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Jul 5, 2017 · 24m · 20vc

20VC: How To Get Back To 200 Tech IPOs Per Year, Why We Are In A 'Bulge" Not A Bubble & The Impending Flat & Down Rounds To Come with Barry Schuler, Partner @ DFJ Growth

Barry Schuler · 17m spoken Harry Stebbings · 6m spoken
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 The 20 Minute VC, DFJ Growth Partner Barry Schuler shares operational and investment insights on late-stage venture capital, explaining why the tech market is experiencing a 'bulge' rather than a bubble. He discusses the necessity of flat or down rounds to restore healthy IPO activity, the cultural pitfalls of M&A, and the structural dynamics shaping growth-stage tech companies.

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 26.7% of the talking time here. How this is scored →

Harry as informed peer 4.6 Guest teaching 5.2 Guest disagreement 1.2 Harry pushing back 1.8
05100:0010:0020:002:05–8:00 · Harry as informed peer 5/10 Barry Schuler's Journey from Operator to Venture Capitalist Harry demonstrates good understanding of late-stage markets by asking how first-day IPO pops occur despite a very small pool of active institutional buyers. Barry provides institutional context on growth stage capital, private market scaling, and engineered IPO pricing mechanics.8:03–11:35 · Harry as informed peer 3/10 Returning to 200 Tech IPOs Per Year and Flat/Down Rounds Harry interjects to highlight how valuation inflation hurts startups, while Barry educates on why flat and down IPO rounds are realistic and necessary for market rationalization, citing DFJ's investment in SolarCity.11:38–16:06 · Harry as informed peer 6/10 The Complexity and Cultural Challenges of Mergers and Acquisitions Harry brings up Barry's past article about being in a bulge rather than a bubble. Barry playfully teases Harry about being too young to remember the actual dot-com crash while detailing the market dynamics of private company bulges.16:07–19:32 · Harry as informed peer 5/10 VC Board Roles, M&A Realities, and Future Threats to Venture Capital Harry asks about board governance responsibilities during distressed M&A. Barry reframes board limitations by emphasizing the classic industry rule that companies are bought, not sold.19:32–23:02 · Harry as informed peer 4/10 Quickfire Round: Mindset, Mentorship, and Recent Investments A warm quickfire exchange covering mindset, book recommendations, and mentorship. Barry ends by complimenting Harry on using his podcast platform to drive proprietary VC deal flow.2:05–8:00 · Guest teaching 5/10 Barry Schuler's Journey from Operator to Venture Capitalist Harry demonstrates good understanding of late-stage markets by asking how first-day IPO pops occur despite a very small pool of active institutional buyers. Barry provides institutional context on growth stage capital, private market scaling, and engineered IPO pricing mechanics.8:03–11:35 · Guest teaching 6/10 Returning to 200 Tech IPOs Per Year and Flat/Down Rounds Harry interjects to highlight how valuation inflation hurts startups, while Barry educates on why flat and down IPO rounds are realistic and necessary for market rationalization, citing DFJ's investment in SolarCity.11:38–16:06 · Guest teaching 6/10 The Complexity and Cultural Challenges of Mergers and Acquisitions Harry brings up Barry's past article about being in a bulge rather than a bubble. Barry playfully teases Harry about being too young to remember the actual dot-com crash while detailing the market dynamics of private company bulges.16:07–19:32 · Guest teaching 5/10 VC Board Roles, M&A Realities, and Future Threats to Venture Capital Harry asks about board governance responsibilities during distressed M&A. Barry reframes board limitations by emphasizing the classic industry rule that companies are bought, not sold.19:32–23:02 · Guest teaching 4/10 Quickfire Round: Mindset, Mentorship, and Recent Investments A warm quickfire exchange covering mindset, book recommendations, and mentorship. Barry ends by complimenting Harry on using his podcast platform to drive proprietary VC deal flow.2:05–8:00 · Guest disagreement 1/10 Barry Schuler's Journey from Operator to Venture Capitalist Harry demonstrates good understanding of late-stage markets by asking how first-day IPO pops occur despite a very small pool of active institutional buyers. Barry provides institutional context on growth stage capital, private market scaling, and engineered IPO pricing mechanics.8:03–11:35 · Guest disagreement 1/10 Returning to 200 Tech IPOs Per Year and Flat/Down Rounds Harry interjects to highlight how valuation inflation hurts startups, while Barry educates on why flat and down IPO rounds are realistic and necessary for market rationalization, citing DFJ's investment in SolarCity.11:38–16:06 · Guest disagreement 3/10 The Complexity and Cultural Challenges of Mergers and Acquisitions Harry brings up Barry's past article about being in a bulge rather than a bubble. Barry playfully teases Harry about being too young to remember the actual dot-com crash while detailing the market dynamics of private company bulges.16:07–19:32 · Guest disagreement 1/10 VC Board Roles, M&A Realities, and Future Threats to Venture Capital Harry asks about board governance responsibilities during distressed M&A. Barry reframes board limitations by emphasizing the classic industry rule that companies are bought, not sold.19:32–23:02 · Guest disagreement 0/10 Quickfire Round: Mindset, Mentorship, and Recent Investments A warm quickfire exchange covering mindset, book recommendations, and mentorship. Barry ends by complimenting Harry on using his podcast platform to drive proprietary VC deal flow.2:05–8:00 · Harry pushing back 3/10 Barry Schuler's Journey from Operator to Venture Capitalist Harry demonstrates good understanding of late-stage markets by asking how first-day IPO pops occur despite a very small pool of active institutional buyers. Barry provides institutional context on growth stage capital, private market scaling, and engineered IPO pricing mechanics.8:03–11:35 · Harry pushing back 2/10 Returning to 200 Tech IPOs Per Year and Flat/Down Rounds Harry interjects to highlight how valuation inflation hurts startups, while Barry educates on why flat and down IPO rounds are realistic and necessary for market rationalization, citing DFJ's investment in SolarCity.11:38–16:06 · Harry pushing back 2/10 The Complexity and Cultural Challenges of Mergers and Acquisitions Harry brings up Barry's past article about being in a bulge rather than a bubble. Barry playfully teases Harry about being too young to remember the actual dot-com crash while detailing the market dynamics of private company bulges.16:07–19:32 · Harry pushing back 2/10 VC Board Roles, M&A Realities, and Future Threats to Venture Capital Harry asks about board governance responsibilities during distressed M&A. Barry reframes board limitations by emphasizing the classic industry rule that companies are bought, not sold.19:32–23:02 · Harry pushing back 0/10 Quickfire Round: Mindset, Mentorship, and Recent Investments A warm quickfire exchange covering mindset, book recommendations, and mentorship. Barry ends by complimenting Harry on using his podcast platform to drive proprietary VC deal flow.

