May 6, 2022 · 53m · 20vc
20VC: Why the Traditional Seed Fund Model No Longer Works, Why Multi-Stage Funds Investing at Seed Bring Signaling Risk but also Less Pressure, The One Criteria All Potential Sales Hires Need to Have and The Clear Signs of 10x Sales Hires with Jason Lemki
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In this episode of 20VC, host Harry Stebbings interviews SaaStr founder Jason Lemkin to explore structural shifts in venture capital, the breakdown of traditional seed fund models, and practical frameworks for scaling SaaS sales, leadership teams, and governance.
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 23.6% of the talking time here. How this is scored →
Harry as informed peer 4.6 Guest teaching 5.3 Guest disagreement 3.0 Harry pushing back 3.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 47:59 Jason dismissing anti-founder fund stance
Jason forcefully dismisses Harry's criticism of founders raising side funds, declaring that market realities make the trend unstoppable regardless of opinions.
Hardest push from Harry ▶ 48:21 Harry challenging founders raising side fundsHarry firmly refuses to accept Jason's pragmatic stance, arguing that founders dilute focus and should prioritize increasing their core company's enterprise value instead.
Biggest teaching moment ▶ 37:10 Jason reframing board meetings as forcing functionsAfter Harry calls board meetings useless, Jason methodically educates him on why board meetings serve as vital fiduciary governance and external forcing functions for VPs.
Harry holds his own ▶ 34:11 Harry defending his lightweight VC modelHarry asserts his expertise in fund strategy by articulating how targeted network introductions generate superior value without the operational burden of traditional lead investing.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Jason Lemkin's Entry into Venture and Early Investments | 2 | 3 | 1 | 1 | Harry asks introductory questions about Jason's entry into venture and lessons learned. Jason warmly reflects on early SaaS investments and the extreme founder commitment required. | |
| Ownership Strategy and Market Scale in Venture | 4 | 4 | 2 | 3 | Harry raises the common argument that growing market size makes ownership less critical. Jason pushes back gently, emphasizing that double-digit ownership is what truly moves the needle for fund returns. | |
| The Impact of Massive Capital Injections ('Foie Grasing') | 5 | 5 | 5 | 4 | Harry challenges the massive capital injections in early SaaS ('foie grasing'). Jason explicitly disagrees with Harry's concern, reframing the issue around VP hiring talent rather than over-capitalization. | |
| Hiring Criteria for Early Sales Reps and Identifying 10x Talent | 3 | 6 | 2 | 2 | Harry asks tactical questions on structuring early sales hires. Jason delivers a structured lesson on ACV alignment, trust, and identifying 10x sales talent who can adapt their playbooks. | |
| Designing Quotas and Compensation Structures | 4 | 6 | 2 | 3 | Harry asks how to evaluate reps during lengthy enterprise sales cycles. Jason explains standard OTE multipliers and points out that founders remain effective VPs of sales until $10M ARR. | |
| Founder Dependency, Burnout, and Executive Leverage | 4 | 5 | 2 | 2 | Harry asks how to handle founder burnout and dependency. Jason candidly notes that most founders face burnout and explains how finding key lieutenants alleviates operational load. | |
| Attracting 'Romantics' to Early-Stage Companies | 6 | 5 | 2 | 3 | Harry cites an extreme 1000x ARR valuation example to question secondary sales and market froth. Jason explains the portfolio math VCs use to justify wild valuations across a fund. | |
| Why the Traditional Seed Fund Model Is Breaking | 5 | 6 | 3 | 3 | Harry notes that pre-seed funding for well-connected founders has inflated rapidly. Jason explains why traditional $50M seed funds struggle under current ownership and check-size dynamics. | |
| Multi-Stage Seed Investing: Signaling Risk vs. Reduced Pressure | 4 | 6 | 3 | 2 | Harry asks how founders should navigate multi-stage funds writing seed checks. Jason contrasts signaling risk with the unexpected benefit of reduced investor pressure from multi-billion dollar funds. | |
| Lead Investor Discipline, Board Seats, and Fund Positioning | 7 | 5 | 4 | 6 | Harry strongly defends his lightweight network-intro investment model. Jason pushes back on whether that approach holds up as check sizes grow, leading to a sharp peer debate on VC strategy. | |
