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Apr 2, 2018 · 31m · 20vc

20VC: Greylock's Jerry Chen on The 2 Fundamentals To Assessing Startup Risk, Why Good Investors Have To Be Optimistic & Why VCs Get In Trouble When They Move Outside Their "Strike Zone"

Jerry Chen · 20m spoken Harry Stebbings · 9m spoken
0:00 / 0:00

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In this episode of The 20 Minute VC, host Harry Stebbings interviews Greylock Partner Jerry Chen to explore key frameworks for assessing startup risk, enterprise product differentiation, and venture capital decision-making. Drawing from his operational tenure at VMware and venture experience at Accel and Greylock, Jerry provides actionable insights on unit economics, distribution shifts, board governance, and maintaining investment discipline.

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 31.5% of the talking time here. How this is scored →

Harry as informed peer 3.0 Guest teaching 3.5 Guest disagreement 1.0 Harry pushing back 1.8
05100:0010:0020:0030:003:05–6:39 · Harry as informed peer 2/10 Jerry Chen's Journey and Lessons from VMware Harry conducts a standard warm interview opening, picking up on key phrases in Jerry's background to ask follow-up questions about the dot-com crash and VMware scale. Jerry shares foundational career lessons on optimism, economic fundamentals, and operating experience without friction.6:39–15:05 · Harry as informed peer 3/10 Frameworks for Startup Risk Assessment Harry challenges conventional startup dogma by asking if a product truly needs to be 10x better. Jerry smoothly reframes this into a framework of drivers versus drags, before detailing his framework distinguishing quantifiable probabilities from unquantifiable uncertainties in risk assessment.15:06–23:24 · Harry as informed peer 4/10 Unit of Value, Distribution Shifts, and Non-Linear Growth Harry displays host expertise by bringing in Andreessen Horowitz partner Alex Rampell's thesis on distribution versus technology. Jerry expands on this by explaining platform shifts as distribution node shifts and outlining how unit of value dictates sales channels and non-linear growth.23:26–28:50 · Harry as informed peer 3/10 Board Governance and Investor Collaboration Harry references feedback from Jerry's portfolio founders to open a discussion on board governance before launching into the quickfire section. Jerry expresses a contrarian view that AWS is beatable in specific product niches, though the overall segment remains friendly and conversational.3:05–6:39 · Guest teaching 3/10 Jerry Chen's Journey and Lessons from VMware Harry conducts a standard warm interview opening, picking up on key phrases in Jerry's background to ask follow-up questions about the dot-com crash and VMware scale. Jerry shares foundational career lessons on optimism, economic fundamentals, and operating experience without friction.6:39–15:05 · Guest teaching 4/10 Frameworks for Startup Risk Assessment Harry challenges conventional startup dogma by asking if a product truly needs to be 10x better. Jerry smoothly reframes this into a framework of drivers versus drags, before detailing his framework distinguishing quantifiable probabilities from unquantifiable uncertainties in risk assessment.15:06–23:24 · Guest teaching 4/10 Unit of Value, Distribution Shifts, and Non-Linear Growth Harry displays host expertise by bringing in Andreessen Horowitz partner Alex Rampell's thesis on distribution versus technology. Jerry expands on this by explaining platform shifts as distribution node shifts and outlining how unit of value dictates sales channels and non-linear growth.23:26–28:50 · Guest teaching 3/10 Board Governance and Investor Collaboration Harry references feedback from Jerry's portfolio founders to open a discussion on board governance before launching into the quickfire section. Jerry expresses a contrarian view that AWS is beatable in specific product niches, though the overall segment remains friendly and conversational.3:05–6:39 · Guest disagreement 0/10 Jerry Chen's Journey and Lessons from VMware Harry conducts a standard warm interview opening, picking up on key phrases in Jerry's background to ask follow-up questions about the dot-com crash and VMware scale. Jerry shares foundational career lessons on optimism, economic fundamentals, and operating experience without friction.6:39–15:05 · Guest disagreement 1/10 Frameworks for Startup Risk Assessment Harry challenges conventional startup dogma by asking if a product truly needs to be 10x better. Jerry smoothly reframes this into a framework of drivers versus drags, before detailing his framework distinguishing quantifiable probabilities from unquantifiable uncertainties in risk assessment.15:06–23:24 · Guest disagreement 1/10 Unit of Value, Distribution Shifts, and Non-Linear Growth Harry displays host expertise by bringing in Andreessen Horowitz partner Alex Rampell's thesis on distribution versus technology. Jerry expands on this by explaining platform shifts as distribution node shifts and outlining how unit of value dictates sales channels and non-linear growth.23:26–28:50 · Guest disagreement 2/10 Board Governance and Investor Collaboration Harry references feedback from Jerry's portfolio founders to open a discussion on board governance before launching into the quickfire section. Jerry expresses a contrarian view that AWS is beatable in specific product niches, though the overall segment remains friendly and conversational.3:05–6:39 · Harry pushing back 1/10 Jerry Chen's Journey and Lessons from VMware Harry conducts a standard warm interview opening, picking up on key phrases in Jerry's background to ask follow-up questions about the dot-com crash and VMware scale. Jerry shares foundational career lessons on optimism, economic fundamentals, and operating experience without friction.6:39–15:05 · Harry pushing back 3/10 Frameworks for Startup Risk Assessment Harry challenges conventional startup dogma by asking if a product truly needs to be 10x better. Jerry smoothly reframes this into a framework of drivers versus drags, before detailing his framework distinguishing quantifiable probabilities from unquantifiable uncertainties in risk assessment.15:06–23:24 · Harry pushing back 2/10 Unit of Value, Distribution Shifts, and Non-Linear Growth Harry displays host expertise by bringing in Andreessen Horowitz partner Alex Rampell's thesis on distribution versus technology. Jerry expands on this by explaining platform shifts as distribution node shifts and outlining how unit of value dictates sales channels and non-linear growth.23:26–28:50 · Harry pushing back 1/10 Board Governance and Investor Collaboration Harry references feedback from Jerry's portfolio founders to open a discussion on board governance before launching into the quickfire section. Jerry expresses a contrarian view that AWS is beatable in specific product niches, though the overall segment remains friendly and conversational.

