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Sep 17, 2018 · 33m · 20vc

20VC: Lessons Learned Scaling PillPack from Seed to Amazon Acquisition, Why Investors Should Spend More Time Assessing Human Capital Risk Taken by Founders & The Right Way To Think About Capital Efficiency in Scaling with David Frankel, Managing Partner @

David Frankel · 21m spoken Harry Stebbings · 10m spoken
0:00 / 0:00

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, host Harry Stebbings interviews David Frankel, Managing Partner at Founder Collective, about his transition from angel investor to institutional VC and the key venture lessons behind scaling PillPack to its Amazon acquisition. Frankel shares valuable insights on assessing founder-market fit, capital efficiency, executive recruitment, and knowing when to double down on startup growth.

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 31.6% of the talking time here. How this is scored →

Harry as informed peer 4.3 Guest teaching 4.2 Guest disagreement 1.2 Harry pushing back 1.7
05100:0010:0020:0030:003:36–7:11 · Harry as informed peer 5/10 David Frankel's Entry into Venture Capital Harry references Uncork investor Andy McLaughlin to prompt a discussion on transitioning from angel capital to institutional LP funds. David agrees strongly and reflects on the partnership dynamics involved in institutionalization.7:11–11:24 · Harry as informed peer 3/10 Founder-Market Fit: The Story of PillPack Harry asks David to unpack the concept of founder-market fit through the story of PillPack. David breaks down TJ's unique pharmacy background and how early advantages allowed PillPack to test initial product iterations.11:29–13:38 · Harry as informed peer 4/10 Evaluating Market Risk vs. Founder Conviction Harry challenges David on how to balance founder fit with structurally tough markets that have low margins and oligopolistic competition. David reframes analytical risk aversion, tongue-in-cheek calling MBAs the anti-entrepreneurship degree.13:40–19:57 · Harry as informed peer 5/10 Rethinking Market Sizing and TAM Harry cites Peter Fenton and Intercom's Owen to ask about market sizing and hiring C-suite executives. David details why early TAM estimations are often irrelevant, using Uber as a key example.20:04–24:11 · Harry as informed peer 5/10 Navigating Rising CAC and Distribution Constraints Harry highlights the macroeconomic problem of rising customer acquisition costs and distribution platform lock-ins. David concurs fully, citing Scott Belsky's quote regarding capital efficiency and resourcefulness.24:14–30:03 · Harry as informed peer 4/10 Knowing When to Scale vs. Exercise Frugality Harry asks about founder mental plasticity between frugality and aggressive scaling before moving into the quickfire round. David gives contrarian advice against taking mega-checks at inflated valuations.3:36–7:11 · Guest teaching 3/10 David Frankel's Entry into Venture Capital Harry references Uncork investor Andy McLaughlin to prompt a discussion on transitioning from angel capital to institutional LP funds. David agrees strongly and reflects on the partnership dynamics involved in institutionalization.7:11–11:24 · Guest teaching 4/10 Founder-Market Fit: The Story of PillPack Harry asks David to unpack the concept of founder-market fit through the story of PillPack. David breaks down TJ's unique pharmacy background and how early advantages allowed PillPack to test initial product iterations.11:29–13:38 · Guest teaching 6/10 Evaluating Market Risk vs. Founder Conviction Harry challenges David on how to balance founder fit with structurally tough markets that have low margins and oligopolistic competition. David reframes analytical risk aversion, tongue-in-cheek calling MBAs the anti-entrepreneurship degree.13:40–19:57 · Guest teaching 5/10 Rethinking Market Sizing and TAM Harry cites Peter Fenton and Intercom's Owen to ask about market sizing and hiring C-suite executives. David details why early TAM estimations are often irrelevant, using Uber as a key example.20:04–24:11 · Guest teaching 4/10 Navigating Rising CAC and Distribution Constraints Harry highlights the macroeconomic problem of rising customer acquisition costs and distribution platform lock-ins. David concurs fully, citing Scott Belsky's quote regarding capital efficiency and resourcefulness.24:14–30:03 · Guest teaching 3/10 Knowing When to Scale vs. Exercise Frugality Harry asks about founder mental plasticity between frugality and aggressive scaling before moving into the quickfire round. David gives contrarian advice against taking mega-checks at inflated valuations.3:36–7:11 · Guest disagreement 1/10 David Frankel's Entry into Venture Capital Harry references Uncork investor Andy McLaughlin to prompt a discussion on transitioning from angel capital to institutional LP funds. David agrees strongly and reflects on the partnership dynamics involved in institutionalization.7:11–11:24 · Guest disagreement 1/10 Founder-Market Fit: The Story of PillPack Harry asks David to unpack the concept of founder-market fit through the story of PillPack. David breaks down TJ's unique pharmacy background and how early advantages allowed PillPack to test initial product iterations.11:29–13:38 · Guest disagreement 2/10 Evaluating Market Risk vs. Founder Conviction Harry challenges David on how to balance founder fit with structurally tough markets that have low margins and oligopolistic competition. David reframes analytical risk aversion, tongue-in-cheek calling MBAs the anti-entrepreneurship degree.13:40–19:57 · Guest disagreement 1/10 Rethinking Market Sizing and TAM Harry cites Peter Fenton and Intercom's Owen to ask about market sizing and hiring C-suite executives. David details why early TAM estimations are often irrelevant, using Uber as a key example.20:04–24:11 · Guest disagreement 1/10 Navigating Rising CAC and Distribution Constraints Harry highlights the macroeconomic problem of rising customer acquisition costs and distribution platform lock-ins. David concurs fully, citing Scott Belsky's quote regarding capital efficiency and resourcefulness.24:14–30:03 · Guest disagreement 1/10 Knowing When to Scale vs. Exercise Frugality Harry asks about founder mental plasticity between frugality and aggressive scaling before moving into the quickfire round. David gives contrarian advice against taking mega-checks at inflated valuations.3:36–7:11 · Harry pushing back 1/10 David Frankel's Entry into Venture Capital Harry references Uncork investor Andy McLaughlin to prompt a discussion on transitioning from angel capital to institutional LP funds. David agrees strongly and reflects on the partnership dynamics involved in institutionalization.7:11–11:24 · Harry pushing back 1/10 Founder-Market Fit: The Story of PillPack Harry asks David to unpack the concept of founder-market fit through the story of PillPack. David breaks down TJ's unique pharmacy background and how early advantages allowed PillPack to test initial product iterations.11:29–13:38 · Harry pushing back 3/10 Evaluating Market Risk vs. Founder Conviction Harry challenges David on how to balance founder fit with structurally tough markets that have low margins and oligopolistic competition. David reframes analytical risk aversion, tongue-in-cheek calling MBAs the anti-entrepreneurship degree.13:40–19:57 · Harry pushing back 2/10 Rethinking Market Sizing and TAM Harry cites Peter Fenton and Intercom's Owen to ask about market sizing and hiring C-suite executives. David details why early TAM estimations are often irrelevant, using Uber as a key example.20:04–24:11 · Harry pushing back 2/10 Navigating Rising CAC and Distribution Constraints Harry highlights the macroeconomic problem of rising customer acquisition costs and distribution platform lock-ins. David concurs fully, citing Scott Belsky's quote regarding capital efficiency and resourcefulness.24:14–30:03 · Harry pushing back 1/10 Knowing When to Scale vs. Exercise Frugality Harry asks about founder mental plasticity between frugality and aggressive scaling before moving into the quickfire round. David gives contrarian advice against taking mega-checks at inflated valuations.

