Jun 26, 2017 · 28m · 20vc
20VC: Bessemer's Jeremy Levine on Why We Are In A Fallow Period For Consumer, Why It Is Bogus That Operational VCs Can Add More Value & 2 Golden Rules To Always Tell Entrepreneurs Pre-Investment
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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 Minute VC, Bessemer Venture Partners partner Jeremy Levine shares his counterintuitive views on why operational experience is overhyped in venture capital, analyzes the current fallow period in consumer tech, and outlines his core principles for founder-investor relationships.
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 22.4% of the talking time here. How this is scored →
Harry as informed peer 2.3 Guest teaching 5.1 Guest disagreement 2.7 Harry pushing back 0.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:38 Calling Operational VC Value Bogus
Jeremy bluntly rejects the premise that operational VCs add superior value, explicitly calling the popular industry narrative bogus.
Hardest push from Harry ▶ 21:36 Pressing on Price SensitivityHarry pushes back against the common venture narrative that valuation does not matter in early deals by directly challenging Jeremy on his price sensitivity.
Biggest teaching moment ▶ 5:20 VC Seat vs Independent Operational SeatJeremy provides an insightful lesson in board dynamics, explaining why command-and-control operators in VC-controlled board seats pose a structural problem for founders.
Harry holds his own ▶ 4:12 Citing Sequoia's Pat Grady on Operational DecayHarry demonstrates strong industry knowledge by framing his query around Pat Grady's thesis regarding the rapid decay rate of operational knowledge.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Jeremy Levine's Path into Venture Capital | 1 | 1 | 0 | 0 | Harry asks a standard introductory question about Jeremy's path into venture capital and offers one brief location clarification. Jeremy provides a cordial overview of his career from McKinsey to startups and Bessemer. | |
| Debunking the Value of Operational VC Experience | 3 | 7 | 6 | 1 | Harry introduces a prompt citing Sequoia partner Pat Grady regarding the decaying value of operational VC experience. Jeremy forcefully rejects the premise, calling the concept bogus and delivering a detailed lesson on historical VC greatness and board seat governance mechanics. | |
| Evolving Board Dynamics and Psychology in Founder Support | 2 | 5 | 1 | 0 | Harry asks how Jeremy's board approach has evolved over 17 years. Jeremy shares insights on managing founder psychological cycles and how experience changes board member dynamics. | |
| Two Golden Rules for Founder-Investor Relationships | 1 | 4 | 2 | 0 | Harry asks a broad question about ideal founder relationships, which he later jokingly calls a stupid question. Jeremy re-centers the response around his two explicit golden rules regarding immediate bad news delivery and radical candor. | |
| Why We Are in a Fallow Period for Consumer Tech | 2 | 8 | 2 | 0 | Harry raises consumer tech skepticism, prompting Jeremy to lay out a comprehensive analysis of platform shifts and distribution gatekeeping by tech monopolies. Harry fully accedes to the thesis, calling it really depressing. | |
| Investment Pace, Valuation Bubbles, and Price Sensitivity | 4 | 6 | 3 | 2 | Harry challenges the standard investment cadence tropes and explicitly asks if Jeremy is price sensitive. Jeremy counters common venture wisdom about price irrelevance by walking through portfolio math models. | |
| Quick Fire Round with Jeremy Levine | 3 | 5 | 5 | 3 | During the quick fire round, Jeremy resists the standard prompt about announcing recent investments, labeling deal PR counterproductive. Harry prompts him to explain his logic before Jeremy answers with Toss. |
Statements from this episode (15)
Levine: Claims that operational VCs add superior value are bogus
“So I think this whole idea of VC being better or adding a lot of value to their operational experience, I think it's bogus. And I think it's sort of a, it's a new idea that's been perpetrated by folks who are competing as VCs who happen to have a lot of operat…”
Levine: Put operational experts in independent board seats, not VC seats
“If you're a founder, you want to have phenomenal operational experience on your board, but you don't want to have it in the seat that's controlled by a VC because now you've made a contractual commitment to have someone on your board who for most of his or her…”
Levine: Operators try to overcome obstacles; great investors pivot away
“When an operator approaches a mountain in his path, his immediate thought is like, how do I scale it or tunnel through it or walk around it? But the presence of the mountain is an immediate challenge that an operator's mind starts spinning on how to solve that…”
Levine: Experienced VCs must exercise caution; words carry unearned weight
“Once you've been part of a few successful companies, your opinions tend to carry a little bit more weight, and so in some sense, you have to be more careful once you've been doing it for 10 or 15 years, because you might say something in passing based on sort …”
Levine: Board members should counterbalance founders' emotional highs and lows
“For me, though, I think my own style has always been to sort of try to identify whether an entrepreneur with whom I'm working is currently on a high or a low, and I kind of try to take more or less the opposite, and so when things are going unbelievably well, …”
Levine requires immediate bad news alerts in exchange for unvarnished feedback
“I, when I invest in companies or as I'm about to invest in companies, I have sort of two golden rules that I will often discuss with an entrepreneur before we consummate a, an investment. The first one is I always say, You have one obligation to me if you take…”
Levine: Consumer distribution is controlled entirely by Facebook, Apple, and Google
“And today, virtually all consumer distribution is controlled by only three companies, Facebook, Apple, and Google.”
Levine: Great consumer tech startups will drop to one every three years
“And so my prediction is that the quantity of great new consumer applications, consumer tech companies that will become household names, went from a couple a year to one every three years, which is depressing because it's a really fun place to invest.”
Levine: Direct-monetization consumer businesses will outperform ad-supported apps
“When you can get a consumer to open up his wallet, the consumer's worth so much more to you that you can afford to spend money on marketing. That's the category of business that's more likely to be interesting from a consumer standpoint. Tech perspective over …”
Levine: High startup entry valuations will drag down overall VC returns
“And so if you're making much lower returns on your rate investments, you won't be able to afford to cover the bad investments. And basically that just means the returns of the industry are going to get dragged down.”
Levine: Bessemer's LinkedIn investment generated a 100x return despite others passing
“Invested in LinkedIn, the two existing VCs thought the price we were paying was so crazy that they invested nothing in the round. I think that round ended up at something like a hundred X return.”
Levine: Evaluating consumer apps via DAU/MAU ratios is a backward-looking strategy
“Everyone's looking for the next consumer application that has a high DAU over MAU ratio, which I think is sort of, is very much a rearview mirror way of looking at things.”
Levine: Narrow vertical B2B software is wildly underhyped
“I think there's still a lot of grubby business software, particularly software focused on really narrow verticals. That's wildly underhyped, but you can build unbelievably successful companies with 80% market share if you focus on the right verticals.”
Levine: Junior VCs must pursue non-consensus deals to avoid veteran competition
“As a junior VC, it's virtually impossible to be successful fishing in a pond that lots of experienced VCs are fishing in, because you've got no way to win those opportunities. But if you can come up with your own ideas that turn out to be right, that other peo…”
Levine: Publicly announcing startup funding rounds is counterproductive for VCs
“Announcing investments was a bad strategy. Because the only people who read about new VC investments are other VCs, And entrepreneurs and other VCs, if they see you've invested in a company, they either, if they think it was a good investment, will start doggi…”