Nov 15, 2017 · 26m · 20vc
20VC: Why VCs Fundamentally Assess Founders The Wrong Way, Why VC Needs To Innovate On The Scouting Model & Why SAFE's and Convertible Notes Are The Future Of Investing with Elizabeth Yin, Founder & General Partner @ Hustle Fund
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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, host Harry Stebbings interviews Elizabeth Yin, Founder and General Partner at Hustle Fund, who explains why traditional early-stage founder assessment is flawed and presents Hustle Fund's model of evaluating startups based on execution speed and automated metric tracking.
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 32.4% of the talking time here. How this is scored →
Harry as informed peer 4.6 Guest teaching 3.3 Guest disagreement 2.3 Harry pushing back 3.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 19:19 Dismissing the tension between ownership targets and portfolio size
Elizabeth directly rejects Harry's premise that portfolio breadth and ownership concentration are mutually exclusive, using Y Combinator as an explicit counterexample.
Hardest push from Harry ▶ 17:12 Challenging metric observation against outlier startupsHarry forcefully questions Elizabeth's evaluation model by bringing up major outlier examples like Twitter, Instagram, and SimpleLegal that would have failed her initial observation criteria.
Biggest teaching moment ▶ 14:04 Product-market fit vs execution speed timelineElizabeth reframes Harry's question about observation length by distinguishing between product-market fit (which takes years and is for Series A investors) and execution speed (which can be measured in weeks).
Harry holds his own ▶ 18:57 Probing ownership math in small check pre-seed roundsHarry demonstrates strong venture knowledge by doing live fund math on ownership percentages derived from $250k checks in a $750k round and challenging her lower ownership targets.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Elizabeth Yin's Career Journey from Founder to VC | 3 | 4 | 3 | 1 | Harry sets up the interview by asking about Elizabeth's background and referencing her stance on traditional VC evaluation. Elizabeth explains her journey from founder to 500 Startups partner, criticizing the standard VC practice of evaluating founders based on pitch talking skills and pedigree rather than actual execution speed. | |
| Assessing Founders Based on Speed and Execution | 5 | 3 | 2 | 5 | Harry pushes back on Elizabeth's speed thesis by asking how it applies to heavily regulated spaces like consumer banking and biotech. Elizabeth reframes speed to explain that even in regulated industries, founders show hustle by how quickly they navigate regulatory hurdles. | |
| Flipping the Venture Funnel with Pre-Seed Checks | 5 | 2 | 1 | 3 | Harry demonstrates domain expertise by asking a technical question about how Hustle Fund secures pro-rata rights in un-capped note or SAFE rounds. Elizabeth outlines their pre-seed check process and standardized side letters. | |
| Innovation in Venture Capital Scouting Models | 4 | 3 | 1 | 2 | Harry and Elizabeth discuss scouting innovation and post-investment observation periods. Elizabeth educates Harry on distinguishing between long-term product-market fit evaluation and short-term execution speed tracking. | |
| Operational Red Flags and Evaluating Outlier Startups | 6 | 4 | 3 | 6 | Harry directly challenges Elizabeth's framework by citing notable outliers like Twitter, Instagram, and SimpleLegal that might have failed her speed/observation test early on. Elizabeth defends her thesis by noting Hustle Fund avoids pure consumer apps and that rapid pivoting reflects execution speed. | |
| Portfolio Strategy, Ownership, and Pre-Seed Fund Dynamics | 6 | 5 | 4 | 6 | Harry pushes on fund economics, noting that small checks in early pre-seed rounds yield low ownership compared to traditional target percentages. Elizabeth counters by pointing to Y Combinator's model, arguing that large portfolio volume and ownership strategies can co-exist. | |
| Quickfire Questions on Pitching, SAFEs, and The Pill Club | 3 | 2 | 2 | 2 | In a quickfire round, Harry asks rapid-fire questions on fundraising, founder red flags, and convertible instruments. Elizabeth takes a contrarian stance advocating for SAFEs and convertible notes as the future of investing. |
Statements from this episode (19)
Elizabeth Yin reviewed over 20,000 startup decks at 500 Startups
“Prior to Hustle Fund, Elizabeth was a partner at 500 Startups, where she ran the 500 Startup Seed program in Mountain View, and where her and her partner saw over 20,000 startup decks.”
VCs assess founders on pitch skill and pedigree, not execution
“And very often VCs assess people based on those meetings, just basically by how well you talk. And also based on your resume, especially at the early stage, when you don't have a whole lot to show, Do you have pedigree or do you not have pedigree? VCs don't ac…”
Strong executing teams at 500 Startups were often weak pitchers
“At least at 500 startups, I've seen so many teams execute while they were in the accelerator program, and very often they were not necessarily the best at pitching.”
The best startups execute rapidly on their single core metric
“This is something that we noticed, Eric, my business partner, and I noticed in many of the portfolio companies we worked with at 500 startups and in our own angel portfolios, the best ones are the ones that execute on that one metric that matters very fast.”
Hustle Fund decides on initial $25k checks after one conversation
“Then we'll be really fast to write a first check, a 25 K check. I think that since I'm a GP of hustle fund, we have to move fast ourselves. So within a conversation, pretty much like unless there's something jarring where we absolutely need a second conversati…”
Hustle Fund uses standard YC SAFEs with pro-rata side letters
“We're investing essentially on, it's a standard YC safe, and you know, we have a side letter with a couple of terms that we want around prorata and information rights.”
VCs exhibit very little innovation in founder scouting
“I think, to be honest, there hasn't been a lot of innovation on scouting amongst VCs.”
Hustle Fund targets execution speed over founder pedigree
“At Hustle, our model is to go after teams that are moving really quickly. This may or may not include teams that have Strong pedigree. Certainly it encompasses some of those teams, but it also encompasses a lot of teams that don't.”
Venture capital has failed to tap underrepresented minority founders
“Arlen Hamilton is going after underrepresented minorities and doing a lot of outreach around communities there. I think that's really innovative. No one has really tapped those communities.”
Hustle Fund does not look for product-market fit when investing
“And I think, frankly, like, it's post-seed or Series A investors who are most concerned with that. We are not looking for product market fit.”
Hustle Fund bases follow-on checks on speed, not absolute traction
“And really what we're looking for, if we decide to write a follow on check, that criteria in part is based on the speed at which that priority metric is moving. It's not so much about where that number stands today.”
Co-founder drama and morale issues are top startup failure reasons
“One of the top reasons why found founding teams fall apart actually has nothing to do with speed. Although speed is a by-product is just, you know, co-founder drama and co-founder breaks, breakups and co-founder issues like that, you know, morale around team, …”
Hustle Fund explicitly excludes pure consumer apps from its portfolio
“So I think first off, to be clear, we, there are certain areas that we are not investing in. So we don't invest in pure consumer apps. So we would have missed out on a Twitter and Instagram, Snapchat, et cetera, anyway.”
Hustle Fund writes high check volumes to hedge bets and gather data
“This is why we are writing a lot of checks, essentially to hedge bets, essentially to gather information across lots of different companies.”
Hustle Fund will not scale to a $300M fund size
“I don't actually think that that would be the strategy for us.”
Startup fundraising will shift to crypto tokens within 10 years
“I actually think in 10 years, some of the craziness will level out. And maybe it's not on Bitcoin, but maybe it's on another token or so, that you will see fundraisers done differently in 10 years.”