Jun 25, 2018 · 35m · 20vc
20VC: The 4 Key Skills All VCs Need To Be Successful, How To Build, Maintain and Scale Your Network in VC and What is The Process Through Which VCs Build Conviction in Opportunities with Max Motschwiller, General Partner @ Meritech Capital
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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, Harry Stebbings interviews Max Motschwiller, Partner at Meritech Capital, discussing growth-stage venture investing, conviction building, fund sizing strategy, and the essential skills required for venture capital success.
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 35.1% of the talking time here. How this is scored →
Harry as informed peer 5.0 Guest teaching 5.1 Guest disagreement 1.1 Harry pushing back 3.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 27:36 Nuanced rejection of distribution thesis
Max explicitly rejects a simple single-variable view on distribution bottlenecks by breaking down 'yes and no' components across viral acquisition and platform monopolies.
Hardest push from Harry ▶ 10:51 Challenging the picking vs winning hierarchyHarry explicitly adopts a contrarian stance, challenging the guest's core assertion that 'picking' is the primary VC skill when growth market herd dynamics prioritize 'winning'.
Biggest teaching moment ▶ 7:13 Reframing operator advantage as a handicapMax educates the host on how direct operating experience can paradoxically hinder investors by making them overestimate how difficult operational challenges will be for founders.
Harry holds his own ▶ 25:06 Monte Carlo simulation statistical backingHarry demonstrates high domain expertise by sharing results from a Monte Carlo simulation he ran to mathematically validate Meritech's 25-company portfolio target.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Max Motschwiller's Journey into Venture Capital | 3 | 5 | 0 | 1 | Harry introduces Max Motschwiller and asks about his journey from Summit Partners to Kleiner Perkins. Max explains the distinction between learning the 'science' of investing at Summit versus the 'art' of investing at Kleiner Perkins. | |
| Career VCs vs. Operational Experience | 5 | 6 | 2 | 4 | Harry introduces quotes from Pat Grady and Jeremy Levine regarding career VCs versus operators. Max reframes operating experience as a double-edged sword that can sometimes cause investors to overestimate the difficulty of operational problems. | |
| Core VC Skills: Finding, Picking, Winning, and Helping | 6 | 6 | 2 | 6 | Harry pushes back contrarian-style on Max's premise that 'picking' is the most important skill, arguing that in competitive growth rounds 'winning' matters more. Max clarifies that picking in growth stage primarily centers on price and building early conviction. | |
| Networking Strategies and Focused Deal Sourcing | 5 | 5 | 1 | 3 | Max outlines his networking philosophy of prioritizing 'best friends' in the ecosystem. Harry shares his personal Affinity tracking system and asks how to balance high-volume deal flow versus focused sourcing. | |
| Winning Competitive Growth Deals as a Younger Partner | 4 | 4 | 1 | 3 | Max details how younger partners win deals through early conviction rather than relying on legacy firm brand name. Harry asks about the true value-add of follow-on funding, which Max contextualizes for late-stage investing. | |
| Meritech's Growth Strategy and Portfolio Construction | 7 | 5 | 1 | 4 | Harry asks how Meritech competes against mega-funds like SoftBank and Sequoia. Max breaks down the bifurcation between late-stage and pre-IPO rounds, and Harry cites a Monte Carlo simulation proving 25 portfolio targets hit optimal diversification. | |
| The State of Consumer Investing and Distribution Platforms | 7 | 6 | 2 | 5 | Harry contrasts opposing views from Bessemer and True Ventures on consumer investing, invoking Peter Fenton's thesis on restricted distribution. Max reframes distribution as a 'yes and no' scenario between viral potential and big tech monopolies. | |
| Quickfire Round | 3 | 4 | 0 | 1 | In the quickfire round, Max discusses book recommendations, key consumer metrics, Rob Ward's 'capital gluttony' term, and Meritech's investment in Amplitude. |
Statements from this episode (16)
Motschwiller: Great VCs combine analytical rigor with thesis-driven art
“And so I think the marriage of both of those two is what makes a venture capitalist great.”
