 | 2 | 2 | Harry articulates his exact sweet spot for seed investing around post-product early traction. Jason agrees that former founders possess a distinct superpower in evaluating founder capabilities. | |
| LP Re-up Complexities and the Quest for DPI | 8 | 7 | 4 | 6 | Harry demonstrates strong market expertise by detailing how LPs evaluate fund managers on 2021 DPI and pacing. He challenges the notion that premier GPs still hold total leverage over LPs. | |
| 2023 Outlook: The Long Recovery and Final Lessons | 5 | 7 | 5 | 3 | Jason closes with a firm reality check for founders, declaring he has no sympathy for crying founders because building startups is meant to be hard. Harry offers lighthearted concluding observations on GP vintage timing. |
Statements from this episode (33)
Lemkin: No sympathy for founders who cry about market conditions
“When I see like a founder cry, I have no sympathy.”
Lemkin: Venture funding and valuations will never return to 2021 peaks
“For founders, you have to understand that will never lead to a return of 2021. Never.”
Lemkin invested in Pipedrive, Talkdesk, Algolia, Greenhouse, and Salesloft in 12 months
“I did pipe drive, talk desk, Algolia, greenhouse, and sales loft all within 12 months.”
Lemkin made almost no venture investments in 2022 due to macro shifts
“I did almost no investing the last 12 months, and some of it's certainly the macro”
Lemkin: VCs boasting about high deal volume on Twitter are dishonest
“I do think it's harder to find good deals, and I think it is true, and I think people are a little bit full of it on the Twitter, right, and on the social media”
Lemkin: Postmates sold for nearly $3B despite being the third-place player
“Postmates, like, you know, I used it, but in the US, I think it was number three or number four, and it still sold for almost three billion dollars.”
Lemkin: Being a unicorn is no longer a point of pride
“Everyone with their unicorns. I don't think anyone brags about being a unicorn today, do they? Do founders brag about it? It's gone out the window as a term of brag, brag, bragification.”
Lemkin: SaaS startups now need $200M in revenue to IPO
“Really today it probably has to be closer to two hundred million because that's when you can really IPO, right? Approaching two hundred million. So you've got a decade to get to two hundred million”
Lemkin: Pre-IPO SaaS funding limits have reset from $400M to $100M
“In the old days, the rough rule is we could raise, including A, B, C, D, E, F, G H I and J rounds. You could raise a hundred total, right? Then that kind of grew to like three or four hundred million as the IPOs got bigger at the peak. And now we're probably b…”
Lemkin: The US healthcare sector shows zero software spending downturn
“In the US, there's no downturn in healthcare right now. There's nothing, and I can't imagine it's different in the UK.”
Lemkin: Shopify ended 2022 with stronger numbers than it started
“Shopify at the end of 2022 was not the rocket ship. It was at peak COVID, but Shopify has stronger numbers at the end of 20 22 than it did at the start.”
Lemkin: Startups over-cutting today will face severe pipeline shortages by year-end
“We're cutting too much and it's going to hurt everybody, not this week or even this quarter, but it's going to hurt. Everyone's going to not going to have enough pipeline at the end of the year when I think things will be better. I think things will be better …”
Lemkin: Marc Benioff just repeated his biggest admitted mistake by cutting sales
“Mark Benioff in his book wrote his biggest mistake in the last downturns was cutting sales. And what did he just do? Cut sales.”
Lemkin: Layoffs are just "little snacks" that do not create growth
“Layoffs don't really solve anything. They're just little, they're little snacks, right? They make little incremental changes, but layoffs don't create growth on their own, right?”
Lemkin: 90% of growth-stage venture investors are currently out of the market
“I would say 90% of growth investors are mostly out of market, like they're not actively investing, but some are.”
Lemkin: Employees joining a $1B unicorn in 2023 will make nothing
“If as an employee, if you join a company with, in, in 2023 with a valuation over a billion as an employee, you're gonna make nothing. It doesn't matter what it sells for, you're gonna make nothing.”
