The Exchanges

Q I love that. What hustle. I do have to also, from reluctant intern to now managing partner, when did you discover, and what was that discovery process like for realizing that really your life's work is to be an investor?

A It was a long journey. I was lucky in that for the first three or four years of my venture career, I had no interest in being a partner at a venture capital firm. I never put on the blue shirt and khakis and chased entrepreneurs for deals. Instead, I was able to follow Josh Koppelman, the founder of the firm, follow him around as a true apprentice and spent the majority of my time with the entrepreneurs where we had already made the investment decision and were heavily into the, the helping aspect of the business. And the really nice thing was I would sit in board meetings with Josh. I would sit in working sessions with the founders with Josh and these entrepreneurs were stronger entrepreneurs than I ever was. They had better ideas than I had in larger markets to attack, but they were 10 weeks or 10 months into a journey, and I had 10 years of experience as an entrepreneur. And in that, I was able to offer support, help, guidance, and strategic advice that was impactful. And so for me, the thing that flipped me from thinking, I'm learning all these things about how to build companies and can't wait to apply them again, to feeling like VC and being an investor is my life's work, was when the thank yous started coming back. And I don't take any credit for The successes that these entrepreneurs had, and certainly they did the work, but when someone takes time out of their day to c…

AI assessment note: “was when the thank yous started coming back”

Q Yeah, no, absolutely. I actually had him on Taneja on from General Catalyst the other day, and he said that pro rata is a lazy mechanism for allowing you not to think about how much to put in. How do you think about that?

A You know, I think that's true. I think any time can make a decision without making a decision. It is a lazy approach, so I agree with the observation, and I think our approach to this has been to really think about the company. We meet as a partnership and discuss the company. The founders often come in and give us an update on the business as we're making our Follow on investment decisions, and we tend to treat them as independent decisions from an investment perspective. At the same time, at the stage that And then the second institutional round where we're deploying the majority of our capital, the unknowns are still tremendous. And oftentimes the founder's decision to work with us in the first round is in some ways dependent on their understanding of our financial support in that second round. And so I think in many ways, our initial decision is often encompassing both the seed investment as well as the series A. And then as we get to the B and beyond is where we start making real decisions about should we be investing more or less? And at that point, As we work with the founder and our relationship with them, we're accounting for our impact on the round dynamics, given our choice, as well as the returns that we think we can generate with that new capital going in in a B round or beyond.

AI assessment note: “I agree with the observation, and I think our approach to this has been”

Q the pop stars were a real, uh, diversion away from the home core. People come because they want to hear about venture from venture insiders, and they want to understand what's going on in the world of venture. But you've said to me before something that's fascinating, and I agree with this, starting on venture. Why do you think the business model for venture is broken in most cases, Finn?

A I started feeling this way in, in 2018, 2019. The venture as an industry has evolved tremendously, right? From, from the seventies when it started and you had folks like Don Valentine jumping into hot tubs with Nolan Bushnell and investing in Atari. These stories of a cottage industry with people who were maybe a little bit, a little bit crazy, risk seeking, but also brought with them deep domain expertise. Back then it happened to be around distribution and sales, sort of go to market expertise for the most part. Partnering with technologists, people who had crafted unbelievable products or deeply understood a new technology, um, you know, chips like Silicon Valley is because it was, it was hardware and they would partner with folks who understood go to market and distribution. It was a one-to-one relationship and together companies would emerge in that collaboration. Right. Um, but the one-to-one relationship was the key and that was a cottage industry. Like any financial sit, you know, arbitrage It was eroded away as more and more people thought, oh, there's big returns in venture. I can, I can come down. I can take that risk. And so at some point the venture firms realized that they had to differentiate and it wasn't enough to be a smart person with expertise, but you needed to do more. And so you had this industrial revolution in venture capital and you saw platform teams.…

AI assessment note: “But the challenge with with the business model of venture in a world where you”

Q I'm asking a really unfair question here. I totally agree with you in terms of owning that niche, but then combining that with your statement earlier of how much further can you go? If you own the seed niche, like the first round did, there's a chance you could own the second round. You could own the Series A as well. Many tried and raised opportunity funds, Series A funds.

A How did that work out? I mean, you know, I think, I think that there, there are folks who have been able to do that without eroding their brand and without eroding the service, but I think it's a very, very hard thing to do if you define yourself as a Delivering a service in a unique way for a unique stage of company. And then you expand beyond that. The only way to do that is to say, at that later stage, it's either is a different product. We do seed and we do it this way. And then because of our brand and reputation at seed, we earn the right to be on cap tables at the later stage. That's just capital. And we're a commodity capital provider. And our value is that we won't be detrimental. You could take that approach, or you could say it's a separate team, which the, the mega funds have, have sort of tried to do and said, you know, we, we have a separate team that focuses in this, in this different way.

