May 15, 2020 · 37m · 20vc
20VC: Sarah Kunst on Why There Is Plenty Of Investor Money Still Available, The Megan Markle Effect and How It Impacts Hiring and Talent & Whether GP Commits Prevent Diversity and Inclusion
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In this episode of The 20 Minute VC, Clio Capital Founder and Managing Director Sarah Kunst joins Harry Stebbings to analyze venture capital availability during market downturns, valuation discipline, founder resilience, diversity in venture capital, and strategic hiring tactics like the 'Meghan Markle Effect.'
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 22.2% of the talking time here. How this is scored →
Harry as informed peer 3.7 Guest teaching 5.1 Guest disagreement 2.0 Harry pushing back 2.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 15:15 Rejecting universal easy fundraising narrative
Sarah directly counters the popular Silicon Valley narrative that fundraising was easy for everyone prior to the downturn, pointing out that female founders still receive less than 10% of venture funding.
Hardest push from Harry ▶ 10:29 Challenging valuation discipline necessityHarry pushes back on Sarah's valuation discipline by citing top early-stage investors who argue that entry valuation is negligible if a company turns into a $5B winner.
Biggest teaching moment ▶ 10:51 Explaining cap table dilution mechanicsSarah breaks down step-by-step founder equity dilution math across multiple funding rounds to demonstrate why low entry valuations demotivate founders during difficult operating cycles.
Harry holds his own ▶ 28:10 Exposing GP commit structural barriersHarry demonstrates deep industry insight by introducing an off-script critique on how standard 2-3% GP commitment requirements structurally exclude emerging managers without personal wealth.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Sarah Kunst's Career Journey and Founding Clio Capital | 2 | 3 | 1 | 1 | Sarah details her career transition from Chanel marketing to startups and venture funds before establishing Clio Capital. Harry listens attentively and warmly acknowledges her background. | |
| Venture Capital Availability and Fund Dynamics During Downturns | 3 | 6 | 2 | 2 | Sarah reframes VC fund dynamics during downturns by referencing the book Venture Deals and explaining capital call structures. Harry prompts her on whether VC funds are truly open for business. | |
| Valuation Discipline and Founder Equity Dilution at Pre-Seed | 5 | 7 | 3 | 4 | Harry challenges Sarah on valuation sensitivity by citing early-stage investors who claim entry price doesn't matter for massive winners. Sarah responds with a detailed breakdown of founder equity dilution and cap table math across funding stages. | |
| Assessing Founder Character and Resilience in Crisis | 4 | 6 | 4 | 3 | Harry quotes Fred Wilson regarding founder character during crisis moments. Sarah pushes back against the premise that fundraising was previously easy for everyone, highlighting that women founders never had easy access to capital. | |
| Portfolio Advice: Hibernation versus Market Acceleration | 3 | 5 | 1 | 1 | Sarah provides portfolio advice by separating startups into those needing to hibernate versus those capturing immediate pandemic-driven demand. Harry agrees and shares light banter about surviving on wine and Doritos. | |
| Capital Allocation, Bridge Rounds, and Runway Strategy | 4 | 5 | 2 | 2 | Harry asks about reserve allocation, prompting Sarah to explain how small funds navigate bridge rounds and source family office dry powder to maintain an 18 to 24 month runway. | |
| Talent Acquisition and the 'Meghan Markle Effect' | 3 | 4 | 1 | 1 | Sarah outlines her recruiting framework called the 'Meghan Markle effect', encouraging founders to reach out directly to top-tier talent who may be re-evaluating their careers. | |
| Quick Fire Round: Books, Diversity, GP Commits, and Time Management | 6 | 6 | 3 | 4 | Harry introduces an unscripted discussion about how standard 2-3% GP commit requirements create non-inclusive barriers in venture. Sarah agrees and elaborates on how emerging managers can navigate LP conversations with radical transparency. | |
| Investment Spotlight: Julia Collins and Planet Forward | 3 | 4 | 1 | 1 | Sarah highlights her pre-seed investment in Julia Collins' climate tech company Planet Forward, explaining her thesis of backing exceptional repeat founders before the full product is revealed. |
Statements from this episode (15)
Kunst: The vast majority of early VC scout investors were men
“I was seeing all these scout investors across a bunch of different funds, and the vast, vast, vast majority were men”
Kunst: LP defaults on venture capital calls are extremely rare during crises
“It's incredibly, incredibly rare, even during the 2008 financial crisis that investors refuse to allocate to their venture funds, unless they have actually gone bankrupt themselves, right?”
Kunst: Cleo Capital targets US pre-seed valuations between $5M and $10M
“Anything much lower than five million in the US for even a very early round, it's a little bit hard for me to understand and get excited about unless it's an accelerator, which is a very different way of giving away equity, because I worry that you're not goin…”
Kunst: Founders risk pricing out investors who rarely circle back after passing
“If you set the price, you have no idea if that price is going to be attractive to a buyer, right, to an investor, and you might find out too late that everybody loves your deal, but they feel like it's too expensive, so they all pass, and once investors pass, …”
Kunst: Female founders receive under 10% of venture capital
“When women are still getting like, 10% of all invested capital or something, and I think it's a lower number than that, it's hard to have an argument that like, oh, women, it's been so easy.”
Kunst: Elite graduates increasingly view startup founding as a resume box check
“Entrepreneurship used to be perceived as a massive risk, and now I think for a certain segment of people, they see it as just another box you check, and if you happen to be really good at it, great, but it's just something you have to do the same way that you …”
Kunst: Economic downturns weed out non-masochists from the startup founder pool
“Being a founder is a little bit of a masochistic career path. And so if you're not a masochist, this is a great time to go do a job that like feels a thousand times better on a day-by-day basis.”
Kunst: A bidet startup hit $500,000 in daily sales during 2020 shortages
“One of the bidet companies was doing a 500,000 dollars A day in sales for a while during that, right?”
Kunst: Flat growth during a sector tailwind signals poor startup execution
“If Zoom's daily average users went from ten million to two hundred million, right, which is a twenty-x increase, I don't expect you to be at two hundred million daily active users if you are a seed stage startup, but if you are a startup in a similar space and…”
Kunst predicted in May 2020 that startup markets would normalize by 2022
“And then assuming that in two years for startups that we will be Relatively close to back to normal, 24 months from now.”
Kunst: Sidelined investors view the 2020 downturn as a necessary market right-sizing
“And there's a lot of money that had been sitting on the sidelines for the last Six, 1218 months, maybe still investing a little bit here or there, but their general feeling was the market's overheated, and now they're seeing a right sizing of that, and they're…”
Kunst: Market disruptions make elite talent significantly more receptive to direct recruitment
“And I think, especially right now, there's a lot of people who are just like, great, I'll do a 20 minute call. Why not? Great. I hate my job. Great. I just got laid off. Great. I've secretly hated my business partner for 10 years, and I think this is a good si…”
Kunst: Greater diversity in VC fund managers drives higher financial returns
“I'd like to see more diversity in fund managers, and the reason for that is simple. It drives better returns”
Kunst: Upfront transparency prevents LPs from demanding a traditional GP commit
“Almost every LP that I've ever talked to, I'm incredibly upfront about that. I'm like, look, yeah, I'm super broke. And they're like, okay, that makes sense. I'm like, okay, great. And no one's ever pushed me on an LP commit, right?”