Aug 26, 2015 · 27m · 20vc
20 VC 066: FOUNDRY GROUP WEEK 1: Seth Levine: 'VC Is Not A Scalable Business'
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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 episode of The 20 Minute VC, Seth Levine, co-founder of Foundry Group, discusses his journey into venture capital, Foundry's lean operational structure, and why VC is an unscalable business. He also shares insights on investing outside Silicon Valley, fund sizing strategy, and emerging technology trends.
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 15.8% of the talking time here. How this is scored →
Harry as informed peer 1.6 Guest teaching 2.3 Guest disagreement 0.3 Harry pushing back 0.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:53 Rejecting Silicon Valley Necessity
When asked if being based outside Silicon Valley deprives a firm of prime deal flow, Seth immediately rejects the premise with an emphatic unequivocally no.
Hardest push from Harry ▶ 15:40 Questioning Fund Sizing StrategyHarry presses Seth on the specific logic behind Foundry's strict $225 million fund cap and asks why that exact figure was chosen.
Biggest teaching moment ▶ 13:23 Explaining Unscalable Nature of VCSeth educates the host on firm mechanics, explaining why venture capital does not scale and why Foundry deliberately avoids hiring associates.
Harry holds his own ▶ 15:39 Highlighting Fund Sizing PatternsHarry demonstrates keen industry tracking by identifying Foundry's pattern of capping every fund at exactly $225 million.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Seth Levine's Early Career and Entry into Venture Capital | 1 | 1 | 0 | 0 | Seth details his background from college through Wall Street, corporate finance, Mobius Venture Capital, and starting Foundry Group. Harry listens passively, offering only brief interjections and a quick age clarification. | |
| The Genesis and Founding of Foundry Group | 2 | 3 | 1 | 0 | Harry asks a question from James Altucher regarding whether VCs must be in Silicon Valley to access top deals. Seth explicitly rejects the premise with an unequivocally no, explaining how virtual communities enable non-Valley firms to succeed. | |
| Scaling Venture Capital and Operational Efficiency | 2 | 3 | 0 | 0 | Seth explains that venture capital is fundamentally an unscalable business and details how Foundry avoids hiring associates or forcing monthly board meetings. Harry asks follow-up questions regarding specific operational and calendaring tools. | |
| Fund Sizing Strategy and the $225 Million Cap | 2 | 2 | 0 | 0 | Harry notes Foundry's consistent 225 million fund cap and asks for the story behind that figure. Seth recounts their initial 2007 fundraising challenges and why they committed to keeping fund sizes uniform. | |
| Maintaining Motivation Following Major Successes | 2 | 2 | 0 | 0 | Harry brings a question asking if major financial outcomes like Fitbit lessen the partners' motivation. Seth clarifies that financial security frees investors to work purely out of passion for supporting founders. | |
| Future Technology Trends and Investment Themes | 1 | 3 | 0 | 0 | Seth lays out two major technological themes he is passionate about: software moving further down-market to micro-businesses and innovations in human-machine interaction. | |
| Quickfire Round | 1 | 2 | 1 | 0 | In a quickfire round, Seth shares his top apps, books, and role models, while gently reframing a question on AngelList to explain how syndicates democratize capital rather than disrupt traditional VCs. |
Statements from this episode (14)
Foundry Group Manages Over $1B Across Five Funds
“The Foundry Group now has five funds, four early stage and one growth fund, totalling over one billion in assets.”
Levine: Brad Feld was the top performer at Mobius Venture Capital
“Brad, of course, had been really the top performer at Mobius and so he was integral in that process”
Levine: Silicon Valley location is not required for top VC deal flow
“No, unequivocally no, and I think, I hope Foundry would serve as a case study that that's not the case.”
Levine: Foundry Group allocates only one-third of investments to California
“Only about a third of our investing has been in California. A third has been in, in Colorado, and a third has been spread really across the rest of the US which is our investment, you know, target market, the full US market.”
Levine: Venture capital is fundamentally an unscalable business
“Venture capital is not a scalable business by any stretch of the imagination.”
Levine: Foundry Group operates with zero analysts or associates
“We, all the partners do their own work. We don't have any analysts or associates.”
Levine: Monthly board meetings chew up valuable time for startups
“When you have too much time on your hands and maybe a little bit too much proximity in some cases to your investments as a venture capitalist, you have a tendency to feel like you're doing a lot of good by, you know, swinging by for a day, for example, or hold…”
Slack and Voxer are Foundry Group's top tools after email
“Slack and Voxer, for example, probably the two most used pieces of technology inside of Foundry after email.”
Levine invested his entire life savings to launch Foundry Group
“I'd really, I mean, it truly had put up my entire life savings to back my portion of the startup cost for Foundry.”
Levine: Foundry Group will cap all future funds at $225M
“We knew that that was going to be the number for the rest of our time as investors, because we'd always said in our fundraising process that we were going to raise a series of funds. They were all going to look exactly the same and in terms of dollar size. And…”
Levine: Financial independence makes founders more passionate, not less
“We sometimes talk about entrepreneurs who've had, you know, had their first win, and maybe they're not as worried about, you know, buying that house that they want, or, you know, the ability to send their kids to college. And in a lot of cases, they become eve…”
Levine: Enterprise software will be rebuilt for small businesses
“There are a lot of technologies that can That have been built for larger businesses that now can be rebuilt for smaller businesses and really impact the U S economy and small businesses and the proprietors of those businesses, their lives in a positive way.”