AI assessment note: “I think that there are folks who have been able to do that”

Q there about kind of the interviewing there and the art of it. One of the references I did on you said that you are Warren Buffett for founder detection, for really understanding the true qualities of a founder in front of you. How have the questions that you asked changed? Are there commonalities to those questions? To determine the true quality of a founder sitting across the table from you.

A I think I've come to believe that your priorities and the way you express those priorities and explain them is probably the most important thing to understand when you think about partnering with a founder. I like to ask people, uh, what, what's the most important thing? What's the best thing that happened at your company this week? And in the answer to that question, you have an understanding of what are they excited about? What do they think will drive the business forward? Do they set up the situation as something that happened to them and they were a victim and they overcame it? Or did they set it up as a challenge that they understood like a puzzle and they navigated? There are many, many ways that your priorities and the way you frame the challenges that you have to overcome are telling in terms of how you will lead a company. And I think that if you can ask questions that get at somebody's priorities and their motivations and their operating style, Then you learn a tremendous amount about them as a founder. You can start to guess and make an educated guess as to how they will handle the complexity that is certainly coming. The uncertainty that is certainly coming, uh, as they, as they lead their business.

AI assessment note: “I like to ask people, uh, what, what's the best thing that happened”

Q What is the day to day routine? I heard I had to ask this

A I don't always stick to it, right? It's not always, you know, you have your aspiration and then you have your actual life. So that's, that was caveat with that. But I try to get up early, try to do some reading, try to exercise. I then will make breakfast and sit with my daughter. I drive her to school, drop her off. We have great conversations on the way, although she's, she's in seventh grade now. So she wants to, we're carpooling a little bit and now she wants to take the bus. I'm afraid I'm gonna lose. I'm gonna lose those morning conversations. It was a nice morning conversation with her. Work, um, you know, till, till, you know, four or five depends, pick her up from school. If I can take her to sports, if I can spend time on family, you know, dinner, uh, and, and then go back to work and then try to get 6:07 hours of sleep and, and do it again. Um, there's obviously times where you have to do, you know, you're doing dinners. I think a night out, uh, two nights out a week for, for work is appropriate. I have a date night every week with my wife. We have date night. I think that's critical. You asked about Parenting. I have so much, so much changes when you have a child, but the biggest thing that changes is the person that you love most in the world. Now there's a third person in the room and each of you loves that person maybe more than you love each other. And you have …

AI assessment note: “get up early, try to do some reading, try to exercise. I then will make breakfast”

Q it a while ago by a pension fund LP, and I stole it from them because it was freaking great. But it was, there's founders, there's markets, there's traction, and there's market timing. If you were to rank them one through four, one being most important, four being least important to you in your investment decision-making process, how would you rank them? Founder, market itself, Traction and the market timing.

A I think founders are first. And the reason I say that is because the ability of a founder to surprise And to shock you with the way they view a market, the opportunity that they identify that no one else has seen, the ability to execute against that. Like that is why I do this is to meet those people. And so if I can't align my business model, my returns with the thing that brings me joy in the work, I struggle. And so I have to start with founders because of that. And then second, I think, I think there's something If you're investing at a stage where traction can exist, I think, I think that early doesn't have to be at scale, but that passion or engagement of a user base is something that is, is often overlooked because like the N is too small. You have hundreds of people that are, that are spending hours or revisiting this thing on a daily basis versus tens of thousands. Um, but I think those early signals should not be ignored. But I think when you're investing Before there's a product, like often, you know, our, our, what we call formation stage is sort of that true seed, you know, pre-seed seed, not like the seven million dollar seed when you've already raised two and you have a product in market, et cetera. I think then it's about the market timing. And what I mean by that market timing versus market is the, the ability to get that early traction. What is it that says no…

AI assessment note: “I think founders are first. And the reason I say that is because”

Q What is the day to day routine? I heard I had to ask this

A I don't always stick to it, right? It's not always, you know, you have your aspiration and then you have your actual life. So that's, that was caveat with that. But I try to get up early, try to do some reading, try to exercise. I then will make breakfast and sit with my daughter. I drive her to school, drop her off. We have great conversations on the way, although she's, she's in seventh grade now. So she wants to, we're carpooling a little bit and now she wants to take the bus. I'm afraid I'm gonna lose. I'm gonna lose those morning conversations. It was a nice morning conversation with her. Work, um, you know, till, till, you know, four or five depends, pick her up from school. If I can take her to sports, if I can spend time on family, you know, dinner, uh, and, and then go back to work and then try to get 6:07 hours of sleep and, and do it again. Um, there's obviously times where you have to do, you know, you're doing dinners. I think a night out, uh, two nights out a week for, for work is appropriate. I have a date night every week with my wife. We have date night. I think that's critical. You asked about Parenting. I have so much, so much changes when you have a child, but the biggest thing that changes is the person that you love most in the world. Now there's a third person in the room and each of you loves that person maybe more than you love each other. And you have …

AI assessment note: “I try to get up early, try to do some reading, try to exercise.”

