Apr 19, 2017 · 25m · 20vc
20VC: Investing; A Game Of Access Or Picking, Why Technical DD At Seed Is Irrelevant & Why A Contrarian Mindset Does Not Always Lead To Optimal Returns with Leo Polovets, Co-Founder & General Partner @ Susa Ventures
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Harry Stebbings interviews Susa Ventures General Partner Leo Polovets to discuss core seed investing strategies, founder fundraising tactics, valuation discipline, and why technical due diligence is overrated at the seed stage.
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 34.8% of the talking time here. How this is scored →
Harry as informed peer 3.6 Guest teaching 4.4 Guest disagreement 0.7 Harry pushing back 1.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:24 Reframing contrarianism versus consensus
Leo politely rejects the conventional VC mandate of needing to be contrarian, explaining that consensus deals with strong execution yield great returns.
Hardest push from Harry ▶ 6:19 Harry challenging the contrarian thesis with the access thesisHarry pushes back against standard VC dogmas by declaring that venture capital is fundamentally a game of access rather than contrarian picking.
Biggest teaching moment ▶ 10:14 Math breakdown of staggered caps vs single capsLeo breaks down the numbers to show that raising on staggered caps yields a negligible half-percent difference in founder dilution while introducing significant operational risks.
Harry holds his own ▶ 13:08 Harry citing Tim Chang on bridge roundsHarry cites Mayfield GP Tim Chang to challenge whether bridge rounds are simply an admission that a startup has failed to achieve product-market fit.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Leo Polovets' Transition from Engineering to Venture Capital | 1 | 2 | 0 | 0 | Harry introduces Leo and asks a standard biographical question about his entry into venture capital. Leo outlines his engineering background at LinkedIn, Google, and Factual before transitioning into seed investing. | |
| Challenging the Contrarian Mindset and the Access Thesis | 5 | 6 | 2 | 3 | Harry asserts his thesis that venture is a game of access rather than picking or contrarian thinking. Leo politely reframes the value of consensus investing vs. contrarianism, backing it up with two illustrative thought experiments on deal access. | |
| Valuation Discipline and Constructive Negotiation Strategy | 4 | 4 | 1 | 2 | Harry presses on valuation discipline and how investors navigate price friction with founders. Leo outlines his approach to market comps and provides a exact script for communicating valuation disagreements without damaging relationships. | |
| The Pitfalls of Raising Capital on Staggered Caps | 6 | 7 | 1 | 3 | Harry brings up industry quotes from Jeff Clavier and Tim Chang regarding runway length and bridge rounds. Leo educates on the math of staggered valuation caps, demonstrating that dilution gains are negligible compared to the four major operational risks created. | |
| Why Deep Technical Due Diligence is Irrelevant at Seed | 5 | 6 | 1 | 2 | Harry cites Jason Lemkin's view on Series A benchmarks while asking about technical due diligence at seed. Leo explains why deep technical DD is virtually irrelevant at seed because startups rarely fail due to code quality. | |
| Quick Fire: Recommended Reading and VC Transparency | 2 | 3 | 0 | 0 | Harry conducts the quick-fire segment covering reading recommendations and VC ecosystem changes. Leo advocates for a public VC reputation database to call out bad actor investors. | |
| Quick Fire: Memorable Pitches and Latest Investment in Talent IQ | 2 | 3 | 0 | 0 | Harry wraps up the quick-fire questions regarding memorable pitches and recent portfolio additions. Leo details what made Ryan Petersen's pitch for Flexport so compelling. |
Statements from this episode (13)
Polovets: LinkedIn had five or six engineers post-Series A in 2003
“And so I spent a couple of years there just when the engineering team was like five, six people most of the time.”
Polovets: Contrarian thinking is not the only path to VC success
“I'm not against being contrarian, but I definitely don't think it's the only path to success.”
Stebbings: Venture capital is a game of access, not contrarian thinking
“I fundamentally don't think that venture is a game of contrarian thinking. I think it's a game of access.”
Polovets: A fund exclusively following top-tier VCs would be highly successful
“So if you had a fund that just did that, where all you did was follow on to these other top funds, like that would be an amazing investment vehicle.”
Polovets: Overpaying across a VC portfolio cuts fund returns in half
“And the problem is, you know, if you overpay by 50 or a hundred percent for one deal or two deals in a 30 deal fund, that's not a big deal. But if you do it for all of your deals, or most of your deals, now your cost basis may be doubled. And now that means th…”
Polovets: Susa walks away when founder valuations double internal targets
“If I was thinking this should be a six million dollar pre and they said they're raising a twelve million dollar pre, that's usually when either I'll walk away or we'll try to have a negotiation and then see if we could make something work out.”
Polovets: Staggered valuation caps offer minimal dilution savings over upfront rounds
“Whether you raise all of it on five, or you raise a little bit on four, seven, and 10, most people think that the four, seven, 10 approach is way better, because the valuations go up so much. But it turns out, I think it's within about half a percent of diluti…”
Polovets: Good bridge rounds address remaining risks, bad ones fund non-essentials
“I think the good bridges are the ones where you had a checklist of four things, and you hit three of them, and you need a little bit more money to prove that the fourth one is not a big risk either. I think the bad bridges are where somebody spent a million or…”
Polovets: Evaluating startup technology and CTOs at seed is a waste
“I spent most of my time trying to figure out how good is the technology, how good is the CTO. And it took me a few months to realize that that was probably just a waste of time for everybody.”
Polovets: Startups fail from lack of product-market fit, not technology
“It's very rare for me to see companies fail because of the technology. It's almost always the product market fit is not there, or the team isn't able to recruit as much as they'd like”
Polovets: 80% of his seed role is helping founders raise follow-on rounds
“Yes, I think it's probably 80% of how I view my role, in the sense that, you know, the ultimate goal is to help a founder build a huge company, and a lot of times the next milestone to get there is to figure out what you have to prove and prove it so you could…”
Polovets: Bad VCs tarnish venture capital due to lack of public accountability
“I think most VCs are great and then a small number are not. And because there's no public repository of people, you know, saying what it's like to work with a specific investor, a lot of times, like both the good and bad investors will be able to get into roun…”
Polovets: Flexport was Susa's only deal decided in the first pitch meeting
“At SUSE, we've made about 50 investments over the last four years. And Flexport was the only one where we made it, like, we basically made the call during the first meeting where we just said, okay, like, we want to be a part of this.”