Sep 9, 2015 · 29m · 20vc
20 VC 070: Do Investors in California Outperform The Rest of The World with Eric ver Ploeg @ Recursive Capital
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In episode 70 of The 20 Minute VC, host Harry Stebbings interviews Eric Ver Ploeg of Recursive Capital to discuss his transition from founder to investor, board management strategies, power-law venture economics, and Silicon Valley's regional advantages.
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 21.9% of the talking time here. How this is scored →
Harry as informed peer 2.1 Guest teaching 4.1 Guest disagreement 1.5 Harry pushing back 1.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 17:13 Rejecting macro interest rate framing
When asked if interest rate hikes will spook late-stage private investors, Eric flatly disagrees with the premise, attributing market shifts to structural changes rather than macro interest rates.
Hardest push from Harry ▶ 6:54 Questioning founder courage with VCsHarry pushes back on Eric's premise that CEOs filter VC advice, questioning whether most founders actually have the gumption to tell VCs they are wrong.
Biggest teaching moment ▶ 9:31 Role of board vs emotional supportWhen Harry asks whether VCs should provide emotional and psychological support, Eric corrects this view, clarifying that boards must remain rational and are not meant to be a crying towel.
Harry holds his own ▶ 19:17 Quoting exact angel conversion metricsHarry demonstrates detailed preparation by citing specific conversion rates from Eric's writing, showing 37 percent of California angel deals reach Series A compared to 21 percent elsewhere.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Sponsorship Announcement for Hiring Screen | 1 | 2 | 1 | 0 | The host opens with sponsorship announcements and introduces the guest. Eric lightheartedly recalls his initial naive belief that venture capital was a part-time job including golf, which coffee meetings quickly disabused. | |
| Early Investment Strategy and Founder Mindset | 1 | 4 | 1 | 0 | Harry asks standard open-ended questions regarding early strategy and operator transition. Eric provides an insightful rule of thumb that 80 percent of VC advice is unhelpful and that good CEOs must filter out the bad 80 percent. | |
| Navigating Board Dynamics and the Role of VC Support | 2 | 5 | 2 | 1 | Harry asks if founders actually have the courage to push back on VCs and whether VCs should offer psychological support. Eric reframes board expectations, clarifying that a board is not a boss nor a crying towel, but a rational entity seeking best outcomes. | |
| The Dichotomy of Hot vs. Cold Startups in Venture Capital | 3 | 4 | 1 | 1 | Harry references Eric's Medium article on the dichotomy of hot versus cold startups. Eric educates the audience on the venture power law where 5 percent of investments generate 95 percent of returns, citing Uber as an extreme example. | |
| Fundraising Dynamics, War Chests, and Down Round Risks | 2 | 4 | 1 | 1 | Harry asks whether startups should raise massive war chest rounds even if it risks future down rounds. Eric walks through stage-dependent fundraising advice and warns against accepting onerous full-ratchet terms just to chase inflated valuations. | |
| Institutional Capital and the Shift in Late-Stage Private Markets | 3 | 6 | 3 | 2 | Harry poses a hypothesis that rising interest rates will pull institutional money away from late-stage private tech. Eric explicitly disagrees with the premise, redirecting to structural changes where companies remain private longer and force institutional asset allocation changes. | |
| The Silicon Valley Advantage and Angel Investment Success | 3 | 5 | 2 | 2 | Harry demonstrates research by quoting specific metrics from Eric's article on California angel investment conversion rates. Eric explains the network effects of Bay Area tech density and contrasts local experienced angel investors with wealthy non-tech angels elsewhere. | |
| Quick Fire Round: Recommended Books, Favorite VCs, and Career Advice | 2 | 3 | 1 | 1 | Harry guides Eric through a quick-fire round covering books, admired peers, and sectors. Eric offers compelling thoughts on why distributed authorization via blockchain is underhyped beyond currency speculation. |
Statements from this episode (14)
Ver Ploeg: Over 80% of VC advice to CEOs is useless
“I'm fully aware that the CEO who's been working 60 plus hours a week in a specific sector for several years knows a lot more about that sector than me as a VC board member who, I mean, really can rarely spend more than five hours a week on a specific company a…”
Ver Ploeg: Corporate training fails to prepare founders for board management
“There's nothing in the training of somebody who's, you know, been in corporate America, or, you In, but anywhere in the world, that trains you for dealing with a board of, you know, smart, opinionated people who have some control over your life, but aren't spe…”
Ver Ploeg: A startup board is not the CEO's boss
“Your board is not your boss, right? It's an, and by the same token, you know, becoming CEO of a young company is not sort of about unfettered open field running either. A board is an amalgamation of people who have a collective interest and have their own sepa…”
Ver Ploeg: Board members should prioritize rational outcomes over emotional support
“By and large, I don't think that's the normal operating role of being sort of the support. I think the, in terms of an efficient business interaction, the role of the board member is a very you know, To be very rational and to be very specific about trying to …”
Ver Ploeg: 5% of early-stage investments generate 95% of venture returns
“And that's the nature of early stage venture is that five percent of those investments generate 95% of their turns.”
Ver Ploeg: Uber's growth mirrors early Google, justifying its valuation
“You know, I haven't seen their financials, but, you know, I've talked to their investors who have, and, you know, they say things like, you know, it's financials are like the early days of Google, that, you know, it really is growing that Stratospherically, an…”
Ver Ploeg: Founders should lower valuations rather than accept full ratchets
“And if you're, you know, you need to agree to a full ratchet to get the valuation that you were looking for then I think either A, you should relax your valuation expectations and, you know get better anti-dilution terms, or not raise that round.”
Ver Ploeg: Mid-stage startups should target 18 months of burn runway
“In the mid-stage, after you've gotten something proven that you're not cash flow positive by any measure, you know, the standard rule of thumb is something like 18 months worth of burn, right?”
Ver Ploeg: Rockstar companies should raise heavily in frothy markets
“In a frothy environment like we have now, or at least we had until last week then, you know, there's a lot of cash available. And if you're a rockstar company, you should take it.”
Ver Ploeg: Microsoft went public at a sub-$1B market cap
“I mean, people like to talk about how when Microsoft went public, it was a sub one billion dollar market cap company.”
Ver Ploeg: Data disproves that remote tools democratize startup success
“You know, honestly, I had thought, sort of a hypothesis of mine was that there, we would see increased geographic democratization over the last handful of years, given, you know, better communication, lower friction and overhead in, in engaging remote resource…”
Ver Ploeg: Being in the Bay Area provides irreplaceable VC deal flow
“There are two answers to that. The short and simple one is yes, in a way that you just couldn't get any other place. Because, you know, if I go to my local coffee shop, which I do every morning, I see venture guys in there, right?”
Ver Ploeg: Silicon Valley angels offer better tech experience than non-tech angels
“I think, you know, you just have a larger fraction of people with money, In the Valley have money from being involved in entrepreneurial ventures. So they have relative experience. Whereas, you know, I grew up in Ohio, like the people who had money there, you …”
Ver Ploeg: Meal delivery startups lack defensibility and will compete to death
“I just don't understand all of these, you know, sort of food meal delivery businesses. They've raised a ton of money and I look at them and I just don't understand where the defensibility comes from their business models and how they're not just going to, you …”