Jan 15, 2019 · 39m · 20vc
20VC: Stride's Fred Destin on The Acceptable vs Non-Acceptable Risks When Investing, How Startup Founders Can Improve The Quality of Their Decision-Making and Must Play for Batting Average & Why Plans Do Not Matter and No Board Member Should Bash An Entre
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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 live episode of The 20VC recorded in Dubai, host Harry Stebbings interviews Stride VC co-founder Fred Destin on early-stage risk management, venture fund sizing, board dynamics, and startup execution speed. Destin shares counterintuitive advice on evaluating founders, rethinking unit economics, and fostering effective board relationships.
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 28.1% of the talking time here. How this is scored →
Harry as informed peer 3.5 Guest teaching 6.1 Guest disagreement 3.3 Harry pushing back 2.4
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:43 Fred's Hulk outburst on missing plan
Fred heatedly calls VCs idiots if they bash entrepreneurs in board meetings for missing budget numbers, declaring that financial plans are fiction.
Hardest push from Harry ▶ 15:27 Harry challenges anti-planning view with 1700 interviewsHarry pushes back on Fred's claim that planners are in trouble by pointing out that over 1,700 VCs he interviewed assess performance based on hitting plans.
Biggest teaching moment ▶ 7:36 Fred reframes unit economics scaling playbookFred dismantles the conventional VC belief that healthy unit economics must come before scaling, pointing out that top companies like Deliveroo and PillPack would never have been funded under that criteria.
Harry holds his own ▶ 23:26 Harry uses Peter Fenton quote on valuation trapsHarry demonstrates his deep research by citing Peter Fenton's advice that turning down deals on valuation is a mental trap to press Fred on his own price sensitivity.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Misconceptions of Risk in Venture Capital | 4 | 5 | 2 | 2 | Harry introduces a perspective from Brian Singerman at Founders Fund regarding upside maximization versus loss aversion. Fred explains portfolio-level risk versus duration risk and illustrates upside thinking through PillPack. | |
| Knowing When to Scale and Rethinking Unit Economics | 3 | 7 | 5 | 3 | Harry pushes slightly off schedule to ask whether healthy unit economics should precede scaling. Fred strongly rejects this standard playbook, citing Deliveroo and PillPack as businesses that would never have been funded under that rule. | |
| Stress-Testing Founders and Assessing Board Dynamics Pre-Investment | 5 | 6 | 2 | 3 | Harry quotes Benchmark partner Peter Fenton laughing at VCs who look for big markets to challenge Fred on market sizing. Fred agrees with Fenton's skepticism and outlines how he stress-tests founders by doing real work in meetings. | |
| Incumbents, Organized Chaos, and Decision-Making | 3 | 6 | 3 | 2 | Harry brings up organized chaos from a previous conversation and asks how startups beat incumbents. Fred uses PillPack's 45-person engineering team and HubSpot's titleless culture to show why rapid decision velocity beats planning. | |
| Debunking the Fallacy of Hitting the Plan | 4 | 7 | 7 | 4 | Harry directly counters Fred's stance against long-term planning by noting that 1,700 VCs he interviewed evaluate companies on hitting plan. Fred reacts strongly, calling board members who bash founders over missed plans idiots. | |
| Data Utility in Early-Stage Venture Investing | 3 | 6 | 3 | 2 | Harry frames a question from an LP perspective regarding the true utility of data in early-stage investing. Fred distinguishes quantitative CPG investing from seed stage investing, calling automated seed sourcing signals exaggerated. | |
| Stock Picking, Brand, and Authenticity in Winning Deals | 5 | 6 | 3 | 3 | Harry brings in quotes from Jeremy Liu and Peter Fenton regarding stock picking and valuation traps. Fred offers a nuanced breakdown of founder selection, authentic partnership, and price negotiation limits. | |
| Driving Real Strategic Value as a Board Member | 2 | 6 | 1 | 1 | Harry asks how board members drive real actionable value. Fred details his key levers: helping founders focus by telling them what not to do, hands-on executive recruiting, and distilling brand storytelling. | |
| Anatomy of a Dysfunctional Board | 3 | 7 | 5 | 2 | Harry asks what makes a board dysfunctional, citing Brad Feld's advice on back-the-founder commitment. Fred vividly describes distrustful reporting boards and compares meddling VCs to carpenter ants destroying a house. | |
| Quick-Fire Round: Books, AI Jobs, VC Partnerships, and Liquidity | 3 | 5 | 2 | 2 | Harry runs a rapid-fire round covering books, AI, VC partnership dynamics, and liquidity. Fred responds briskly, predicting massive job displacement from workflow automation and stressing radical intellectual honesty in VC partnerships. |
Statements from this episode (33)
Destin: Stride VC Will Keep Fund Size Constrained by Design
“I'd much rather be on smaller funds that we keep constrained by design so that we can really hopefully deliver to our investors a return that are more attractive than I think what the larger funds are trying to do.”
