Jul 22, 2019 · 35m · 20vc
20VC: IA Ventures' Jesse Beyroutey on Game Theory and How It Impacts Investor Mindset, How To Avoid "The Pressure To Deploy" Today In Venture & Why Ownership Is The Single Most Important Parameter When Investing
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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, host Harry Stebbings interviews Jesse Beyroutey, Partner at IA Ventures, to discuss applying game theory to early-stage investing, maintaining deployment discipline, and establishing deep founder partnerships.
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 33.9% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 2.8 Guest disagreement 1.0 Harry pushing back 1.6
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 10:12 Jesse rejects Harry's market expansion thesis
Jesse directly rejects Harry's stated thesis of investing in small markets on the assumption that founders will pivot into adjacencies, calling it bad probability compounding.
Hardest push from Harry ▶ 30:34 Harry refuses Jesse's definition of a miss on PlaidHarry explicitly challenges Jesse's framing of Plaid as a miss, arguing that because the initial pitch was a totally different consumer app, it cannot be deemed a real venture miss.
Biggest teaching moment ▶ 12:50 Jesse explains how capital moats cause lazy strategyJesse breaks down how access to cheap mega-capital often leads to lazy thinking and improper vertical integration rather than inherent competitive moats.
Harry holds his own ▶ 8:28 Harry uses prior guest's thesis to challenge game theory limitsHarry brings up a counter-argument citing Apple, Google, and Amazon to question whether startup defensibility and game theory framing are actually realistic.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Jesse Beyroutey's Entry into Venture Capital | 1 | 1 | 0 | 0 | Harry introduces Jesse Beyroutey and asks standard background questions about his pathway into VC and love for early-stage investing. The tone is entirely friendly and welcoming. | |
| Applying Market Game Theory to Venture Capital | 4 | 3 | 1 | 3 | Harry asks Jesse to define market game theory and introduces a counter-thesis from a previous guest claiming big tech incumbents render startup defensibility naive. Jesse politely acknowledges this default while reframing how startups attack via niche flanks. | |
| Evaluating Market Size, Dominance, and Expansion | 5 | 5 | 3 | 3 | Harry offers his own investment thesis that VCs can buy into small markets assuming strong founders will expand into adjacencies. Jesse directly rejects this framing, arguing that compounding probabilities make backing adjacent expansion a flaw. | |
| Capital Moats and the Pitfalls of Abundant Funding | 3 | 4 | 1 | 1 | Harry asks about capital moats like SoftBank and how to pass on founders constructively. Jesse educates on how abundant capital often creates lazy thinking and improper strategic expansion rather than true moats. | |
| Avoiding Deployment Pressure & Internal Decision Dynamics | 3 | 2 | 1 | 2 | Harry contrasts IA's model with another GP who noted immense pressure to deploy capital. Jesse explains IA's structural setup that insulates them from external deployment pressure. | |
| Ownership Strategy, Follow-On Allocation, and Pricing Discipline | 4 | 2 | 0 | 1 | Harry asserts his view that ownership is set at the first check. Jesse agrees on seed ownership importance while expanding on follow-on allocation discipline and options valuation. | |
| Founder Engagement & Content Consumption Ratios | 2 | 2 | 0 | 0 | Harry invites Jesse to elaborate on his writing vs reading ratio philosophy in founder-VC dynamics. Jesse explains his high-touch approach to annotating board materials. | |
| Managing Information Overload & Disconnecting from News Cycles | 4 | 3 | 2 | 3 | In the quickfire section, Jesse calls missing Plaid a big miss, but Harry pushes back arguing it was pitched as a completely different product and shouldn't count as a true miss. |
Statements from this episode (15)
Beyroutey: Startups compete with Big Tech by attacking niche flanks
“I think that that's fair in a whole host of markets, and so I think of that as a strong default, and I might compare that sentiment to the strong defaults in the nineties and early 2000 that you can't compete with Microsoft. And that's a strong default because…”
Beyroutey: Market dominance opportunity inversely correlates with market scale
“Generally, the opportunity to dominate a market is inversely correlated with its scale, and I say generally because there are always exceptions to this, but you can look at a smaller scale market, and especially a smaller scale market today that has the opport…”
Beyroutey: Dominating one market rarely provides enough advantage for adjacent markets
“Achieving dominance in one market generally does not lead to enough extra advantage in the next market to then dominate that one too.”
Beyroutey: Abundant capital breeds lazy thinking and flawed rapid expansion
“Having a ton of capital can also cause a form of Just sort of lazy thinking where, for example, companies that have credibly high access to cheap capital and not enough discipline or first principles thinking might end up choosing to vertically integrate or to…”
Beyroutey: Many viable companies should not raise venture capital
“There are a ton of companies that are worth building that Are not necessarily with the present level of information that the founder has a great high volatility upside call option that makes it a good idea to raise a bunch of capital and to scale it.”
IA Ventures partners make only 1 to 3 investments each per year
“We do One, two, three, each of the three of us at iVentures each year.”
Beyroutey: IA Ventures intentionally avoids growing fund size or scaling AUM
“We don't raise funds on a set and periodic cycle. And we've intentionally decided not to grow our fund size or assets under management”
Beyroutey: IA Ventures requires unanimous partner consensus despite individual lead autonomy
“Our model is that each one of us will lead an investment, and the person leading the investment is the ultimate decision-maker about whether or not we're going to pursue the investment. But in parallel, all of our investments are unanimous, so we don't do a vo…”
Beyroutey: Early entry is the only strategy for outsized exit ownership
“Building ownership early is by and large, the only available strategy for having outsized ownership at exit.”
Beyroutey: IA Ventures turned TransferWise board decks into Google Docs for feedback
“I think the first company that I had the pleasure of working on at IA called TransferWise started doing this and we ended up doing it with a lot of our other portfolio companies. We made our board decks into a Google document”
Jesse Beyroutey blocks social media and news apps during the workweek
“First of all, I deleted off of my phone every app or thing that I would unconsciously open and refresh. And that included every bit of social media and news platform. So I don't read them on my phone. And further, I stopped reading them during the week. So I s…”
Beyroutey: Following news cycles is entertainment, not productivity
“I definitely believe that keeping up with the news and news cycle is more of a form of entertainment than a form of productivity.”
Beyroutey: Passing on Plaid was my biggest investment mistake
“The company Plaid, I would count as one of my absolute biggest misses, and the mistake that I made was I looked at the product that they were thinking about building in the very beginning, which was consumer financial management and playing with location at th…”
Beyroutey: Board members should write as much as they read
“I would say spend time writing as much as you spend time reading, and that will cause you to ramp up as a board member and understand and be effective at knowing what the company does much faster than not.”
Beyroutey: Most demand for crypto assets today is speculative
“Today, most demand for crypto assets is speculative, and what makes it viable for natural demand, people who would actually be using the crypto asset for some sort of productive activity, is primarily a strong guarantee, like we were talking about before, that…”