| Reassessing Board Meetings: Fiduciary Duty and Management Forcing Functions | 5 | 7 | 6 | 5 | Harry claims board meetings are useless and ineffective. Jason directly counters, schooling Harry on board meetings as critical fiduciary checks and executive forcing functions. | |
| Quick Fire: Outbound Sales Efficacy and In-Person Meetings | 5 | 5 | 2 | 2 | Harry launches quick-fire questions on sales tactics. Jason demonstrates outbound effectiveness by conducting a playful live outbound pitch directly on Harry. | |
| Investing Over Zoom and Compressed Fundraising Timelines | 5 | 5 | 2 | 3 | Harry brings up peer perspectives on Zoom investing. Jason reflects on why Zoom removes the secret rumination period he relied on to make investment decisions. | |
| Debate on Active Founders Raising External Venture Funds | 6 | 6 | 6 | 7 | Harry strongly criticizes active founders raising external funds, insisting on focus. Jason rejects Harry's framing, arguing that market reality and economic incentives make 9-figure founder funds inevitable. |
Statements from this episode (37)
Lemkin: Five of First Six Venture Investments Became Unicorns
“The first four investments eventually became unicorns, five out of the first six”
Lemkin: Cloud Market Scale Expanded 100x Over Five Years
“The sheer scale of the cloud, obviously, is a hundred X what it was five years ago, a thousand X what it was 10 years ago”
Lemkin: Pass on Founders Lacking 20-Year Commitment
“My rule is, and I've made this mistake since, don't invest. No matter how much you love, you can love them as humans. They can be doing very well. But if you don't have this crazy 20 year commitment to building something huge, it's hard to make money in ventur…”
Lemkin: All core portfolio positions maintain double-digit ownership
“When I look over my eight year history of investing, it's the ones with the double digit ownership that moved the needle. And for better or worse, when I've had my own fund, when I look at what the companies I'm sitting on today, obviously you regret ones you …”
Lemkin: When investors identify a winner, buy maximum available allocation
“When you meet a winner, you buy all the shares. Now, if you can buy a quarter of the company, you buy a quarter of the company. If you can buy two percent of the company, you buy two percent of the company. But you either buy all of them or none.”
Lemkin: Less VC collaboration is better for founders
“Without question, it's better for founders. Much of the collaboration in venture did not benefit founders.”
Lemkin: Over 100 operator funds manage over $50 million
“There are over a hundred founder and operator led funds of over fifty million.”
Lemkin: Mediocre VPs of sales will spend 100% of raised capital
“What does a mediocre VP of sales do if there's sixty million in the bank? They spend it all. A hundred percent of them spend it all.”
Lemkin: Startup CEOs are to blame for lowering VP hiring standards
“I think this is true, but I blame the CEOs for lowering the bar on hiring for VPs.”
Lemkin: Most successful B2B founders serve as first head of sales
“I would say the majority of B to B companies That are successful that you and I have worked with, Harry, the majority, but not all. The founder has been the first head of sales.”
Talkdesk founder Tiago Paiva was sole salesperson up to $2M revenue
“Tiago from TalkDesk. He was the only salesperson through the first two million of revenue.”
Lemkin: Hiring VP of Sales before two performing AEs fails 80% of time
“If you don't have those two AEs and you hire a VP of sales, 80% of the time it doesn't work because there's nothing for them to work with.”
Lemkin: Great VPs of Sales now wait for $10M ARR before joining startups
“The ones that used to join at one million, they're all waiting for a ten million ARR startup today, or a unicorn, whichever comes earlier.”
Lemkin: SaaS startups must only hire sales reps with matching ACV experience
“First, make sure they've sold at your price point. A sales, if you're a five K ACV startup, do not hire someone from a million dollar a year group, no matter how much you love them. It's the wrong toolkit.”
Lemkin: 10x early SaaS sales reps differentiate by adapting their playbook
“What makes them Tenex, and it took me a long time to figure this out, they can change their playbook. 90% of sales reps, and this works out the bigger you get, they sell exactly the same way.”
Lemkin: At scale, SaaS quotas should be 3x to 5x OTE
“And then at scale, we end up at these three X, four X, five X numbers, right? Which is quotas are an SMB. Usually three X, you're fully burdened comp. You're on target earnings, you're OT up to five X in the enterprise. That's the way it works.”
