Apr 8, 2020 · 31m · 20vc
20VC: Are VCs Still "Open For Business", How VCs Attitude To Risk Has Changed & The 2 Most Valuable Assets To Founders Today with Fred Destin, Founding Partner @ Stride VC
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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 Stride VC co-founder Fred Destin to examine how macroeconomic crises impact venture capital, shifting investor risk appetites, LP relationships, and hands-on founder support strategies.
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 19.9% of the talking time here. How this is scored →
Harry as informed peer 3.8 Guest teaching 5.6 Guest disagreement 2.4 Harry pushing back 1.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 23:55 Calling out Peloton VC advice
Fred strongly criticizes superficial VC advisors who step off their Peloton bikes after smoothies to tell founders to cut burn by 40% without getting into operational details.
Hardest push from Harry ▶ 16:13 Challenging reserve allocation habitsHarry presses Fred on portfolio reserve discipline, asking directly how managers avoid the trap of just feeding the hungriest mouths that return first.
Biggest teaching moment ▶ 12:16 Demystifying full ratchet anti-dilutionFred educates listeners on how full ratchet anti-dilution mathematically rebases company valuation to zero in a down round, wiping out founder equity.
Harry holds his own ▶ 14:02 Framing the new fund deployment crisisHarry showcases informed domain knowledge by highlighting the trend of rapid 12-18 month fund deployment and questioning if a wave of young funds will fail.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Fred Destin's Career Path and Founding Stride VC | 2 | 5 | 3 | 1 | Harry asks open questions about Fred's background and whether the VC market is still open for business. Fred dismisses the 'open for business' VC narrative as unhelpful PR and gives a detailed macro breakdown on QE, inflation, and market shocks based on his derivatives background. Harry mostly listens and briefly cites another guest on monetary policy. | |
| Evolution of VC Risk Management and Term Sheet Pitfalls | 4 | 6 | 2 | 2 | Fred details how VC risk models adjust during crises through time-to-exit and path-to-exit variables. Harry interjects off-schedule to ask about unacceptable term sheet terms, prompting Fred to explain nasty terms like full ratchet anti-dilution and participating preferred. | |
| Venture Fund Reserves, Deployment Rates, and Portfolio Triage | 5 | 6 | 2 | 2 | Harry demonstrates industry knowledge by bringing up guest commentary regarding a potential graveyard of fast-deploying seed funds and asks how to maintain discipline in reserve strategy. Fred references data from Samir Kaji and explains why feeding the hungriest portfolio companies first is a trap. | |
| Best Practices for GP-LP Communication and Capital Calls | 5 | 5 | 1 | 1 | Harry asks about best practices for GP-LP communication, and later references data on the new class of LPs to ask if a wave of defaults is coming. Fred explains how Stride proactively called capital to flush out default risk and notes the lack of leverage GPs have when LPs default. | |
| Hands-On Portfolio Management and Advice for Emerging VCs | 3 | 6 | 4 | 0 | Harry prompts Fred for advice for emerging managers during a crisis. Fred delivers a monologue mocking out-of-touch VCs offering generic burn-rate advice from Peloton bikes and urges hands-on involvement in product and pricing strategy. |
Statements from this episode (12)
Harry Stebbings: Fred Destin's portfolio exceeds $10B enterprise value
“His portfolio has a total enterprise value of more than ten billion dollars, and he generated in excess of seven hundred million dollars in exit value to his investment.”
Destin: I worked at Goldman Sachs hiding the Greek deficit
“One day I was actually working at Goldman Sachs on hiding the Greek deficit through long dated swaps, and I decided I had enough of it, and I jumped into the world of entrepreneurship”
Destin: VCs claiming 'business as usual' in crisis are unhelpful to founders
“It's, I believe, extremely unhelpful for founders to go out there with a message that says, we are open for business as usual, because nothing about this is usual.”
Destin: JP Morgan reported US small businesses have median 26 days working capital
“JP Morgan, I think, reported that SMBs in the US have a median working capital of 26 days”
Destin: Stride VC paused new investments for two to three months
“And there was definitely an aspect here of reacting to a market that was sort of pretending it was business as usual and sort of planting a flag and saying, hey, we're actually on pause for a month or two or three.”
Destin: Venture funds succeed through great founders, not aggressive terms
“And honestly, on top of that, I don't know of any fund that was ever returned on nasty terms. Funds are returned by backing the right entrepreneurs and exceptional outcomes.”
Destin: ~1,200 US VC funds launched over past decade
“Excluding nano funds, which aren't tracked, there is something in the region of 1100 or 1200 new funds that have been established in the US over the last 10 or 11 years or so.”
Destin: 70-80% of seed funds had 6-12 month portfolio runway
“Samir Khadji from First Republic Bank in the US is an active observer of the early stage market, and he said that 70 or 80% of the seed funds that he spoke to had six to 12 months of life for most of their portfolio companies.”
Destin: Tier-one VC funds experienced LP defaults in 2008 crisis
“LP defaults have historically occurred, even to some tier one funds. They definitely occurred in oh nine”
Destin: Stride VC accelerated capital calls early in COVID crisis
“When the crisis hit, we actually accelerated our capital call. We kept it reasonable because we appreciate people want to limit liquidity at least, but we immediately issued a capital call, and it was a way to effectively flush out whether we'd have any LP iss…”
Destin: Emerging VC managers have no leverage if LPs default
“Especially if you're an emerging manager and you're a first time fund, are you going to go sue one of your LPs because they don't pay? The reality is like, you kind of have no leverage. You're just a sitting duck. And if people decide not to pay you, then they…”