StarZero All shows Try the podcast clipper →

Mar 8, 2017 · 26m · 20vc

20VC: Why Valuation Is Of Critical Importance At Seed, How To Understand Innovation Cycles & Having 3 CEOs and Burning $10m a Month with Lee Hower, Co-Founder @ NextView Ventures

Lee Hower · 18m spoken Harry Stebbings · 6m spoken
0:00 / 0:00

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 Lee Hower, co-founder of NextView Ventures and early PayPal and LinkedIn executive. Lee discusses his journey through the 'PayPal Mafia' era, key principles of seed-stage venture investing and valuation discipline, and how studying technology innovation cycles guides long-term venture investments.

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 25.8% of the talking time here. How this is scored →

Harry as informed peer 2.7 Guest teaching 2.9 Guest disagreement 0.7 Harry pushing back 1.7
05100:0010:0020:002:06–5:00 · Harry as informed peer 1/10 Joining PayPal and Meeting Elon Musk Harry asks a warm-up question on behalf of Lee's co-founder Rob Goh regarding how Lee joined PayPal. Lee shares a lighthearted personal anecdote about meeting Elon Musk at UPenn and sitting next to him at dinner.5:00–7:30 · Harry as informed peer 2/10 Lessons from the PayPal Mafia Era Lee details the early days of the PayPal mafia, highlighting intense burn rates and rapid leadership changes. Harry briefly interjects with a sharp VC perspective on how those stats would terrify investors today.7:30–10:49 · Harry as informed peer 2/10 Transitioning to VC and Choosing Seed Stage Harry asks why Lee chose seed investing over multi-stage investing and how he navigates the crowded seed landscape. Lee explains his preference for hands-on early-stage work and outlines structural shifts in seed rounds since 2010.10:49–14:13 · Harry as informed peer 4/10 Valuation Discipline in Early Stage Investing Harry brings up fund economics and quotes Micah Rosenblum's perspective on moderate exit sizes. Lee educates on valuation overhang, power-law distributions, and how seed fund sizes alter exit requirements compared to multi-stage firms.14:13–16:51 · Harry as informed peer 5/10 Thematic vs. Opportunistic Investment Strategies Harry directly challenges Lee by asking how he responds to claims that 'opportunistic investing is another word for lacking strategy.' Lee rejects the premise,arguing that strategy includes stage, capital lifecycle, and founder alignment rather than just themes.16:51–20:05 · Harry as informed peer 4/10 Understanding Innovation Waves and Hype Cycles Harry prompts Lee to identify specific overhyped versus durable technologies. Lee draws on historical context from the 2003 post-bubble internet era to explain hype cycles, singling out chatbots as overhyped and autonomous vehicles as durable.20:05–24:45 · Harry as informed peer 1/10 Quick-Fire Round with Lee Hower Harry conducts a standard quick-fire round covering books, work-life balance, mentorship, and advice for junior VCs. The tone remains highly collaborative and rapid-paced.2:06–5:00 · Guest teaching 1/10 Joining PayPal and Meeting Elon Musk Harry asks a warm-up question on behalf of Lee's co-founder Rob Goh regarding how Lee joined PayPal. Lee shares a lighthearted personal anecdote about meeting Elon Musk at UPenn and sitting next to him at dinner.5:00–7:30 · Guest teaching 2/10 Lessons from the PayPal Mafia Era Lee details the early days of the PayPal mafia, highlighting intense burn rates and rapid leadership changes. Harry briefly interjects with a sharp VC perspective on how those stats would terrify investors today.7:30–10:49 · Guest teaching 3/10 Transitioning to VC and Choosing Seed Stage Harry asks why Lee chose seed investing over multi-stage investing and how he navigates the crowded seed landscape. Lee explains his preference for hands-on early-stage work and outlines structural shifts in seed rounds since 2010.10:49–14:13 · Guest teaching 4/10 Valuation Discipline in Early Stage Investing Harry brings up fund economics and quotes Micah Rosenblum's perspective on moderate exit sizes. Lee educates on valuation overhang, power-law distributions, and how seed fund sizes alter exit requirements compared to multi-stage firms.14:13–16:51 · Guest teaching 4/10 Thematic vs. Opportunistic Investment Strategies Harry directly challenges Lee by asking how he responds to claims that 'opportunistic investing is another word for lacking strategy.' Lee rejects the premise,arguing that strategy includes stage, capital lifecycle, and founder alignment rather than just themes.16:51–20:05 · Guest teaching 4/10 Understanding Innovation Waves and Hype Cycles Harry prompts Lee to identify specific