Q so appreciate our relationship. It's one of the great joys of doing the show for me, building friendships like we have. And so huge thanks for that. But I want to start with some context. So, Talk to me first. Why did you leave first round? And before you said to me about a co-founding moment and the pursuit of it, can you talk to me about those two elements?

A Sure. Leaving first time was a really, really hard decision. I think, you know, you, you find your greatest opportunities when you leave the best job you ever had. Um, and, and I think that's, that's definitely the case here. It was a wonderful, obviously brand, very successful, wonderful people. But for me, there was always this question, um, sort of eating at me. Around, uh, was, was this it, right? Was, was this all there was in my venture career? And was there more in, in the opportunity to build something of my own and find a way to do that and continue to push myself and continue to engage, uh, with, with the edges of what I was capable of, uh, by, by trying my own thing. And, and so admittedly with some probably COVID induced navel gazing, um, you know, in, in, in Was looking at the market and feeling the work I was doing and where I wanted to go and felt like it was a now or never moment. And I had, uh, had some conversations with, with Josh and other partners, and we figured out a path to navigate that, that was sort of, um, I think appropriate and acceptable to everyone, not the happiest of moments, because anytime you, you know, these are deep friendships and people that you, you care for and trust. And in that recognition that you want to go try something else. Um, I think I, I underestimated the sense maybe that that somehow meant that what I was doing wasn't good …

AI assessment note: “was there more in the opportunity to build something of my own”

Q there that the first round have had. I think you learn a lot from the hits and you learn a lot from the misses. I really hope you've had some misses because Because fuck me, I have done. But my question is, on the biggest hit, what would you say your biggest hit is? And when you, like, reflect and do a post-mortem, how did it change how you invest?

A When I started investing, I was a, I was a product person. You know, I built sneakers and video games. My early investments, if I look at them, they were products that I thought should exist. And, and I have a, from being a product person, you, you build up a, a sort of schizophrenia where you can take on the personality of the customer and, and have empathy and understand their priorities and needs. And, and then you could imagine a product that would meet those needs and would resonate. And I think I did a lot of that bank simple, um, you know, birch box, even blue apron, I think were, were those things. And the work I did with notion, I think was, was really foundational in, Understanding the product is a piece of what you're doing, but that understanding the, the ways that that product drives distribution, the power of software platforms versus just an application and the sense of a product that can evolve with, can grow with the user and, and deepen that attachment over time and sort of lock in, I guess you would call it. Um, I learned, I learned many of those things from, from Ivan, um, Akshay, watching them, watching them build that business, uh, helping them recruit people to, to join that business and seeing it, seeing it scale. I think the, the lessons of Uh, notion, uh, sort of informed, uh, things like persona, um, getting excited about, you know, some of the things…

AI assessment note: “the lessons of Uh, notion, uh, sort of informed, uh, things like persona”

Q Do you have to encourage founders to take your services? And what I mean by that is I speak to a lot of people with platforms, venture platforms, and they say, honestly, you'd be surprised by how few founders actually take us up on the services that we add.

A When Dan and I were designing the firm, One of the core things was that it would be an unbundled offering because we trust the founders to know their critical needs. And we want them to be able to choose where we have a unique product that gives them a specific advantage over the rest of the market and where we don't. So for example, if someone comes to us and they have their core team, five, six people, they're, they're starting to build product. They're sort of heads down on that. And they want to recruit You know, 20 engineers after they find product market fit and raise their next round. Like we are not the recruiters for that. They should either use an outsource service or they should we can help them hire the head of talent who will do that for them. But that's not what we do. The person that has three co-founders and a really strong sense of what they want to build, and they want to engage with, you know, hands on keyboard, you know, someone like Jonathan Wall, who Well, he built Google wallet. He then built his own company index. He sold it to Stripe. He led infrastructure at Stripe for their terminal product. And he deeply understands how to build, you know, early stage companies, infrastructure, et cetera, for scale. And they want to engage with him to figure that out and then engage with our recruiters to figure out how to sort of build that early team numbers four, …

AI assessment note: “it would be an unbundled offering because we trust the founders to know their critical needs.”

Q there that the first round have had. I think you learn a lot from the hits and you learn a lot from the misses. I really hope you've had some misses because Because fuck me, I have done. But my question is, on the biggest hit, what would you say your biggest hit is? And when you, like, reflect and do a post-mortem, how did it change how you invest?

