Mar 20, 2017 · 33m · 20vc
20VC: SaaStr's Jason Lemkin on The 3 Things You Want From Your LPs, Why Most VCs Do Not Add Value & Why The Best VCs Know How To Package Startups For The Next Round
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In this episode of The 20 Minute VC, host Harry Stebbings interviews SaaStr founder and solo GP Jason Lemkin about venture fund mechanics, evaluating early-stage startup risk, LP relationships, and how VCs can add tangible value while positioning portfolio companies for major follow-on funding rounds.
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 26.7% of the talking time here. How this is scored →
Harry as informed peer 4.2 Guest teaching 4.6 Guest disagreement 2.7 Harry pushing back 3.0
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 9:58 Challenging the Micro VC Classification
Jason directly interrupts Harry's premise labeling SaaStr a micro VC fund, insisting the term is confusing and explaining why fund capital deployment differs from traditional perceptions.
Hardest push from Harry ▶ 14:27 Throwing the Towel in the Ring on LP DollarsHarry directly calls out Jason by turning his earlier assertion that all money is green back on him, challenging whether LP capital is equally undifferentiated.
Biggest teaching moment ▶ 4:50 Correcting Host on GP Stress and Fund MathJason explicitly shuts down Harry's guesses about GP stress with 'No, no, no' and lays out the exact $700M outcome math required for a $70M fund to return itself on every deal.
Harry holds his own ▶ 20:37 Cross-Examining Founder Centrality with Rory O'DriscollHarry demonstrates deep venture domain knowledge by citing Scale VP's Rory O'Driscoll to challenge Jason's focus on team quality, arguing that markets and product pull dominate 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 |
|---|---|---|---|---|---|---|
| Origin of SaaStr and Community-Driven Venturing | 2 | 3 | 1 | 0 | Harry sets an appreciative tone and asks open-ended questions about SaaStr's origins. Jason describes how focusing exclusively on his community saved him from taking undifferentiated pitch meetings. | |
| Managing Stress and Underwriting Standards as a Solo GP | 3 | 6 | 4 | 2 | Jason directly rejects Harry's guesses about solo GP stress with a clear 'No, no, no', explaining the mathematical pressure of needing every single $70M fund deal to reach a $700M valuation. Harry follows up by asking how a solo GP maintains rigorous examination without partners. | |
| Seed Stage Check Sizes and Investor Skin in the Game | 3 | 5 | 3 | 2 | Harry asks if small checks represent experimental risk, prompting Jason to reframe the premise by explaining that while smaller fund checks are suboptimal, founders should remember all money is green when cash is needed. | |
| The Micro VC Phenomenon and LP Fundraising Realities | 3 | 7 | 5 | 2 | Jason challenges Harry's categorization of SaaStr as a micro VC, breaking down check sizing, reserve pooling, and the rare cadence at which LPs actually add new fund managers. | |
| What VCs Want from LPs and Downstream Deal Packaging | 6 | 4 | 2 | 6 | Harry presses Jason by turning his earlier phrase back on him, asking if LP dollars are also all green. Jason agrees and outlines three key differentiators for top-tier LPs before explaining downstream series A packaging. | |
| Target Ownership, Lead Responsibilities, and Product-Market Risk | 6 | 5 | 3 | 5 | Harry challenges seed fund positioning by quoting Charlie O'Donnell's claim that seed VCs are mostly late-stage VCs seeking optionality. Jason accepts the premise, conceding he avoids product-market risk in favor of team and execution risk. | |
| Assessing Market Pull vs. Team Quality at Early Stage | 7 | 5 | 3 | 5 | Harry demonstrates strong industry expertise by quoting Rory O'Driscoll's thesis that markets make outcomes rather than teams. Jason acknowledges Rory's expertise while clarifying how early-stage investors must squint to spot market pull before ARR metrics exist. | |
| Modern VC Value Add and Late Seed Execution Strategy | 6 | 4 | 2 | 4 | Harry cites Ryan Peterson's view that VCs rarely add value beyond capital. Jason largely agrees for the broader industry but highlights his specific playbook of placing management teams and preparing startups for Series A. | |
| Quick-Fire Round, Co-Selling Space, and Investment in Automile | 2 | 2 | 1 | 1 | A fast-paced concluding round covering SaaStr's deal flow, the physical co-selling space, and Jason's thesis behind his investment in Automile. |
Statements from this episode (23)
Adobe Document Services ARR Doubled From $50M to $100M in 2012–2013
“He oversaw the growth of Adobe Document Services ARR from fifty million dollars in 2012 to a staggering one hundred million dollars in 2013.”