Lemkin: VCs tweeting about buying public Shopify shares are "losers"
“And so when I see VCs on Twitter talking about how they're looking at buying some shares of Shopify, honestly, I think they're losers.”
Lemkin: Early-stage VCs waste time adjusting markups on growing startups
“If you're not growing, I think it makes sense to mark it down. If it's growing at a decent rate, I think if you're not Fidelity or a late stage investor, I think it's a waste of your time to mark up or mark down because I asked all my LPs this question. They s…”
Lemkin: Startups that raise massive early capital become un-acquirable and "dead"
“When you raise massive amounts of money early, how are you going to sell for 10 X what you raise? Who's going to buy you for five hundred million dollars? You're dead.”
Lemkin: Laid-off tech workers won't build Figma, they want easy jobs
“I don't think any of those people are going to go off and start the next Figma. I think they're going to continue to look for a job. They can kind of phone it in and make a lot of money.”
Lemkin: Tech workforce quality plummeted as companies hired "mainstream normal people"
“The quality plummeted as we hired mainstream normal people, the quality plummeted. Any leader will tell you this quietly. Any VP, Mark Benioff said it last week. Like they'll tell you the quality went down the last three years. Way down.”
Lemkin: 90% of VCs haven't built products and cannot talk to CTOs
“90% of VCs make is they haven't built product themselves. They don't even know how to talk to a CTO or a technical co-founder.”
Lemkin: Startups staying in a strategic retreat for a year never recover
“If you do a brief strategic retreat as a startup, it's fine. Take a quarter, get your house in order, right? Get rid of that terrible VP, cut your burn rate. But if you stay in strategic retreat for a year, you never pull out of it, right?”
Lemkin: SaaStr lost $10M canceling its 2020 annual conference the night before
“Going back in time in March, 2020, when we had to cancel Saster Annual the night before, we lost ten million dollars, ok?”
Lemkin: Boom-era micro-funds are already decimated and don't know it yet
“I think they're going to be decimated. I think they already are decimated and they don't know it.”
Lemkin admits to wasting investment shots during the recent venture boom
“I think we all wasted a few shots the last couple years. I know I wasted one or two. I wish I could get them back. I didn't waste 20, but times were so good I wasted shots.”
Lemkin: Talkdesk scaled from $1M to $15M ARR in a single year
“Going from, you know, one to fifteen million with so few employees in a year was so much product market fit in there that you're like, okay, well, this is going to be worth a billion, but not more, right?”
Lemkin: Achieving a $1B exit typically takes a startup ten years
“Like it takes 10 years to get a billion dollar exit, like M&A. I don't, IPO can vary. It's 10 years for, so the market's going to change a lot in ten billion, right?”
Lemkin: Founder-investors have a superpower in recognizing who is better than them
“Founders have this investing superpower that money managers don't have, which is they know who's better than them.”
Lemkin: SaaS multiples will rise 20% to 40% by end of 2023
“And so I'm pretty bullish at the end of this year. I'm bullish that multiples will be Up somewhere between 20 and 40%, and I believe that will lead to a rush to deploy capital, but for founders, you have to understand that will never lead to a return of 2021.”
Lemkin: Startups unfundable today won't become fundable in a year-end recovery
“If you can'range any money at all today, like if you're unfundable, I don't think you're going to be fundable at the end of the year. Okay. If you're fundable today, but you don't like the metrics, you don't like the valuation, you double the end of this year …”
Lemkin: The Series B fundraising bar will remain very high long-term
“The bar is going to remain high to be fundable for a very long period of time, especially Series B and B and later, it's going to remain very high.”
Lemkin spent 24 months relearning that sociopath CEOs can build unicorns
“I've spent the last 24 months relearning the unicorn lessons. Re-learning that companies I thought would never be unicorns became unicorns. That sociopath CEOs became unicorns. That bullshit artists became unicorns. That folks that did not have an extremely st…”