Apr 5, 2017 · 26m · 20vc
20VC: Why Spray & Pray Investing Is Wrong, Why Data-Informed VC Beats Data Driven VC & What To Look For When Investing In A Marketplace with Josh Breinlinger, Managing Director @ Jackson Square Ventures
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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 VC, host Harry Stebbings interviews Josh Breinlinger, Managing Director at Jackson Square Ventures, discussing why data-informed venture investing beats data-driven metrics, the flaws of spray-and-pray portfolio strategies, and key frameworks for evaluating marketplace defensibility and growth.
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 32.3% of the talking time here. How this is scored →
Harry as informed peer 3.4 Guest teaching 2.9 Guest disagreement 1.6 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:31 Critiquing Data-Driven VC Hype
Josh forcefully rejects the premise of purely data-driven venture capital, citing Charlie Munger to claim that young VCs calculate too much and think too little while buying into unsustainable hype.
Hardest push from Harry ▶ 18:48 Challenging Uber's Market DefensibilityHarry directly challenges Josh's theory on marketplace defensibility by pointing out Uber's ongoing struggle to prevent driver multi-homing between Uber and Lyft.
Biggest teaching moment ▶ 14:59 Horizontal Marketplace MechanicsWhen Harry attempts to pin down a fixed monetary threshold for low-frequency marketplaces, Josh educates him on how horizontal platforms aggregate disparate low-frequency categories to achieve high overall platform usage.
Harry holds his own ▶ 8:09 Exposing VC Deal Announcement RealitiesHarry showcases deep industry knowledge by interjecting that marquee venture firms often publicly claim to lead investment rounds despite contributing only a tiny fraction of the total capital.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Josh Breinlinger's Journey from Engineering to Venture Capital | 3 | 3 | 2 | 1 | Harry demonstrates preparation by quoting Josh's past blog post on data-informed versus data-driven investing. Josh responds by invoking Charlie Munger to argue that modern VCs over-quantify early-stage metrics and fall for short-lived hype like Meerkat. | |
| Evaluating Startups: Team, Product Shift, and Data Validation | 4 | 2 | 1 | 2 | Josh outlines his investment framework of team, product experience, and data validation using ScriptDash as a case study. Harry demonstrates industry insider knowledge when he calls out top VC firms claiming to lead rounds while putting in minimal capital. | |
| The Rise of Master Marketplaces and Evaluating Market TAM | 4 | 3 | 2 | 4 | Harry pushes back on Josh's master marketplace thesis by asking whether deep specialization results in a total addressable market that is too small for VC returns. Josh reframes the issue by explaining how master platforms leverage expert time across vertical-specific TAMs. | |
| Marketplace Dynamics: Transaction Size, Frequency, and GMV Quality | 3 | 4 | 2 | 3 | Josh criticizes flawed marketplace concepts like Uber for locksmiths due to low transaction frequency. When Harry attempts to establish a rigid dollar threshold for viable low-frequency platforms, Josh educates him on how horizontal platforms like OfferUp overcome category-level low frequency. | |
| Post-Match Value Creation and Preventing Disintermediation | 3 | 3 | 1 | 2 | Harry inquires about methods to prevent disintermediation in services platforms like Thumbtack. Josh explains that attempting to block contact info fails, arguing instead that platforms must continuously create post-match value for both buyers and sellers. | |
| Share of Wallet, Defensibility, and Driver Switching | 5 | 3 | 2 | 4 | Harry challenges Josh's defensibility criteria by bringing up Uber and Lyft driver multi-homing as a primary failure of lock-in. Josh acknowledges the difficulty of solving driver switching and subsequently defends bridge rounds through his firm's experience with DocuSign. | |
| Quick-Fire Round: Books, Defensibility, and ScriptDash | 2 | 2 | 1 | 1 | A collaborative rapid-fire segment covering book recommendations, marketplace defensibility, liquidity hacking, and ScriptDash. Josh provides concise takeaways while Harry keeps the tempo fast and agreeable. |
Statements from this episode (15)
Breinlinger: Relying on early metrics like MRR leads VCs to bad decisions
“If you are so focused on just the data of user acquisitions, MRR growth, whatever, especially at the early stages where it's probably only a million or so in revenue, I think you can just buy into hype too easily and make bad decisions that ignore common sense…”
Breinlinger: Meerkat's rapid growth was unsustainable and crashed post-investment
“Meerkat is actually one of my favorite examples, which was skyrocketing in terms of usage, but nothing was sustainable about it, and, you know, they got an investment, and it crashed shortly after that”
Breinlinger: Evaluate founding team first, product second, and data third
“And so I have to fall in love with the team first, then with the product and the service, and then the data has to back it up.”
Breinlinger: Concentrated, high-conviction portfolios are best strategy to beat market
“I believe the best way to get returns is to have very high conviction investments, very concentrated investments, and I think that's the way to beat the market and stand out.”
Breinlinger: Marketplace platforms cannot successfully span both commodity and premium tiers
“I actually don't believe the same company can own both. Largely because the workflow is just completely different for commodity level and master level.”
Breinlinger: Audio transcription cannot support a premium master marketplace model
“I don't think there's an opportunity to build a master transcription marketplace because there's just not enough of a difference in quality between what we do as the commodity and what a master could do.”
Breinlinger: On-demand 'Uber for locksmiths' models are terrible marketplace ideas
“Where people run into mistakes is where they might try to do the Uber for locksmiths. To me, that's just a terrible market because you just don't use locksmiths very often.”
Breinlinger: Horizontal marketplaces beat vertical models for low-frequency categories
“The frequency of any one of those Types of transactions might be fairly low, but when you span every single category and you can literally buy anything, the frequency is, is very high. And OfferUp has done that in peer-to-peer commerce. Thumbtack has done that…”
Breinlinger: Frequent small marketplace transactions create more value than large trades
“Somebody comes into your marketplace and spends a thousand dollars one time, and then they're gone. Or somebody comes in, spends 10 dollars a hundred times with a hundred different providers. That is much more valuable because you've got so much more data and …”
Breinlinger: Jackson Square tests if users outgrow marketplace services before investing
“That's actually an important test I look at for every investment is, hey, do users outgrow the service?”
Breinlinger: Marketplaces only win when users move all behavior to one platform
“If people can switch too easily back and forth, you just don't really have that defensibility yet. And you're not building that boat. You know, I think you really need people to completely move all their behavior to your marketplace, and that's when you can wi…”
Breinlinger: Uber lacks lock-in because drivers routinely switch to Lyft
“Yeah, it's a big challenge for them. You know, I've certainly heard that Lyft is gaining market share, and that is a big problem for them, that almost, you walk around San Francisco, and every car has two stickers on it, One Uber and one Lyft. And so, it's rea…”
Breinlinger: Three of four Jackson Square Ventures unicorns required bridge rounds
“At Jackson Square Ventures, the partners here, we've invested in four unicorn companies, and three of them, Equalogic, DocuSign, and Responsys, they all had bridge rounds.”