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Sep 14, 2015 · 29m · 20vc

20 VC 071: Pre-Seed Investing, Why Now Is The Best Time with Nicholas Chirls @ Notation Capital

Nicholas Chirls · 22m spoken Harry Stebbings · 4m spoken
0:00 / 0:00

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, Nicholas Chirls, co-founder of Notation Capital, discusses his transition from Betaworks to pre-seed investing in Brooklyn, detailing his fund's investment thesis, founder evaluation criteria, and the unique dynamics of New York City's venture ecosystem.

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 16.9% of the talking time here. How this is scored →

Harry as informed peer 2.7 Guest teaching 3.0 Guest disagreement 1.3 Harry pushing back 1.2
05100:0010:0020:001:26–6:36 · Harry as informed peer 1/10 Nicholas Chirls' Career Origin and Learning Venture Capital Harry asks standard career origin questions about Nicholas' transition from Betaworks to venture capital. Nicholas answers collaboratively, sharing candid reflections on learning the trade and finding mentors.6:36–10:32 · Harry as informed peer 3/10 Notation Capital Investment Thesis and Pre-Seed Strategy Harry prompts Nicholas for the quick elevator pitch on Notation Capital. Nicholas outlines his thesis, explaining how traditional NYC seed funds have migrated upmarket and created a pre-seed opportunity.10:39–14:57 · Harry as informed peer 3/10 Evaluating Pre-Stage Founders and Market Valuations Harry questions how early valuation and access work when dealing with serial entrepreneurs. Nicholas reframes the premise, pointing out that repeat founders are not inherently superior and pointing to iconic first-time founders like Mark Zuckerberg.14:59–19:21 · Harry as informed peer 2/10 Geographic Focus, Hands-On Support, and Deal Sourcing The pair discuss geography and deal sourcing. Nicholas offers a bluntly candid take on pitch events, calling demo days a shitty way to get to know a founder.19:21–23:37 · Harry as informed peer 5/10 Fund Size, Ownership Strategy, and LP Dynamics Harry demonstrates solid grasp of micro-VC mechanics by proposing a specific initial check versus follow-on reserve ratio for an $8 million fund. Nicholas explains their strategy of prioritizing initial ownership and using SPVs for follow-ons.23:37–27:54 · Harry as informed peer 2/10 Quickfire Round: Future Goals, Reading Habits, and Recent Deals A friendly quickfire round covering future fund goals, reading fiction, meditation apps, and recent portfolio company Zipdrug.1:26–6:36 · Guest teaching 2/10 Nicholas Chirls' Career Origin and Learning Venture Capital Harry asks standard career origin questions about Nicholas' transition from Betaworks to venture capital. Nicholas answers collaboratively, sharing candid reflections on learning the trade and finding mentors.6:36–10:32 · Guest teaching 4/10 Notation Capital Investment Thesis and Pre-Seed Strategy Harry prompts Nicholas for the quick elevator pitch on Notation Capital. Nicholas outlines his thesis, explaining how traditional NYC seed funds have migrated upmarket and created a pre-seed opportunity.10:39–14:57 · Guest teaching 5/10 Evaluating Pre-Stage Founders and Market Valuations Harry questions how early valuation and access work when dealing with serial entrepreneurs. Nicholas reframes the premise, pointing out that repeat founders are not inherently superior and pointing to iconic first-time founders like Mark Zuckerberg.14:59–19:21 · Guest teaching 3/10 Geographic Focus, Hands-On Support, and Deal Sourcing The pair discuss geography and deal sourcing. Nicholas offers a bluntly candid take on pitch events, calling demo days a shitty way to get to know a founder.19:21–23:37 · Guest teaching 3/10 Fund Size, Ownership Strategy, and LP Dynamics Harry demonstrates solid grasp of micro-VC mechanics by proposing a specific initial check versus follow-on reserve ratio for an $8 million fund. Nicholas explains their strategy of prioritizing initial ownership and using SPVs for follow-ons.23:37–27:54 · Guest teaching 1/10 Quickfire Round: Future Goals, Reading Habits, and Recent Deals A friendly quickfire round covering future fund goals, reading fiction, meditation apps, and recent portfolio company Zipdrug.1:26–6:36 · Guest disagreement 0/10 Nicholas Chirls' Career Origin and Learning Venture Capital Harry asks standard career origin questions about Nicholas' transition from Betaworks to venture capital. Nicholas answers collaboratively, sharing candid reflections on learning the trade and finding mentors.6:36–10:32 · Guest disagreement 1/10 Notation Capital Investment Thesis and Pre-Seed Strategy Harry prompts Nicholas for the quick elevator pitch on Notation Capital. Nicholas outlines his thesis, explaining how traditional NYC seed funds have migrated upmarket and created a pre-seed opportunity.10:39–14:57 · Guest disagreement 2/10 Evaluating Pre-Stage Founders and Market Valuations Harry questions how early valuation and access work when dealing with serial entrepreneurs. Nicholas reframes the premise, pointing out that repeat founders are not inherently superior and pointing to iconic first-time founders like Mark Zuckerberg.14:59–19:21 · Guest disagreement 3/10 Geographic Focus, Hands-On Support, and Deal Sourcing The pair discuss geography and deal sourcing. Nicholas offers a bluntly candid take on pitch events, calling demo days a shitty way to get to know a founder.19:21–23:37 · Guest disagreement 1/10 Fund Size, Ownership Strategy, and LP Dynamics Harry demonstrates solid grasp of micro-VC mechanics by proposing a specific initial check versus follow-on reserve ratio for an $8 million fund. Nicholas explains their strategy of prioritizing initial ownership and using SPVs for follow-ons.23:37–27:54 · Guest disagreement 1/10 Quickfire Round: Future Goals, Reading Habits, and Recent Deals A friendly quickfire round covering future fund goals, reading fiction, meditation apps, and recent portfolio company Zipdrug.1:26–6:36 · Harry pushing back 0/10 Nicholas Chirls' Career Origin and Learning Venture Capital Harry asks standard career origin questions about Nicholas' transition from Betaworks to venture capital. Nicholas answers collaboratively, sharing candid reflections on learning the trade and finding mentors.6:36–10:32 · Harry pushing back 1/10 Notation Capital Investment Thesis and Pre-Seed Strategy Harry prompts Nicholas for the quick elevator pitch on Notation Capital. Nicholas outlines his thesis, explaining how traditional NYC seed funds have migrated upmarket and created a pre-seed opportunity.10:39–14:57 · Harry pushing back 2/10 Evaluating Pre-Stage Founders and Market Valuations Harry questions how early valuation and access work when dealing with serial entrepreneurs. Nicholas reframes the premise, pointing out that repeat founders are not inherently superior and pointing to iconic first-time founders like Mark Zuckerberg.14:59–19:21 · Harry pushing back 1/10 Geographic Focus, Hands-On Support, and Deal Sourcing The pair discuss geography and deal sourcing. Nicholas offers a bluntly candid take on pitch events, calling demo days a shitty way to get to know a founder.19:21–23:37 · Harry pushing back 2/10 Fund Size, Ownership Strategy, and LP Dynamics Harry demonstrates solid grasp of micro-VC mechanics by proposing a specific initial check versus follow-on reserve ratio for an $8 million fund. Nicholas explains their strategy of prioritizing initial ownership and using SPVs for follow-ons.23:37–27:54 · Harry pushing back 1/10 Quickfire Round: Future Goals, Reading Habits, and Recent Deals A friendly quickfire round covering future fund goals, reading fiction, meditation apps, and recent portfolio company Zipdrug.

