Aug 8, 2016 · 28m · 20vc
20VC: Data Collective's Matt Ocko on Why "All Fund Size Models Are Wrong" and The Lifecycle of Current Venture Funds Is Inefficient?
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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 Matt Ocko, co-managing partner at Data Collective, to explore the structural flaws of traditional venture fund sizing, the need for longer fund lifecycles, and Data Collective's thesis-driven approach to deep tech investing.
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 24.1% of the talking time here. How this is scored →
Harry as informed peer 3.5 Guest teaching 4.7 Guest disagreement 2.5 Harry pushing back 1.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 22:11 Rejecting Arianna Huffington's Sleep Philosophy
Matt directly dismisses Arianna Huffington's emphasis on sleep, arguing that his firm's top venture returns validate his high-intensity, low-sleep strategy over her guidance.
Hardest push from Harry ▶ 11:27 Challenging Opportunity Fund Negative SignalingHarry presses Matt on whether failing to follow on with an Opportunity Fund creates a damaging negative signaling effect for portfolio startups.
Biggest teaching moment ▶ 4:02 Explaining Signal Destruction in Rigid Fund SizesMatt breaks down how strict segregation by fund size forces early investors into blind auctions, destroying critical information and placing later-stage LP capital at risk.
Harry holds his own ▶ 26:18 Demonstrating Domain Network with TradeshiftHarry demonstrates domain expertise by citing his discussion with Tradeshift chairman Morton Lund, surprising Matt and demonstrating deep network access.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Founding Story of Data Collective | 2 | 5 | 3 | 1 | Matt reframes fund size categorization as an information-destroying mechanism that forces sub-optimal behavior and places LP capital at risk. Harry sets up the discussion with open-ended framing questions without offering pushback. | |
| Data Collective's Investment Strategy and Follow-On Mechanics | 4 | 6 | 2 | 3 | Harry directly asks Matt how Data Collective avoids the negative signaling function when they choose not to follow on with their Opportunity Fund. Matt defends their process with clarity, using their early investment in ZenPayroll/Gusto as an explicit case study. | |
| Meta-Thesis Driven Venture Investing | 3 | 5 | 2 | 2 | Matt explains Data Collective's meta-thesis around deep compute, algorithms, and capital efficiency across industries. Harry provides lightweight prompt questions on thesis versus stage-driven venture capital. | |
| Inherent Inefficiencies in Fund Life Cycles | 3 | 6 | 4 | 2 | Matt playfully critiques LP expectations regarding fund lifecycles, quoting LP Chris Douvos about cognitive dissonance over short-term returns versus multi-decade venture compounding. Harry guides the theme on deep tech liquidity realities. | |
| Quick Fire Round: Books, Sleep, and Productivity | 2 | 4 | 3 | 2 | Matt lightheartedly dismisses Arianna Huffington's sleep recommendations, arguing that his firm's venture returns validate his low-sleep routine over her advice. Harry facilitates the rapid-fire questions cleanly. | |
| Quick Fire Round: Recent Investments in Three Scan and Tradeshift | 7 | 2 | 1 | 1 | Harry demonstrates sharp insider knowledge by revealing his prior connection with Tradeshift's chairman Morton Lund. Matt acknowledges Harry's rare connectedness, noting he is one of very few people outside their customer base to know about the company. |
Statements from this episode (13)
Segregating venture funds by size destroys signal quality, says Matt Ocko
“I sincerely believe, and there's a large but quiet group of other experienced VCs with successful track records that who also believe that the strict segregation of funds by size has an information destroying or signal reducing aspect.”
Early-stage VCs bias investments to please late-stage investors, says Matt Ocko
“Meanwhile, the early stage investor Because they have to consider this capital formation risk is at best unconsciously and at worst very consciously biasing the nature of the investments that they pick towards what is popular or acceptable or soothing to the t…”
Early-stage investors evaluate follow-on funding better than late-stage VCs
“In a perverse sense, their adjudication of whether that company deserves another three million or five million or seven million dollars is at least as good, if not better, than the next guy up the line, especially if that next guy up the line is by necessity D…”
Data Collective avoided micro-VC fund size to write larger initial checks
“We made a very conscious decision from the very beginning of our first institutional fund not to be a micro VC, not to be in the 30 to fifty million dollar fund size category, because if you disagree with conventional wisdom about a series A and you want to wr…”
Data Collective's Opportunity Fund is contractually forbidden from outside investments
“Our opportunity fund is in fact contractually prohibited from chasing deals outside of our portfolio.”
Data Collective passed on Gusto follow-ons because it wasn't deep tech
“We didn't follow on. We didn't raise our hand to be the big dog in successive rounds. And it had nothing to do with the quality of the company. And people trust us when we explain that because the company was a wonderfully engineered, great SAS company deliver…”
Planet Labs is the world's second or third largest space power
“Planet Labs is delivering massive informatics advantage to its customers by virtue of having become the second or third largest space power in the world measured in satellites.”
Data Collective passes on standard SaaS deals favored by Jason Lemkin
“We regretfully either say no up front or don't follow on in the kind of companies that somebody like Jason Lempton is going to make a fortune in.”
LPs uncomfortable with 15-to-20-year lifecycles shouldn't invest in early-stage VC
“I think that some LPs who over time are uncomfortable with Perhaps a 15 year, or some of my VC colleagues have quietly mentioned, maybe the equivalent of a 20 year long bond in venture. You know, those LPs may not be the right ones to go forward in the early s…”
Data Collective's early portfolio targeted $2B in 2016 revenue and bookings
“In aggregate in just a couple of our early stage funds are companies have hard contracted gap bookings and or fully recognized gap revenue approaching what should be about two billion dollars in 2016.”
Ordinary founders cannot build high-growth startups while sleeping eight hours
“Ordinary, ordinary humans like us can't respond to the demands of a truly successful startup. One that has this hard, sharp arc of takeoff and sleep eight hours and cook our own organic breakfast and get in a brisk Six mile walk and then write a little bit of …”
Three Scan maps tissue 1,000x faster than human pathologists
“So follow on, three scan, because they are transforming both drug development and medicine by delivering a three D map From the subcellular level all the way up to complete organ systems a thousand times faster and with essentially infinitely greater accuracy …”
Tradeshift serves 1M businesses, dwarfing competitor Ariba's footprint
“They have almost a million discrete companies in a 140 countries worldwide from tiny companies in China up to a huge chunk of the fortune 100 addicted to their stuff. And they dwarf the footprint of Ariba and any other, you know, would be competitor.”