Aug 8, 2022 · 1h 0m · news
Mo Koyfman: The Secret to Winning in Venture; Why Small Funds Outperform Large Funds | 20VC #915 · 20VC with Harry Stebbings
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this interview, Mo Koyfman, founder of Shine Capital, shares his journey through the venture capital landscape, explaining his philosophy on maintaining small fund sizes, building meritocratic team structures, and prioritizing disciplined, stage-specific investing over massive, unconstrained capital pools.
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 13.7% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 3.6 Guest disagreement 2.0 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 28:07 Mo calls the 'pro rata always' claim total bullshit
When Harry asks if refusing guaranteed pro rata hurts competitive edge, Mo forcefully rejects the assumption, declaring that VCs claiming they always do pro rata are telling total bullshit.
Hardest push from Harry ▶ 43:40 Harry challenges Mo's optimistic take on VC karmaHarry explicitly refuses Mo's framing that aggressive VC behavior gets punished by karma, arguing instead that capital scarcity allows multi-stage mega-funds to bully founders and smaller co-investors even more.
Biggest teaching moment ▶ 18:05 Mo explains how fund size constraints drive performanceMo educates Harry on Fred Wilson's core lesson: larger early-stage funds underperform because the abundance of capital removes constraints, whereas smaller funds force disciplined stock-picking.
Harry holds his own ▶ 42:18 Harry uses personal deal anecdote to hit back on VC greedHarry brings sharp, real-time domain knowledge into the discussion, calling out a large fund that refused to yield 0.6% ownership to him despite being an LP, illustrating current uncollaborative market realities.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Mo Koyfman's Journey to Venture Capital | 1 | 2 | 0 | 0 | Harry opens with a standard, wide-open question asking about Mo's path into venture capital. Mo delivers a long, uninterrupted narrative about his background, parents, Penn, Bear Stearns, IAC, and Spark Capital with no pushback or expert intervention from Harry. | |
| Lessons from Spark Capital & Venture Firm Structures | 3 | 3 | 1 | 1 | Harry asks about lessons from Spark Capital and founding Shine, prompting Mo to explain the distinction between partnership structures and investment firms. Harry interjects toward the end to compare Shine's clear hierarchy with his own firm's organizational structure. | |
| Strong Opinions, Weakly Held & the Power of Debating | 3 | 3 | 2 | 2 | Harry asks a probing question about Mo's opinionated nature potentially shooting team members down. Mo defends his philosophy of strong opinions weakly held, referencing Talmudic debate and Barry Diller's IAC culture, while Harry validates the concept with his own thoughts on mentors. | |
| The Value of Constraints and Fund Size | 6 | 4 | 1 | 3 | Harry demonstrates strong sector expertise by citing fund math and pressing on fees and reserve math for a $125M fund. Mo explains Fred Wilson's lesson on how small fund constraints force disciplined deal selection rather than reckless capital deployment. | |
| Reserves, Deserves, and Pro Rata Decisions | 5 | 5 | 7 | 5 | Harry challenges Mo on whether refusing automated pro rata harms competitive positioning against major funds. Mo forcefully rejects Harry's premise, calling the narrative that VCs always do pro rata total bullshit and outlining his 'deserves' framework. | |
| Ownership Centrality vs. Indexing and VC Collaboration | 7 | 4 | 3 | 6 | Harry demonstrates deep personal industry expertise by recounting an ongoing battle with a mega-fund over 0.6% ownership, challenging Mo's view on industry karma. Harry pushes back when Mo claims greedy behavior backfires, noting constrained capital gives bully funds leverage. | |
| Selecting the Right Partners & Lessons from Failure | 6 | 4 | 1 | 2 | Harry shares a personal lesson about setting aside ego when a founder cut his allocation, turning a potential mistake into a major financial win. Mo discusses why he only learns from failures and reflects on his early investment in Plaid. | |
| Multi-Stage Funds vs. Stage-Specific Boutique Funds | 4 | 5 | 2 | 2 | Harry asks how boutique seed funds can advise founders against taking multi-stage pre-seed/seed money. Mo educates on the risks of founders becoming a pimple on the ass at large multi-stage institutions where partner turnover is high. | |
| Quick Fire Round & Future of Shine Capital | 3 | 2 | 1 | 1 | Harry leads a rapid quick-fire segment covering burgers, books, and startup market changes. Mo advocates for fewer investors and less capital in the ecosystem to restore discipline, ending on a friendly note. |
Statements from this episode (20)
Dara Khosrowshahi and Jeremy Liew Ran IAC's Strategy Team in 2001
“I joined the strategic planning team who, interestingly enough, we were just talking about this, was then being run by Dara Khosrowshahi, who's now the current CEO of Uber, who hired me into IAC, as well as a guy named Jeremy Liu, who you may also know who led…”
Barry Diller Used Vivendi Cash to Roll Up Depressed Web 1.0 Assets
“We were flush with cash after the Vivendi universal entertainment transaction, and Barry decided to scoop up internet assets that had fallen out of favor. It was an incredibly prescient decision, and we ended up consolidating massive web one dot O categories t…”
Bijan Sabet's Twitter Series B Catapulted Spark Capital Into Top Tier
“As I was joining Spark, Bijan Sabat at Spark led Twitter series B and that investment catapulted us into the upper echelon of VC firms.”
