Mar 1, 2017 · 28m · 20vc
20VC: The Power Of A Concentrated Seed Portfolio, Why Operational Value Add Models At Seed Do Not Make Sense & Why We Will See A Shakeout Of Growth Stage Investors with Roger Ehrenberg, Founder & Managing Partner @ IA Ventures
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Roger Ehrenberg, founder and managing partner of IA Ventures, joins Harry Stebbings on The 20 Minute VC to discuss the power of concentrated seed portfolios, realistic runway management, and the limitations of VC platform services. He shares key venture insights on follow-on strategies, product-market fit, and why overcapitalization will trigger a shakeout among growth-stage investors.
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 30.4% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 2.9 Guest disagreement 1.9 Harry pushing back 1.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:58 Dismissing VC platform features as 'crap'
Roger forcefully rejects the industry trend of building large horizontal VC platforms, bluntly stating that at the early seed stage 'none of this crap matters'.
Hardest push from Harry ▶ 14:34 Challenging Roger on VC platform valueHarry explicitly tees up a disagreement with Roger over his quote that VC platforms are not a panacea, directly confronting him on the value of operational support.
Biggest teaching moment ▶ 7:33 Calling founder misalignment concerns a red herringRoger educates Harry on institutional seed mechanics, explaining why concerns over follow-on investor misalignment are a red herring in efficient capital markets.
Harry holds his own ▶ 13:00 Quoting Mike Maples on bridge roundsHarry demonstrates strong market awareness by citing VC Mike Maples' dictum that a bridge round is a 'pier to nowhere' to press Roger on extension round outcomes.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Transition from Wall Street to Seed Investing | 3 | 3 | 2 | 2 | Harry asks an insightful question about whether broad 50-plus company portfolios constitute 'spray and pray' investing. Roger politely reframes the premise by clarifying how premier firms like Accel concentrate capital in late-stage winners while IA takes an artisanal seed approach. | |
| Target Ownership and Follow-On Strategy | 4 | 4 | 3 | 3 | Harry challenges Roger's follow-on strategy by citing Eric Paley's opposing model at Founder Collective regarding founder misalignment. Roger rejects the premise, explaining why misalignment concerns are a 'red herring' in efficient capital markets. | |
| Establishing Runway and Defining Product-Market Fit | 4 | 3 | 1 | 1 | Harry cites Justin Kan's benchmark for product-market fit to probe how IA evaluates company progress. Roger contrasts simple consumer rules of thumb with B2B enterprise realities like shortened sales cycles and unbundled consultative servicing. | |
| Managing Extension and Bridge Rounds | 5 | 4 | 4 | 4 | Harry cites Mike Maples on bridge rounds being 'piers to nowhere' and directly tees up a debate on VC platform services. Roger responds forcefully, citing success stories like The Trade Desk and dismissing early-stage platform value-add features as 'crap [that] doesn't matter'. | |
| Fund Capital Allocation and Growth Investor Shakeout | 3 | 3 | 2 | 2 | Harry asks if capital is strictly carved out per partner over a fund cycle. Roger flatly rejects the premise, emphasizing fund-level focus over individual partner allocations before predicting a shakeout among growth stage investors. | |
| Quickfire Round on Books, Process, and Mentorship | 4 | 1 | 1 | 1 | During the quickfire round, Harry connects Roger's choice of W. Edwards Deming's book to previous guest Alexis Ohanian's emphasis on VC process. Roger strongly agrees and elaborates on why process matters under high uncertainty. | |
| Investment Spotlight: Octane Lending | 1 | 2 | 0 | 0 | Harry invites Roger to highlight his recent investment in Octane Lending. Roger gives a thorough breakdown of how the company built proprietary credit curves for powersports financing. |
Statements from this episode (16)
Ehrenberg: Concentrated seed portfolios best deliver 3x to 5x net returns
“What that really led me to believe when I looked at modeling portfolio construction around the time that I started IA was that a much more concentrated strategy than a more traditional strategy. 40, 50, 60 portfolio constituent approach was what I felt had the…”
Ehrenberg: IA Ventures limits portfolios to 25 companies per fund
“Our adaptation of that is, you know, we're a very small firm taking an artisanal approach to venture investing where, you know, Brad, Jesse, and I, we have no junior people. We each do our own work. That by going deep in two to three companies a year each over…”
Ehrenberg: Seed follow-on funding avoids founder misalignment with upfront clarity
“We do not think there's misalignment As long as there is absolute clarity with the founder prior to investing as to what constitutes success for the series A.”
Ehrenberg: Seed VC signaling risk is a red herring for Series A
“The notion of misalignment is somewhat of a red herring because smart investors will see what we're seeing and that if the company hasn't done well, Then they're not going to be able to raise anyway.”
Ehrenberg: 24 months of runway is table stakes for development-stage startups
“In terms of having some extra cushion for companies that are really still very much in the developmental stage, I think, 24 months is table stakes.”
Ehrenberg: Enterprise product-market fit means selling software without heavy services
“So to us, product market fit at that point is where sales cycle has come way in, where there's not the need for heavy services in order to get somebody to buy, but where the product fit and finish is such that somebody is just willing to buy the product.”
Ehrenberg: The Trade Desk raised multiple extensions before its Series A
“Some of our best companies have actually raised kind of extension rounds. The Trade Desk, you know, which is now, you know, trading at well over a billion dollars, they needed a few extensions before they were able to kind of raise their Series A.”
IA Ventures provides outsourced CFOs to portfolio startups in year one
“We help companies with an outsourced CFO for their first year of life.”
Ehrenberg predicts the VC industry will consolidate into a barbell model
“I think it really is, is going to, that the industry is going to look like a barbell, and I've long thought you'll kind of have firms that are really focused on helping build companies at the seed stage and proving out their businesses, and then you'll have la…”
Ehrenberg: Broad VC platform services are useless at the seed stage
“And the bottom line is at the very early seed stage where you're just trying to prove out the experiments. None of this crap matters, right? Conversely, once you've proven the experiments and you've got a real company and you've got a company that is worthy, t…”
Ehrenberg: IA Ventures does not set partner capital allocations
“Engage in hyper-transparent communication with our portfolio founders, and that's where we found there to be the greatest power, not that, oh, Brad gets 50, Jesse gets 50, Roger gets 60, or anything like that. We never even think of that, to be totally honest.”
Ehrenberg predicts a major shakeout among growth-stage VC funds
“I mean, I think there's going to be a real shakeout because I think that there are relatively few growth funds that are going to be able to hit the return objectives to kind of justify LP investment.”
Ehrenberg: Early-stage VC success requires process-oriented founders and data iteration
“Especially, Harry, where we're investing in IA, which is so early, where there is such sparse data, that if we don't have a process, if we don't have founders that embrace experimentation, if we don't have a rigorous approach to data collection, analysis, iter…”
Ehrenberg: Complex term sheets and document obscurity in VC mean nothing
“I spent 12 of my 18 years in the derivatives markets, and I know that mystery and seeming obfuscation and complexity adds mystique. It's such bullshit. It's like the hardest part of VC is finding great people who are aligned on the challenging mission that's i…”
Ehrenberg: Octane Lending raised $100M financing backed by proprietary credit models
“Both traditional data and alternative data were able to create their own credit curves and stress test them such that they could raise a hundred million dollars of financing from a large hedge fund and a bank as a senior lender based upon their proprietary dat…”
Ehrenberg: Banks vacated middle-tier credit following Dodd-Frank regulations
“With Dodd-Frank, this big underserved piece of the market where there's money for super prime and there's money for deep subprime, but everything in between has largely been vacated by the banks and the finance companies.”