Dec 9, 2015 · 25m · 20vc
20 VC 095: How VCs Find Startups and How To Add Value Once Invested with David Teten @ ff Venture 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 this episode of The 20 Minute VC, host Harry Stebbings interviews David Teten, Partner at ff Venture Capital, to discuss modern venture capital deal sourcing, post-investment value creation, and structural trends disrupting early-stage investing. Teten shares insights from his published research on operational platform models, fund differentiation, and emerging FinTech investment opportunities.
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 26.4% of the talking time here. How this is scored →
Harry as informed peer 3.7 Guest teaching 4.3 Guest disagreement 2.3 Harry pushing back 1.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:43 Brand Building as a Farce
David directly dismisses Harry's suggestion that emerging funds should focus on brand building, labeling it a farce without underlying substance and quoting a Yiddish proverb about noisy empty coin boxes.
Hardest push from Harry ▶ 18:04 Challenging AngelList ScaleHarry pushes back on the limits of AngelList's reach by citing Gil Penchina's $8M syndicate to challenge whether platforms are already replacing traditional VCs at Series A and B.
Biggest teaching moment ▶ 8:43 Reframing VC Brand BuildingDavid dismantles Harry's premise about emerging fund strategy, teaching that marketing before establishing tangible value-add is useless chatter.
Harry holds his own ▶ 18:04 Citing Penchina's $8M SyndicateHarry displays domain knowledge of the early-stage landscape by citing Gil Penchina's $8 million syndicate data point to press David on syndicate threat levels.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| David Teten's Career Journey and ff Venture Capital Overview | 2 | 3 | 1 | 1 | Harry introduces David and asks standard open-ended questions about his background and firm focus. David explains his career trajectory and outlines ff VC's philosophy of being generalist seed investors. | |
| Inbound Deal Sourcing Strategy versus Outbound Models | 3 | 4 | 2 | 1 | David notes that he wrote the seminal academic research study on deal sourcing and contrasts outbound algorithmic data models with ff VC's inbound portfolio acceleration model. Harry asks follow-up questions on algorithmic sourcing trends. | |
| Fund Differentiation and the Flaws of Brand Building | 4 | 6 | 5 | 3 | When Harry asks if new funds should prioritize brand building to generate inbound, David forcefully rejects the premise and calls brand building without substance a farce. David also corrects the framing around early-stage portfolio cash burn. | |
| Economics of Operational Platform Teams in Venture Capital | 5 | 5 | 2 | 2 | Harry brings up Andreessen Horowitz's heavy operational platform model. David details the underlying economics, explaining how platform headcount reduces immediate partner cash compensation. | |
| Disruption in Investing, Crowdfunding, and AngelList | 6 | 4 | 3 | 4 | Harry demonstrates industry expertise by citing Gil Penchina's $8 million AngelList syndicate to ask whether syndicates are moving up-market into Series A and B. David agrees and defends how traditional seed platforms compete against individual angels. | |
| FinTech White Space and Investment Thesis Areas | 3 | 5 | 1 | 0 | David lays out his fintech thesis areas including cyber security, back-office automation, and alternative data sources. Harry allows David to detail his thesis without interrupting. | |
| Quick Fire Round: Tools, Books, Amazon, and Skycatch | 3 | 3 | 2 | 1 | In a quick-fire round, David gives contrarian takes on Amazon's valuation model and recommends Edward Tufte's data visualization books. Harry guides the quick transitions between topics. |
Statements from this episode (24)
Teten: HBS Alumni Angels Is New York's Largest Angel Group
“David is a partner at FF Venture Capital and is also founder and chairman of Harvard Business School Alumni Angels of Greater New York, the largest angel group in New York.”
Teten Authored Most-Read Deal Origination Study in Journal of Private Equity
“He also led the first ever study of best practices of venture capital and private equity funds in originating new deals, and it's the number one all-time most read study in the Journal of Private Equity, what an incredible stat that is, and the first ever stud…”
Teten: ff Venture Capital Is Largest East Coast Seed Fund by Headcount
“FF Venture Capital is, we believe, the largest by headcount seed-focused VC on the East Coast.”