speaking balance: gold is Harry, purple is the guest (3 minute bins)

0:00 · Harry 80.8% · guest 19.2%0:00 · Harry 80.8% · guest 19.2%3:00 · Harry 9.7% · guest 90.3%3:00 · Harry 9.7% · guest 90.3%6:00 · Harry 13.6% · guest 86.4%6:00 · Harry 13.6% · guest 86.4%9:00 · Harry 5.9% · guest 94.1%9:00 · Harry 5.9% · guest 94.1%12:00 · Harry 12.4% · guest 87.6%12:00 · Harry 12.4% · guest 87.6%15:00 · Harry 14.3% · guest 85.7%15:00 · Harry 14.3% · guest 85.7%18:00 · Harry 19.7% · guest 80.3%18:00 · Harry 19.7% · guest 80.3%21:00 · Harry 44.3% · guest 55.7%21:00 · Harry 44.3% · guest 55.7%24:00 · Harry 100% · guest 0%24:00 · Harry 100% · guest 0%
Sharpest disagreement ▶ 13:28 Rejection of the bubble narrative

Barry dismisses media talk of a tech bubble as bad pattern recognition and teasingly reminds Harry that he was too young to experience the real dot-com crash.

 Hardest push from Harry ▶ 6:35 Questioning IPO pricing pops

Harry challenges the logic of first-day stock pops, asking why 90 percent of IPOs pop if the buyer pool of institutional investors is as small as Barry claims.

 Biggest teaching moment ▶ 16:21 Dispelling board M&A power

Barry corrects the common misconception that VCs or boards can simply push a struggling company into a lucrative M&A, explaining that M&A deals are bought, not sold.

