Jun 4, 2018 · 31m · 20vc
20VC: What John Doerr Taught Me About Great Investing, Why Not All A Rounds Are Post-Traction and Why Despite Overfunding, There Is Still Gaps In Venture Financing with Trae Vassallo, Founding Partner @ Defy.vc
0:00 / 0:00
gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Trae Vassallo, co-founder and managing director of defy.vc, joins host Harry Stebbings on The 20 Minute VC to discuss her journey from engineer and startup founder to venture investor. She details the market gap that prompted the creation of Defy's $151 million Series A fund, her thesis on early-stage investing, key lessons from working with John Doerr, and actionable ways to drive diversity in tech.
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 27.8% of the talking time here. How this is scored →
Harry as informed peer 1.7 Guest teaching 2.6 Guest disagreement 0.9 Harry pushing back 0.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 14:12 Rejection of 'All A Rounds Are Post-Traction'
Trae explicitly disagrees with Harry's citation that Series A investments require post-revenue traction, offering Defy's pre-revenue Owl Cam deal as direct evidence against the claim.
Hardest push from Harry ▶ 14:00 Harry Citing David Beisel on Post-Traction Series AHarry pushes back on Trae's early-stage focus by quoting NextView partner David Beisel's assertion that Series A rounds must be post-traction.
Biggest teaching moment ▶ 20:56 In-Housing Firm Back Office vs. OutsourcingTrae educates Harry on why standard advice to outsource venture back-office operations is flawed, showing how managing third parties consumes excessive partner time unless dedicated talent is hired.
Harry holds his own ▶ 14:00 Harry Citing Industry Peers on Series A DynamicsHarry demonstrates sector knowledge by introducing David Beisel's viewpoint on Series A requirements to challenge Trae's investment criteria.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Trae Vassallo's Early Life and Journey to Stanford | 0 | 1 | 0 | 0 | Harry opens with a warm intro question about Trae's rural Minnesota childhood and application process to Stanford. Trae shares her early inspiration from Apple II computers and self-directed path to engineering. | |
| Engineering Studies, Design Thinking, and Stanford Robotics | 1 | 2 | 0 | 0 | Trae details her mechanical engineering studies, her work at IDEO on the Palm V, and meeting John Doerr at Stanford before co-founding Good Technology. Harry listens supportively with brief friendly interjections. | |
| Board Experience with John Doerr and Time at Kleiner Perkins | 2 | 3 | 0 | 0 | Harry asks probing questions about John Doerr's board style and Trae's key learnings from 11 years at Kleiner Perkins. Trae explains how shadowing different partners helped her realize venture does not scale well beyond small teams. | |
| The Motivation and Catalyst Behind Founding Defy.vc | 4 | 5 | 4 | 2 | Harry brings up a counter-quote from investor David Beisel stating all Series A rounds are post-traction. Trae explicitly rejects the premise, explaining that Defy's first deal was pre-revenue and defining traction as relative. | |
| Warehousing Deals vs. Demonstrating Investment Execution | 2 | 3 | 1 | 1 | Harry asks about warehousing deals during fundraising and LP concerns regarding new team partnerships. Trae clarifies that Defy did personal seed investments rather than deal warehousing to show joint execution. | |
| Building Firm Infrastructure and In-Housing Back Office Operations | 2 | 4 | 2 | 1 | Trae dismantles the conventional wisdom of outsourcing back-office operations, explaining why Defy hired a full-time CFO to maintain operational excellence. Harry follows up by asking if smaller funds should adopt this approach. | |
| The Emotional Story Behind Defy's $151 Million Fund Target | 2 | 2 | 0 | 0 | Trae recounts the emotional story behind Defy's $151 million fund target, tied to an entrepreneur reference battling cancer. Harry asks how male VCs can meaningfully foster diversity without sounding patronizing. | |
| Quick Fire: LP Heroes, Spousal Dynamics, and Learning Frameworks | 1 | 1 | 1 | 0 | Harry leads a lighthearted quick-fire segment covering LP role models, competing with her VC husband Steve, and taking up gymnastics. Trae humorously notes winning the one deal she competed on against her husband. | |
| Investment Thesis: Deep Dive into Owl Cam | 1 | 2 | 0 | 0 | Trae details the thesis behind Defy's investment in Owl Cam, emphasizing the proven founder team from Apple and Dropcam and expanding video security into vehicles. Harry lets Trae elaborate on the market vision. |
Statements from this episode (18)
BlackBerry Acquired Good Technology for $425M in 2015
“Good Technology, which was ultimately acquired by BlackBerry in 2015 for 420 Five million dollars.”
