StarZero All shows Try the podcast clipper →

Jul 26, 2017 · 25m · 20vc

20VC: Why YC Is The Exact Opposite of Proprietary Deal Flow, Why Having No Follow On Dramatically Aligns Incentives & Why Founders Do Not Have To Be Passionate About Their Idea From The Start with Michael Ma, Founding Partner @ Liquid 2 Ventures

Michael Ma · 14m spoken Harry Stebbings · 8m 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, host Harry Stebbings interviews Michael Ma, Founding Partner at Liquid Two Ventures, exploring his journey from TalkBin founder to seed-stage investor. Michael shares insights on micro VC fund strategy, founder evaluation, LP relations, and counterintuitive perspectives on startup passion and Silicon Valley culture.

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 37.4% of the talking time here. How this is scored →

Harry as informed peer 4.5 Guest teaching 3.5 Guest disagreement 2.0 Harry pushing back 3.0
05100:0010:0020:002:29–8:59 · Harry as informed peer 4/10 Journey into Tech and Entrepreneurial Origins Harry demonstrates good domain knowledge regarding micro VC market overcrowding and specialization strategies. Michael politely explains his fund's decision-making framework, including their unique silver bullet rule, while gently pushing back against the consensus for specialist funds.8:59–14:14 · Harry as informed peer 5/10 Bridge Rounds, LP Relations, and Value Creation Thesis Harry brings strong industry context by citing Mike Maples' viewpoint on bridge rounds leading to nowhere. Michael agrees with the assessment and explains Liquid 2's incentive alignment with founders and stance on taking board seats.14:14–19:29 · Harry as informed peer 6/10 Evaluating Y Combinator, Deep Tech, and Founder Characteristics Harry presses Michael on market rumors regarding Y Combinator's quality dilution and cites quotes from Sean Rad and Peter Fenton. Michael provides an insightful reframe on YC's batch size expansion, explaining that international deals alter perception without lowering core company quality.19:29–23:00 · Harry as informed peer 3/10 Quick Fire Round and Core Venture Beliefs In the quick-fire section, Harry guides the pacing while Michael offers a contrarian opinion on founder passion, explaining why founders can grow into an idea rather than needing immediate passion. Harry briefly presses on newsletter choices.2:29–8:59 · Guest teaching 3/10 Journey into Tech and Entrepreneurial Origins Harry demonstrates good domain knowledge regarding micro VC market overcrowding and specialization strategies. Michael politely explains his fund's decision-making framework, including their unique silver bullet rule, while gently pushing back against the consensus for specialist funds.8:59–14:14 · Guest teaching 3/10 Bridge Rounds, LP Relations, and Value Creation Thesis Harry brings strong industry context by citing Mike Maples' viewpoint on bridge rounds leading to nowhere. Michael agrees with the assessment and explains Liquid 2's incentive alignment with founders and stance on taking board seats.14:14–19:29 · Guest teaching 4/10 Evaluating Y Combinator, Deep Tech, and Founder Characteristics Harry presses Michael on market rumors regarding Y Combinator's quality dilution and cites quotes from Sean Rad and Peter Fenton. Michael provides an insightful reframe on YC's batch size expansion, explaining that international deals alter perception without lowering core company quality.19:29–23:00 · Guest teaching 4/10 Quick Fire Round and Core Venture Beliefs In the quick-fire section, Harry guides the pacing while Michael offers a contrarian opinion on founder passion, explaining why founders can grow into an idea rather than needing immediate passion. Harry briefly presses on newsletter choices.2:29–8:59 · Guest disagreement 2/10 Journey into Tech and Entrepreneurial Origins Harry demonstrates good domain knowledge regarding micro VC market overcrowding and specialization strategies. Michael politely explains his fund's decision-making framework, including their unique silver bullet rule, while gently pushing back against the consensus for specialist funds.8:59–14:14 · Guest disagreement 1/10 Bridge Rounds, LP Relations, and Value Creation Thesis Harry brings strong industry context by citing Mike Maples' viewpoint on bridge rounds leading to nowhere. Michael agrees with the assessment and explains Liquid 2's incentive alignment with founders and stance on taking board seats.14:14–19:29 · Guest disagreement 2/10 Evaluating Y Combinator, Deep Tech, and Founder Characteristics Harry presses Michael on market rumors regarding Y Combinator's quality dilution and cites quotes from Sean Rad and Peter Fenton. Michael provides an insightful reframe on YC's batch size expansion, explaining that international deals alter perception without lowering core company quality.19:29–23:00 · Guest disagreement 3/10 Quick Fire Round and Core Venture Beliefs In the quick-fire section, Harry guides the pacing while Michael offers a contrarian opinion on founder passion, explaining why founders can grow into an idea rather than needing immediate passion. Harry briefly presses on newsletter choices.2:29–8:59 · Harry pushing back 3/10 Journey into Tech and Entrepreneurial Origins Harry demonstrates good domain knowledge regarding micro VC market overcrowding and specialization strategies. Michael politely explains his fund's decision-making framework, including their unique silver bullet rule, while gently pushing back against the consensus for specialist funds.8:59–14:14 · Harry pushing back 3/10 Bridge Rounds, LP Relations, and Value Creation Thesis Harry brings strong industry context by citing Mike Maples' viewpoint on bridge rounds leading to nowhere. Michael agrees with the assessment and explains Liquid 2's incentive alignment with founders and stance on taking board seats.14:14–19:29 · Harry pushing back 4/10 Evaluating Y Combinator, Deep Tech, and Founder Characteristics Harry presses Michael on market rumors regarding Y Combinator's quality dilution and cites quotes from Sean Rad and Peter Fenton. Michael provides an insightful reframe on YC's batch size expansion, explaining that international deals alter perception without lowering core company quality.19:29–23:00 · Harry pushing back 2/10 Quick Fire Round and Core Venture Beliefs In the quick-fire section, Harry guides the pacing while Michael offers a contrarian opinion on founder passion, explaining why founders can grow into an idea rather than needing immediate passion. Harry briefly presses on newsletter choices.