overhyped versus durable technologies. Lee draws on historical context from the 2003 post-bubble internet era to explain hype cycles, singling out chatbots as overhyped and autonomous vehicles as durable.20:05–24:45 · Guest teaching 2/10 Quick-Fire Round with Lee Hower Harry conducts a standard quick-fire round covering books, work-life balance, mentorship, and advice for junior VCs. The tone remains highly collaborative and rapid-paced.2:06–5:00 · Guest disagreement 0/10 Joining PayPal and Meeting Elon Musk Harry asks a warm-up question on behalf of Lee's co-founder Rob Goh regarding how Lee joined PayPal. Lee shares a lighthearted personal anecdote about meeting Elon Musk at UPenn and sitting next to him at dinner.5:00–7:30 · Guest disagreement 0/10 Lessons from the PayPal Mafia Era Lee details the early days of the PayPal mafia, highlighting intense burn rates and rapid leadership changes. Harry briefly interjects with a sharp VC perspective on how those stats would terrify investors today.7:30–10:49 · Guest disagreement 0/10 Transitioning to VC and Choosing Seed Stage Harry asks why Lee chose seed investing over multi-stage investing and how he navigates the crowded seed landscape. Lee explains his preference for hands-on early-stage work and outlines structural shifts in seed rounds since 2010.10:49–14:13 · Guest disagreement 1/10 Valuation Discipline in Early Stage Investing Harry brings up fund economics and quotes Micah Rosenblum's perspective on moderate exit sizes. Lee educates on valuation overhang, power-law distributions, and how seed fund sizes alter exit requirements compared to multi-stage firms.14:13–16:51 · Guest disagreement 3/10 Thematic vs. Opportunistic Investment Strategies Harry directly challenges Lee by asking how he responds to claims that 'opportunistic investing is another word for lacking strategy.' Lee rejects the premise,arguing that strategy includes stage, capital lifecycle, and founder alignment rather than just themes.16:51–20:05 · Guest disagreement 1/10 Understanding Innovation Waves and Hype Cycles Harry prompts Lee to identify specific overhyped versus durable technologies. Lee draws on historical context from the 2003 post-bubble internet era to explain hype cycles, singling out chatbots as overhyped and autonomous vehicles as durable.20:05–24:45 · Guest disagreement 0/10 Quick-Fire Round with Lee Hower Harry conducts a standard quick-fire round covering books, work-life balance, mentorship, and advice for junior VCs. The tone remains highly collaborative and rapid-paced.2:06–5:00 · Harry pushing back 0/10 Joining PayPal and Meeting Elon Musk Harry asks a warm-up question on behalf of Lee's co-founder Rob Goh regarding how Lee joined PayPal. Lee shares a lighthearted personal anecdote about meeting Elon Musk at UPenn and sitting next to him at dinner.5:00–7:30 · Harry pushing back 1/10 Lessons from the PayPal Mafia Era Lee details the early days of the PayPal mafia, highlighting intense burn rates and rapid leadership changes. Harry briefly interjects with a sharp VC perspective on how those stats would terrify investors today.7:30–10:49 · Harry pushing back 0/10 Transitioning to VC and Choosing Seed Stage Harry asks why Lee chose seed investing over multi-stage investing and how he navigates the crowded seed landscape. Lee explains his preference for hands-on early-stage work and outlines structural shifts in seed rounds since 2010.10:49–14:13 · Harry pushing back 2/10 Valuation Discipline in Early Stage Investing Harry brings up fund economics and quotes Micah Rosenblum's perspective on moderate exit sizes. Lee educates on valuation overhang, power-law distributions, and how seed fund sizes alter exit requirements compared to multi-stage firms.14:13–16:51 · Harry pushing back 6/10 Thematic vs. Opportunistic Investment Strategies Harry directly challenges Lee by asking how he responds to claims that 'opportunistic investing is another word for lacking strategy.' Lee rejects the premise,arguing that strategy includes stage, capital lifecycle, and founder alignment rather than just themes.16:51–20:05 · Harry pushing back 3/10 Understanding Innovation Waves and Hype Cycles Harry prompts Lee to identify specific overhyped versus durable technologies. Lee draws on historical context from the 2003 post-bubble internet era to explain hype cycles, singling out chatbots as overhyped and autonomous vehicles as durable.20:05–24:45 · Harry pushing back 0/10 Quick-Fire Round with Lee Hower Harry conducts a standard quick-fire round covering books, work-life balance, mentorship, and advice for junior VCs. The tone remains highly collaborative and rapid-paced.

