Nov 9, 2020 · 37m · 20vc
20VC: Lessons from Investing in Uber and Airbnb, How To Think Through Bundling vs Unbundling, Late Stage Funds Moving Earlier, Early Stage Funds Moving Later& The Mechanics of Venture That Founders Should Know with Derek Zanutto, General Partner @ Capital
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In this episode of The 20VC, host Harry Stebbings interviews Derek Zanutto, General Partner at Capital G, to discuss growth equity investing, macroeconomic market trends, enterprise software dynamics, and board governance. Derek shares insights from backing Uber and Airbnb, details Capital G's thesis-driven research framework, and offers strategic advice for founders navigating changing venture capital environments.
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 3.4 Guest teaching 2.9 Guest disagreement 0.7 Harry pushing back 2.1
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 8:17 Reframing capital oversupply premise
Derek gently challenges Harry's framing on capital oversupply by specifying 'undisciplined capital' and pointing out that oversupply has been the norm for over ten years.
Hardest push from Harry ▶ 21:02 Refusing hedge fund Series A narrativeHarry explicitly rejects the idea that hedge funds entering early rounds is helpful, asserting that it is fundamentally bad for founders due to lack of hands-on expertise.
Biggest teaching moment ▶ 10:31 Explaining macro discount rate mechanicsDerek provides a detailed financial explanation of how rising inflation triggers interest rate hikes, elevating discount rates and compressing valuation multiples across equity markets.
Harry holds his own ▶ 26:07 Comparing VC fee stacking to political corruptionHarry demonstrates keen industry insight into VC incentives, offering an articulate commentary on how stacked management fees corrupt fund motivations over time.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Derek Zanutto's Career Journey to Capital G | 1 | 1 | 0 | 0 | Harry asks a standard introductory question about Derek's background. Derek provides an extended overview of his career from Morgan Stanley and TPG to joining Capital G. | |
| Macroeconomic Trends and Capital Oversupply | 4 | 5 | 1 | 3 | Harry introduces macro topics including Bill Gurley's views on capital oversupply and asks how inflation impacts late-stage valuations. Derek educates the host on financial mechanics such as discount rates and valuation multiples. | |
| Managing High Valuations and Rapid Fundraising Cycles | 3 | 3 | 1 | 2 | Harry probes pricing dynamics and price sensitivity in the market. Derek explains that high pricing requires deeper conviction and proactive research rather than chasing breadth. | |
| Thesis Building and Mitigating Confirmation Bias | 4 | 3 | 1 | 3 | Harry quotes a portfolio founder's praise for Derek's thesis-driven approach, but presses on the danger of confirmation bias and market timing risk. Derek outlines Capital G's primary customer research process to mitigate bias. | |
| Enterprise Dynamics: Software Bundling vs. Unbundling | 4 | 4 | 0 | 1 | Harry brings up vertical software unbundling trends around video tools. Derek agrees and provides a detailed historical overview of enterprise data stack consolidation versus fragmentation. | |
| Crossover Funds and Changing Venture Capital Dynamics | 5 | 3 | 2 | 6 | Harry forcefully asserts that late-stage crossover funds investing in Series A rounds is fundamentally bad for entrepreneurs. Harry also playfully calls out Derek for giving a diplomatic politician-style answer when asked about taking easy capital. | |
| Capital G's Capital Structure and Decision Framework | 5 | 3 | 1 | 3 | Harry compares growing AUM and fee-stacking in traditional VCs to political corruption. Derek details how Capital G's single-LP structure with Alphabet aligns incentives differently. | |
| Board Governance and Investor Service Philosophy | 3 | 3 | 0 | 1 | Harry asks about investment decision criteria and board governance best practices. Derek outlines his personal net-worth test for deals and shares lessons learned from mentor Tony Vinciquerra. | |
| Quickfire Round with Derek Zanutto | 2 | 1 | 0 | 0 | Harry leads a standard quickfire round covering books, time management, VC industry changes, and recent deals. Derek gives concise, collaborative answers. |
Statements from this episode (17)
TPG invested in Uber's Series D at a $3B valuation
“And one of the very first investments we did was an investment into Uber's series D round. When it was valued at, you know, at the time felt like a very rich price of three billion dollars.”
