Aug 24, 2016 · 24m · 20vc
20VC: Why Raising A Fund Is Like Raising A $25m Seed Round with No Product & Why Not All LP Money Is Equal with Chad Byers, General Partner @ Susa Ventures
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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 speaks with Chad Byers, General Partner at Susa Ventures, about the mechanics of launching and raising Fund I versus Fund II, building strategic LP bases, fund construction strategies, and identifying technology-driven defensible moats.
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 28.1% of the talking time here. How this is scored →
Harry as informed peer 4.1 Guest teaching 2.7 Guest disagreement 0.9 Harry pushing back 1.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:43 Rejecting 'LP Money is Equal' premise
Chad explicitly rejects the common industry premise that LP money is fungible green capital, insisting Susa intentionally curated a strategic LP base rather than taking capital out of desperation.
Hardest push from Harry ▶ 20:26 Challenging 6 GP decision-making frictionHarry directly presses Chad on whether expanding Susa's GP headcount to six will lengthen and complicate the deal decision-making process for founders.
Biggest teaching moment ▶ 16:27 Explaining fund reserve strategy evolutionChad educates Harry on how rapid portfolio markups like Robinhood forced Susa to adjust their fund construction reserves from a 1:1 upfront-to-follow-on ratio to 1:2.
Harry holds his own ▶ 6:04 Citing seed fund circularity trendsHarry exhibits deep ecosystem knowledge by citing Nick Chirls' essay on seed fund circularity and asking whether angel-to-institutional transitions represent a macro industry trend.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Chad Byers' Early Life, Career, and the Origin of Susa Ventures | 2 | 2 | 0 | 0 | Harry asks a broad opening question about Chad's entry into venture capital, allowing Chad to recount his early childhood days flipping Beanie Babies on eBay and his operating background at Silver Spring Networks. | |
| Transitioning from Angel Investor to Institutional Fund Manager | 5 | 3 | 1 | 2 | Harry demonstrates industry domain knowledge by referencing Nick Chirls' article on seed fund circularity and professionalization. Chad gently corrects Harry on his total number of angel investments before addressing fund institutionalization. | |
| The Reality of Raising Fund I vs. Fund II | 3 | 4 | 0 | 1 | Harry asks insightful follow-ups regarding the mechanics of fund raising and LP rejection reasons. Chad details how Susa pitched institutions three years in advance during Fund I to prepare for Fund II. | |
| Strategically Structuring the LP Base | 5 | 4 | 2 | 3 | Harry challenges the standard view that all LP capital is commoditized and introduces a question from LP Michael Kim of Cendana. Chad rejects the premise that LP money is equal, detailing Susa's highly strategic LP base. | |
| Brand, Team, and Data as Defensible Moats | 6 | 3 | 1 | 2 | Harry brings up insights from Floodgate's Ann Miura-Ko regarding team moats and asks informed questions on reserve ratios and Opportunity Funds. Chad articulates Susa's preference for data network effects over brand power. | |
| Susa's 15-to-20-Year Long-Term Master Plan | 6 | 2 | 1 | 4 | Harry pushes back on Chad's 15-to-20-year plan to expand to 6 GPs by asking if that creates decision-making friction and delays. He also frames Susa's potential trajectory against industry models like Benchmark and Andreessen Horowitz. | |
| Quickfire Round with Chad Byers | 2 | 1 | 1 | 0 | A collaborative quickfire round where Harry asks rapid questions on books, market cap predictions, and Susa's latest investment in Modsy. |
Statements from this episode (21)
Susa Ventures Announces $50 Million Fund II
“Last week, they announced the raise of Fund Two, a new fifty million dollar fund, absolutely testament to the quality of Fund One, which included the likes of some incredible companies and former guests of the show, including List, Robinhood, LendUp, and many …”
Chad Byers Flipped Beanie Babies on eBay at Age 11
“I remember being one of the first sellers on eBay during the beanie baby craze in the late nineties. So I was 11 years old. I'd set up this like little business flipping beanie babies on eBay.”