speaking balance: gold is Harry, purple is the guest (3 minute bins)

0:00 · Harry 57.5% · guest 42.5%0:00 · Harry 57.5% · guest 42.5%3:00 · Harry 5.7% · guest 94.3%3:00 · Harry 5.7% · guest 94.3%6:00 · Harry 4.4% · guest 95.6%6:00 · Harry 4.4% · guest 95.6%9:00 · Harry 12.1% · guest 87.9%9:00 · Harry 12.1% · guest 87.9%12:00 · Harry 6.4% · guest 93.6%12:00 · Harry 6.4% · guest 93.6%15:00 · Harry 6.1% · guest 93.9%15:00 · Harry 6.1% · guest 93.9%18:00 · Harry 9.9% · guest 90.1%18:00 · Harry 9.9% · guest 90.1%21:00 · Harry 7.1% · guest 92.9%21:00 · Harry 7.1% · guest 92.9%24:00 · Harry 8.3% · guest 91.7%24:00 · Harry 8.3% · guest 91.7%27:00 · Harry 64% · guest 36%27:00 · Harry 64% · guest 36%
Sharpest disagreement ▶ 18:25 Rejection of Demo Days

Nicholas expresses sharp disdain for public pitch events, describing demo days as a shitty way to evaluate entrepreneurs compared to organic relationship building.

 Hardest push from Harry ▶ 20:54 Probing Fund Reserves Strategy

Harry cuts in directly to challenge and refine Nicholas' fund construction, asking if the fund splits three million for initial checks and five million for follow-on capital.

 Biggest teaching moment ▶ 12:45 Reframing First-Time vs. Repeat Founders

Nicholas dismantles the assumption that serial entrepreneurs are always ideal, arguing that world-changing companies are frequently built by first-time founders who keep early spending disciplined.