TPG backed Airbnb in 2014 at a $10B valuation
“We then followed that in 2014 with an investment into Airbnb when it was at a ten billion dollar valuation.”
Zanutto: Capital oversupply in venture has persisted for over 10 years
“I think there's been an oversupply Supply of capital for, you know, the better part of 10 years now, at least 10 years, really since the Fed took interest rates down to zero coming out of the GFC in 2008, 2009.”
Derek Zanutto: Investors must form sector theses before companies start fundraising
“And I think what that means in reality is that for investors to make informed judgments On underwriting risks and making investments, you really need to have been doing your research and your work and developing your thesis on a category well in advance of a c…”
Derek Zanutto: Pursuing market breadth over depth in expensive markets fails
“What I worry most about, and I think what's most challenging is if in markets like this where prices are incredibly high, going for breadth and trying to chase everything, I think is a losing strategy because then you're going to, you know, not have enough, en…”
Zanutto: CapitalG's Collibra thesis originated from discussions with Google engineers
“So for Clibra as an example, that initial idea around data intelligence and data management came from spending time with a number of Google engineers who had regular conversations with folks throughout Google and outside Google who are combating these challeng…”
Zanutto: Novel COVID-era startup services are significantly harder to underwrite
“But a whole host of other startups thriving now in the COVID economy where they're offering services that didn't really exist a whole lot pre-COVID. And in my mind, those are much more challenging to underwrite And assess as an investor today, because then you…”
Derek Zanutto: Enterprise Data Stack Will Consolidate as CIOs Rationalize Vendors
“And I think there's a case to be made that you're likely to see a bit more consolidation down the road as CIOs and CDOs look to rationalize all the vendors are using to solve, you know, common pain points throughout the enterprise.”
Zanutto: Hedge funds use early checks as loss leaders for pre-IPO allocation
“Frankly, a lot of these hedge funds manage such enormous pools of capital relative to the size of the traditional VC fund. That for them, you know, writing a 25 or fifty million dollar check into an A or a B round is a rounding error, right? So for them, they …”
Stebbings: Accepting early-stage capital from hedge funds is bad for founders
“So I think this is fundamentally bad for entrepreneurs. I don't mean to speak out badly against anyone. I'm sure they're great people. It's just fundamentally bad for entrepreneurs. Entrepreneurs in the way that, like, bluntly, as you said, it's a rounding err…”
Zanutto: High valuations and easy money create severe downstream financing risks
“One learning that I've come away with from those conversations and experiences is if you take the money and it's at a very high price and it's easy money, there is a risk to that because you, if you take it at too high of a price, you get over your skis and th…”
Zanutto: Early-Stage VC Funds Moving Upstack Will Split or Reuse Teams
“I think you'll see some of those early stage funds will hire entirely separate teams, and some of them will use the exact same early stage team to prosecute those growth rounds.”
Zanutto: Established VC firms lose performance sensitivity due to stacked management fees
“A younger fund's partners will make nearly all of their money based on how well their underlying portfolio companies perform, while older funds will be less sensitive to underlying investment performance given the steady stream of stacked management fees that …”
Zanutto: Test VC Deals by Risking Proportional Personal Net Worth
“Would you invest your own money in the deal proportionate to your own personal net worth? So if you are evaluating an investment for the fund that would account for five percent of the fund's capital, would you invest five percent of your own net worth in that…”
Zanutto: Tony Vinciquerra is the best board member in media and tech
“You know, the best board member I've come across in my career is this guy, Tony Vince Acquera.”
Zanutto: Startup media overemphasizes individual founders over teams
“No one investor is the be all and end all for any given company's board. No one individual can build a world beating business all on their own. And I think the media around startups and venture often defaults to the story of the individual because it's frankly…”