Apr 9, 2018 · 23m · 20vc
20VC: Why You Have To Raise $100m+ If You Want To Go Big Today, The 5 Fundamentals To Starting and Scaling A Successful Marketplace & Why Female Founders Under-Promise and Over-Deliver with Paul Hsiao, Founding Partner @ Canvas Ventures
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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 20VC, host Harry Stebbings interviews Paul Hsiao, Founding Partner at Canvas Ventures, to discuss the mechanics of building marketplace startups, venture capital fund dynamics, and capital requirements for category-defining companies. Hsiao shares key principles for scaling marketplaces, insights from analyzing 500 top tech companies, and his perspectives on backing exceptional female founders.
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 41.6% of the talking time here. How this is scored →
Harry as informed peer 2.2 Guest teaching 3.0 Guest disagreement 0.0 Harry pushing back 0.7
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:45 Rejection of early direct online ad spend
Hsiao rejects conventional marketing advice for early marketplaces, arguing that cranking up direct online ad spend early on is a waste of capital compared to offline distribution.
Hardest push from Harry ▶ 10:20 Challenging patience versus stubbornnessStebbings presses Hsiao to clarify how an investor distinguishes between necessary founder patience and unproductive stubbornness when execution is failing.
Biggest teaching moment ▶ 16:36 Demographics of top tech company foundersHsiao educates the host with empirical data from his study of 500 tech companies, revealing that 80% of top tech founders started their companies in their 20s or 30s.
Harry holds his own ▶ 13:13 Citing female founder VC funding statisticsStebbings demonstrates strong industry research by citing the precise 2.19% statistic for VC capital allocated to female founders when framing his query.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Sponsorship Messages: Ring and Cooley | 0 | 1 | 0 | 0 | Segment 1 includes sponsorship reads for Ring and Cooley, followed by the host introducing Paul Hsiao and asking about his career background. The atmosphere is purely introductory and cordial without host pushback or guest combativeness. | |
| Comparing VC Firm Models: Canvas Ventures vs. NEA | 2 | 3 | 0 | 1 | Stebbings relays a question from investor Oren Zeev regarding fund models between NEA and Canvas. Hsiao explains that fund size influences exit expectations, and that picking the individual GP matters more than firm branding. | |
| Five Core Fundamentals for Building Marketplaces | 3 | 5 | 0 | 1 | Hsiao outlines five fundamental principles for building successful marketplaces based on his venture experience. Stebbings interrupts constructively to ask how investors distinguish between founder patience and stubbornness. | |
| Capital Scaling, Cohort Retention, and Female Founders | 3 | 3 | 0 | 1 | Stebbings cites industry data showing female founders receive only 2.19% of VC dollars, contrasting it with Hsiao's portfolio. Hsiao notes that female founders in his experience tend to under-promise and over-deliver. | |
| Assessing Product-Market Fit and Findings from 500 Tech Companies | 3 | 4 | 0 | 1 | Hsiao presents findings from a study of 500 top tech companies, noting founder age trends and total capital raised. Stebbings questions capital efficiency assumptions and locked liquidity in private markets. | |
| Quick Fire Round and Recent Investments | 2 | 2 | 0 | 0 | In a rapid-fire round, Hsiao shares book recommendations, key board member lessons, and his shift in perspective on the necessity of raising large growth rounds. The interaction is warm and mutually complimentary. |
Statements from this episode (14)
NEA requires $800M+ exits to move the needle, unlike smaller funds
“I think one realization coming since joining Canvas a few years ago is a small exit, like, easily moves the needle for a fund like Canvas, whereas we used to joke when you don't have an exit more than eight hundred million, you know, it doesn't move the needle…”
Founders should pick individual VC partners over firm brands
“Vice says CEO is that ultimately an entrepreneur's relationship with VCs is with one individual of the firm. You rarely see other partners, so picking the right GP for you is the most important and not the firm, and I've seen that to be very true.”
Marketplaces should target power sellers over long-tail supply
“One is winning a very differentiated supply first. Always go deep and have a thick network in one specific cluster versus broad and horizontal. And we're just finding that equivalent of power sellers in your target market is really critical. They have volume, …”
Direct online demand marketing wastes capital for early marketplaces
“When generating early demand, one of the more counterintuitive learnings Is that early marketplace demands are dependent on an existing distribution and offline activities. Like for house, for example, you mentioned early health on Tulia was invaluable. And I …”
Marketplace growth occurs in step functions driven by supply critical mass
“The other is, third is actually it takes patience. It takes the growth curve, looks more like step function versus a linear curve. You get frustrated that demand looks flat for a period of time, and we see this often. And then suddenly the demand jumps. You ge…”
Marketplace founders should give up if supply isn't differentiated
“I think when you know you should give up is when your supply is not differentiated. When the users can actually find your supply at a lot of different places, you have to question whether what you do is truly making your supply size business better. Is it tran…”
Monthly repeat cohort data dictates when to scale marketplace capital
“At that level, when deciding whether you put a lot of capital to work, we look at the monthly repeat cohort data. It really tells you a lot how often they come back, and all the things we just talked about play into and contribute to that cohort data, and that…”
Female founders consistently under-promise and over-deliver compared to male peers
“One thing that's unique about this cohort of entrepreneurs is that they tend to under-promise and over-deliver, and it's really just more consistent amongst the female entrepreneurs and CEOs.”
Venture investors bias female founders' pitch confidence as aggressiveness
“When a female entrepreneur presents, the confidence is viewed as negative. It's been too aggressive.”
80% of top tech founders started companies in their 20s or 30s
“One commonalities, the most striking one is they are mostly started by young people. You know, we all know some of the extreme examples of Gates, Zuckerberg, and Steve Jobs, who started their companies in their teens and early twenties, but I was surprised by …”
90% of the top 500 tech companies raised $85M+ in capital
“90% of the entire cohort raised more than 85 to a hundred million dollars. I mean, there are always exceptions like Stitch Fix, Zoopla in UK, and Tableau in Seattle, but really the vast majority of them have raised a lot of capital, especially in more recent t…”
Over $600B in LP capital is trapped inside private tech companies
“Yeah, I think for the LPs, for the minimum partners who have trusted their capital with us, there is what, More than six hundred billion dollars currently trapped inside these large private enterprises. And I think it is our fiduciary responsibility and of the…”
Raising $100M+ is critical for new tech company success
“I would say going back to the study and also seeing my own data points, The capital efficiency, well, actually, simply, it is important to win the capital arms race. That raising a hundred million dollars is critical to the success of new companies.”
Consumer tech is in a fallow period lacking viral distribution channels
“I think so, yes, but I can change quickly. You know, I think about Alexa or Google Home, those could all, you know, emerge or become an important new distribution channel. We don't know yet. Too early to tell. But yes, we are in a period where we lack new and …”