Lemkin: Pitching founders outside the SaaStr community was a waste of time
“What I quickly learned is meeting with founders that weren't Part of the Sastra community, even back in a few years ago, was a complete waste of my time. I was completely undifferentiated as an investor. They didn't know who I was. Why not just go to Sequoia o…”
Lemkin: SaaStr manages a $70M fund targeting 10-15% ownership
“So we have a seventy million dollar fund. We try to buy ownership stakes in the 10 to 15% range, sometimes a little higher.”
Lemkin: Every SaaStr investment must have $700M valuation potential
“So if you kind of back into that math with a little dilution, that means every single time that we invest, I have to believe the company will be worth at least seven hundred million dollars.”
Lemkin: Solo GPs are more conservative than partners at multi-partner VC firms
“The learning is when you're on your own in a solo GP fund, you're actually, you're more conservative. I say no to deals that I would have done in another firm, and I'm not remotely convinced that's the right decision.”
Lemkin's first startup raised $9M on $2M pre-money with 5x liquidation preference
“In my first startup before Echo sign, there was so much drama the first time I raised money. But at the end of the day, I got the world's worst term sheet with the world's worst terms. It was nine, a nine million round on a two pre with a five X liquidation pr…”
Lemkin: Mega-funds leading $700k seed rounds is suboptimal for founders
“In an ideal world, a ten billion dollar fund leading your 700,000 dollar round is suboptimal because that's nickels and dimes. It's pocket change. No one putting in a tiny amount of money is going to remotely care if they write off the investment.”
Lemkin: VCs committing 1%+ of their fund will do whatever it takes to help
“Someone that puts in one, two, three percent of their fund into the investment is going to do whatever it takes to help the company and to help you raise the next round.”
Traditional VC funds reserve 60% to 70% for follow-on checks
“So a typical venture firm will actually only use 30 to 40% of its fund for initial checks, and they will reserve 60 to 70% for second checks and third checks and doubling down on their winners.”
Lemkin: Only 5% of LPs invest in smaller micro VC funds
“It's probably five percent of LPs even want to do smaller funds.”
Average LP adds only one new manager every 2-3 years
“The average LP will add one new manager every two to three years.”
Lemkin: Small funds face huge risk without downstream Series A packaging
“Especially if you're a small fund, if you can't package your investments up for the next round, you have huge risk because you have to carry these companies.”
Lemkin: All but one portfolio company raised eight-figure follow-on checks
“All but one of my deals so far has been followed with an eight figure check from a top SAS VC.”
Lemkin: Lead VCs Are Expected to Fund Follow-On Rounds
“The lead has to carry the company. And the non-leads don't. No one's expecting a non-lead to write another check into the company, but everyone's expecting the lead to write another check.”
Lemkin: SaaStr Has Never Invested in Pre-Revenue Companies
“As a VC, I've never done a pre-revenue investment, and I'm not sure that I will.”
Lemkin: Most Successful VCs Avoid Product-Market Risk
“Most VCs that are successful don't want to take product market risk anymore.”
Algolia grew from $8K monthly to eight-figure ARR in two years
“The company, you know, the company is doing eight figures. An ARR now was doing eight K a month when I invested a little more than two years ago.”
Lemkin: Market pull requires squinting early, but becomes quantifiable at $4M ARR
“The earlier you go, the more you have to squint to see market pull. Once you hit four or five million in ARR, it becomes a numbers game.”
Lemkin: Most VCs do not add value to portfolio companies
“I do think that most VCs do not add value.”
Lemkin built Talkdesk's initial US management team within 60 days of investing
“When I invested in TalkDesk, which is one of my best investments, I was able to help put in the entire first management team within 60 days, and this was when Tiago was the only US employee”
Jason Lemkin gets 100% of his deal flow from SaaStr
“I've learned that the blog and the Saster community is all of my deal flow. It's a hundred percent of it, but it's 10 times bigger than it was two and a half years ago.”
Automile grew ARR from under $800K to over $3M in one year
“The company went from a little less than 800 K in air last year to a little more than three million by the end of this year, and is accelerating.”
Lemkin: Only invest in CEOs you would personally work for
“Because if I would work for the CEO, then I know we can recruit an amazing team under him, and he's already built the bones of a great team, and whatever happens, I'm with the company until the end of time, and at my gut, I feel like we can't lose.”