The Exchanges

Q This fucking LP. God. This story is a fucking LP title. Can I ask a final one before you just touch on the market? Is there anything you know about fundraising now that you wish you'd known at the start? I'm sure there's many things, but like what do you wish most?

A I, so I'm, I've become, like I said, I've become so much more zen about this. Um, in the first fund, every time someone said no, I took it personally and I felt like it was a waste of time. Now looking back, it is amazing. Like this one LP that I mentioned is one of our, it's actually our biggest LP now. This is the one that I talked to them in fund one. They never, I actually, it was very kind of them. They didn't actually engage very much, but they always took a meeting or two and then passed. And then I think fund three or fund four, they didn't even take a meeting and then fund five, they came in and I was like, you know what? Like how much of a waste of time was that? Not much, right? It was like a handful of meetings over the course of however many years, some email updates and they're, they're great partners with us and they're, they're a pretty large LP for us. And if that has kind of changed my thinking, we're like, you just don't know, like people are in the business of like meeting managers. You're in the business of meeting LPs and you just don't know how relationships are going to evolve. People are going to go to different platforms and, you know, at a new platform, maybe you become a really great fit for them when they weren't before. So just like allow serendipity to happen and do your job. And I feel like things will work out.

AI assessment note: “in the first fund, every time someone said no, I took it personally”

Q I'm gonna be a bit of a dick. I speak to a lot of LPs, and they're always like, oh, we hate opportunity funds. Did they hate opportunity funds with you too?

A You know, when we raised the opportunity funds look pretty darn good. Um, uh, there was this like brief moment in time where the numbers are quite strong. I mean, this was really, uh, 2002, 2002 1001, really when we raised it. Um, so there was a lot less pushback. Um, I think that LPs also liked the idea that, you know, most of the dollars were going into the seed fund, not the opportunity fund. I think there are other firms where the balance was different, right? It was like two to one the other way. Um, LPs didn't love that. Um, I think the, the third is like, there's an alternative, which is we just raise a bigger fund overall. Um, but I think everybody kind of loses in that case, right? Because, you know, it's hard to deploy that much money. The fees effectively are higher if you don't do, because our, our opportunity fund has somewhat discounted fees. Um, and so I see this as kind of a win-win, uh, for everybody in, uh, who's doing this.

AI assessment note: “so there was a lot less pushback.”

Q And I really want to touch on something you said about the larger funds causing a potential disconnect with the startups. What do you think this disconnect is caused by? What causes that, do you think?

A Yeah, I just think that it, it comes down to a, a difference of incentives, right? So when a business is looking to raise, you know, a million dollars or even less, it becomes very difficult for, uh, you know, a multi-hundred million dollar, you know, nearly billion dollar fund make the math and the time investment work for that kind of a company. Um, and so it creates this, uh, disconnect where founders really want somebody who is hands-on and engaged, Um, and really, really cares about those seed dollars. And as a, as a very large fund, you're, you're, it requires sort of a mental or emotional leap to either say, even though we're only investing, you know, a teeny tiny percentage of our fund, I'm really going to care and invest a bunch of time and effort, even if it seems like it's not worth it, or we're going to kind of treat this investment as sort of the dollar's warrant, and we're just not going to spend the time, right? And in either case, it doesn't really work in our perspective. Uh, in many cases. In some cases, it, it, it works, and there's some really good investors, uh, at much larger funds who do a great job at the seed stage, but, um, there's just this natural tension that occurs.

AI assessment note: “it comes down to a, a difference of incentives, right?”

Q And I really want to touch on something you said about the larger funds causing a potential disconnect with the startups. What do you think this disconnect is caused by? What causes that, do you think?

A Yeah, I just think that it, it comes down to a, a difference of incentives, right? So when a business is looking to raise, you know, a million dollars or even less, it becomes very difficult for, uh, you know, a multi-hundred million dollar, you know, nearly billion dollar fund make the math and the time investment work for that kind of a company. Um, and so it creates this, uh, disconnect where founders really want somebody who is hands-on and engaged, Um, and really, really cares about those seed dollars. And as a, as a very large fund, you're, you're, it requires sort of a mental or emotional leap to either say, even though we're only investing, you know, a teeny tiny percentage of our fund, I'm really going to care and invest a bunch of time and effort, even if it seems like it's not worth it, or we're going to kind of treat this investment as sort of the dollar's warrant, and we're just not going to spend the time, right? And in either case, it doesn't really work in our perspective. Uh, in many cases. In some cases, it, it, it works, and there's some really good investors, uh, at much larger funds who do a great job at the seed stage, but, um, there's just this natural tension that occurs.

