May 29, 2017 · 25m · 20vc
20VC: Kleiner Perkins' MZ Zaveri on Why Success In Venture Is About The 3 F's, How VCs Can Manage Deal Heat & Is There Too Much Venture Dollars At Seed
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In this episode of The 20 Minute VC, host Harry Stebbings interviews MZ Zaveri, Partner at Kleiner Perkins, to discuss proactive deal sourcing, evaluating founder DNA, navigating deal heat, and the evolution of the seed capital ecosystem.
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 30.7% of the talking time here. How this is scored →
Harry as informed peer 3.7 Guest teaching 4.0 Guest disagreement 2.5 Harry pushing back 2.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 16:43 MZ directly counters host premise on machine learning
MZ explicitly rejects Harry's assertion that machine learning hype is justified while VR is not, arguing that standalone AI models without vertical applications are overhyped misnomers.
Hardest push from Harry ▶ 16:12 Harry pushes guest to declare overhyped sectorsHarry intentionally takes a provocative stance by contrasting enterprise ML and VR, forcing the guest to take a definitive side on market hype.
Biggest teaching moment ▶ 16:43 MZ reframes AI models and tech stack valuationMZ educates Harry by making the analogy that no one buys programming languages, explaining why evaluating machine learning purely on model talent misses product-market fit.
Harry holds his own ▶ 16:12 Harry presents strong sector analysis on VR and MLHarry showcases deep industry knowledge by citing Oculus's disproportionate market excitement versus reality alongside enterprise machine learning trends.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| MZ Zaveri's Entrepreneurial Journey to Venture Capital | 2 | 3 | 1 | 1 | Harry asks standard career setup questions while MZ outlines his path from YC founder to Tencent seed investor and Kleiner Perkins. MZ articulates why outbound sourcing is necessary regardless of fund brand, gently reframing Harry's question about institutional brand power. | |
| The Three Fs of Venture Capital: Finding, Financing, and Fixing | 3 | 3 | 1 | 2 | Harry introduces the three Fs framework from pre-interview discussion and brings up counter-arguments from other VCs regarding follow-on funding as the main value-add. MZ elaborates on financing dynamics and frames startups as growth engines fueled by capital. | |
| Pipeline Sourcing, Founder DNA, and Investment Timing | 4 | 3 | 2 | 3 | Harry highlights that VC success relies heavily on timing rather than just picking, pushing MZ on whether founder or VC carries the responsibility for navigating fund lifecycles. MZ resists the binary framing, noting it is a shared responsibility across founders and existing investors. | |
| Managing Deal Heat and the Evolution of Seed Party Rounds | 3 | 5 | 3 | 3 | Harry probes deal heat and asks if party rounds are dead in West Coast seed investing, while pressing MZ on deal heat being a false positive. MZ explicitly corrects Harry's phrasing, explaining how over-socialized deals create artificial deal momentum. | |
| Industry Sector Hype: Machine Learning vs. VR and Thematic Investing | 6 | 6 | 6 | 5 | Harry challenges MZ directly by contrasting enterprise machine learning hype with VR overhype. MZ counters Harry's premise head-on, explaining why model-first AI is overhyped and reframing SaaS as a business model rather than a thematic trend. | |
| The State of the Modern Seed Capital Ecosystem | 4 | 4 | 2 | 2 | Harry cites specific data comparing the growth of seed funds from 2009 to the present before transitioning into a rapid quickfire round. MZ provides specialized insights on Chinese monetization models like native microtransactions in content apps. |
Statements from this episode (16)
Zaveri: Outbound sourcing is how venture works, not inbound deal flow
“I fundamentally learned that outbound is the way venture works and inbound is rarely the way it should work.”
Zaveri: Capital is commoditized, making early relationship-building essential for VCs
“Capital is pretty commoditized today , and so, in essence, if you are selling something that's, like, partially a commodity, you should get to know, sort of, the founders, or the founders should get to know you also, particularly, sort of, if they have multipl…”
Zaveri: VC operational help works faster in enterprise than consumer startups
“On the enterprise side where you can do customer introductions, maybe add value to the top line revenue side. I'd say even on the consumer side, there's a lot one can do, but it's probably much more explicit or sort of much more, you know, you can realize it s…”
Zaveri: Out-raising competitors starves rivals and yields a distribution advantage
“Particularly sort of in sort of markets where there might be four or five competitors, if one can raise more than the others, you can suck out, suck the oxygen out of the room and have an advantage on customer acquisition and distribution in general.”
Kleiner Perkins leverages dual venture and growth funds to defer risky deals
“We're very fortunate where we have two funds within one firm, and, you know, we invest across the stages, so If we, on the venture side, feel something's just not clicking here, and we think there's an, you know, excess, you know, there is some weird form of r…”
Zaveri: Most startup financings do not involve multiple competitive term sheets
“You know, not in reality is not most financings, the most financings are probably not, you know, sort of like 10, 50, 10 plus, like, you know, eight to 10 term sheets in, in motion. Most financings take time, you know, you want to get to know each other. There…”
Zaveri: Institutional seed investors target 7% to 15% startup equity
“There's a number of institutional seed investors and, you know, they're sort of positioned to want to take anywhere from like, I don't know, seven to 15%, right? With probably 15 being kind of the ceiling.”
Zaveri: Seed party rounds with dozens of investors have declined since 2013
“Anecdotally speaking, you're seeing less of these rounds from like, 2012, 2013, where there's like, 12, 13 people on a cap table, and you've thrown the financing together, and you might have two to three million bucks on a note where, and I mean, it could stil…”
Zaveri: Deal heat is often manufactured by early investors over-socializing rounds
“In many ways, actually, I've seen that if you kind of peel back the onion, you can kind of find The root node or sort of the creator, there's sort of individuals that, you know, may have feel sort of have put some early dollars into a financing and have a stro…”
Stebbings: VR hype is unjustified and consumer adoption is far off
“A theme that I would say is justified heat is enterprise machine learning, and then I would say unjustified, I would say VR. I think Oculus has created disproportionate excitement around the space that is It's infinitely further away than we think would be min…”
Zaveri: Value in AI comes from vertical applications, not infrastructure
“I look at it from a vertical application standpoint, not from just Hey, we want to have the best models, the best sort of, you know, technology, and we're just going to sell enabling technology, you know. No one buys programming languages. And in the same way,…”
Zaveri: Broad themes like frontier tech are marketing labels needing sub-themes
“Themes have sub-themes. So, you know, if you are sort of a, hey, we're frontier tech, You know, we're frontier tech investors, or, you know, we invest in machine intelligence. That's very broad at that point. Is it autonomous driving? Is it smarter application…”
Zaveri: Seed capital excess mainly threatens undifferentiated new venture funds
“So I don't over worry about the excess of capital. I think it can be problem. It can be problematic if you are trying to start a new fund where what's your differentiation, right?”
Zaveri: Dismissing founders or ideas as just a feature is dangerous
“I'd say, like, huge market, and then the other pet, you know, pet peeve is, oh, this is a feature or something like that, right? It's like, you know, companies evolve and change, and I'd say there might be sort of folks that may sort of poorly phrase things, a…”
Zaveri: Tencent generates 50% of its revenue from microtransactions, not ads
“Tencent, for instance, historically continues to not monetize just through ads. 50% of its revenue comes through microtransactions”
Zaveri: Chinese-style native in-app commerce will expand to Western markets
“You're seeing, so, for instance, like there's news reading apps there, like Tatiao, which integrate sort of commerce-like functionality in the news app, and you can actually conduct commerce there natively, and I think you were going to see this theme sort of,…”