Chad Byers Co-Wrote Silver Spring Networks' S-1 at Age 23
“I got to be there doing a tremendous amount of growth from about a 150 people to 600 people, and eventually see the IPO which was kind of just a fantastic first company experience, dream come true. Got to write part of the S-One, which for a twenty-three-year-…”
Susa Ventures Seeded Fund I With Marked-Up Angel Deals at Cost
“One of the things we did when we raised the first fund, I think that helped in a tremendous way, is we pulled some of our angel investments into FundOne at cost. So we took some investments we had made the year before, put them in the fund at cost, even though…”
Chad Byers: Institutional LPs Rarely Back First-Time Venture Funds
“So when you start talking about fund to funds or endowments or institutions, they typically aren't funding first, first funds, unless there's a rare circumstance with the GP.”
Susa Ventures Raised $50M for Fund II After Targeting $40M
“We were targeting forty million. All the existings came in for about 30 of that. We landed one of the big institutions I'd kept warm for three and a half years. They kind of anchored the fund with ten million. And then We went up to the hard cap relatively qui…”
Chad Byers: Institutional LPs Reject First-Time Distributed Venture Teams
“At the time we were in LA, SF and New York, literally the team was distributed. Most big institutions, that was an immediate no. Felt the team had to be in the same place.”
Chad Byers: The best modern moats rely on data and network effects
“So we strongly believe that for businesses to create long-term value today, you have to have some form of strong defensibility or moat. And we think the best moats today are built with data network effects or economies of scale.”
Susa Ventures Limits Portfolio Companies to 6-8 Per Partner
“And so we'll always maintain in a really low partner to company ratio, ideally long-term kind of six to eight companies per partner, which is very unique at seed because we want to be so operationally involved.”
Chad Byers: Susa Ventures Aims to Grow to Six General Partners
“Our long-term vision for this fund is to have six GPs On a seed fund which would be pretty unique.”
Susa Ventures' Anchor LP Reference-Checked 30 of 40 Portfolio Founders
“The proof for us in that was our anchor LP and fund two called probably 30 of our 40 portfolio company founders and just said, is Sousa helpful?”
Chad Byers: Susa Ventures Avoids Investing Based on Brand Defensibility
“I think in our opinion, we'd rather see one of those other three than just a strong brand. So I think, you know, a good example of this is in the commerce space. There's some companies I think where their most defensible aspect is brand. There's examples of ma…”
Susa Ventures Fund I Maintained a 1:1 Reserve Ratio
“So in fund one, just to give you a benchmark, we were about a one-to-one in terms of upfront to follow-on capital in terms of the ratio.”
Robinhood Scaled to a $50M Series B in 18 Months
“What we learned in fund one, which is really important to inform what we did in fund two was that these companies that grow really quickly for us, it was companies like Robin hood where we invested at seed and a year and a half later they had raised a fifty mi…”
Susa Ventures Fund II Allocates $2 in Reserves Per $1 Upfront
“And so in fund two, we've shifted to a dollar up front to two dollars follow on. And who knows in the future that might change again, but that's the model in which we're going to operate this time.”
Chad Byers: LP Sentiment on Opportunity Funds Is Mixed
“The feeling in the LP community is pretty mixed on them. And so we haven't, you know, gone there yet, but it's something we've thought about and we've seen quite a bit of.”
Chad Byers: Susa Ventures Will Permanently Cap Fund Size at $150M
“The end state for us is 125, one hundred and fifty million dollar fund capped at that size, never getting bigger. Focus exclusively at early stage.”
Susa Ventures Doubled Check Size to $500K in Fund II
“So our check size and fund one was 25, 250 K in this fund is 500 K.”
Chad Byers: Susa Ventures Aims to Lead Every Deal Within 10 Years
“You know, essentially becoming moving from a follow on fund and hopefully, you know, 10 years from now being the investor of record in every deal, right?”
Chad Byers: Early-Stage Funds Over $100M Must Lead Investment Rounds
“Because you're going to have to be leading deals if you have a fund of over a hundred million.”
Chad Byers Predicts Facebook or Amazon Will Hit $1 Trillion First
“So I think it's Facebook. You know, my second answer, although this is kind of cheating, would probably be Amazon. So Facebook or Amazon, I don't think it's Apple. I don't think it's Google. I think it's going to be one of those two.”