Mo Koyfman Led Plaid's Seed Round and Was First Outside Director
“I led the seed round in Plaid and joined the founders, William and Zach, as their first outside board member.”
Durable VC Firms Require Clear Leadership Rather Than Equal Partnerships
“And while both can certainly work and there are certain, and there are notable exceptions here, like union square ventures, for instance, which works very well as a partnership structure, the more durable firms in my experience often have very clear leadership…”
Barry Diller Ran Eight-Hour 'Dynamic Debate' Meetings at IAC
“And when I was at IAC, Barry used to call our Monday meetings, our office of the chairman meetings, the dynamic debate. And we would sometimes sit in there for eight hours yelling at each other and screaming at each other to get to the right answer.”
Larger Early-Stage Venture Funds Consistently Yield Lower Returns Over Time
“Larger early stage funds always lead to lesser returns over time.”
Shine Capital Manages $435 Million Across Core and Opportunity Funds
“We manage about four hundred and thirty five million dollars or so. Our first fund was a hundred and twenty five million dollar early stage fund. Our second fund is a two hundred million dollar early stage fund, and we have a hundred million dollar opportuniti…”
Shine Capital Writes $1.5M-$3M Seed and $6M-$8M Series A Checks
“We're typically writing for a seed, call it one and a half to three million dollars to lead around and for an A, six to eight million dollars to lead around, and if we really push it, we could probably go up to 10.”
Shine Capital Reserves Follow-On Capital per Fund, Not per Company
“We don't actually reserve per company when we do a deal at all. I actually reserve a bucket for the entire fund”
VCs Who Claim to Always Exercise Pro-Rata Rights Are Lying
“Anybody that says they do pro rata always, I think, is lying. I just, I don't believe that to be the case, and I've seen enough, I've been in venture long enough to know that that's total bullshit.”
Investors Prefer Re-Backing Founders Who Shut Down Failing Startups Gracefully
“The investors are That are in your cap table today are infinitely more likely to back you again, watching you make that kind of mature decision as an entrepreneur, rather than watching you piss that money down the drain over the next two years, and actually, i…”
Shine Capital Limits Portfolio Size to 25 Companies per Fund
“We're not investing in a hundred companies. We're investing in, you know, 25 per fund.”
Shine Capital Targets 10% Ownership Rather Than the Traditional 20%
“We're always looking to be pigs. Like we are trying to get double digit ownership where we can, and we will do a little bit less here and there. Like we're, we will sometimes build our way into positions. We'll buy five or six percent and then buy a little mor…”
Harry Stebbings' $150K Investment From 20VC Fund I Returned $16M
“That one fifty's now done a two X on the fund. And I could have let my ego get in the way there, and that would have been a sixteen million dollar mistake.”
Learning Lessons From Venture Successes Is Extremely Dangerous Due to Bias
“I've actually found that learning lessons from successes is extremely dangerous because of the risk of confirmation bias. We will convince ourselves Of whatever we want to convince ourselves is the proximal cause of the success, you know, because it was succes…”
Five-Year Employee Retention at Giant Multi-Stage VC Firms Is Zero
“These are people, these are businesses with hundreds of people working there. The odds that all of those same people are going to be there in five years are zero.”
Giant VC Funds Cannot Be Deeply Invested in Seed Startups
“When you take money from a very big firm, definitionally at the early stage, definitionally, they can only be so invested in your success because it is a tiny amount of overall capital for the firm.”
Excess Venture Capital Creates Bad Habits and Dampens Returns
“I think we should have fewer investors and some less capital in the system. I think we've pumped too much capital into the system and it's created a lot of bad habits. And I think it's going to dampen returns, frankly.”
The VC Industry Faces a Reckoning With Many Firms Shutting Down
“I think there will be a lot of folks that go away in this cycle. I watched it in the last go round. You know, Spark and USV and all these firms didn't exist before the last cycle. And they really made their names coming out of the O eight crisis. And on the ot…”