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

0:00 · Harry 98.1% · guest 1.9%0:00 · Harry 98.1% · guest 1.9%3:00 · Harry 21.2% · guest 78.8%3:00 · Harry 21.2% · guest 78.8%6:00 · Harry 13.8% · guest 86.2%6:00 · Harry 13.8% · guest 86.2%9:00 · Harry 18.2% · guest 81.8%9:00 · Harry 18.2% · guest 81.8%12:00 · Harry 13.6% · guest 86.4%12:00 · Harry 13.6% · guest 86.4%15:00 · Harry 19.3% · guest 80.7%15:00 · Harry 19.3% · guest 80.7%18:00 · Harry 14% · guest 86%18:00 · Harry 14% · guest 86%21:00 · Harry 31.6% · guest 68.4%21:00 · Harry 31.6% · guest 68.4%24:00 · Harry 14.5% · guest 85.5%24:00 · Harry 14.5% · guest 85.5%27:00 · Harry 48.9% · guest 51.1%27:00 · Harry 48.9% · guest 51.1%30:00 · Harry 100% · guest 0%30:00 · Harry 100% · guest 0%
Sharpest disagreement ▶ 26:38 Jerry challenges consensus belief on AWS dominance

Jerry explicitly pushes against market consensus among founders and venture capitalists by asserting that Amazon Web Services is beatable in key product categories.

 Hardest push from Harry ▶ 7:55 Harry pushes back on the 10x better rule

Harry directly questions the widely accepted industry rule that a startup product must be 10x better than existing solutions to succeed.

 Biggest teaching moment ▶ 9:17 Jerry breaks down probabilities versus uncertainties in risk

Jerry educates Harry on the distinction between quantifiable probability risks like execution and unquantifiable uncertainty risks like behavior change in new markets.

 Harry holds his own ▶ 15:05 Harry brings Alex Rampell's quote on distribution race

Harry demonstrates domain preparation by introducing Alex Rampell's thesis on distribution vs technology to test Jerry's go-to-market framework.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
Jerry Chen's Journey and Lessons from VMware 2301 Harry conducts a standard warm interview opening, picking up on key phrases in Jerry's background to ask follow-up questions about the dot-com crash and VMware scale. Jerry shares foundational career lessons on optimism, economic fundamentals, and operating experience without friction.
Frameworks for Startup Risk Assessment 3413 Harry challenges conventional startup dogma by asking if a product truly needs to be 10x better. Jerry smoothly reframes this into a framework of drivers versus drags, before detailing his framework distinguishing quantifiable probabilities from unquantifiable uncertainties in risk assessment.
Unit of Value, Distribution Shifts, and Non-Linear Growth 4412 Harry displays host expertise by bringing in Andreessen Horowitz partner Alex Rampell's thesis on distribution versus technology. Jerry expands on this by explaining platform shifts as distribution node shifts and outlining how unit of value dictates sales channels and non-linear growth.
Board Governance and Investor Collaboration 3321 Harry references feedback from Jerry's portfolio founders to open a discussion on board governance before launching into the quickfire section. Jerry expresses a contrarian view that AWS is beatable in specific product niches, though the overall segment remains friendly and conversational.

