May 9, 2022 · 57m · 20vc
20VC: WTF Is Going On? 3 Outcomes for What Could Happen From Here; What Needs to Happen To Avoid Recession? Why Stagnation is Most Likely and What This Means for Startups and Venture & Why Catastrophe is More Likely Than Ever and Switzerland Could Be a "H
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In this episode of 20VC, host Harry Stebbings interviews FJ Labs founding partner Fabrice Grinda to analyze global macroeconomic conditions through three probabilistic scenarios. Grinda breaks down the impact of inflation and stagnation on tech startups while sharing strategic capital deployment frameworks for venture investors.
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 19.8% of the talking time here. How this is scored →
Harry as informed peer 4.0 Guest teaching 4.8 Guest disagreement 1.9 Harry pushing back 2.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 35:20 Switzerland safe haven contrarian thesis
Fabrice bluntly rejects the consensus view of Swiss financial stability, arguing the country's banking assets are an over-leveraged house of cards analogous to Iceland in 2008.
Hardest push from Harry ▶ 21:44 Harry reframes recession startup formationHarry firmly interrupts to dispute the idea that economic downturns cause startup success, arguing that mobile platform shifts and App Store creation were the real catalysts.
Biggest teaching moment ▶ 12:25 Discount rate math on venture valuationsFabrice clearly breaks down the quantitative impact of moving from a zero rate to a 10% discount rate environment on long-term terminal value cash flows.
Harry holds his own ▶ 21:44 Harry demonstrates platform shift expertiseHarry asserts his market knowledge by decoupling macroeconomic timing from underlying technological platform shifts that enabled Uber and Instagram.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Podcast Welcome and Fabrice's Entry into Investing | 4 | 3 | 2 | 4 | Harry challenges the practice of active startup founders raising and managing external venture funds. Fabrice defends his dual angel/founder track by arguing it provided strategic market intelligence. | |
| Assessing Today's Macro Environment: The Great Unknown | 2 | 5 | 1 | 1 | Harry invites Fabrice to unpack his macro analysis. Fabrice lays out his probabilistic framework spanning an optimistic recovery, stagflation, and severe downturn. | |
| Macro Scenario 1: The Optimistic Case for Market Recovery | 3 | 6 | 1 | 1 | Fabrice explains the mathematical sensitivity of startup valuation multiples to discount rates and details how supply chain normalization could reduce inflation. Harry listens attentively and asks about capital flows into Web3. | |
| Tech Innovation vs Short-Term Market Sentiment | 6 | 4 | 3 | 5 | Harry pushes back on the conventional narrative that the 2008 recession birthed great startups, attributing their success instead to the mobile platform shift. Fabrice acknowledges the nuance while maintaining that macro headwinds do not impede technological innovation. | |
| Macro Scenario 2: The Case for the Great Stagnation | 3 | 6 | 2 | 1 | Fabrice outlines his base case of sustained stagnation, driven by excessive public debt and political unwillingness to hike rates to real positive territory. Harry asks how central banks should navigate the policy dilemma. | |
| Startup Strategy and Survival During Economic Stagnation | 5 | 7 | 4 | 3 | Fabrice presents a severe bear case involving Swiss banking leverage and refutes the Luddite fallacy regarding technological displacement. Harry contributes live monetary policy updates and references macroeconomic theories on labor productivity. | |
| Venture Capital Deployment Strategy and LP Dynamics | 5 | 4 | 1 | 2 | Harry demonstrates strong industry awareness regarding the denominator effect and mega-funds absorbing institutional LP allocations. Fabrice explains how he adapted by cutting check sizes and holding reserves. | |
| Quick Fire Round: Books, Misses, and Investment Lessons | 4 | 3 | 1 | 1 | In a rapid-fire format, Fabrice shares candid reflections on his biggest investment passes, public market exit strategies, and check-size constraints. Harry steers the conversation smoothly through key takeaways. |
Statements from this episode (21)
Grinda Auto-Signed All Angel Investment Legal Documents Without Reading Them
“Every document that was ever sent to me, legal document that was sent to me, SPA, anything like company selling, et cetera, I auto-signed, or actually my virtual assistant in the Philippines who had my signature would auto-sign for me all the docs that I never…”
FJ Labs Evaluates 200 Weekly Inbound Deals Through Two One-Hour Meetings
“And instead of one hour meeting today, we have 2:01 hour meetings. So usually the inbound deals that we get about 200 a week, they go to someone else first and the team reviews takes the first call and I take the second call. So we went from one hour decision …”
Grinda Assigns 60% Chance to Macroeconomic Stagnation, 20% to Severe Downturn
“Today, in my probabilistic terms, I'd say there's a 20% scenario that we probability that we end up with a optimistic outcome from where we are, and I can explain why. Maybe a 60% scenario of what I call the Great stagnation, and another 20% scenario of, like,…”
Grinda: Crypto Is a Risk Asset, Not an Inflation Hedge
“Crypto is not An inflation hedge , it's still a risk asset”
Grinda: Early-Stage VCs Should Focus on Macroeconomic Conditions 7-10 Years Out
“As an early stage investor, like pre-C, seed, and A, it doesn't really impact me too much because the macro I care about is the macro is seven, 10 years in the future.”
