Nov 30, 2016 · 26m · 20vc
20VC: Why There Is A Revolution In VC, Why Boards Are Inherently Inefficient & Why Data Will Be Central To VC In The Future with Chris Farmer, General Partner @ SignalFire
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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 Chris Farmer, General Partner at SignalFire, to discuss how big data, artificial intelligence, and proprietary operational software are transforming the venture capital industry. Farmer shares insights into SignalFire's unique data-driven investment approach, the evolution of seed fundraising, and why traditional firm structures and board dynamics must evolve.
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 30.1% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 4.3 Guest disagreement 2.3 Harry pushing back 1.8
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:06 Rejection of Correlation VC comparison
Chris directly rejects Harry's framing comparing SignalFire to Correlation VC, asserting that they operate on opposite ends of the spectrum.
Hardest push from Harry ▶ 8:19 Devil's advocate on founder human judgmentHarry explicitly plays devil's advocate, challenging whether a heavily data-centric approach destroys the essential human judgment needed to evaluate founder grit.
Biggest teaching moment ▶ 8:36 Reframing data usage in venture capitalChris corrects Harry's assumption by explaining that SignalFire does not use data to score founders, comparing their model to Uber rather than Mattermark.
Harry holds his own ▶ 13:35 Citing Chad Byers on board-to-partner ratioHarry demonstrates industry expertise by referencing a previous guest's operational philosophy on low board-to-partner ratios to challenge Chris.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Chris Farmer's Journey to Venture Capital and SignalFire | 1 | 2 | 0 | 0 | Harry introduces Chris with background notes and prompts him for his career trajectory. Chris delivers a friendly bio narrative tracing his journey from Tufts and early angel investing to General Catalyst and SignalFire. | |
| Why Venture Capital Needs Technological Revolution | 3 | 5 | 3 | 1 | Harry quotes Chris's own statement regarding software barely touching venture capital. Chris lays out how traditional VCs rely on manual relationships and 1970s practices, contrasting it with SignalFire's deep engineering team. | |
| Balancing Data Analytics with Human Judgment in Early Stage VC | 4 | 6 | 3 | 4 | Harry plays devil's advocate by asking if heavy data analytics risks losing the human touch in evaluating founders. Chris reframes the premise, clarifying that data is used for context and workflow rather than scoring founders. | |
| SignalFire's Competitive Advantage and Portfolio Value Add | 2 | 4 | 2 | 1 | Harry inquires about competitive differentiation in winning deal allocations. Chris outlines SignalFire's superior win rates against traditional seed funds by offering in-house SaaS tools and dedicated operational talent. | |
| Rethinking Board Seats and Scaling Operational Support | 5 | 6 | 4 | 4 | Harry cites past guest Chad Byers regarding board ratios and later mentions Correlation VC. Chris explicitly rejects taking board seats at seed stage and pushes back on being grouped with Correlation VC, clarifying SignalFire is high-touch. | |
| Quick Fire Round with Chris Farmer | 2 | 3 | 2 | 1 | Harry guides Chris through a rapid-fire series of personal and industry questions. Chris criticizes VCs who sit on the fence without conviction and shares his thesis behind investing in Frame.io. |
Statements from this episode (17)
Farmer: Traditional VC model is outdated and must be rebuilt from scratch
“After a few years, I felt that VC was outdated. So I left Bessemer to study one question. If you were to strip a venture curve down to the bare metal to where to recreate a firm from scratch, how would you build a next generation VC?”
Farmer hired six researchers to interview 500 founders and deconstruct VC
“I hired six researchers for a year in 2009 to study precisely that question. And we interviewed over 500 founders and 170 funds from seed to buyout hedge and every major venture fund in between.”
Farmer: Most venture capital firms operate exactly as they did in 1970
“So for the most part, the way most VCs do business has barely changed since 1970.”
Farmer: Most venture capital data efforts are superficial window dressing
“Some firms have begun to dabble with data, but almost none have serious efforts in the area, so it's mostly window dressing at best.”
SignalFire employs 17 staff, primarily engineers and data scientists
“Today we have 17 full-time people on the team, and we have more engineers and data scientists than any other function.”
Farmer: SignalFire does not use data to evaluate founder quality
“I'd still believe in, you know, heavily in human loop systems, and so we're not trying to assess the quality of the founder, you know, with using data.”
Farmer: SignalFire operates more like Uber than a database like Mattermark
“We're using technology to enable discovery, competitive intelligence, contextualization, collaboration, and ultimately support of our portfolio companies. So, so we look more like Uber than we look like Mattermark in that sense.”
Farmer: Institutional seed investing emerged in 2008 driven by AWS
“And then around oh eight seed investing started to institutionalize driven by capital efficiencies from open source and cloud computing platforms like AWS and the distribution channels like the app stores and social networks.”
Farmer: Major VC funds have devolved into momentum investors
“The major funds, I think, to drift away from their roots of sort of being that sort of foundational investor, and they've become much more momentum investors versus sort of the initial partner that a founder has from inception.”
Farmer: Survey of 500 founders reveals recruiting is the top pain point
“So, you know, in the research we did, interviewing over 500 founders, recruiting was the number one pain point of almost all the founders”
Farmer: SignalFire almost always beats traditional seed funds head-to-head
“And as a result of that, we have an unbelievably high win rate against the top venture firms in the industry and almost always win head to head against the seed funds because typically we're competing with, you know, two guys and a dog and we're bringing an ar…”
Farmer: SignalFire refuses to take board seats at the seed stage
“At the seed stage, we don't take board seats.”
Farmer: Traditional quarterly board meeting cycles move far too slowly
“Frankly, I think that the cycle of board interactions is far too slow.”
Farmer: Founders care about operational support, not VC sourcing algorithms
“No entrepreneur gives a shit what, you know, algorithm we use to find them. They care about how we help them build the business as they should”
Farmer: Traditional VCs will fade away without investing in founder support
“I think the old guard VCs are on notice and that they have to make meaningful investments in better support of entrepreneurs or they'll fade away.”
Farmer: Too many VCs lack conviction and rely on peer validation
“There's probably too many people who, and VCs in the industry who sit on the fence and don't have the conviction themselves to make their own decisions without Without pure validation. And so there's some awesome entrepreneurial, you know, investors that reall…”