Trae Vassallo Co-Engineered the Palm V With One Other IDEO Engineer
“Myself and one other engineer basically engineered the whole product.”
Good Technology Was Sold to Motorola for $500 Million
“We ultimately sold that company to Motorola for five hundred million”
John Doerr Excels on Boards by Ignoring Minutiae for Core Drivers
“The thing that was so incredible about working with John is that he was really good at quickly identifying the big question, the big issue. He never got distracted by the small minutiae that so many folks can get distracted by. He was always laser focused on w…”
Venture Capital Decision-Making Does Not Scale Beyond Five Partners
“And so one of the learnings for myself was that I wasn't so sure that venture scaled well. Of making hard decisions. It's different when you have five people around a table versus 10 people around the table.”
Vassallo: The venture capital industry is overfunded
“The venture industry is overfunded. I mean, I don't think anyone would argue that there's, you know, not too much capital in the venture industry.”
Billion-Dollar VC Funds Have Abandoned $3M-$4M Checks for $10M-$15M+
“A lot of the venture firms that used to be early stage focused venture firms have gone from, you know, having 304 hundred million dollar funds to billion dollar funds. And these billion dollar funds are not likely investing three to four million dollars at a t…”
Defy.vc's First Series A Investment Was Pre-Revenue and Pre-Product
“In fact, our first investment was in a company that was absolutely pre-revenue. It was a Series A. They hadn't launched their product, but it was an investment in a different set of criteria.”
Trae Vassallo made Eero her first personal seed investment
“Eero was my first personal seed investment.”
Defy partners personally backed Owlcam before closing fund, then led Series A
“Timing-wise, we hadn't actually closed our fund yet, so we personally put some capital in. Some other firms led the seed round, but then we closed our first close and then led his Series A.”
Vassallo: LPs Demanded Deal Processing Examples During Defy.vc Fundraising
“We did a small personal seed investment that wouldn't really have been what we would have done had the firm been in existence, but LPs absolutely wanted to see how we process deals and how we work together as a team, and so it was definitely a great example th…”
Vassallo: LPs' primary concern was founders' lack of shared history
“The biggest concern is you've got a new team coming together, so Neil and I didn't have this Story of, you know, yeah, we've worked together for the last 10 years, but at different firms, we really hadn't crossed paths.”
VC Fee Structures Create Adverse Incentives to Outsource Back-Office Operations
“And I will add the reason why a lot of people end up outsourcing it is because it becomes a fund expense. When you outsource it to hire someone that comes out of the management fee pool. And so there's a weird adverse incentive to want to hire the right people…”
Vassallo: $150M+ funds should hire in-house CFOs instead of outsourcing
“If your fund is seed funder on the smaller side, then absolutely, you know, it doesn't make sense. But Once you start getting, you know, so our fund is a hundred and fifty one million dollars. And so, you know, we absolutely, it makes sense to bring that perso…”
Defy.vc Raised Its Debut Fund Cap to $151M for One Entrepreneur
“And so, in fact, our cap was one 50. And so it's actually a great story. And I think it was a really good example of How much we care about our entrepreneurs, but there was an entrepreneur who had been an incredible, it is an incredible reference for us. We've…”
Vassallo: Women played crucial roles in building Google's early business model
“You know, she talks about company like Google, you know, we only ever think of Larry and Sergey, but there were incredibly important and influential women who helped lead that company in the early days and helped build out the business model that made Google w…”