 Harry holds his own ▶ 13:06 Referencing guest's written work

Harry demonstrates deep research by citing Barry's own published thesis that tech is experiencing a bulge rather than a bubble.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Barry Schuler's Journey from Operator to Venture Capitalist 5513 Harry demonstrates good understanding of late-stage markets by asking how first-day IPO pops occur despite a very small pool of active institutional buyers. Barry provides institutional context on growth stage capital, private market scaling, and engineered IPO pricing mechanics.
Returning to 200 Tech IPOs Per Year and Flat/Down Rounds 3612 Harry interjects to highlight how valuation inflation hurts startups, while Barry educates on why flat and down IPO rounds are realistic and necessary for market rationalization, citing DFJ's investment in SolarCity.
The Complexity and Cultural Challenges of Mergers and Acquisitions 6632 Harry brings up Barry's past article about being in a bulge rather than a bubble. Barry playfully teases Harry about being too young to remember the actual dot-com crash while detailing the market dynamics of private company bulges.
VC Board Roles, M&A Realities, and Future Threats to Venture Capital 5512 Harry asks about board governance responsibilities during distressed M&A. Barry reframes board limitations by emphasizing the classic industry rule that companies are bought, not sold.
Quickfire Round: Mindset, Mentorship, and Recent Investments 4400 A warm quickfire exchange covering mindset, book recommendations, and mentorship. Barry ends by complimenting Harry on using his podcast platform to drive proprietary VC deal flow.

Statements from this episode (11)

Assertion Not checkable as stated
Schuler: DFJ Growth was founded on tech companies staying private longer
“This is back in 2005 where we saw an inefficiency in the marketplace. We felt companies were going to stay private longer. We thought they had to because of the markets.”
Barry Schuler Jul 5, 2017 ▶ 3:31
Assertion Supported
Schuler: Only about 70 institutional investors buy first-day tech IPOs
“At least in the U S public markets, the amount of institutional investors who like to buy First day, tech stocks has become very small. There's a handful of banks that take them out. We know who they all are, and there's, you know, about 70 institutional inves…”
Barry Schuler Jul 5, 2017 ▶ 5:34
Assertion Partly supported
Schuler: Facebook went public overpriced and took years to recover
“If you're overvalued, and they really kind of force the issue out, you can see problems like Facebook experienced, you know, when they went out overpriced problems in the market, and it took them a couple of years of performing well before they straightened it…”
Barry Schuler Jul 5, 2017 ▶ 7:30
Prediction Held up
Schuler: Up to 50% of tech IPOs will be flat or down
“So you'll see, I think, flat and down IPO rounds. Maybe up to 50% of the companies that are out there.”
Barry Schuler Jul 5, 2017 ▶ 11:09
Disclosure
Schuler: SolarCity succeeded post-IPO despite a flat-to-down offering
“We, SolarCity is a good example of an IPO we had where it was a flat to down IPO round. Everyone ended up putting money in to get that company public, and they did sensationally.”
Barry Schuler Jul 5, 2017 ▶ 11:17
Opinion
Schuler: High late-stage tech valuations are not a dot-com bubble
“All these prices, all these unicorns, this must be just like the dot-com bubble was, when it's nothing like the dot-com bubble. You were probably quite young for those of us who lived through it, I was exactly, exactly. You have to read the history. We are the…”
Barry Schuler Jul 5, 2017 ▶ 13:39
Prediction Held up
Schuler: Public multiple expansion after high private valuations is extremely rare
“In the old days, the momentum of the growth period of a stock happened in the public markets. They're happening in the private market. So to expect someone to have a huge multiple on the private phase and then go into the public markets and have a huge multipl…”
Barry Schuler Jul 5, 2017 ▶ 15:16
Prediction Held up
Schuler: Low-traction late-stage unicorns will be acquired at down-round valuations
“The last group in that bulge are our companies that run out of the capital they've raised. They've not gotten the traction in the marketplace that they had hoped to. They still have value, and they're still important, and I would expect you'll see that smart a…”
Barry Schuler Jul 5, 2017 ▶ 15:43
Prediction Not checkable as stated
Schuler: Exclusive machine-to-machine trading will cause financial markets to fail
“When machines start trading with each other, the markets will disappear because We need the uncertainty of humans to make those markets, markets work.”
Barry Schuler Jul 5, 2017 ▶ 18:38
Insight
Schuler: Venture capital's biggest existential threat is persistent overcapitalization
“The existential threat to VC is Is one that's always been around too much money searching for too few good deals yielding low returns and making the category not so attractive.”
Barry Schuler Jul 5, 2017 ▶ 19:09
Disclosure
Schuler: DFJ Growth preemptively invested in Giphy when it wasn't fundraising
“Well, the most recent one, we did two toward the end of the year. One was unity and the second was Giphy, and Giphy, I had to get them to say yes. They actually weren't raising money, and one of the ways we like to operate is being a little preemptive, and we …”
Barry Schuler Jul 5, 2017 ▶ 22:13
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