Motschwiller: Operating experience can cause VCs to overestimate problem difficulty
“The flip side to that is you might understand that there's a problem that's so hard to solve, it was so hard for you to solve, that then you don't believe that This entrepreneur will solve it, and it might lead you to overestimate the difficult of that problem…”
Motschwiller: Career VCs face limitations advising CEOs on managing large organizations
“There are certainly elements that are missed, and I feel most disadvantaged from when an operator is going through specific challenges, and they're mostly around people, right, where I haven't managed large organizations before, and so fully understanding the …”
Motschwiller: Growth VC success depends on knowing when to pay up
“Often the brilliance of a growth investor is knowing where to really stretch and pay up on price. And when I say picking, that is really the element that I think is hard and unique.”
Motschwiller: Tracking Growth Startups Across Funding Rounds Builds Conviction
“One of the easiest ways to build conviction over time is to see the company in the round before. And as a later stage firm, oftentimes we'll see and look at an A round or B introduced. And it's very clearly around too early, but then they say, hey, our budget …”
Motschwiller: Current Out-Execution Correlates Highest With Future VC Returns
“The highest correlation to a business that will be a great return and will continue to execute is one that is out executing in the current state.”
Motschwiller: Junior VCs Fail by Neglecting Deep Co-Investor Relationships
“Where I think people get tripped up is they don't farm the bottom of the network and make sure that they develop what we call internally as best friends.”
Motschwiller: Early conviction helps junior VCs win competitive deals
“Entrepreneurs want people who believe in their vision and have conviction around the same belief that they have. And if you To that entrepreneur. And instead of have them convince you go to them and you are already convinced and share that with them and offer …”
Motschwiller: Executive recruitment and customer intros are VC's highest-leverage value-adds
“The two highest points of leverage that I find my entrepreneurs really love are, one, finding them great people, and that oftentimes means great Great executives as they're building out that team and scaling quickly and finding executives that can take them to…”
Max Motschwiller: Top founders need outside lead investors to validate market pricing
“They want, for the most part, want an outside lead to come and price the round, right? If they don't take this to market at all, they just have no sense for what market is. If all they do is listen to an offer from their insiders, they don't know if their insi…”
Max Motschwiller: Meritech Fund VI targeting $600M and 25 portfolio companies
“So we're in the process of raising our sixth fund, it'll be about six hundred million, and our view is to have roughly 25 portfolio companies in that fund, so not hugely concentrated, but we think the right balance is”
Harry Stebbings: Venture portfolio diversification benefits level off at 23 companies
“I just yesterday ran a Monte Carlo simulation on kind of the benefits of diversification, and at 23, you get to 85%, and they tail off pretty significantly after that, so I couldn't agree more with you on the 25.”
Max Motschwiller: Meritech reserves only 20-25% of funds for follow-on rounds
“Explicitly, we keep 20 to 25% of our fund captive for reserves, and that is definitely smaller than the average early stage venture firm, and because of what I mentioned before, we're just coming in at later stages such that there are fewer subsequent rounds a…”
Motschwiller: Consumer VC landscape in 2018 is harder with fewer upside opportunities
“Relative to other time periods, take when I joined Kleiner in 2012, this feels like a harder time to be investing in consumer and that there are fewer high quality and super high upside opportunities in consumer.”
Motschwiller: Series A rounds for top consumer decacorns occurred pre-2012
“You look at the series A Funding times of the consumer decacorns that are out there, the Ubers, the Lyfts, the Airbnbs, the Snaps, the Pinterest, the Spotifys, those series A's were all done pre-二零 12.”
Motschwiller: Capital Gluttony Causes Startups to Lose Discipline and Focus
“There is a ton of capital in the system, and access to capital is a great thing in some respects, but to use a Rob Ward term, he frames it, there's capital gluttony. When there's too much capital, it can lead to deprioritization and defocus, Because you think …”