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

0:00 · Harry 99.8% · guest 0.2%0:00 · Harry 99.8% · guest 0.2%3:00 · Harry 41.1% · guest 58.9%3:00 · Harry 41.1% · guest 58.9%6:00 · Harry 15.9% · guest 84.1%6:00 · Harry 15.9% · guest 84.1%9:00 · Harry 11.3% · guest 88.7%9:00 · Harry 11.3% · guest 88.7%12:00 · Harry 11.1% · guest 88.9%12:00 · Harry 11.1% · guest 88.9%15:00 · Harry 13.2% · guest 86.8%15:00 · Harry 13.2% · guest 86.8%18:00 · Harry 12.3% · guest 87.7%18:00 · Harry 12.3% · guest 87.7%21:00 · Harry 15.3% · guest 84.7%21:00 · Harry 15.3% · guest 84.7%24:00 · Harry 24.6% · guest 75.4%24:00 · Harry 24.6% · guest 75.4%27:00 · Harry 6.1% · guest 93.9%27:00 · Harry 6.1% · guest 93.9%30:00 · Harry 95.4% · guest 4.6%30:00 · Harry 95.4% · guest 4.6%33:00 · Harry 100% · guest 0%33:00 · Harry 100% · guest 0%
Sharpest disagreement ▶ 11:44 Dismissing traditional MBA market analysis

David forcefully reframes standard business school risk assessment, calling MBAs the anti-entrepreneurship degree due to their focus on reasons to say no.

 Hardest push from Harry ▶ 11:29 Challenging reliance on founder fit in hard markets

Harry pushes back on David's praise for founder fit by questioning how investors evaluate businesses with low margins and fierce incumbent oligopolies.

 Biggest teaching moment ▶ 13:53 Deconstructing early market sizing and TAM

David educates the host on why formal TAM analysis is often misleading at seed stage, using Uber's initial pitch deck to demonstrate how markets expand.