Destin: Tier-Two VCs Struggle to Return $500M+ Funds
“But if you're a tier two VC running a five to eight hundred million dollar fund, you know, it's extremely hard to actually provide the kind of returns that really venture demands.”
Destin: Portfolio of 25 seed companies mitigates venture loss risk
“The reality is if you invest with a certain level of discipline across 25 companies, you own enough of them, you know, 10, 12, 15, 18%, you're actually really looking at a relatively spread risk and with odds of certainly returning a multiple of capital that a…”
Destin: Venture capital risk lies in exit duration, not investing
“I think we do have a risk is on duration. You know, when are the returns going to be realized? Because it's as we know, it's easy to invest. It's extremely hard to exit.”
Destin: Americans Outperform Other Founders by Thinking Bigger
“And this is where the Americans are so much better than anybody else because they've lived it.”
Destin: Founder Mental Limits, Not Business Potential, Constrain Scale
“You can systematize your thinking around achieving large outcomes, and it's more a question of your own mental limitations than usually the businesses themselves.”
Destin: Requiring Proven Unit Economics Would Have Killed Deliveroo and PillPack
“We would never have funded Deliveroo. We would never have funded PillPack. You know, in fact, Kareem probably would never have taken in any capital because you have to project yourself into sometimes a three or four year cycle before these unit economics reall…”
Destin: Replacing Startup Founders Destroys Company Magic
“When you replace founders, you lose the magic.”
Destin: Avoided VR Investments Due to Unpredictable Market Timing
“I haven't done a ton in VR because I find it insanely difficult to predict when that market's really going to take off at scale.”
Destin: Stride VC skips pitch presentations by the second meeting
“What I do now, which is, it's not a trick, but I start the work of building the company, like in the second meeting. So instead of sitting back and listening to a pitch and formatted information, it's like, let's map out the organization. Let's think about you…”
Destin: Investors should test founder responses to conflict pre-investment
“Find a disagreement with the founder before you invest, because your conflict resolution mode is important, and actually the person's reaction to conflict or to pushback is also important.”
Destin: Early Market Sizing Top-Down or Bottom-Up Is Unreliable
“I think your ability to assess markets Either bottom up or top down at the beginning of a life of a new company or a new, new segment is extremely hard to do. And very often because the legacy industries are unattractive.”
Destin: Non-Strategic Startups Force VCs Into 40% Secondary Discounts
“Because if you're not strategic, nobody has to buy you. If nobody has to buy you as a VC, I'm going to sit on that position for 12 years and end up selling it secondary to a horrible secondary buyer who's going to take a 40% discount on my book value.”
Destin: PillPack Built Its Pharmacy Software With Just 50 Engineers
“I mean, PillPack is a company that got acquired by Amazon for a billion dollars. Guess how many engineers they have? 45. This is a tiny engineering team that built a pharmacy operating system, which, you know, the incumbents have supposedly spent half a billio…”
Destin: HubSpot Refused to Use Internal Job Titles for Years
“So HubSpot in Boston was famous for not having any titles for the longest time. They're titles externally, because clients care or your executive vice president or whatever, but internally, actually, they refuse to have a structure of titles.”
