Aug 15, 2022 · 53m · news
Sheel Mohnot: Lessons from Investing in Flexport and Missing on Robinhood | 20VC #917 · 20VC with Harry Stebbings
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In this episode of 20VC, Harry Stebbings interviews Sheel Mohnot, co-founder of Better Tomorrow Ventures, to explore his entrepreneurial roots, investment successes and misses, portfolio construction strategies, and the evolving dynamics of early-stage fintech investing.
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 27.4% of the talking time here. How this is scored →
Harry as informed peer 4.6 Guest teaching 3.8 Guest disagreement 2.3 Harry pushing back 3.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:49 Direct contradiction on venture collaboration
When Harry asserts that venture capital has never been so sharp-elbowed and uncollaborative, Sheel immediately rejects the premise stating 'I don't agree with you actually', leading to both explicitly telling each other 'You're wrong'.
Hardest push from Harry ▶ 43:00 Refusing LATAM market optimism framingHarry explicitly breaks format to state 'I disagree on LATAM', breaking down Kaszek, Monashees, Canary, General Atlantic, and Naspers to argue that Latin America lacks proper lifecycle growth capital.
Biggest teaching moment ▶ 16:51 Educating host on sub-$10M deal qualityAfter Harry implies that sub-$10M entry points must be lower quality 'C-class deals', Sheel systematically lists his top fund investments that entered under $10M and scaled to $300M, $600M, and $1.2B.
Harry holds his own ▶ 39:33 Demonstrating institutional LP mechanics expertiseHarry demonstrates deep structural fund knowledge by detailing how institutional LPs demanding high GP commits force fund managers to fund commitments out of management fees, effectively capping team expansion.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Sheel's Entrepreneurial Journey and Founding BTV | 1 | 1 | 1 | 0 | Harry asks a basic introductory question about Sheel's trajectory from founder to venture capitalist. Sheel provides a straightforward narrative answer detailing his time at 500 Startups and co-founding Better Tomorrow Ventures with Jake Gibson. | |
| Financial Unlock and Low-Burn Lifestyle Virtues | 2 | 3 | 2 | 1 | Harry asks how much selling two companies unlocked financial independence. Sheel reframes the financial unlock by explaining his low-burn lifestyle derived from living on a dollar a day during a fellowship in India. | |
| Family Roots and Lessons From 500 Startups | 3 | 2 | 1 | 1 | Harry uses a reflective question sourced from Jeremy Liu regarding rebelling from family history. Sheel shares personal background about his conservative Jain family who wished he became a doctor before detailing early fund lessons at 500 Startups. | |
| Internalizing the Power Law in Venture | 6 | 2 | 1 | 2 | Harry presses on the exact moment Sheel internalized the power law. Harry demonstrates high domain expertise by sharing his own $25M regret regarding Sequoia's hold-your-winners advice, which Sheel validates with his own similar experience. | |
| Concentrated Strategy, Reserves, and Entry Points | 5 | 6 | 2 | 5 | Harry skeptically questions how Sheel finds sub-$10M valuation seed deals without them being C-class opportunities. Sheel schools Harry by reciting BTV's top fund returns, including entries at $2M and $8M that reached $600M valuation. | |
| Negotiating Terms as a Price Maker | 6 | 5 | 3 | 5 | Harry challenges automated follow-on pro-rata strategies as moronic for middle-tier portfolio companies. Sheel defends his price-maker philosophy and explains turning over another card for founders. | |
| The Collaborative Reality of Modern Seed Investing | 7 | 6 | 7 | 7 | Harry claims venture capital has become hyper-competitive and uncollaborative, prompting Sheel to forcefully reject the premise. Both exchange direct pushback ('You're wrong') before debating multi-stage ownership requirements and co-lead dynamics. | |
| Reinvestment Discipline and Follow-On Support | 5 | 6 | 2 | 3 | Harry probes how Sheel handles follow-on investments in wildly overpriced Series A rounds. Sheel outlines BTV's capital efficiency mandate and details Flexport's 160x return alongside a $230M exit that yielded higher returns than a $900M exit. | |
| Analyzing the Misses: Chime and Robinhood | 5 | 5 | 2 | 2 | Harry asks how VCs can avoid becoming cynical after missing major winners. Sheel candidly details missing Robinhood and Chime due to flawed initial assumptions and historical anchor bias from Simple. | |
| Regrets on Fund One Ownership Targets | 6 | 4 | 1 | 3 | Harry articulates a detailed insight into how excessive LP demands for large GP commits force fund managers to pay themselves from management fees, capping operational budget. Sheel strongly agrees, referencing his own net worth guidelines. | |
| Emerging Markets, Macro Risks, and Retrenchment | 7 | 5 | 4 | 7 | Harry aggressively pushes back on Sheel's optimism regarding Latin American venture funding, explicitly listing major regional funds and arguing the capital stack lacks growth-stage leads. | |
| Memorable First Meetings and Pitch Lessons | 2 | 1 | 2 | 2 | Harry conducts a quickfire round covering favorite pitch meetings, book habits, personal strengths, and desert island preferences. The dynamic is playful and collaborative with light banter on chocolate and dating. |
Statements from this episode (36)
Mohnot and Gibson declined VC offers in 2019 due to bureaucracy
“We ended up getting offers at funds, but decided during this time that he and I got to know each other a lot better, we decided, hey, maybe we should just do our own thing. These funds are maybe not for us. Some of them are too bureaucratic. Some of them have …”
Mohnot Lived on One Dollar a Day During India Fellowship
“I did this fellowship lived in India on a dollar a day. So very, very low burn lifestyle. I was working in microfinance and decided I would live like my borrowers and my borrowers, you know, lived on a dollar a day. So I decided I would too.”