 Harry holds his own ▶ 4:57 Citing Andy McLaughlin's LP capital insights

Harry demonstrates strong industry knowledge by drawing a direct line between Andy McLaughlin's observations on LP capital risk aversion and David's fund experience.
the scores for every segment, with the reasoning behind each
ChapterTopicHarry as informed peerGuest teachingGuest disagreementHarry pushing backWhy
David Frankel's Entry into Venture Capital 5311 Harry references Uncork investor Andy McLaughlin to prompt a discussion on transitioning from angel capital to institutional LP funds. David agrees strongly and reflects on the partnership dynamics involved in institutionalization.
Founder-Market Fit: The Story of PillPack 3411 Harry asks David to unpack the concept of founder-market fit through the story of PillPack. David breaks down TJ's unique pharmacy background and how early advantages allowed PillPack to test initial product iterations.
Evaluating Market Risk vs. Founder Conviction 4623 Harry challenges David on how to balance founder fit with structurally tough markets that have low margins and oligopolistic competition. David reframes analytical risk aversion, tongue-in-cheek calling MBAs the anti-entrepreneurship degree.
Rethinking Market Sizing and TAM 5512 Harry cites Peter Fenton and Intercom's Owen to ask about market sizing and hiring C-suite executives. David details why early TAM estimations are often irrelevant, using Uber as a key example.
Navigating Rising CAC and Distribution Constraints 5412 Harry highlights the macroeconomic problem of rising customer acquisition costs and distribution platform lock-ins. David concurs fully, citing Scott Belsky's quote regarding capital efficiency and resourcefulness.
Knowing When to Scale vs. Exercise Frugality 4311 Harry asks about founder mental plasticity between frugality and aggressive scaling before moving into the quickfire round. David gives contrarian advice against taking mega-checks at inflated valuations.

Statements from this episode (11)

Prediction Held up
Frankel: Team venture investing "kills" solo angel investing
“I would never go back, ever go back to Angel. I think that that working as a team with my partners just kills Angel investing”
David Frankel Sep 17, 2018 ▶ 6:52
Assertion Not publicly verifiable
PillPack initially used robotic equipment from co-founder's father's pharmacy
“At the very beginning of PillPack, a very unknown fact is, we used the machinery and the robotic equipment, and it was pretty simple robotics, Out of his dad's pharmacy.”
David Frankel Sep 17, 2018 ▶ 7:48
Insight
Frankel: Founder-market fit endures permanently, unlike product-market fit
“Product market fit can come and go, but founder market fit, if you get it right, it always stays.”
David Frankel Sep 17, 2018 ▶ 9:40
Opinion
Frankel: An MBA is the "anti-entrepreneurship degree" that teaches risk aversion
“So I've always joked that an MBA is the anti-entrepreneurship degree. And I say this really tongue in cheek because it equips you with so many, so much ability to say no. If your hunch is this is tough, You'll find many ways of corroborating that this is tough…”
David Frankel Sep 17, 2018 ▶ 11:45
Disclosure
PillPack survived two existential crises that nearly shut it down
“Having gone through at least two completely existential experiences, where truly the company could have gone out of business very quickly.”
David Frankel Sep 17, 2018 ▶ 13:20
Disclosure
Frankel: Founder Collective spends minimal time on seed-stage TAM assessment
“We do very little of that. We spend a huge amount of time on the team and what they could do early on.”
David Frankel Sep 17, 2018 ▶ 13:54
Assertion Not checkable as stated
Frankel: Nobody could have predicted Uber's market size at seed stage
“Uber, which Eric participated in at the get-go, looked like a better way of calling limos. No one in their mind could have known how big that was going to be.”
David Frankel Sep 17, 2018 ▶ 14:01
Insight
Frankel: Founders taking "human capital risk" is a key validation signal
“VCs have A huge portfolio and take financial risk all the time, but I always look at the folks who take human capital risk. It's what attracted me to pull back in the first place that Elliot Cohn, I knew had loads of options. He graduated well from MIT compute…”
David Frankel Sep 17, 2018 ▶ 17:28
Insight
Frankel: Pharmacy e-commerce is a binary 'scale or die' business model
“The distributors, the drug distributors who control a lot of the markets don't take you that seriously. You don't get the financial breaks that much, much larger customers get unless you're reaching a certain scale. The PBMs certainly don't take you very serio…”
David Frankel Sep 17, 2018 ▶ 18:25
Opinion
Frankel: Early-stage startups are ultimately working for Facebook and Google
“Ultimately you could say that all these startups are working for Facebook, Google, and, you know, the programmatic players.”
David Frankel Sep 17, 2018 ▶ 20:20
Prediction Not checkable as stated
Frankel: Consumer startups without acquisition experts will fail to return capital
“The companies that are attacking consumer verticals that don't have these kind of acquisition experts will just spend like crazy will raise more and more money, and it's unclear whether they will be able to exit in a way that provides a return for any of their…”
David Frankel Sep 17, 2018 ▶ 21:24
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