Jun 3, 2019 · 37m · 20vc
20VC: Why Portfolio Construction Is Inefficient, Why The Only Thing That Matters In Venture Is Pricing & The Future of Venture; Bundled or Unbundled with Zach Coelius
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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 20VC, host Harry Stebbings interviews investor and former founder Zach Coelius about his transition into venture capital, his unconventional views on portfolio construction, entry pricing discipline, and how solo GPs leverage networks like AngelList to outperform traditional institutional firms.
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 30.4% of the talking time here. How this is scored →
Harry as informed peer 4.0 Guest teaching 5.1 Guest disagreement 4.5 Harry pushing back 1.9
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 32:32 Vicious callout of VCs wiping pro-rata allocations
Zach displays his most combative posture by calling VCs who cut out follow-on rights stupid and unprofessional, vowing to blacklist them from future deal flow.
Hardest push from Harry ▶ 16:57 Harry challenges VC follow-on practices using partnership opticsHarry interrupts to challenge the premise of why VCs yield follow-on rights, detailing how fund partner career dynamics and LP markup games drive irrational follow-on decisions.
Biggest teaching moment ▶ 10:47 Zach dismantles Naval Ravikant's venture unbundling modelZach re-educates the host on market dynamics by arguing that venture is not simply unbundling as Naval claims, but simultaneously hyper-bundling at multi-stage platforms like Andreessen Horowitz.
Harry holds his own ▶ 16:57 Harry demonstrates deep structural venture capital expertiseHarry counters Zach's question about why VCs abandon inside information by laying out exact LP reporting incentives and internal firm political biases.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Zach Coelius' Journey into Startup Investing | 2 | 3 | 1 | 0 | Harry welcomes Zach and asks a friendly origin question about how he entered startup investing. Zach humorously describes himself as a washed-up entrepreneur who stumbled into syndicate investing on AngelList before hitting early exits like Cruise. | |
| Applying Ad Tech Crucible Lessons to Investing | 3 | 4 | 1 | 1 | Harry cites specific prep research from guest mutual friend Michael Katz regarding ad tech crucible lessons. Zach lays out his framework for extreme differentiation and product-market clarity required to survive intense ad tech competition. | |
| Managing Institutional Capital vs. Angel Mindset | 4 | 5 | 2 | 2 | Harry references Andy from Uncork to ask about transitioning from angel to institutional mindset. Zach gently reframes the premise by clarifying he always managed external capital, before detailing how his 1300 AngelList backers provide diligence and deal flow superpower. | |
| The Simultaneous Bundling and Unbundling of Venture | 5 | 6 | 4 | 2 | Harry cites Naval Ravikant's hypothesis on the unbundling of venture capital into separate components. Zach rejects the simplified unbundling premise, explaining that venture is simultaneously bundling at the mega-firm level like Andreessen Horowitz while unbundling at the early syndicate level. | |
| Challenging Traditional Portfolio Construction Models | 3 | 7 | 6 | 2 | Harry asks standard portfolio construction questions about optimal numbers and check sizing. Zach forcefully critiques standard VC portfolio theory as whiteboard nonsense that creates artificial inefficiencies by restricting access and deal flow. | |
| Follow-On Dynamics and Utilizing Inside Information | 7 | 5 | 4 | 6 | Harry demonstrates high host expertise by explaining the structural incentives inside VC partnerships and LP dynamics that cause VCs to surrender follow-on allocation for LP markup reporting. Zach validates Harry's analysis and details how inside information allows him to scale check sizes from 200k to 5M. | |
| Valuation Discipline and Expected Loss Ratios | 4 | 6 | 5 | 2 | Harry prompts Zach on valuation discipline, loss ratios, and sweet-spot insertion points. Zach takes a hard contrarian stance that pricing is the single most important variable in venture, contrasting early-stage gladiator fighting with post-PMF product articulation. | |
| Founder Work-Life Balance vs. Outsized Success | 4 | 5 | 7 | 1 | Harry brings up the growing trend promoting founder work-life balance. Zach aggressively dismisses the idea that outsized non-normal success can be achieved without intense hustle, telling founders seeking balance to expect normal returns. | |
| Tier-1 VC Re-Entry and Solo GP Competitive Advantage | 5 | 6 | 7 | 2 | Harry asks how solo GPs can compete against multi-stage Tier-1 funds moving downstream. Zach dismisses multi-stage VCs as potential tourists and sharply criticizes consensus-driven partnership committees trying to make non-consensus investments. | |
| Tailoring Post-Investment Support to Founder Needs | 3 | 4 | 8 | 1 | In post-investment support and quickfire rounds, Zach expresses fierce hostility toward VCs who strip pro-rata rights from seed investors. He vows never to send deal flow to funds that engage in what he deems unprofessional conduct. |
Statements from this episode (27)
Coelius filled his first $200K AngelList syndicate in 24 hours
“So I put up a 200 K allocation on AngelList and emailed some of my friends, and 24 hours later, it was filled.”