speaking balance: gold is Harry, purple is the guest (3 minute bins)

0:00 · Harry 80.3% · guest 19.7%0:00 · Harry 80.3% · guest 19.7%3:00 · Harry 6.8% · guest 93.2%3:00 · Harry 6.8% · guest 93.2%6:00 · Harry 11.6% · guest 88.4%6:00 · Harry 11.6% · guest 88.4%9:00 · Harry 13.9% · guest 86.1%9:00 · Harry 13.9% · guest 86.1%12:00 · Harry 24.2% · guest 75.8%12:00 · Harry 24.2% · guest 75.8%15:00 · Harry 10.4% · guest 89.6%15:00 · Harry 10.4% · guest 89.6%18:00 · Harry 17.6% · guest 82.4%18:00 · Harry 17.6% · guest 82.4%21:00 · Harry 10.1% · guest 89.9%21:00 · Harry 10.1% · guest 89.9%24:00 · Harry 64.7% · guest 35.3%24:00 · Harry 64.7% · guest 35.3%
Sharpest disagreement ▶ 15:26 Lee counters the 'lacking strategy' premise

Lee directly resists Harry's suggestion that opportunistic investing implies a lack of discipline, arguing that founders spend more time on niche markets than VCs and that strategy encompasses stage and team fit.

 Hardest push from Harry ▶ 15:26 Harry challenges opportunistic investment strategies

Harry explicitly puts Lee on the defensive by posing a sharp critique: 'How would you respond to people that say opportunistic is another word for lacking strategy?'

 Biggest teaching moment ▶ 11:45 Lee on power law dynamics and valuation overhang

Lee provides a clear breakdown of venture mathematical realities, explaining why venture outcomes follow power laws rather than normal distributions and how overvaluation creates lethal overhang for early-stage startups.

 Harry holds his own ▶ 12:18 Harry cites Micah Rosenblum on exit expectations

Harry demonstrates industry knowledge by citing Founder Collective partner Micah Rosenblum to challenge conventional assumptions about unicorn-only exit requirements for early-stage VC funds.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Joining PayPal and Meeting Elon Musk 1100 Harry asks a warm-up question on behalf of Lee's co-founder Rob Goh regarding how Lee joined PayPal. Lee shares a lighthearted personal anecdote about meeting Elon Musk at UPenn and sitting next to him at dinner.
Lessons from the PayPal Mafia Era 2201 Lee details the early days of the PayPal mafia, highlighting intense burn rates and rapid leadership changes. Harry briefly interjects with a sharp VC perspective on how those stats would terrify investors today.
Transitioning to VC and Choosing Seed Stage 2300 Harry asks why Lee chose seed investing over multi-stage investing and how he navigates the crowded seed landscape. Lee explains his preference for hands-on early-stage work and outlines structural shifts in seed rounds since 2010.
Valuation Discipline in Early Stage Investing 4412 Harry brings up fund economics and quotes Micah Rosenblum's perspective on moderate exit sizes. Lee educates on valuation overhang, power-law distributions, and how seed fund sizes alter exit requirements compared to multi-stage firms.
Thematic vs. Opportunistic Investment Strategies 5436 Harry directly challenges Lee by asking how he responds to claims that 'opportunistic investing is another word for lacking strategy.' Lee rejects the premise,arguing that strategy includes stage, capital lifecycle, and founder alignment rather than just themes.
Understanding Innovation Waves and Hype Cycles 4413 Harry prompts Lee to identify specific overhyped versus durable technologies. Lee draws on historical context from the 2003 post-bubble internet era to explain hype cycles, singling out chatbots as overhyped and autonomous vehicles as durable.
Quick-Fire Round with Lee Hower 1200 Harry conducts a standard quick-fire round covering books, work-life balance, mentorship, and advice for junior VCs. The tone remains highly collaborative and rapid-paced.