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

0:00 · Harry 92.2% · guest 7.8%0:00 · Harry 92.2% · guest 7.8%3:00 · Harry 23.9% · guest 76.1%3:00 · Harry 23.9% · guest 76.1%6:00 · Harry 18.2% · guest 81.8%6:00 · Harry 18.2% · guest 81.8%9:00 · Harry 35.8% · guest 64.2%9:00 · Harry 35.8% · guest 64.2%12:00 · Harry 23% · guest 77%12:00 · Harry 23% · guest 77%15:00 · Harry 17.3% · guest 82.7%15:00 · Harry 17.3% · guest 82.7%18:00 · Harry 26.3% · guest 73.7%18:00 · Harry 26.3% · guest 73.7%21:00 · Harry 41.5% · guest 58.5%21:00 · Harry 41.5% · guest 58.5%24:00 · Harry 100% · guest 0%24:00 · Harry 100% · guest 0%
Sharpest disagreement ▶ 20:38 Rejecting the founder passion requirement

Michael directly rejects the prevailing VC gospel that founders must be deeply passionate about their idea from day one, noting that founders frequently grow into passion over time.

 Hardest push from Harry ▶ 14:48 Challenging YC's deal quality

Harry confronts Michael with widespread market criticism that Y Combinator's rapid expansion has significantly degraded the average quality of its startup batches.

 Biggest teaching moment ▶ 14:59 Deconstructing YC quality perceptions

Michael educates Harry on why batch quality appears lower to traditional VCs, clarifying that the addition of non-standard international deals skews perception while top-tier batch count remains steady.

