The Exchanges

Q And then we've got a question from Jason Seats. And he says, where do you still see brokenness and inefficiencies in the current venture model itself?

A Well, I think, you know, if you take a step back and look at the venture capital industry, you know, you sort of get out of the day to day, you know, what you see is lots of venture capitalists are very good at what they do, deploying, you know, 5,000,010 1,000,020 million into a company and sitting on the board and helping with strategy. I think that part of the market actually works quite well. The VC is trying to do seed. You know, you see so much, uh, failure there, right? You see, it's just a different game. And you see the professionalization of angel investing, as I mentioned earlier on with phenomenons like, you know, AngelList, which is taking a sort of online approach to it. Techstars, which is a scale, you know, global ecosystem, hands-on approach to it. And, and lots of other things trying to sort of organize the segment, which is maybe above angel, but below venture capital. And nobody really has a name for that segment. Um, so I, I think that segment gets named, you know, seed at scale, whatever it is, and can be organized much better.

AI assessment note: “The VC is trying to do seed. You know, you see so much, uh, failure there”

Q And I'm intrigued now, now with benefit of hindsight and looking back as an overview over the whole process now, how have you seen your investment decision making change with time?

A Well, I think it's a function of the capital you have available and the strategy of the fund in place at that time. And there's lots of limited partners that we have. You have big institutional investors, The Morgan Stanley's and best goes of the world, you know, sort of look at your decision making in the past. You have to justify some things like, you know, we, um, one example that I talk about a lot, digital ocean, which came out of the tech stars, Boulder accelerator. Um, you know, obviously we invested in the company, but we didn't go deep into the rounds. And the reason for that was twofold at that time. Um, we didn't have the capital to give, give us any more meaningful position in that company. Five million dollar fund at the time. The company came out hot with its next round and obviously has done really well, you know, didn't match a strategy at that moment in time and didn't really have enough capital under management to, to make that decision make sense. And so we quote unquote missed following on in that opportunity, but it made sense at the time. And so you always have regrets looking back, you know, just should have done that one. But obviously given the performance of the funds, you know, we're pretty happy with how it's all turned out. You adjust it every time based on capital you have at hand.

AI assessment note: “You adjust it every time based on capital you have at hand.”

Q And with the portfolio scaling as it did in the beginning, um, How did you adjust your time management and your value add to that? I think it's often something we forget as investments grow, your time actually becomes more limited. So how does that affect you?

A Yeah, well, you know, we're fortunate, um, at Techstars, you know, today, you know, so we went from that five million dollar fund today, we're over three hundred million dollars in, in managed capital, but, you know, we have a 150 people in the organization. Um, we have 35 people that, you know, used to be CEOs, right? That are, that are totally capable of helping You know, these companies, so we've been able to scale our infrastructure along with the growth and capital. So unlike a typical three hundred million dollar VC, that's, you know, three or four partners, right? We're 150 people, a person for every two million dollars we're managing. And I think that helps us. It's not just my time that matters, right? For our seed investments, our managing directors are on the ground in New York and London and Berlin and Los Angeles and so on and can actually be helpful. But I think, you know, it's, it's like anything you focus on the things that Um, begin to show value and, and begin to work and where you have the most capital. And that's, that's how I've scaled my time.

AI assessment note: “focus on the things that begin to show value... that's how I've scaled my time.”

Q And I'm intrigued now, now with benefit of hindsight and looking back as an overview over the whole process now, how have you seen your investment decision making change with time?

A Well, I think it's a function of the capital you have available and the strategy of the fund in place at that time. And there's lots of limited partners that we have. You have big institutional investors, The Morgan Stanley's and best goes of the world, you know, sort of look at your decision making in the past. You have to justify some things like, you know, we, um, one example that I talk about a lot, digital ocean, which came out of the tech stars, Boulder accelerator. Um, you know, obviously we invested in the company, but we didn't go deep into the rounds. And the reason for that was twofold at that time. Um, we didn't have the capital to give, give us any more meaningful position in that company. Five million dollar fund at the time. The company came out hot with its next round and obviously has done really well, you know, didn't match a strategy at that moment in time and didn't really have enough capital under management to, to make that decision make sense. And so we quote unquote missed following on in that opportunity, but it made sense at the time. And so you always have regrets looking back, you know, just should have done that one. But obviously given the performance of the funds, you know, we're pretty happy with how it's all turned out. You adjust it every time based on capital you have at hand.