Statements from this episode (9)

Assertion Supported
X.com and Confinity completed a 50-50 merger in spring 2000
“The two companies ended up merging a fifty-fifty merger of equals in the spring of 2000.”
Lee Hower Mar 8, 2017 ▶ 3:10
Assertion Supported
Hower: PayPal went through three CEOs and burned $10M+ monthly in 2000
“During my first year working there in 2000, you know, we had essentially three different CEOs over the course of that year. You know, at our worst point, we were burning, you know, more than ten million dollars a month.”
Lee Hower Mar 8, 2017 ▶ 6:24
Assertion Supported
Hower: Dedicated seed funds were scarce in Boston and NY in 2010
“And at the time that we started in 2010, you know, there were relatively few seed funds here in the New York area and the Boston area. Fast forward to today, you know, 2017, there's obviously been a proliferation of seed investors.”
Lee Hower Mar 8, 2017 ▶ 10:00
Assertion Supported
Hower: Average seed funding rounds were $1M in 2010
“When we started investing in 2010, you know, your average seed round was about a million bucks or slightly larger.”
Lee Hower Mar 8, 2017 ▶ 10:26
Insight
Lee Hower: High valuations without progress create severe overhangs
“At any point in, in the life cycle, You can create a valuation overhang where if a company raises capital at an exceptionally high valuation and can't hit value accretive milestones along the way to merit that, that valuation, they put themselves at a challeng…”
Lee Hower Mar 8, 2017 ▶ 11:45
Insight
Hower: No 'subprime model' exists in venture capital due to power laws
“There's no subprime model to venture capital investing, right? You can't invest in the mediocre companies at a cheap price and produce a good outcome because the distribution of outcomes is a power law. It's not a normal distribution.”
Lee Hower Mar 8, 2017 ▶ 12:06
Insight
Hower: $100M exits return seed funds but fail multi-stage fund thresholds
“If you own 10% of a company that exits for a hundred, hundred fifty billion dollars with a 40, 50, 60, seventy-five million dollar fund, you can still return a meaningful portion of that fund with a, you know, a 102 hundred million dollar exit. Obviously, the …”
Lee Hower Mar 8, 2017 ▶ 13:10
Opinion
Hower: Standalone chatbot and messaging AI companies are overhyped and unsustainable
“I think not sustaining, there's a lot of emphasis on Sort of chatbots and messaging AI happening at a messaging layer. I think that's actually going to be critical in many, many ways to a broader array of applications, but I think undue emphasis has probably b…”
Lee Hower Mar 8, 2017 ▶ 19:03
Prediction Held up
Hower: Autonomous Vehicles Won't Be Everywhere in Two to Three Years
“I happen to be of the opinion that we're not going to have self-driving autonomous vehicles everywhere in a very, you know, in the next two years or three years, but I do believe that there's a massive opportunity in transforming transportation, which is a hug…”
Lee Hower Mar 8, 2017 ▶ 19:43
Made with StarZero

Turn any episode into a week of clips.

This entire site, over 1,200 episodes transcribed, diarized, checked and made playable, runs on the StarZero media pipeline. Drop in your own episode and the podcast clipper finds the moments worth sharing, cuts them, captions them, and reframes them for every feed.

Try the podcast clipper Learn more