Jun 27, 2022 · 59m · news
Sonali De Rycker | How I Became a Partner at Accel; Type 1 vs. Type 2 Mistakes | 20VC #902 · 20VC with Harry Stebbings
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In this insightful interview with 20VC host Harry Stebbings, Accel Partner Sonali De Rycker shares key lessons on navigating market cycles, maintaining Accel's collaborative global culture, and cultivating high-conviction relationships with extraordinary founders.
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 21.3% of the talking time here. How this is scored →
Harry as informed peer 3.2 Guest teaching 2.9 Guest disagreement 1.3 Harry pushing back 1.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 35:10 Rejection of passive high-valuation seed capital
Sonali directly pushes back on Harry's assertion that early-stage founders prefer higher valuations from crossover funds, arguing that serious founders demand real partner alignment.
Hardest push from Harry ▶ 10:59 Challenging time spent on non-outlier companiesHarry explicitly challenges Sonali's narrative about working through low-return exits, citing prominent VCs who claim spending time on cents-on-the-dollar outcomes is a waste of time.
Biggest teaching moment ▶ 31:06 Extracting lessons from failed investmentsWhen Harry insists he learned nothing from a failing startup because his investment process was sound, Sonali corrects him by showing how the shift in cost of capital provided vital strategic lessons.
Harry holds his own ▶ 34:18 Analyzing crossover VC migration to seed stageHarry demonstrates deep market insight by predicting that large growth funds halting growth rounds will flood the seed market with capital, driving massive seed price inflation.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Title Sequence and Introductions | 1 | 1 | 0 | 0 | Harry warmly introduces Sonali and asks about her path into venture capital. Sonali details her journey from socialist India to US academia, Goldman Sachs, Atlas Venture, and Accel. | |
| Lessons from Market Booms and Busts | 2 | 3 | 0 | 0 | Harry asks how living through early market booms and busts shaped Sonali's investing mindset. Sonali shares detailed anecdotes about David Bonderman calling her on a satellite phone in 2002 and Lehman Brothers collapsing during an LP meeting in 2008. | |
| Time Allocation: Outliers vs. Underperforming Portfolio Companies | 4 | 3 | 2 | 5 | Harry challenges Sonali's focus on low-return outcomes by quoting venture veterans who advise focusing exclusively on outliers rather than getting cents on the dollar. Sonali defends her view, emphasizing that long-term venture success relies on supporting founders through both highs and lows. | |
| "The Glue" of Accel London & Vulnerable Leadership | 3 | 2 | 1 | 2 | Harry brings quotes from Accel partners describing Sonali as the glue of Accel London. Harry gently pushes on whether being vulnerable as a leader is a luxury afforded mostly by seniority. | |
| Accel's Culture: Collaborative on the Inside, Competitive on the Outside | 3 | 2 | 0 | 0 | Harry contrasts Doug Leone's framing of Sequoia's team culture with Accel's approach. Sonali describes Accel as hyper-competitive externally but ultra-collaborative internally. | |
| Preventing Bottlenecks through Delegation and Empowerment | 3 | 2 | 0 | 1 | Harry asks how Sonali avoids becoming a bottleneck given her extensive board commitments. Sonali explains Accel's early delegation culture and interview questions designed to test emotional resilience. | |
| Advice for Young Investors: Resilience and Navigating Failure | 3 | 5 | 2 | 2 | Harry asks for advice on dealing with failing portfolio companies, sharing his personal frustration over a startup that failed despite doing everything right. Sonali reframes his experience, pointing out that he learned vital lessons about cheap capital and risk internalization. | |
| The Shift in Venture: Ambition, Capital Intensity, and Tech Waves | 5 | 4 | 4 | 4 | Harry argues that crossover funds moving down to seed with inflated valuations will attract early founders. Sonali firmly rejects this premise, contending that high-quality founders prioritize authentic ground-zero partnerships over pure valuation when challenges arise. | |
| Evolving Investing Styles & Understanding Exceptional Greatness | 4 | 3 | 1 | 2 | Harry probes how Sonali's investing style evolved, highlighting Spotify's scale to question the utility of outcome scenario planning. Harry also argues against prorata follow-ons, advocating for an all-in or nothing approach. | |
| Managing Board Dynamics & Losing Faith in a Founder | 4 | 3 | 2 | 1 | Harry asks what to do when losing trust in a founder. Sonali emphasizes early alignment and critiques the market's shift toward conflict-averse cheerleading. | |
| Type 1 vs. Type 2 Mistakes: Learnings from Saying No | 2 | 4 | 1 | 0 | Sonali outlines the difference between Type 1 and Type 2 errors in VC, sharing her personal missed opportunities caused by fixating on initial market size and underestimating bull market capital availability. | |
| Insecurities & The Continuous Learning Curve of Venture | 4 | 3 | 2 | 2 | Sonali discusses her ongoing insecurities around missing outlier founders. Harry offers his own perspective on portfolio strategy, leading Sonali to jokingly note that Harry answered his own question. |
Statements from this episode (25)
De Rycker: 2022 tech downturn resembles 2000 dot-com bust, not 2008
“I think we're much more a version in a version of 2000 than we are in, in a version of 2008.”