Teten: Seed Stage VCs Should Be Generalists
“The philosophy of FF Venture Capital is that as seed stage investors, we should be generalists. We should keep our doors open wide to the broadest possible array of companies.”
Teten: ff Venture Capital Maintains a One-in-Six Portfolio Write-Off Rate
“We have a one out of six write-off rate, which is well below industry norms, and that attracts to us over 2000 inbound companies per year, and we filter through them for the approximately one dozen new companies per year in which we invest.”
Teten: Algorithmic Deal Sourcing Will Grow but Never Replace Traditional Methods
“So it will be a, an increasingly important tool in the VC's toolkit. But it will never be the only tool.”
Teten: Early-Stage VCs Spend 80% of Time on Deals They Reject
“One of the great frustrations of our friends who work at, ah, most other VCs at our stage is they spend 80% of their time talking with companies with whom they can't consummate an investment.”
Teten: ff Venture Capital Employs No Staff Dedicated Exclusively to Deal Origination
“Ah, in our model, we have no one at FFVC, despite our large headcount, whose job is origination.”
Teten: Generic VCs Lacking Differentiation Will Struggle in Upcoming Fundraising Cycles
“The generic VC, meaning the GC that doesn't have an edge, and the conventional VC that doesn't have something special that they bring to the table, will, I suspect, find themselves challenged in the next two fundraising cycles.”
Teten: ff Venture Capital Employs Nine Accountants Providing Startup CFO Services
“We have a team of nine accountants who provide outsourced CFO services to our companies.”
Teten: Delivering Real VC Value-Add Is Difficult Due to Low Scalability
“It's easy to talk about value-add, but it's harder to deliver, particularly given the limited scalability of the VC model.”
Teten: Only a Handful of VC Firms Build Full Platform Teams
“Besides us and Google ventures and Andreessen Horowitz, first round capital OpenView does some work on this area. A lot of other firms talk about it, but they've hired one or two people, right? They don't have a whole set of resources”
Teten: VC Platform Models Reduce Partner Cash Compensation for Future Gains
“What that means is they're foregoing current management fees. In the hope that 10 years later, they're gonna have greater capital gains. That is a very long-term bet. Of course, VCs are supposed to make long-term bets, but unless this is a difficult bet, becau…”
Teten Predicts Market Downturn Will Shrink Non-Core VC Platform Teams
“When the market turns down, which it will, I think you will see some shrinkage in this model by the people who are not fully dedicated to it and who haven't built it out as a core part of their business.”
Teten: 12 Academic Studies Show Angel Returns Median 18% to 54%
“We have collected 12 different academic studies on angel investing, which show median returns of 18% to 54%.”
Teten: Cash Returns in Early-Stage VC Take at Least 10 Years
“And in the best case scenario, it can take 10 years to actually see cash returns.”
Teten: Most of the 500+ Crowdfunding Sites Will Fail
“There are also over 500 crowdfunding sites, and most of them will fail, so we're glad we invested in one of the clear winners of that game.”
Teten: AngelList Is Becoming the Operating System of Venture Capital
“We are certainly monitoring AngelList because there is no question that they are working up the food chain to make themselves the fundamental operating system of this asset class.”
Teten: Traditional Two-Partner VCs Are Threatened by AngelList
“But I think that the modal VC, two partners, and an admin, and maybe an analyst, is under threat from AngelList, because they can't possibly have the level of granular knowledge of different sectors that individual angels do.”
Teten: ff Venture Capital Uses Addepar to Run Its Back Office
“We not only invested but became a client. We run part of our back office on Adapart because we, of course, own interests in about 80 different companies with lots of different types of securities and amounts and so on, and we need some mechanism to track all o…”
Teten: Sell Amazon Stock Due to Weak Retail Pricing Power
“I would probably sell On the grounds that, ah, it's not clear to me if when they eventually turn on the monetization spigot, ah, it will be impossible for other people to compete with them. In other words, the whole theory of Amazon, not unlike a lot of early-…”