Apr 27, 2016 · 24m · 20vc
20VC: Why Every Successful Company Pivots and Good Companies Get Funded in Good & Bad Markets with John Frankel, Founding Partner @ 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 John Frankel, Founding Partner at ff Venture Capital, to discuss macroeconomic venture dynamics, portfolio construction, and startup valuation management. Frankel shares strategic insights on capital efficiency, when startups should pivot, and how disciplined seed investing yields sustainable, top-tier returns.
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 31% of the talking time here. How this is scored →
Harry as informed peer 2.4 Guest teaching 3.1 Guest disagreement 1.7 Harry pushing back 1.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:16 John's 'Two Inches Taller' Reframe
John humorously dismisses Harry's premise about extending startup runways to 36 months by pointing out the unfeasible dilution tradeoffs required.
Hardest push from Harry ▶ 17:37 Harry Cites Founder Collective ThesisHarry directly challenges John's reserve strategy by citing Founder Collective's explicit counter-thesis against follow-on funding.
Biggest teaching moment ▶ 8:47 Deconstructing Downturn Deal FlowJohn dismantles the popular venture capital narrative that downturns automatically bring superior deal flow, detailing market reflexivity and founder quality dynamics.
Harry holds his own ▶ 17:37 Harry Leverages Industry KnowledgeHarry demonstrates keen industry insight by bringing up Eric Paley and David Frankel's anti-follow-on stance to test John's portfolio construction philosophy.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| John Frankel's Origin Story and Journey to ff Venture Capital | 1 | 1 | 0 | 0 | Harry invites John to share his origin story from Oxford to Goldman Sachs and founding ff Venture Capital. John provides a concise chronological overview while Harry politely listens and validates the summary. | |
| Macro Tech Economy, Cost of Creation, and Interest Rates | 2 | 4 | 2 | 1 | John delivers a macro-economic breakdown on how central bank rate policy and falling cost of creation impact tech efficiency. When Harry asks if finding startups is harder like finding needles in a haystack, John gently reframes the metaphor by noting entrepreneurs are active seekers, not passive needles. | |
| Venture Capital Branding and Long-Term Portfolio Building | 3 | 5 | 3 | 1 | Harry asks whether downturns improve deal flow quality based on common VC narratives. John directly counters this belief, explaining that private markets lagged public market recovery reflexively and that top founders get funded in any market cycle. | |
| Managing Startup Valuations and Strategic Capital Accumulation | 3 | 3 | 1 | 3 | Harry presses John on when high valuations are appropriate versus detrimental. John explains capital intensity and defensive fundraising strategies, citing Slack's aggressive capital strategy as a primary example. | |
| The Necessity and Timing of Strategic Startup Pivots | 3 | 4 | 3 | 2 | Harry queries whether founders should preemptively extend runways to 24-36 months. John humorously rejects the premise by stating 'in an ideal world I'd be two inches taller', pointing out the severe equity dilution tradeoffs founders face. | |
| Reserve Allocation and Follow-On Investment Strategies | 4 | 3 | 3 | 3 | Harry challenges John's reserve allocation policy by directly referencing Founder Collective's anti-follow-on investment thesis. John defends his firm's strategy while jokingly feigning ignorance about competitor Kickstarter during the quickfire transition. | |
| Spotlight on Investment in Wade & Wendy's AI Recruitment | 1 | 2 | 0 | 0 | John highlights his investment in Wade & Wendy, describing how AI recruitment platforms streamline candidate funnels using an example from his experience at Goldman Sachs. |
Statements from this episode (17)
ff Venture Capital Manages $150M With 30 Employees
“Alex Katz one of my partners here and I, we started the firm in November, 2008. And we're now, I guess in our eighth year, about 30 people, hundred and fifty million AUM.”
John Frankel Says Startup Creation Costs Have Bottomed Out
“I think it's pretty much bottomed out. I think we've pretty much taken most of the OPEX, or rather, most of the CAPEX involved in starting a business making an OPEX. I'm not sure it goes down much from here, because now you're down to people costs, And real es…”
John Frankel Argues the Federal Reserve Is Trapped in a Rate-Cutting Loop
“The Fed has consistently cut rates over the last 16 years to solve problems brought about, to be quite honest, by low rates, and is now stuck in this circle sort of consuming itself and the rest of the economy.”
John Frankel Predicts Interest Rate Normalization Will Be Ugly
“At some point, we're going to have to smash back through the looking glass to some sense of normality. It'll be ugly when it happens, but no central bank or government has a stomach together set.”
John Frankel Says High-Volume Seed Investing Degrades Portfolio Returns
“The problem is that doesn't lead to high returns to that portfolio. Because for, you know, every one in a thousand companies you had, you also have the other 999.”
ff Venture Capital Evaluates 3,000 Companies Annually to Invest in 15
“We look at two to 3000 companies a year and we end up investing in 15 to 20.”
John Frankel Says Good Startups Raise Capital in Any Market
“Generally good companies get funded in good or bad scenarios. Bad companies get funded in good funding markets, and sometimes bad companies pivot into being great companies.”
John Frankel Warns High Valuations Box Startups in for Future Rounds
“You can raise too much money at too high valuation, and then box yourself in for the next round.”
John Frankel Says the Best Time to Scale Capital Is Series A
“The best time to raise a lot of capital is once you've solved a lot of a problem, so you don't prematurely scale, but you scale into a business with no numbers. That's usually around about the series A to series B stage.”
John Frankel Claims Every Successful Startup Undergoes a Pivot
“Oh, every, every successful company pivots.”
John Frankel Says Most Failing Startups Pivot Too Late
“Usually, companies pivot too late. Usually, when it, you know, when it fails, it's because they pivoted too late. They stayed with the wrong model too long.”
John Frankel Says Worst Performers Took Years to Generate Revenue
“The worst companies we've seen in our portfolio have been the ones that take three, four years to get to revenue, three, four years to get, to prove their ideas against customer engagement.”
John Frankel Notes Each Venture Round Dilutes Startup Equity by 20%
“Each round is 20 to 30% diluted plus or minus.”
John Frankel Warns Oversubscribed Deals Frequently Lead to Premature Scaling
“We often find that the hot deals where everyone's scrambling to get in, where they raise the round size and they raise the round price, they prematurely scale, and they're often challenged as the company approaches the next round and the like.”
John Frankel Argues Crowdfunding Is Not a Winner-Take-All Market
“It's not necessarily a winner-take-all space. You know, I've heard people describe Kickstarter as becoming the Friendstoper space, but I'm not really seduced by that argument. I think that there's room for more than one platform, and they, their models really …”