A When I started investing, I was a, I was a product person. You know, I built sneakers and video games. My early investments, if I look at them, they were products that I thought should exist. And, and I have a, from being a product person, you, you build up a, a sort of schizophrenia where you can take on the personality of the customer and, and have empathy and understand their priorities and needs. And, and then you could imagine a product that would meet those needs and would resonate. And I think I did a lot of that bank simple, um, you know, birch box, even blue apron, I think were, were those things. And the work I did with notion, I think was, was really foundational in, Understanding the product is a piece of what you're doing, but that understanding the, the ways that that product drives distribution, the power of software platforms versus just an application and the sense of a product that can evolve with, can grow with the user and, and deepen that attachment over time and sort of lock in, I guess you would call it. Um, I learned, I learned many of those things from, from Ivan, um, Akshay, watching them, watching them build that business, uh, helping them recruit people to, to join that business and seeing it, seeing it scale. I think the, the lessons of Uh, notion, uh, sort of informed, uh, things like persona, um, getting excited about, you know, some of the things…

AI assessment note: “the work I did with notion, I think was, was really foundational”

Q it a while ago by a pension fund LP, and I stole it from them because it was freaking great. But it was, there's founders, there's markets, there's traction, and there's market timing. If you were to rank them one through four, one being most important, four being least important to you in your investment decision-making process, how would you rank them? Founder, market itself, Traction and the market timing.

A I think founders are first. And the reason I say that is because the ability of a founder to surprise And to shock you with the way they view a market, the opportunity that they identify that no one else has seen, the ability to execute against that. Like that is why I do this is to meet those people. And so if I can't align my business model, my returns with the thing that brings me joy in the work, I struggle. And so I have to start with founders because of that. And then second, I think, I think there's something If you're investing at a stage where traction can exist, I think, I think that early doesn't have to be at scale, but that passion or engagement of a user base is something that is, is often overlooked because like the N is too small. You have hundreds of people that are, that are spending hours or revisiting this thing on a daily basis versus tens of thousands. Um, but I think those early signals should not be ignored. But I think when you're investing Before there's a product, like often, you know, our, our, what we call formation stage is sort of that true seed, you know, pre-seed seed, not like the seven million dollar seed when you've already raised two and you have a product in market, et cetera. I think then it's about the market timing. And what I mean by that market timing versus market is the, the ability to get that early traction. What is it that says no…

AI assessment note: “I think founders are first.”

Q Do you have to encourage founders to take your services? And what I mean by that is I speak to a lot of people with platforms, venture platforms, and they say, honestly, you'd be surprised by how few founders actually take us up on the services that we add.

A When Dan and I were designing the firm, One of the core things was that it would be an unbundled offering because we trust the founders to know their critical needs. And we want them to be able to choose where we have a unique product that gives them a specific advantage over the rest of the market and where we don't. So for example, if someone comes to us and they have their core team, five, six people, they're, they're starting to build product. They're sort of heads down on that. And they want to recruit You know, 20 engineers after they find product market fit and raise their next round. Like we are not the recruiters for that. They should either use an outsource service or they should we can help them hire the head of talent who will do that for them. But that's not what we do. The person that has three co-founders and a really strong sense of what they want to build, and they want to engage with, you know, hands on keyboard, you know, someone like Jonathan Wall, who Well, he built Google wallet. He then built his own company index. He sold it to Stripe. He led infrastructure at Stripe for their terminal product. And he deeply understands how to build, you know, early stage companies, infrastructure, et cetera, for scale. And they want to engage with him to figure that out and then engage with our recruiters to figure out how to sort of build that early team numbers four, …

AI assessment note: “it would be an unbundled offering because we trust the founders to know their critical needs”

Q the pop stars were a real, uh, diversion away from the home core. People come because they want to hear about venture from venture insiders, and they want to understand what's going on in the world of venture. But you've said to me before something that's fascinating, and I agree with this, starting on venture. Why do you think the business model for venture is broken in most cases, Finn?

A I started feeling this way in, in 2018, 2019. The venture as an industry has evolved tremendously, right? From, from the seventies when it started and you had folks like Don Valentine jumping into hot tubs with Nolan Bushnell and investing in Atari. These stories of a cottage industry with people who were maybe a little bit, a little bit crazy, risk seeking, but also brought with them deep domain expertise. Back then it happened to be around distribution and sales, sort of go to market expertise for the most part. Partnering with technologists, people who had crafted unbelievable products or deeply understood a new technology, um, you know, chips like Silicon Valley is because it was, it was hardware and they would partner with folks who understood go to market and distribution. It was a one-to-one relationship and together companies would emerge in that collaboration. Right. Um, but the one-to-one relationship was the key and that was a cottage industry. Like any financial sit, you know, arbitrage It was eroded away as more and more people thought, oh, there's big returns in venture. I can, I can come down. I can take that risk. And so at some point the venture firms realized that they had to differentiate and it wasn't enough to be a smart person with expertise, but you needed to do more. And so you had this industrial revolution in venture capital and you saw platform teams.…

AI assessment note: “the challenge with with the business model of venture in a world where”