Feb 7, 2022 · 43m · 20vc
20VC: Biggest Lessons and Challenges Building One of the Most Successful Seed Funds, How To Manage Investor Psychology, Self-Doubt and Insecurity & The Secret to Truly Successful Venture Partnerships with David Frankel, Co-Founder @ Founder Collective
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In this episode of 20VC, host Harry Stebbings interviews David Frankel, co-founder and managing partner of Founder Collective, about the evolution of seed-stage venture capital, fund sizing discipline, and partnership dynamics. Frankel shares key operational frameworks for evaluating founders, maintaining alignment through disciplined fund sizes, and building lasting venture 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 29.8% of the talking time here. How this is scored →
Harry as informed peer 3.3 Guest teaching 4.2 Guest disagreement 1.1 Harry pushing back 2.2
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 12:57 David rejects venture capital jargon
David forcefully rejects standard VC terminology like 'deploying capital' and 'playing the game', insisting that capital allocation should be framed humanistically rather than transactionally.
Hardest push from Harry ▶ 12:42 Harry challenges David on VC collaborationHarry directly counters David's view of market dynamics, asserting that dilution demands and larger fund sizes have made VCs far more adversarial and less collaborative than in the past.
Biggest teaching moment ▶ 35:15 David on influence versus power in VCDavid reframes the investor-founder relationship by educating Harry that board members and seed investors never hold actual power over entrepreneurs, only influence gained through trust.
Harry holds his own ▶ 18:01 Harry details his founder expectation frameworkHarry demonstrates strong operational expertise by articulating his specific policy for check size thresholds and setting clear communication boundaries with portfolio founders.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Episode Sponsorship Announcements | 0 | 0 | 0 | 0 | This introductory segment consists entirely of host monologue and podcast sponsorship reads for Tagus, Cooley, and Sprig. As there is no guest interaction, all dynamic scores are zero. | |
| David Frankel's Early Career and Path to Venture | 1 | 3 | 0 | 0 | Harry opens with warm pleasantries and asks David about his path into investing. David recounts his career starting Africa's largest ISP, selling it to NTT, and transitioning into angel investing alongside Eric Paley and Chris Dixon. | |
| Transitioning from Solo Angel to Institutional Partner | 4 | 4 | 1 | 2 | Harry references Josh Kopelman's insights on becoming more conservative when raising institutional capital and asks how partnership dynamics altered David's mindset. David explains the shift from solo angel decision-making to having partners challenge your ideas. | |
| Managing Partner Disagreements: The Motorway Deal | 3 | 4 | 1 | 3 | Harry asks for a concrete example of partner disagreement, prompting David to tell the story of investing in Motorway despite internal resistance around fund stage rules. Harry contributes context about early investor Shaq from Frontline. | |
| Evolution of Early-Stage Valuations and VC Competition | 5 | 5 | 2 | 4 | Harry questions how David evaluates current early-stage market valuations and pushes back on David's assertion that venture isn't overly adversarial, arguing that venture is less collaborative today than ever before. | |
| Fund Sizing Discipline and Alignment with Founders | 5 | 6 | 2 | 4 | Harry asks how Founder Collective maintains ownership without inflating fund size and asks how to handle LP pressure to compress deployment cycles to 12 months. David warns against treating venture as an AUM game and rejects terms like 'deploying' capital. | |
| Storytelling, Pitching, and Conducting Off-List Diligence | 4 | 5 | 2 | 3 | Harry pushes back against founders who claim fundraising isn't their core responsibility, while David outlines his equation for satisfaction and describes Founder Collective's off-list reference checking method. | |
| Learning from Investment Misses and Evaluating Markets | 4 | 5 | 1 | 3 | Harry asks about David's most notable investment misses and challenges David on whether strong market tailwinds and venture capital can override a weak founding team. | |
| Overcoming Sector Biases and Structuring Partner Decision-Making | 4 | 5 | 1 | 2 | Harry asks how David avoids sector biases from past failures, how Founder Collective structures Monday partner meetings, and how senior partners ensure junior team members feel empowered to speak up. | |
| Delivering Honest Feedback and Influencing Entrepreneurs | 3 | 5 | 1 | 1 | Harry highlights a quote from partner Micah about delivering critical feedback to founders without causing offense and asks David for his philosophy. David explains that venture investors hold influence rather than true power. | |
| Quickfire Round: Books, Market Risks, and Portfolio Insights | 3 | 4 | 1 | 2 | Harry conducts a quickfire round covering favorite books, changing perspectives on founders versus markets, uncapped convertible notes, and current macro insecurities. |
Statements from this episode (18)
Frankel: Launching an institutional seed fund multiplies deal flow a hundredfold
“When you hoist a flag and say, look, we're open to give capital at the earlier stage, if you're any good at it, the amount of opportunities that you see seem to go up a hundredfold.”