 Harry holds his own ▶ 8:59 Quoting Mike Maples on bridge rounds

Harry leverages insights from legendary investor Mike Maples to challenge Michael's approach to follow-on investments and seed extension rounds.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Journey into Tech and Entrepreneurial Origins 4323 Harry demonstrates good domain knowledge regarding micro VC market overcrowding and specialization strategies. Michael politely explains his fund's decision-making framework, including their unique silver bullet rule, while gently pushing back against the consensus for specialist funds.
Bridge Rounds, LP Relations, and Value Creation Thesis 5313 Harry brings strong industry context by citing Mike Maples' viewpoint on bridge rounds leading to nowhere. Michael agrees with the assessment and explains Liquid 2's incentive alignment with founders and stance on taking board seats.
Evaluating Y Combinator, Deep Tech, and Founder Characteristics 6424 Harry presses Michael on market rumors regarding Y Combinator's quality dilution and cites quotes from Sean Rad and Peter Fenton. Michael provides an insightful reframe on YC's batch size expansion, explaining that international deals alter perception without lowering core company quality.
Quick Fire Round and Core Venture Beliefs 3432 In the quick-fire section, Harry guides the pacing while Michael offers a contrarian opinion on founder passion, explaining why founders can grow into an idea rather than needing immediate passion. Harry briefly presses on newsletter choices.

Statements from this episode (11)

Assertion Supported
TalkBin was the fastest exit in Y Combinator history
“At the time, TalkBend was the fastest exit YC had ever had.”
Michael Ma Jul 26, 2017 ▶ 4:20
Disclosure
Liquid 2 partners get one unilateral 'silver bullet' deal per year
“Silver bullet is any, at any point in time, individual partner says, I just want to do this deal. They get one per year, and they don't need anybody else to vote on it. Otherwise, usually it's majority vote.”
Michael Ma Jul 26, 2017 ▶ 8:06
Assertion Partly supported
The best micro VCs reserve 75% of capital for follow-on investments
“Typically for micro-receives, I'd say in industry, it's like fifty-fifty, 50% out of fund, 50% on the back end. I'd say the best funds are doing like something like three to one with three being the follow on. I'd say first round poly is doing that. Like some …”
Michael Ma Jul 26, 2017 ▶ 8:27
Prediction Held up
Liquid 2 Ventures skips seed extensions to re-invest at Series A
“Generally, we say we stay out of seat extensions and during the A, we think the lead is going to be the signal anyway. So that's when we'll come back in.”
Michael Ma Jul 26, 2017 ▶ 8:51
Insight
VCs should avoid seed extensions because bridge rounds rarely succeed
“But in general, I think you should stay away from it from the VC standpoint. Just to, they just tend to go nowhere, like Maple said.”
Michael Ma Jul 26, 2017 ▶ 9:39
Assertion Supported
Liquid 2 Ventures does not take board seats at the seed stage
“We don't take board seats on seed.”
Michael Ma Jul 26, 2017 ▶ 12:44
Opinion
Y Combinator is the exact opposite of proprietary deal flow
“So, YC, in a lot of ways, exact opposite of proprietary deal flow. Everybody talks about proprietary deal flow like having something unique, and YC is a public demo day where everybody in the Valley is invited, and so, in a lot of ways, it's antithesis to a lo…”
Michael Ma Jul 26, 2017 ▶ 14:25
Assertion Not checkable as stated
YC yields a constant number of good deals regardless of batch size
“I think what we have seen is there's a certain number of good deals per batch, regardless of batch size.”
Michael Ma Jul 26, 2017 ▶ 15:22
Insight
Perceived YC quality decline stems from international deals US VCs cannot fund
“What has gone up is YC has done more international deals. So from a lot of VC's perspective, those deals are just not doable. And so the batch size has, let's say, another 20 or 30 African Indian deals. I don't think those are bad companies, and some of them a…”
Michael Ma Jul 26, 2017 ▶ 15:28
Insight
Aspiring VCs can perform analyst duties before getting hired
“I mean, it's actually possible for you to basically act like an analyst associate at a fund without getting a job. You can meet with founders. You can write market maps. You can basically do the job. You can send over these deals to VCs, and you'd be surprised…”
Michael Ma Jul 26, 2017 ▶ 19:55
Insight
Founders do not need initial passion for their startup idea
“So I don't think you need to be passionate about an idea in the beginning, which is sort of controversial in my opinion, but you actually do see founders grow into something.”
Michael Ma Jul 26, 2017 ▶ 21:06
Made with StarZero

Turn any episode into a week of clips.

This entire site, over 1,200 episodes transcribed, diarized, checked and made playable, runs on the StarZero media pipeline. Drop in your own episode and the podcast clipper finds the moments worth sharing, cuts them, captions them, and reframes them for every feed.

Try the podcast clipper Learn more