AI assessment note: “I just think that it, it comes down to a, a difference of incentives”

Q now in monetary, in monetary figures, because there's two sides to the table. There's some people like Jeff Clavier and, and I, uh, probably persuaded by Jeff here, but very bullish on the large seed round, obviously offering an extensive runway period to attain the inevitably higher series A metrics with less pressure. However, you fall into the other camp, so why do you think smaller seed rounds are optimal?

A Yeah. So first of all, I think it's actually not a one size fits all proposition. You know, I think there are certain businesses where, um, you need, you know, it's all about what milestones you can achieve with the seed round. And there are some businesses, uh, actually we, we are co-investors with Jeff and in a number of companies and one in particular that I'm thinking about where, you know, it's a hardware based business and you need some minimal amount of capital to be able to hit a product inflection point that will significantly de-risk the company. Um, so there are some businesses where more capital is, is quite necessary, but in general, you know, there was this sense the last few years that if you can raise more capital, you should just do it, like absolutely do it because you never know. And, you know, my realization, I think looking, uh, observing the last few years is that there seems like there's no downside to raising more money, but there actually is. And the downside is actually around, um, a lack of focus, uh, scrappiness, uh, And, and over investment in overhead, um, before there's really the sort of core machinery to support it. And so, you know, if I look at our own portfolio, you know, it's very anecdotal, but, you know, I, I often see companies that raise a lot of money. And, and again, I'm thinking seed investing, you know, pre-product market fit. There …

AI assessment note: “downside is actually around, um, a lack of focus, uh, scrappiness”

Q Not at all. But before we do dive into the show, I'd love to start with some context. And so tell me, how did you make that first foray into the world of venture and come to found next for you?

A Uh, so this is going to sound ridiculous. Uh, I got into venture because I got a cold call from a VC firm when I was in business school. Um, I was, uh, I distinctly remember I was looking for, I was either going to start a company or, uh, Um, or join an early stage startup. I was at a pre-seed stage startup interview, and I got an email from a partner at, uh, at Spark Capital, because they were looking at the team with a digital media background. And, you know, at the time, everyone had a very narrow, um, definition of what they were looking for. It was like, top business school, worked at eBay, Google, or Yahoo, and lived in the local market. And so I was in Boston. This fund was in Boston. So, went in for an interview. I was like, oh, this is kind of interesting. Let me pursue this. And then proceeded to get tortured for six months before I finally got my offer. But that's how I got into the business.

AI assessment note: “I got into venture because I got a cold call from a VC firm”

Q Rob, tell me next five years for you and for next What does that look like when we chat in twenty-twenty-eight?

A My vision and our team's vision is for NextView to be And we don't have a great marketing pitch for this, but I think if benchmark and YPO had a baby and focused on seed, that's what I'd love next to you to be, right? So from on the benchmark side, it's a, it's a very partner driven model, equal partnership, a lot of stability, best in class, um, best in class investor, very concentrated model. YPO, um, The, the, an ethos of founder vulnerabilities, support and, um, and kind of communal excellence, uh, that folks are able to have like lifelong relationships that they think is one of the most important things in their lives. Like, I would love that to be what founders say about being part of the next new portfolio. So if we can marry those two things, I would love that.

AI assessment note: “if benchmark and YPO had a baby and focused on seed”

Q What do you see today in the seed market that you think not enough What people are talking about or spending enough time on?

A Related to your last question, I think there's actually a lot of opportunity out there for non-consensus thinking. I think there are a lot of companies that aren't getting very much love, um, because they're not AI. The teams aren't fancy founders that came from well-known companies that are just having a really tough time raising. And I think that there's going to be like, like many diamonds in the rough that come out of that. Uh, and so, you know, I think there's a lot of like doom and gloom and like disgruntled, like chatter among seed investors right now. And I'm like, I don't know, like, There are a lot of companies out there. Go ahead and do it. And by the way, if the company, if the founders are really that great, like just go ahead and pay a higher price. Like that's okay too.

AI assessment note: “I think there's actually a lot of opportunity out there for non-consensus thinking.”

Q What was the best ever LP meeting you had?

A I'll tell you the LP meetings I most enjoy are ones that focus a lot on the human beings and the kind of nature of the team dynamic, the why behind what we do. Um, you know, the touchy-feely meetings. There is a class of LPs, and I'm trying to figure out where, I think that there's a lot of roots in the way that, like, the Yale management, uh, company has trained, um, investors. Like, I, I think a lot of folks who, who have this approach, um, have a heritage at Yale, so I really enjoy those meetings. Another meeting I remember was, uh, with Horsley Bridge. Um, they're not LPs in our fund, but I remember actually a follow-up Where we were talking about portfolio construction, and one of the, one of the folks there said, you know, the best portfolio construction in the world is to invest in one company and put all your money into the first round and be right. And every derivative from that basically is allowing for uncertainty and risk. Uh, and I always kind of remember that. I really, I kind of enjoyed there, like probing, taking ideas to an extreme, just to stretch your thinking, because I felt like I learned something from that. And, you know, obviously that's not what anybody does, but I kind of appreciated that point of view and it changed the way that, um, I sometimes think about portfolio construction myself.