Destin: Startup financial plans are a fiction, not reality
“The plan is a fiction. The plan is a framework for which to think about the future. You know, the moment you finish writing it, the conditions change, etc.”
Destin: Forcing startups to hit plans drives bad decisions
“In fact, even worse, if you force a company to hit plan, and they're not hitting plan naturally, you're probably making the wrong decisions for the business long term.”
Destin: Naval Ravikant Created AngelList to Decouple VC Capital From Advice
“AngelList, the original vision of AngelList, because Naval hates VCs, was why don't I separate the skill set here between people who are good at investing and people who would be good advisors, and I'll break it open through a network.”
Destin: Y Combinator Can Function Without Traditional Investment Partners
“YC goes almost a step further, which is, YC can operate without investing partners, because they plug you into a network of alumni, and the network is the value.”
Destin: Andreessen Horowitz Industrialized Venture With Corporate and Recruitment Networks
“And then number two, of course, is Andreessen Horowitz. You're the badass operators who come into venture and say, nobody in venture is a true operator. So we are going to build an operating company to help build startups. And so half or more of the organizati…”
Destin: Data will not rapidly disrupt early-stage venture capital
“And so I think that the notion that data is going to disrupt early-stage venture fast to me is somewhat exaggerated because I mean, we did some of that work at Accel. It is insanely hard to derive signal from the very Fuzzy nature of the early stage data we ge…”
Destin: Founders Should Never Take Investment From Toxic Investors
“My only recommendation, which I always tell entrepreneurs, is please don't ever take money from assholes. You cannot fire your board members. It is probably not worth it in your life in general. I'd rather not get funded than take money from people who are tox…”
Destin: Deliveroo Received Seven Term Sheets At 20 Employees
“Well, when I spoke to Will Shue at Deliveroo, there were 20 people in the company. It wasn't as early as what we usually do, but, you know, he had seven term sheets on the table.”
Destin: Founder-Friendly Investors Prioritize Companies Over Their Fund Partners
“Founder friendly means I will leave my fear at the door of the boardroom because I will come in and do the right thing by the company. Not by my partners, you know, not whatever. I get roasted at the fund level because the company isn't doing well. Well, I wil…”
Destin: Walking away from top deals over minor valuation differences is foolish
“Now, if you say no to a world-class deal because the pre-money is three million off what you thought it should be, you're an idiot. Because world-class deals don't come through your door every day.”
Destin: Benchmark Gets Discounted Deal Pricing Due to Brand Prestige
“In fact, I bet you benchmark gets discounted pricing on most of what it does because they're benchmarked.”
Destin: Stride does not compete on price or match inflated valuation bids
“And, you know, I've definitely gone into negotiations saying we are, in fact, deliver is a good example. We are not going to match the other prices. I'm sorry. I'm not going to go up to the level of people who are desperate to get in and are competing based on…”
Destin: Founders picking investors over small valuation gains are short-term optimizers
“But if they're trying to get you to climb up a tree and kind of make their ultimate selection based on a couple of million bucks of pre-money, that to me is usually a signal that you're a short-term optimizer and not somebody who's going to build an amazing bu…”
Destin: The best entrepreneurs require no VC help
“The best entrepreneur, like Alex Chesterman at Zoopla, for example, the best entrepreneur is someone you don't really need to help.”
Destin Spends Half His VC Board Time Telling Founders What Not to Do
“I'd say I spend half my time telling people what not to do, so they're more efficient at the stuff that actually matters.”
Destin: Dysfunctional boards focus on reporting over forward-looking decisions
“Dysfunctional boards tend to be reporting boards where there is distrust with the entrepreneur, usually because they don't spend enough time with the company and, or they forgot, they lost the empathy of understanding what the, what journey the company is on a…”
Destin: Board members must fully back the CEO or fire them
“If you're backing the CEO and he's running the company, It is your job to be behind the CEO. If at some point you make a decision to remove the CEO, make a decision to remove the CEO. What you're not allowed to do is be like a fucking carpenter ant that's like…”