De Rycker: VCs that stop investing during downturns lose right to exist
“Never stop investing. The minute you lose your confidence, you lose your right to exist. Because if you look at the funds that were around in 2000, so many of them disappeared exactly for that reason.”
De Rycker: Erratic VC advice during COVID was deeply confusing for founders
“It's such a confusing time for these founders, right? They, we told them, Cut costs during COVID. It's a recession. Who knows? The demand is gone. Then there was money flowing through the system. Money had never been cheaper. It was all about growth. We said, …”
De Rycker: Backing struggling founders pays off in their next startup
“But I think the relationship with the founders matters a lot because that's what we're in the business of doing is backing them and, you know, backing repeat founders. Company number one didn't work, but company number two might be a blockbuster.”
De Rycker: Accel proactively marks down private portfolio valuations during downturns
“We're pretty proactive about taking down the valuations, but they're already sitting in pretty deep discounts.”
De Rycker: Portfolio markdowns will primarily trigger during new funding rounds
“I do think people will be proactive because you have to be, but it's going to take Time, and it's going to happen much more on the companies that have to have an outside mark, right, in terms of doing, doing around.”
De Rycker: Startups are avoiding priced rounds to prevent valuation down-marks
“And the challenge is that people are just not interested in going out and getting an outside mark right now. They much rather just put their head down and take the capital that they have and keep going.”
De Rycker: Managing internal VC firm talent cannot be a side hustle
“We thought that we needed a Wendy-like figure, you know, but because it's all about if you're telling your companies to focus on culture, you're telling your companies to focus on talent, why would you not want to do that? And of course you can do that yoursel…”
De Rycker: Accel pays team-wide bonuses when junior investors source winning deals
“If one of the younger investment team members identifies a great company, A great founder that we actually end up investing in. Everybody gets a bonus because that's sort of a way to hard code collaboration”
De Rycker: Accel operates globally without a CEO or top-down structure
“The fact that that exists without a CEO, some top-down instrumentation, any kind of top-down structure just shows how frankly authentic it is because it has to endure.”
De Rycker: Accel's early hiring mistakes stemmed from ignoring emotional characteristics
“When we made mistakes, we were, what we were getting wrong was kind of the emotional characteristics, and really the who As opposed to the how or the what.”
De Rycker: Asking candidates about negative feedback shortcuts background reference checks
“When you ask someone, for example, you know, what was the most surprising negative feedback that you got, and why do you think you got it? The person will tell you something that you're never going to find out. So that was a really interesting question for me,…”
De Rycker: VC outcomes are driven by missing winners, not backing losers
“We all know it's not about the type one mistakes, frankly, it's all about the type two mistakes.”
De Rycker: Risks listed in investment memos will eventually materialize
“If something can go wrong, and in a long enough period, it actually might go wrong. So don't just write it down, absorb it, internalize it.”
De Rycker: $200B to $400B in VC dry powder remains uninvested
“There is enough dry powder, Harry, right now. I think it's like the numbers are two, three, four hundred billion that is out there in venture capital at the moment in dry powder.”
De Rycker: Market downturns concentrate tech talent into the best startups
“The good news is I think you can maybe focus talent, concentrate talent again, In some of the really great businesses versus this fragmentation of talent that happened.”
Stebbings: Growth capital shift will trigger unprecedented seed-stage price inflation
“And I think we're going to see the migration of capital from growth to super early, and then actually price inflation at the seed, like we've never seen it before, ironically.”
De Rycker: Accel backed Spotify at $70M revenue and 1.5M subscribers
“When we invested, it was sort of seventy-ish million in gross revenue. I mean, it's ten billion now. And It was about a million and a half paying users”
De Rycker: Outcome scenario planning is useless for early-stage venture capital
“You can do all your outcome analysis. It doesn't really matter, especially if you invest. As early as we do.”
De Rycker: Blindly exercising pro-rata rights severely damaged VC fund performance
“The biggest mistakes were people just putting a lot of pro rata money in or just following in and supporting companies. So you get your outliers, but then if a lot of your percentage of your fund goes into companies that actually don't return capital because y…”
De Rycker: The venture market devolved into cheerleading and party rounds
“And by the way, there's very few of those discussions that happen. It's become a cheerleading market. And I hope that goes away with this current cycle, but it's pretty dis, it's pretty dismaying to see where the market had got to. It was like fragmented cap t…”
De Rycker: Accel reviews all missed investment deals in team post-mortems
“We put all the companies down that we got wrong, and we really figure out why we got it wrong as a group, and we try to learn from each other's mistakes.”
De Rycker: Great founders expand initially small markets via product adjacencies
“The great founders, They just create adjacencies. They change user behavior with beautiful products, and I completely got that wrong because the markets, they look small.”
De Rycker misjudged bull market capital availability for strong fundraisers
“I think I personally just misjudged how much capital was available for the entrepreneurs who could fundraise really well. I really got that wrong, so it would have been better just to be early in some of these great businesses.”
De Rycker: Global venture capital expansion requires local on-the-ground presence
“How do you do global? Well, is that you have boots on the ground, you have local decision-making, you're investing in entrepreneurs. It's a relationship business. You need to be able to make that investment decisions sitting across the table and, you know, not…”