Sep 21, 2016 · 33m · 20vc
20VC: Why Valuation Is A Stupid Concept, VC Is Ripe For Disruption & Not All LPs Are Made Equal with Michael Skok, Founding Partner @ Underscore VC
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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 Michael Skok, Founding Partner at Underscore VC, about disrupting traditional venture capital through community alignment, transparent operations, and vector funding. Skok explains why early-stage valuations are often misguided and presents strategic frameworks for market evaluation and startup success.
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 28.5% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 4.1 Guest disagreement 1.4 Harry pushing back 1.5
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 21:52 Valuation is a Stupid Concept
Michael directly rejects the premise of Harry's question about valuation competition by calling valuation a 'stunningly stupid concept' when assessing early-stage founders.
Hardest push from Harry ▶ 4:41 Founder Collective Counter-ExampleHarry pushes back on Michael's claim of founder alignment by explicitly citing Founder Collective's model of never following on as a competing benchmark for true alignment.
Biggest teaching moment ▶ 18:00 Minimum Viable Segment (MVS)Michael educates Harry on product-market fit progression by introducing his proprietary 'Minimum Viable Segment' concept that sits between MVP and broader market traction.
Harry holds his own ▶ 16:41 Citing Jeff Clavier on RunwayHarry displays sharp domain knowledge by citing investor Jeff Clavier's specific preference for 24-36 months of runway when questioning Michael on portfolio cash planning.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Michael Skok's Background and Founding Underscore VC | 1 | 2 | 0 | 0 | Harry asks a open welcoming question about Michael's background and the founding of Underscore VC. Michael explains his transition from entrepreneur to VC and how a listening tour led to founding the firm. | |
| Disrupting the VC Model & Building Community Alignment | 5 | 4 | 2 | 4 | Harry probes Michael's definition of founder alignment by citing Founder Collective's contrasting policy of not following on past seed. Michael praises FC but argues the 40-year-old traditional VC model is ripe for disruption and details Underscore's community carry platform. | |
| LP Strategy, Selection, and Long-Term Fund Raising | 3 | 4 | 1 | 2 | Harry asks whether LPs can provide strategic value to portfolio companies. Michael categorizes their LP base into co-investors, cause-based supporters, and passive capital, emphasizing the need for patient long-term capital. | |
| Early Stage Investment Focus and Vector Funding | 2 | 4 | 0 | 1 | Harry asks about portfolio construction and early-stage strategy. Michael introduces vector funding, explaining how committing $5M upfront from Seed through Series A allowed Mautic to scale rapidly without fundraising friction. | |
| Funding Milestones and the Minimum Viable Segment | 4 | 5 | 1 | 2 | Harry references Jeff Clavier's standard 24-36 month runway benchmark. Michael agrees and builds on this by explaining milestone-driven funding vectors and introducing his proprietary Minimum Viable Segment framework. | |
| Assessing Market Creation with the BLACK Framework | 2 | 5 | 0 | 0 | Harry asks how VCs evaluate market creation in undefined spaces. Michael delivers a mini-lecture explaining his BLACK framework (Blatant, Latent, Aspirational, Critical). | |
| Rethinking Valuation and Ownership | 3 | 6 | 5 | 2 | When Harry asks about managing valuation in hyper-competitive deals, Michael forcefully rejects the question's premise, declaring valuation a 'stunningly stupid concept' at early stage. He advocates for open-source investing and blowing up the traditional VC black box. | |
| Quick-Fire Round & Mautic Case Study | 2 | 3 | 2 | 1 | Harry conducts a quick-fire round where Michael reveals he initially rejected Mautic due to a bad experience with Joomla until his community core changed his mind. Michael ends the segment by flipping the microphone to interview Harry about his own motivation. |
Statements from this episode (17)
Skok: Venture capital is a commodity while founder time is priceless
“Capital is clearly a commodity and entrepreneurs lives clearly aren't.”
Skok: Venture capital suffers from poor alignment between founders, VCs, and LPs
“There isn't good alignment, whether people like it or not, between the entrepreneur, their VC, and the VC, and their GPs, and sorry, and their LPs in many instances.”
Underscore VC shares carried interest with community advisors
“First of all, we're going to take a chunk of our carry, and we're going to make it accessible to what we call our community, which is the cause.”
Underscore VC's inaugural fund is backed by a $40B+ LP base
“The fund has been oversubscribed very quickly. We were able to select the VC, sorry, the LPs who really understood the model and wanted to get behind it. I'm happy to tell you that, you know, that's well over forty billion dollars worth of capital in the found…”
Skok: Underscore VC founders committed 5x traditional GP capital
“I mean, we put five times as much capital in individually as the founders here than would traditionally be the case.”
Michael Skok: Demandware raised $70M before going public
“I've invested in companies like Demandware, for example, which probably took about seventy million dollars worth of capital before we got it public.”
Skok: Emerging VCs should target endowments over individual investors
“It's very important to look at this as a business that is At least a decade long fund at a time, and you never really know the results of your fund's performance for some number of years. So you need to get investors who are very patient, and you have the you …”
Underscore VC commits $5M Series A checks alongside initial seed funding
“We'll give you a seed check to get the initial team together, but we'll also do something we've called vector funding, which is right. Very clear basis for them, for the entrepreneur to go from seed all the way through to series a and commit to that series a, …”
Mautic Acquired Over 50,000 Customers in First Year
“And for him, what that's meant is in his first year, he's gone from zero customers to well over 50,000 customers”
Startups should target a Minimum Viable Segment before broader market fit
“MVP is great, but I'll tell you the next big milestone that most people miss is in product market fit. They say, Oh, well, you're going to go prove that that product's being accepted by the market. Yes. But the market's huge if you're going up to something sig…”
Skok: Infrastructure startups take up to 3 years to reach MVS
“In some cases, I've seen it, for example, when you get into infrastructure products, you know, this is things like, for example, data warehousing as a service, companies like Casino that are doing that. That could take three years, because you're knocking down…”
Skok: Category-creating startups begin by addressing latent, unrecognized customer needs
“In many instances, if you're creating something, you're going to start at a latent aspirational level. You really won't have customers begging for what you're doing because you're creating it. They don't know they have that need.”
Michael Skok: Early-stage startup valuation is a stunningly stupid concept
“Well, first of all, valuation is just a stunningly stupid concept. Who on earth can value a person? I can't. And at the stage that we're working at, we're valuing people.”
Underscore VC runs diligence and deal flow transparently in the cloud
“In fact, our core members, when they're investing with us, get to watch us and participate in a whole cloud based investing program, because the way in which we do our investments is, you know, we eat our own cooking here. So everything is in the cloud because…”
Skok: Blogging helps founders organize thoughts and attract relevant support
“I do encourage entrepreneurs to blog because I think rather than reading other people's blogging for yourself is actually, first of all, great therapy, and secondly, it brings people to understand how they might help you.”