Mohnot Faked Having a Fund by Investing Personal Capital for 18 Months
“For the first 18 months, I was basically funding it out of my own pocket, pretending like I had a fund. And it was most of the money I had at the time. Like I was selling stock to invest in startups to pretend like I had a fund.”
One 500 Fintech Portfolio Company Returned the Entire Fund Five Times Over
“Even though I invested in 70 plus companies, there's only a handful of them that really matter, and the one The one biggest one represents a five X on the fund.”
Mohnot: Three BTV portfolio companies each represent multiple fund turns
“There are three companies that each represent multiple turns on the fund.”
Mohnot: 3x–5x exits do not move the needle against 100x fund winners
“These smaller exits are not necessarily gonna get you anything. Even, even like a three, five X return, it doesn't, unfortunately, it just doesn't move the needle that much when you have a hundred X return out there.”
Stebbings Missed $25M in Liquidity by Following Sequoia's Advice to Hold Winners
“My biggest regret and my biggest lesson is that I didn't, because I believed in Sequoia's, hold on to your winners, never sell your winners, and I didn't, and I probably could have taken off about twenty five million dollars for an eight million dollar fund.”
Mohnot: BTV increased fund reserves from 50% to 60%
“And in fund one, we had 50% reserves in fund two, we have actually 60% reserves. So we're reserving more for follow ons.”
Mohnot: BTV Fund I averaged $1M check at $10M post-money valuation
“So so our minimum is actually 10. So we have invested so in fund one, our rough numbers, our average first check was a million bucks, and for about 10% ownership. So we invested on average at a ten million post in fund one.”
Mohnot: Fintech seed valuations did not fall in 2022
“Seed valuations in fintech, for some reason, haven't really fallen much. And so our 20, 22 numbers are actually higher. We're investing at a higher valuation than we were then.”
BTV's Top Fund I Deals Grew From Single-Digit Valuations to Over $300M
“Number one we led a deal at 12 and a half million. It's now worth 1.2 billion. Number two, our first check was at, it was either eight or ten million and it's now six hundred million. Number three, first investment was at two million. It's now six hundred mill…”
Sheel Mohnot: Better Tomorrow Ventures dictates valuations as a price maker
“The other is there's a difference between a price taker and a price maker. So like, Oftentimes a founder will say like, this is what I want. And we say, okay, like totally understandable. If you want to work with us, the price is X. And here's a bunch of folks…”
Stebbings: VCs Will Never Regret Skipping Pro-Rata in Middle-Tier Portfolio Companies
“I believe the pro rata for your middle tier is never actually a great thing anyway. Like the messy middle pro rata, you're not gonna regret not doing it.”
Mohnot: Better Tomorrow Ventures does not automatically exercise pro-rata rights
“Yeah, we definitely don't always do our pro rata. I would say we are choosy”
Stebbings: Venture capital has reached an unprecedented level of uncollaborative competition
“I specifically think that venture has never been quite so sharp elbowed, and has never been as uncollaborative.”
Mohnot: Multi-stage funds reduced Series A ownership targets from 20% to 15%
“Is a lot of, let's say a lot of the like multi-stage funds, typically historically leading series A's, they used to have an ownership threshold of. 20% minimum. And now they have a lower ownership threshold, 15.”