 Harry holds his own ▶ 20:54 Demonstrating Venture Math Expertise

Harry showcases deep industry understanding by immediately calculating standard core-to-reserve allocation ratios upon hearing the fund size.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Nicholas Chirls' Career Origin and Learning Venture Capital 1200 Harry asks standard career origin questions about Nicholas' transition from Betaworks to venture capital. Nicholas answers collaboratively, sharing candid reflections on learning the trade and finding mentors.
Notation Capital Investment Thesis and Pre-Seed Strategy 3411 Harry prompts Nicholas for the quick elevator pitch on Notation Capital. Nicholas outlines his thesis, explaining how traditional NYC seed funds have migrated upmarket and created a pre-seed opportunity.
Evaluating Pre-Stage Founders and Market Valuations 3522 Harry questions how early valuation and access work when dealing with serial entrepreneurs. Nicholas reframes the premise, pointing out that repeat founders are not inherently superior and pointing to iconic first-time founders like Mark Zuckerberg.
Geographic Focus, Hands-On Support, and Deal Sourcing 2331 The pair discuss geography and deal sourcing. Nicholas offers a bluntly candid take on pitch events, calling demo days a shitty way to get to know a founder.
Fund Size, Ownership Strategy, and LP Dynamics 5312 Harry demonstrates solid grasp of micro-VC mechanics by proposing a specific initial check versus follow-on reserve ratio for an $8 million fund. Nicholas explains their strategy of prioritizing initial ownership and using SPVs for follow-ons.
Quickfire Round: Future Goals, Reading Habits, and Recent Deals 2111 A friendly quickfire round covering future fund goals, reading fiction, meditation apps, and recent portfolio company Zipdrug.

Statements from this episode (11)

Disclosure
USV partner Andy Weissman helped Notation Capital raise its first fund
“These folks were not just mentors in the sense that they helped me learn the business, but actually they helped us raise Notations First Fund in many ways, and so Andy Weissman has been has been a mentor to us, who's a partner at Union Square Ventures.”
Nicholas Chirls Sep 14, 2015 ▶ 5:33
Assertion Supported
New York City consistently produces billion-dollar tech exits like Etsy and Tumblr
“New York, we believe, has now shown that it consistently can produce billion plus dollar exits, and so that's companies like Etsy and Mongo and Tumblr and a bunch of others, you know, a bunch of e-commerce companies as well.”
Nicholas Chirls Sep 14, 2015 ▶ 7:19
Opinion
Thrive, Lerer Hippeau, and First Round have abandoned true seed investing
“Many of the best VCs in New York have moved up the stack. And what that means is they've raised dramatically larger funds in the last two years. And so, Folks like Thrive Capital, and Lyra Ventures, and First Ground, and folks that you might consider as tradit…”
Nicholas Chirls Sep 14, 2015 ▶ 8:31
Disclosure
Notation Capital writes $150K checks into pre-seed rounds under $500K
“We write on average, 150,000 dollar checks into what we, Consider pre-seed rounds, so that is typically rounds of 500 K or less”
Nicholas Chirls Sep 14, 2015 ▶ 9:27
Opinion
First-time founders build the most important companies, not repeat founders
“I think if you look at some of the biggest, most important companies over the last 10 years, they're first time founders, you know including Mark Zuckerberg at Facebook. So, you know, I don't I don't think repeat founders are always the best founders.”
Nicholas Chirls Sep 14, 2015 ▶ 12:57
Opinion
New York early-stage startup valuations remain much more practical than Silicon Valley
“I think that what we've seen in terms of seed and pre-seed and even Series A in New York is is much more much more practical valuations. I mean, I don't think it's super crazy here, here in New York. Certainly out in the valley, I think you're seeing I think y…”
Nicholas Chirls Sep 14, 2015 ▶ 14:09
Prediction Didn’t hold up
Notation Capital will exclusively back startups based in New York City
“Yeah, so at least today we're on New York, very much a New York City focused fund. The, so, so every single one of our companies that we work with will be primarily based in New York.”
Nicholas Chirls Sep 14, 2015 ▶ 15:01
Opinion
Accelerator demo days are a terrible way to evaluate startup founders
“I personally, I don't go to demo days. I'm just kind of, I'm, you know, I'm kind of burnt out by them. I think it's a, it's actually it's kind of a shitty way to get to know a founder, you know, is to listen to them pitch on a stage amongst hundreds of other f…”
Nicholas Chirls Sep 14, 2015 ▶ 18:20
Disclosure
Notation Capital's inaugural venture fund is just under $8 million
“Yeah, so it's just under eight million dollars.”
Nicholas Chirls Sep 14, 2015 ▶ 20:55
Disclosure
Notation Capital targets high single-digit equity ownership for initial pre-seed checks
“We're focusing on having initially relatively high ownership in the companies that we work with. That's usually high single-digit percentage.”
Nicholas Chirls Sep 14, 2015 ▶ 21:34
Disclosure
Notation Capital raised its first fund from 30 individual and institutional LPs
“So we have about 30 LPs. Half of those are, or I'd say, you know, in terms of dollar amounts, about half the fund is individuals many of whom are founders and partners that are at other VC firms and folks that, you know, we've worked with in the community for …”
Nicholas Chirls Sep 14, 2015 ▶ 23:05
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