AI assessment note: “You adjust it every time based on capital you have at hand.”

Q And we're going to discuss bullet time now and the strategy going forward, as you said, Uber, Twilio, just to name a few there. So, so in terms of, The initial fund and deciding on the structure, how did you decide on the initial to the follow on funding ratio in that first fund?

A You know, I, I come up under the mentorship of amazing people like, like Brad that you mentioned, you know, his partner, Jason Mendelsohn, uh, and others that I had learned from. And one thing that I really understood was the insight advantage we had at Techstars, you know, some of the early companies that came out of the Techstars ecosystem, you know, the Sendgrids and Spheroes, et cetera. Or because we really understood those companies, we had lived with them for three months. And, and it's really comes from this, this learning that as an angel, and this was really just a scaled angel fund. It's about having a consistent strategy and just sticking to it. You know, it almost doesn't matter so much what the strategy is as that you're consistent about it and stick to it. And that's something I had learned in my early investing career. So, you know, we really wanted to get in early at, at low prices and, We would make at most one follow on investment of the same size. That was the strategy. That was what I had done as an angel. Um, a lot of people that were successful as angels that were my mentors had done similar things. And so I just applied the same strategy to essentially a scale angel fund.

AI assessment note: “We would make at most one follow on investment of the same size.”

Q think the kind of really big and troubling question for me that I always ask myself is how do you balance when maybe assessing a portfolio company from the VC's perspective between really buying into that mission and vision of the founder versus maybe being more realistic as to when something is not working? How do you think about that balance? Are there any leading indicators to suggest either direction?

A I would just separate the two, and I'd say if you don't believe in that optimistic vision and future, then why are you investing? I mean, that's, that's just the ante to the game. You have to believe in that. But I think at the same time, as you move towards that goal, right, that purpose, that long-term vision, having people that can inject some realism, we're probably not going to triple revenue in three months, and we're probably not going to do it more profitably than we're doing it today, is helpful because you can overspend, you can over-resource as you move towards this vision. But I would separate the two and say, don't do it if you're not a believer in that vision and a huge optimist about it.

AI assessment note: “I would just separate the two, and I'd say if you don't believe”

Q What do you think is a not big market now, but will be a big and boring market in the future? Whether it be APIs for drones, that could be a potential, but a huge market. Is there one for you?

A You know, one of the things about big boring is they tend to stay the same. I mean, I think about, you know, all that can still be done in the transportation industry. I mean, how many people just You know, still hate having to get on a plane, right? And insurance, bank, banking to me is a huge one. I mean, you see the potential disruption in, you know, Bitcoin, blockchain sort of technologies, authentication, security. I mean, they tend to stay the same. That's what makes them boring. People don't view them as new. You know, they're so big and so much money flowing through them, and often the software is just way behind where it should be in the industry.

AI assessment note: “one of the things about big boring is they tend to stay the same.”

Q What do you think is a not big market now, but will be a big and boring market in the future? Whether it be APIs for drones, that could be a potential, but a huge market. Is there one for you?

A You know, one of the things about big boring is they tend to stay the same. I mean, I think about, you know, all that can still be done in the transportation industry. I mean, how many people just You know, still hate having to get on a plane, right? And insurance, bank, banking to me is a huge one. I mean, you see the potential disruption in, you know, Bitcoin, blockchain sort of technologies, authentication, security. I mean, they tend to stay the same. That's what makes them boring. People don't view them as new. You know, they're so big and so much money flowing through them, and often the software is just way behind where it should be in the industry.

AI assessment note: “insurance, bank, banking to me is a huge one.”