Sheel Mohnot: Venture capital is less sharp-elbowed and competitive today
“So I think actually, I think we're less sharp elbow than we used to be.”
Mohnot: Series A is the hardest round for multi-investor syndicates
“A is the toughest round to get multiple people into because there's typically a lead investor, typically a single one.”
Tier-One VC Funds Are Now Accepting 8% Ownership Stakes in Series A
“So I think it's happening and that never used to happen. You wouldn't have like a tier one fund taking Eight percent ownership in a Series A. But that's happening.”
Better Tomorrow Ventures expanded ownership from 10% to 13% in top portfolio company
“No, and we have, yeah, in, in some of our best companies, we've grown ownership over time. So yeah, the one that comes to mind, we started it at around 10, and now we have 13. So over time, we've grown.”
Mohnot: BTV portfolio Series A rounds hit $100M-$125M valuations in late 2021
“Particularly second half of last year, all of the series A's in our portfolio, like we were doing them at the price that, you know, we invest that, and then they were getting done at the hundred to 125 range.”
Mohnot Achieved a 169x Return Selling Flexport Shares at $25.40
“Personally, my biggest tip from a cashback perspective is Flexport. I think rough numbers, when I invested, it was like, 15 cents a share, and I sold at 25 dollars and 40 cents a share.”
Mohnot's Chipper Cash Investment Grew From $2.5M to Over $2B Valuation
“And then unrealized, I think my biggest is a company called chipper cash. My first investment in the company was at a two and a half million dollar valuation about three years ago, and the last round was over two billion.”
Mohnot: VC-dependent customer acquisition models create inherently worse businesses
“Businesses that constantly need venture capital dollars to acquire customers just aren't as good businesses.”
Mohnot: Uber raised $25B in VC to reach a $50B enterprise value
“And you've seen it with the likes of Uber, you know, today, a fifty billion dollar enterprise value. There's twenty-five billion dollars of venture capital money that went into that company.”
Mohnot: Chime Is Significantly Overvalued at a $25 Billion Valuation
“While chime at twenty-five billion is probably very significantly overvalued.”
Mohnot: Failed investments bias VCs against viable business models
“And I think the biggest miss for me was you look at a model, you've invested in a model that didn't work and you have the idea that it can't work. And actually, no, that's not true. It's just like the founder didn't do the right things to make it work.”
Mohnot: Investing in Seed Startups at $50M Valuations Rarely Yields Returns
“So you can't invest at a seed company at a fifty million dollar valuation and expect to make money. Like that's, if you're doing that, it's just going to be really tough.”
Sheel Mohnot: Better Tomorrow Ventures targeting 15% average fund ownership
“We averaged 10%, and in this fund, we're hoping to average closer to 15.”
Mohnot: Venture GP fund commitments should cap at 10% of net worth
“So I think it really should be some portion of your net worth, and maybe it should be, like, up to 10% of your net worth should be in a fund. And that's a significant portion, but not like, it's not like you're gonna need an extra, like, you're not gonna wanna…”
Stebbings: High GP Commitments Drain Management Fees and Harm Fund Quality
“I also find it moronically because you insist on a certain bar, the managers can't do it out of their own personal capital. And so then they pay for it out of fees. And then that means that they are fundamentally capped from reinvesting in their own teams, pla…”
Stebbings Predicts Complete VC Retrenchment From Emerging Markets Like Southeast Asia
“I think in the macro, we're going to see complete retrenchment away from emerging markets that we mentioned there, Southeast Asia, Indonesia included.”
Mohnot: Venture markets in Africa and Pakistan face the greatest downturn
“I think the markets that are in the most trouble are Africa and Pakistan.”
Mohnot: BTV portfolio company slashed $7M/month burn to reach cash flow positivity
“We actually have companies that have been able to do it, and like, we have a company that went from burning seven million dollars a month at the beginning of this year to probably being free cash flow positive in the next couple months.”
Shorts cut from this episode
▶ Trouble in Emerging Markets #shorts · 20VC with Harry Stebbi (@41:36)
▶ How receiving a MILLION $$$ CHECK changed my life #shorts · (@4:15)
▶ The secret behind Uber's $50 BILLION valuation #shorts · 20V (@31:06)
▶ Missed out on MILLIONS $$$ in these two companies - Part 2/2 (@33:24)
▶ Missed out on MILLIONS $$$ in these two companies - Part 1/2 (@32:24)
▶ How I made MILLIONS $$$ Angel Investing #shorts · 20VC with (@29:19)