Lemkin: Long enterprise sales cycles become predictable at $20M–$30M ARR
“North of 20, thirty million in revenue, you're lining up so many deals at the same time that long sales cycles don't matter because if you have a hundred deals in flight, it actually starts to happen very predictably, right?”
Lemkin: Enterprise SaaS founders remain head of sales until $10M ARR
“In true enterprise, like real enterprise, the founder is often the VP of sales until ten million.”
Lemkin: SaaS companies must reinvent team and strategy every 4-5 years
“You do need to reinvent yourself every four to five years. And the only way you can do that is if you kind of reinvent the team and your mission, not your mission, but your strategy every four to five years.”
Lemkin: Startups are lucky if half their VPs carry extra founder load
“You're lucky if half your VPs not only do their job well, right, but do more than their job. Like, carry some of that load, and if you can even have half of your management team do it, that's like magic, and I realize he's right”
Lemkin: 100x ARR startups must quintuple revenue the following year
“Basically a hundred X ARR startup has to at least quintuple next year with high quality revenue, at least quintuple.”
Stebbings: Pre-seed venture funding no longer exists
“I don't think pre-seed actually exists anymore.”
Lemkin: Most of my top investments lacked blue-chip tech pedigree
“I would say most of my best investments did not, and those have not seen the same level of pre-seed inflation, but they have seen enough that can break the seed model.”
Lemkin: The traditional $50M–$60M seed fund model no longer works
“Does the traditional 50, sixty million dollar seed fund work. I think it doesn't work unless you go with anything that has any proof, any social proof, anything privileged, it doesn't work. So you either have to find the less privileged where I think it works,…”
Lemkin: Pre-seed valuation inflation only applies to founders with social proof
“I think the media confuses the privileged pre-seed with the less privileged. I don't think we've seen the same levels of inflation for folks that have no social proof.”
Lemkin: Multi-stage seed funds create negative signaling if they skip Series A
“Of course, if Sequoia or Excel or Andreessen or Lightspeed has two years of data and they don't preempt the A, of course it's a problem. Of course it's a bad signal. So that was a problem, and that exists today.”
Lemkin: Multi-billion funds exert less pressure on early-stage founders
“If you take money from a big fund as an early stage founder, there's actually less pressure. This is so changed. The funds are so big and they're raising funds every 12 months. We have different portfolios and my portfolios, when the multi-billion dollar funds…”
Lemkin: VCs can only actively lead five portfolio companies simultaneously
“But being the only active investor, it might be five if you take it seriously.”
Lemkin: Board Meetings Serve as Essential Management Forcing Functions
“I think you can really only be so upset with them once or twice a year. Otherwise it's demoralizing and people quit. But if every six weeks your VP of sales, that's a little bit behind has to report, Harry, my plan for Q one was ten million. I'm at 8.4. Here's…”
Lemkin: Founders Should Require Board Slides Instead of Notion Docs
“That's why I beg founders not to use notion and board meetings. I begged them to force everyone to make slides to spend the time because we all love notion and Coda. We just put our stuff in our Google docs. It's so efficient, isn't it? But not only did I thin…”
Lemkin: First meetings in venture and enterprise sales are no longer in person
“And I think the biggest change in venture and enterprise sales, because they're similar venture and enterprise sales actually have some similarities to them is that those first meetings are no longer done in person.”
Lemkin: Timeline compression hurts late-stage investors unable to conduct diligence
“I actually think the compression, what I've seen, I think it's harder on the late stage investors who no longer can do diligence.”
Lemkin: Founder-led funds perform zero due diligence before investing
“Founders don't do any diligence, right? Like, they just decide if they're great.”
Lemkin: 50 active startup founders will raise nine-figure venture funds
“There's too many founders that are going to raise nine-figure funds, While they're running their own startups, and it used to be a bad sign for the startup. How could you do anything other than run your own startup? But it doesn't matter what you and I think, …”
Stebbings: Increasing company valuation by 1% yields more than small funds
“If you increase the enterprise value of your company by one or two percent, you'll make far more than you will from this 5,000,010 million dollar fund.”