Frankel: Hardest VC transition is learning to accept partner disagreement
“I would say the toughest part of that transition for me was actually having a partner and having someone say, I think you're wrong, and really listening.”
Frankel: Founder Collective has been outright lied to only once
“It's amazing that in over a decade of doing this institutionally, we've had one difficult situation where we were out and out lied to.”
Frankel: Founder Collective bans the term "deploy" for capital
“I think that there are some no-go zones in Founder Collective in terms of words. Deployment, we never deploy, we invest.”
Frankel: Larger VC fund sizes have made deal-sharing harder
“The fund sizes have gotten much bigger, so it's difficult to share, because you want to invest, you know, if prepared to invest half a million before, and the deal size was two million, now you want all of the two million. So that's made it tougher to share, f…”
Frankel: Founder Collective maintained a constant fund size over 12 years
“Harry, we could sound almost anachronistic because we've kept the fund size pretty much the same for the last 12 years now through FC one, two, three, four.”
Frankel: Founder Collective partners are the largest LPs since Fund II
“The partnership has been the second, or from fund to onwards, the largest investor in the fund from the get-go.”
Frankel: Founder Collective exclusively does seed and never leads later rounds
“We've never let an A, and absolutely never let a B or a C. We are unequivocally involved in every funding round, and we've built a business around there, but we only do seed.”
Frankel: Check size relative to VC fund size reveals true priority
“Look at the check relative to the fund size will tell you pretty much everything you need to know. Are you going to be, if it's Sequoia investing less than today, a 50 or a hundred million or twenty million at early stage, it's probably not going to take you t…”
Frankel: Sequoia omits brand on scout program to eliminate signaling risk
“By the way, to Sequoia's credit, they've never used the Sequoia brand on their scout platform, and I think that that actually is A fantastically respectful thing to do to founders, because it eliminates the signaling risk of why didn't Sequoia follow on, and t…”
Frankel: Founder Collective Fund 1 has over 60 active companies
“So like 12 years after doing this, we've got over 60 companies in fund one that are still active.”
Frankel: Founder Collective has backed 25 billion-dollar companies
“I've got 25 companies worth over a billion dollars, and some of them are better known than others.”
Frankel passed on Remitly after Sequoia's Roelof Botha raised diligence concerns
“Beam at Mobile, Matt Oppenheim comes to mind. I loved what he was doing, and then I got into diligence, and I spoke to Rulof Buerta, who was in Zoom, and he helped talk me out of it, just talking about how difficult, you know, foreign kind of compensation was,…”
Frankel: Overcoming VC incumbency bias requires relying on unbiased partners
“Incumbency bias is real. The only way through it Is to have people around you who you feel more objective and less tainted, less biased than you.”
Frankel: Remote VC work makes rigorous investment discipline tougher
“Doing all of this on Zoom, in some ways, I would say there's this kind of convenience over connection. So if you like getting stuff done, it's very convenient. But if you miss people, the connection stuff's difficult. And wrestling stuff to the ground, which i…”
Frankel shifts evaluation criteria toward market opportunity over founder talent
“So I keep on vacillating, but, you know, based on my subjective history, I'm over-indexing now, you know, I'm indexing more on the what.”
Frankel: Founder Collective refuses to invest in uncapped convertible notes
“No from us. It doesn't make sense.”
Founder Collective backed Peartree to modernize the child adoption industry
“One of them, Peartree comes to mind. Peartree is using dating style software in the adoption industry, literally adopting kids, and so, you know, if you look at that, there's a massive, archaic industry that's been done the same way forever.”