Grinda: US Seed-Funded Startups Surged to 15,000-20,000 Annually in 2020-2021
“There used to be 5000 seed-funded startups per year in the U.S. That would raise 500 K or more, and last two years, it was over 15,000. It was between 15 and 20,000.”
Grinda: Annual Venture Capital Deployment Tripled From $50B to $150B
“It used to be venture capital was fifty billion a year, and all of a sudden it became a hundred fifty billion a year, right?”
Grinda: Insight Partners Will Not Disrupt Series A and B Venture Markets
“I don't think they're going to screw up the A and B market and asset class because they're going to play. It's not going to be the bread and butter.”
Grinda: Oil Prices Exceeding $100 Per Barrel Historically Preceded Recessions
“Every time in the past that oil prices have gone over a hundred dollars, we've had a recession post that.”
Grinda: Fed Avoided Recession in Only 3 of 7 Past Rate Hiking Cycles
“I think only three of the seven times that we've increased race have we've been able to avoid a recession.”
Fabrice Grinda Allocates 60% of His Net Worth to Early-Stage Startups
“My asset allocation, my personal net worth is still 60%, basically, early-stage startups”
Grinda Predicts Fewer Exits, Lower Valuations, and Lower VC IRRs
“It means we have fewer exits in the next few years. It means the valuations at which these X's happen are lower, which means that the IR we get are lower”
Grinda Rejects Degrowth, Citing Technology-Led Productivity as the Sole Solution
“The degrowth movement is bullshit. Like, no one wants to go back to being a farmer and having a life expectancy of 29, starving multiple times a year. The only way we solve the problem is actually through technology-led productivity growth and deflation, and t…”
Grinda: Switzerland Is a House of Cards That Could Default
“Last year, as I was thinking through what are safe havens for cash, I was thinking of putting a lot of my cash in Swiss francs in Switzerland. And I did an analysis, and I realized, and I actually came to the conclusion that it's the opposite. I think Switzerl…”
Grinda: UBS and Credit Suisse Are Too Big for Switzerland to Bail Out
“They're too big to bail. So it's not too big to fail. They're too big to bail. They're so big, the Swiss government does not have the underwriting power to underwrite it. And I could see them failing and bringing down Switzerland with them.”
Grinda: FJ Labs Tripled Deal Volume and Cut Check Sizes by Two-Thirds
“So because the number of startups that was created tripled from 5000 to 15,000, we tripled the number of deals we did from a hundred to 300, essentially. And so I've had to divide my check sizes by three to not run out of money.”
FJ Labs Avoided All Series C+ Deals in 2021 Due to Valuations
“I mean, last year we didn't do a single deal C and beyond, just because prices were too high.”
Grinda: Key Sectors Remain at Sub-5% Tech Market Penetration
“If you think of all the major categories, education, healthcare, public services, B to B, we're still at like sub-five percent penetration in many of these. So I still think the tech revolution remains to be built”
Grinda: Major Late-Stage Startup Repricing Coming Within 12 Months
“Where I'm most excited about opportunities to deploy a lot of capital at good prices in the coming 12 months, yes, it is the B and beyond, or C and beyond, because I think we're going to see major repricing.”