Coelius's first three angel investments were Branch, OneSignal, and Cruise
“Branch was the first one. A company called OneSignal, which is doing really well, was my second. Cruise Automation was my third”
Coelius: Ad tech is one of the toughest startup battlegrounds
“The crucible that is ad tech, I mean, it is literally one of the hardest industries to compete in, is an amazing learning ground for entrepreneurs because you just get the crap beat out of you constantly.”
Coelius: A startup pitch must work on a cold call at 9 PM
“I like to say, if you can't cold call a customer at nine o'clock at night, On their cell phone, while they're putting their kid to bed and describe what you're doing in one sentence, forget about it. You have no hope of them basically of selling a product unle…”
Coelius manages $100 million in assets under management
“I mean, at this point, there's a hundred million AUM that I'm responsible for.”
Stebbings: AngelList is the most undervalued startup in tech
“I always think it's the most undervalued startup when we think about, A, the incredible data it has that it's reserves, the hiring platform that it is, the funding mechanism that it is.”
Coelius: 700 AngelList backers have invested their own money in my deals
“So at this point, I have almost 1300 people who sign up to basically get emails from me and participate in my deals. 700 of them have put their own money at risk into deals with me”
Coelius: 25% of my deal flow comes from my AngelList backers
“They send me a lot of deal flow, so I'd probably say 25% of the deal flow I get comes from that list.”
Coelius: Mega VC firms are taking platform bundling to a higher level
“If you look at what Andreessen is doing and you look at what the number of the other big platforms are doing, they're taking venture to a whole even higher level of bundling where they're saying, look, we're going to basically use the sort of returns that come…”
Coelius: Venture capital remains static and conformist due to LP relationships
“The industry, in my opinion, is really, really static. It doesn't Adapt and evolve very well because of the nature of the LP relationships. It's pretty sort of conservative, and it's very conformist,”
Coelius: Deal flow and access are the only hard things in venture capital
“The only two hard things that I can see in this business are basically deal flow and access. So if you don't have basically good deal flow and you don't have access, you're out of luck. You're not going to be successful.”
Coelius writes checks ranging from $40,000 to $4 million
“I have four million dollar positions, and I have 40,000 dollar positions. I write checks into series seed or pre-seed, and I write checks into series seed.”
Coelius: Theoretical portfolio construction creates market inefficiencies in venture
“Portfolio construction leads to a bunch of inefficiencies that are great in a sort of theoretical world, but not in the sort of reality of this business.”
Coelius: VCs make a mistake by not leading follow-on rounds
“The venture capital industry generally makes a mistake by not taking advantage of that. Why is it that we get an inside position and then we let somebody else lead the round and take all the opportunity to deploy capital in subsequent rounds?”
Coelius scaled his Branch Metrics investment from $200K to $5M
“Like with branch, my first check was 200. My second was seven 50. My third was a million and my fourth was five million.”
Coelius: Treat prior checks as sunk costs during follow-on rounds
“I basically like to think of every investment decision as an isolated event where I have, I like my sort of sunk cost is deployed capital, but it's the sunk cost. I don't think about that relative to the decision to participate.”
Coelius: Entry price is the only thing that matters in venture capital
“At the end of the day, the only thing that matters in this business is price.”
Coelius claims zero failures across his first 40 angel investments
“So far I haven't, I've got 40 companies in the portfolio. We haven't lost one yet.”
Coelius projects a one-third failure rate for his venture portfolio
“My assumption is, is that we'll probably have about a third of our portfolio will be losers.”
Coelius: Product-market fit is when customers start saying yes to your pitch
“Between those two points, I think there's a point where the entrepreneur finds product market fit. They find that sentence that they can describe to the customer at nine o'clock at night. The customer starts saying yes. And you go from this sort of very amorph…”
Coelius: Triggit grew from $1M to $30M in revenue in 12 months
“For my company, Trigger, it was like, we basically went from being a very broad sort of demand-side platform, and all those things we could do, to like, hey, we give you retargeting on Facebook. And the moment we did that, suddenly, Walmart, Best Buy, HomeDevo…”
Coelius: Entrepreneurship is a rocket ship ride into your own incompetence
“At the end of the day, I believe that being an entrepreneur is a rocket ship ride into the walls of your incompetence.”
Coelius: Work-life balance gives founders a near-zero chance of outsized success
“Just know that if you do that, your chance of basically, like, having outsized, non-normal success is almost zero. Like, at the end of the day, if you really want to achieve more than anyone else, if you want to be not normal, you have to work not normal.”
Coelius: Tier-1 VCs entering seed will fail if they avoid the work
“If they do the work, they're going to be great. And if they don't do the work, they're going to fail.”
Coelius: Individual allocators outperform committees across almost every asset class
“In almost every single other asset class, individual decision makers have proven to be the most effective way of basically deploying capital.”