Sep 7, 2018 · 29m · 20vc
20VC: The Mindset The Best Investors Assume When Assessing Opportunities, Why So Many Hardware Startups Fail Today & The Right Way To Think About Employee Retention with Andrew Farah, Founder & CEO @ Density
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Density founder and CEO Andrew Farah joins Harry Stebbings on The 20 Minute VC to discuss scaling space analytics, hardware business models, investor storytelling, and strategies for employee retention.
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 41.1% of the talking time here. How this is scored →
Harry as informed peer 2.0 Guest teaching 3.0 Guest disagreement 0.8 Harry pushing back 0.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:25 Rejecting standard VC pitch dynamics
Andrew dismisses common VC behavior where investors spend meetings forcing founders to defend tactical details rather than evaluating the scale of upside if the core premise succeeds.
Hardest push from Harry ▶ 23:57 Contrasting European and US VC mindsetsHarry reframes Andrew's critique of VC behavior by pointing out that downside risk focus vs upside assumption is the primary distinction between European and US investors.
Biggest teaching moment ▶ 20:23 Deconstructing hardware startup failure modesAndrew provides an expert breakdown of hardware economics, explaining how 18-month cycles, 800 components, and improper COGS amortization destroy hardware companies that treat hardware like software.
Harry holds his own ▶ 23:57 Analyzing regional VC risk tolerance differencesHarry demonstrates deep industry insight by contextualizing Andrew's point about investor behavior within broader transatlantic VC structural differences.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Andrew Farah's Background and the Origins of Density | 2 | 2 | 0 | 0 | Harry guides the conversation smoothly through Andrew's background, super connectors, and investor updates. The interaction is highly collaborative and complimentary, with Harry echoing and supporting Andrew's thoughts on storytelling. | |
| Employee Retention, Diversity, and Designing the Company | 2 | 3 | 1 | 0 | Andrew offers insightful perspectives on employee retention psychology and treating candidate diversity as a marketing problem. Harry asks supportive follow-up questions and fully agrees with Andrew's observations. | |
| Distribution Strategy and Avoiding Hardware Startup Pitfalls | 1 | 4 | 0 | 0 | Andrew breaks down the complex supply chain and manufacturing realities that cause many hardware startups to fail. Harry acts as an admiring listener, expressing regret for not investing early. | |
| Quickfire Round: Insights on VC, Hiring, and Productivity | 3 | 3 | 2 | 1 | In the quickfire round, Andrew critiques VCs who spend pitches forcing founders to justify their existence. Harry demonstrates expertise by extending this idea to compare European and US venture capital mindsets. |
Statements from this episode (15)
Density was the seventh side project of Farah's software consultancy
“Anytime we had excess profits or additional cash, we would put it into side projects, and Density was the seventh.”
Users invent more creative applications for fundamental products than founders
“The ones that seem to be really fundamental problems, things that people really care about, For whatever reason, people tend to be more creative with them than you could be.”
Ludlow's Jonathan Triest introduced Density to leads in all three rounds
“Jonathan is a close friend and someone, he's one of our earliest investors, and he has introduced us to the lead of every round we've done, and we've done three.”
Narrative stories in investor updates are as important as core metrics
“The truth of your business, the facts of your business, those things are critical, but just as important are the surrounding stories around what's happening within the business.”
Density averages 45 days to hire versus tech industry average of 75
“The tech industry's averages is 75 days. I think we average about 45 days”
Early diversity hiring is a startup's best recruitment engine
“Doing your absolute level best to fill a team with diverse candidates is not only hard, it is probably the single best thing you can do as an early stage startup. Because when you have people from different backgrounds early on, call it in the first 50 employe…”
Density maintained 100% voluntary employee retention over its first four years
“We have a hundred percent retention since our founding four years ago, We've never voluntarily lost anyone.”
Distribution strategy drives 80% of a company's success
“I think that like 80% of all great companies behind 80% of a company's success is, is typically a really interesting distribution strategy. Sometimes that's a viral method. Sometimes that's a big deal with IBM and in Microsoft's very early days. Sometimes that…”
4.4 billion square feet of US corporate office space sits vacant
“In the US, there's eleven billion square feet of leased or owned corporate office space, and 4.4 billion square feet of that space is vacant but paid for.”
Moving a hardware product to mass production takes 12 to 18 months
“You're looking at 18 months, probably minimum from start. That's like from prototype to mass pro or mass production, 12 months, maybe if you're great at it and you know exactly what you're doing.”
Density retains hardware ownership and charges solely for data access
“Well, we don't sell the hardware. We sell only access to the data. In fact, we retain responsibility for the hardware itself, so that if a customer no longer needs that door, or if the device breaks for some reason, or if the technology improves for being able…”
VC decision-makers and corporate boards suffer from extreme demographic homogeneity
“I think that it definitely could really use some improvements in the diversity of the people who are making those decisions. You know, whether it's corporate boards or it's managing directors, it is amazing, the homogeneity.”
The best VCs assume a founder's premise to evaluate upside potential
“The best venture capitalists I've ever spoken to assume your premise and then ask, okay, what could happen if you were right? And you spend 45 minutes talking about that portion of the idea and not 45 minutes justifying your existence.”
Real-time foot-traffic data will replace fixed transit schedules
“Architects won't have to guess at what rooms to build, and interior designers won't have to argue about whether or not a particular asset got used, and trains won't run on time schedules. They'll run on actual Predictable demand based on foot traffic.”
Density's sensors could eliminate security tailgating without using cameras
“We can eliminate tailgating. I mean, I'm not entirely sure that that's true, but I think we might be able to eliminate tailgating. And when I say tailgating, I mean, like, two people go into a secure facility through a door and only one badge is in.”