Apr 17, 2017 · 26m · 20vc
20VC: Can Founders Really Trust Their VC & How To Navigate The Acquisition Process Successfully with Josh Felser, Co-Founder @ Freestyle.vc
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 20VC, host Harry Stebbings interviews Josh Felser, co-founder of Freestyle, discussing the transition from serial entrepreneur to venture capitalist, tactics for navigating acquisition negotiations, and how to build authentic trust between founders and VCs.
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 32.1% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 3.3 Guest disagreement 1.0 Harry pushing back 1.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:01 Firm rejection of seed-stage CEO replacement
Josh forcefully rejects the idea that seed stage board members should replace founders, noting that historical performance for such replacements is terrible outside of fraud cases.
Hardest push from Harry ▶ 9:52 Host pushes back on board accountabilityHarry directly challenges Josh on whether a board member is failing their duty by letting a founder give up early rather than stepping in to encourage or replace them.
Biggest teaching moment ▶ 16:13 Masterclass on high anchoring during M&AJosh educates Harry and the audience on valuation negotiation dynamics, illustrating how pulling an unfounded $500M anchor out of thin air resulted in a $320M acquisition.
Harry holds his own ▶ 11:20 Host cites early-stage CEO signaling riskHarry demonstrates keen venture insight by highlighting the severe signaling risk associated with replacing a CEO at the seed stage.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| The Origin of Freestyle and Transitioning from Founder to VC | 2 | 2 | 1 | 0 | Harry welcomes Josh and asks standard background questions regarding the origin of Freestyle and his transition from operator to investor. Josh lightheartedly jokes and shares his journey from selling internet startups to entering VC. | |
| Can Founders Really Trust Their VCs? | 2 | 3 | 1 | 1 | Harry prompts a discussion on founder-VC trust dynamics across lifecycle stages. Josh outlines where incentives align and where they diverge, such as during M&A discussions. | |
| Navigating M&A Decisions, Founder Replacements, and Board Duty | 5 | 4 | 1 | 5 | Harry actively challenges Josh on board responsibilities when a founder wants to sell early, questioning whether the board should intervene or replace the CEO. Harry also correctly identifies early-stage signaling risk. | |
| The Evolving Role and Communication Style of a Board Member | 2 | 3 | 1 | 1 | Josh candidly discusses his self-awareness as a board member, comparing his generalist style to his partner Jenny and emphasizing transparent communication. | |
| M&A Strategy: Anchoring Valuations and Negotiating Exits | 4 | 5 | 1 | 2 | Harry cites Josh's written articles to steer a discussion on M&A negotiation tactics. Josh educates the audience with a detailed story about anchoring high during the sale of Spinner to AOL. | |
| Managing Team Transparency During Acquisition Processes | 2 | 3 | 1 | 1 | Josh shares insights on managing internal transparency during M&A, followed by a fast-paced quickfire round covering diversity in hiring and political engagement in tech. |
Statements from this episode (15)
Felser: Operating a startup is the most stressful job
“Being an operator is the most stressful thing you'll ever do, and so I think it can evolve you, but it can also make, make it hard to experience the other pleasures in life”
Felser: Venture capital is easier than entrepreneurship due to flexibility
“It's obviously easier than being an entrepreneur, but I can do it from anywhere. I'm flexible about my hours. I can work, you know, sometimes I work until one AM, sometimes I work until three PM and have a portfolio of companies to spread the stress across.”
Felser: Freestyle is out of alignment with founders only 1% of time
“One percent of the time, I find myself out of alignment with an entrepreneur at some point in the process.”
Felser: Later-stage VCs are more transactional than early-stage investors
“Well, later, later stage VCs really are become more transactional, I think, than early stage VCs.”
Felser: A VC secretly pitched founders against each other at Spinner
“We had a horrible situation, Dave and I did, when we started Spinner. We had a VC who was whispering, I think I wrote about this, whispering in Dave's ear bad things about me, and whispering in my ear that things were okay.”
Felser: Portfolio company sold low after founder rejected insider bridge round
“So last, last year we had a company go through the M&A process and we were surprised by it because we were on the page of this company being a billion dollar company. We really were. And all the investors were. And the founder had a rough experience raising ca…”
Felser: Forcing a founder to stay damages long-term LP returns
“I can make a short-term decision that would actually maximize shareholder value for that company, but I could Destroy my reputation doing it, and so then that, so if I look at my ultimate duty is to my LPs, so short-sightedly I can say, well, you know, I'm gon…”
Felser: Replacing seed founders performs so poorly it requires fraud to justify
“The history of replacing a founder at the siege stage with a new CEO, that historical performance of that experience is so poor that I can't imagine, it would have to be almost a fraud situation Situation for me to do that versus kind of replacing a founder wh…”
Felser pledges never to secretly discuss founders with other investors
“So I promise entrepreneurs that I will never have a conversation about them. That they don't know about with other investors.”
Felser: Spinner sold to AOL for $320M after initial $500M anchor
“So with the spinner, we were asked what our number was, and we, and I remember, I was sitting in the boardroom with AOL, and I said, five hundred million. Now, first, what was that based on? Nothing. It was just, I said it with conviction. I remember, I looked…”
Felser: Time and the board are a founder's top M&A leverage
“Your two greatest weapons are time and your board.”
Felser details $65M Crackle acquisition breakdown between cap table and management
“The breakdown of crackle was 60,000,005 million. So five million was just set aside for management and sixty million was for the cap table with a spinner. It was all cap table.”
Felser: Don't inform employees about acquisition talks until deal is finalized
“I wouldn't tell the team until you have a deal.”
Felser: Pursuing M&A offers makes returning to normal operations almost impossible
“Once they actually go down this path of, you know, enabling M&A and actually being promised an offer, it's almost impossible to go back to running the company”
Felser: Best way to recruit women in tech is asking for help
“So the best way to add more women in tech, though, is to ask for help. If you're recruiting, if you're either recruiting for your own venture capital firm, or you're trying to help your company, your portfolio company you recruit, ask women for help.”