Statements from this episode (12)

Insight
Chen: Good venture investors must maintain relentless optimism
“To be a good investor, you have to always be optimistic to see the possible Because if you're always focused on what can go wrong, you're never going to put money to work. You're never going to invest. You're never going to believe the founder.”
Jerry Chen Apr 2, 2018 ▶ 4:18
Insight
Chen: Venture capitalists are advisors, never company decision-makers
“Part of venture you have to realize is you're an advisor, an influencer, you're a mentor and a coach, but you're actually never a decider, right? So I think a lot of ventures getting comfortable with a lot of things being out of control.”
Jerry Chen Apr 2, 2018 ▶ 5:42
Insight
Chen: Effective startup board members require prior operator experience
“Without being on the other side of the table, without shipping product, hiring employees, firing employees, I was not going to be a great board member, a great advisor to these founders.”
Jerry Chen Apr 2, 2018 ▶ 5:55
Insight
Chen: Enterprise startups must address a buyer's top three priorities
“If you're not the top three priorities for your customer as a founder or executive, you either have to hit one of those top three priorities or convince her this should be a top three priority. Because it doesn't matter if you're the fifth or sixth wishlist on…”
Jerry Chen Apr 2, 2018 ▶ 6:59
Insight
Chen: Venture risk divides into quantifiable probabilities and unquantifiable uncertainties
“There's really two or three categories of risk to think about. There's probabilities and uncertainties. I think probabilities are quantifiable risks, right? So the execution risk, the market risk, and you and I as investors can make an educated bet or guess on…”
Jerry Chen Apr 2, 2018 ▶ 9:41
Prediction Held up
Chen: Autonomous vehicle winners will reach $100 billion valuations
“A large consumer outcome, or even some of these autonomous vehicle outcomes, are going to be a hundred billion plus or minus companies, right? Or tens of billions. If, you know, autonomous vehicles become a reality, that's going to disrupt a multi-trillion dol…”
Jerry Chen Apr 2, 2018 ▶ 11:31
Insight
Chen: VCs fail when investing outside their strike zone
“People get in trouble when they start swinging outside the strike zone, if you will, and do things that are not comfortable with or not good at. And then that's when things kind of fall apart.”
Jerry Chen Apr 2, 2018 ▶ 13:58
Insight
Jerry Chen: Low-priced products cannot sustain complex direct sales forces
“If you have kind of a small unit value, that's low price point and have a complex direct sales force, the economics would never work out no matter how hard you try.”
Jerry Chen Apr 2, 2018 ▶ 17:23
Insight
Jerry Chen: Budget-additive enterprise software requires a bottoms-up sales strategy
“If you're budget additive to a company, you probably want to be bottoms up selling motion and a small unit value. These new CIO or CFO is going to wake up saying, I need your new widget. So you have to be a small unit value and kind of bottoms up and that's in…”
Jerry Chen Apr 2, 2018 ▶ 19:20
Insight
Jerry Chen: Early founders should prioritize adoption over non-linear value
“Don't overthink about nonlinear value. Just make sure you're getting your product used by customers. And then after you get some adoption and kind of the later second act or third act of the company, then be a lot more conscious about bending that curve to cre…”
Jerry Chen Apr 2, 2018 ▶ 21:41
Opinion
Jerry Chen: AWS is beatable in specific product areas and markets
“Given this VC podcast, I would say that a lot of founders, investors don't think you can beat Amazon's cloud, AWS, but I actually think AWS is very beatable in certain product areas in certain markets, so I'm still bullish in finding companies that can challen…”
Jerry Chen Apr 2, 2018 ▶ 26:41
Prediction Not checkable as stated
Jerry Chen: Greylock aims to make one or two investments annually
“But the truth of the matter is our goal is to find one or two great investments a year, not five or 10 good investments a year.”
Jerry Chen Apr 2, 2018 ▶ 27:20
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