AI assessment note: “Another meeting I remember was, uh, with Horsley Bridge.”

Q on the show from FF Venture Capital in New York. He said that with regards to VC branding, Uh, the coin box that rattles the most has the fewest coins, uh, in reference to kind of the noisiest investors potentially have the fewest value add. How do you think investors can then convey their true authenticity and genuine value add in the noisy storm that we have at the moment?

A That's a good question. I actually tend to disagree, or I actually have just a different way of thinking about it, right? Um, nobody cares about noise. But if there's actual value in the information that's being shared, then there's actual value, right? I tend to think that quote unquote audiences do tend to flow towards quality content and quality information. And if it's just kind of flash in the pan, like noisiness at some point, you know, the, the, the smart audiences will fatigue on that. And I think that's definitely true with, you know, entrepreneurs and, and sort of VC oriented content. So, you know, I think that that's probably not true. The most important, uh, aspect is, you know, what do other founders say about you? And not just what do other founders in your portfolio that are the best performing founders, right? Because like every company that's doing great, the, their, their investors spend a lot of time with them and cheer them on. But you know, what do the founders say about you when their companies haven't worked out very well? What do founders say about you when you don't invest in their companies, right? Like, are you known for having an authentic, Um, interaction that, you know, founders walk away saying, you know what, they said no, um, or things didn't go well, but, you know, I, I valued every moment that I spent with this investor. I think that that's re…

AI assessment note: “The most important, uh, aspect is, you know, what do other founders say about you”

Q And with all this concentration on the kind of label and tagging of the seed round, I'm really intrigued to hear your thoughts on the emergence of, of pre-seed investors. We recently had Charles Hudson of Precursor on the show and Nick Charles of Notation. So how does the pre-seed rise affect you and your status as a seed investor?

A Yeah, I love pre-seed funds. I just think that, uh, you know, they're kind of doing what, uh, seed investors were kind of meant to do, um, when, when this whole thing started. So I really love the ethos behind them. You know, I think there's a, there's a reason why I'm not like a, trying to be a hedge fund manager or a buyout manager, right? It's because you want to be, you know, directly involved in the creation of something out of nothing. Um, so I, I love that, that positioning from the pre-seed managers and You know, most of these groups are ones that are trying to, uh, invest in smaller rounds much earlier in the life of the company, and, you know, their pitch is sort of the things we talked about. Like, it's, it's in a founder's best interest to be able to stage capital appropriately, uh, and to have a partner that is very comfortable with the uncertainties of a business at the, uh, pre-product market fit stage, as more and more of the seed investors are really, you know, more tuned towards, uh, investing post-product market fit. So I, I really love that. With the next view, you know, we, you know, we tell our, there's a slide in our, in our, you know, annual meeting deck to investors that basically says, look, there's all these subsectors, pre-seed, seed, post-seed, small a, and, you know, we care very little about the, um, the nomenclature. We are very excited about inv…

AI assessment note: “We are very excited about investing in the full spectrum of seed.”

Q No, I totally agree. Can I ask you, in terms of, like, management of the process, How tightly should it be managed? I don't find emerging managers managed them well at all. How tightly should it be managed?

A I think you want to be organized. Especially the first couple of times you do this. I think you want to be very organized, but don't try to manage it too tightly because you actually don't know enough to be able to manage it like a fine oiled machine. Um, and you have to allow for some serendipity, right? So I don't know. I, I'm like a little Zen about this, this kind of thing. Like, you know, I try to stick to my timelines. I try to be very transparent with our LPs, but you know, I always say that if, if you're not for us this time, maybe next time. And, and who knows, right? Like I, when I started, I had so much urgency around, like, we need to hit this date. We need to close this amount by this amount of time, like trying to jam people into a framework. And now I'm just like much more like laissez faire about it. Um, we had one experience with one of our funds where we closed most of it, frankly, right before the lockdown happened with COVID. And we were like, well, you know, we've, we've, we've hit our target. Like, should we just like stop fundraising and, and just like focus on, on investing? And I was like, Yes, but you never know what might happen. And like nine months later, one LP that frankly is a relationship I'd cultivated since like, since fund one decided to come in at the very, very end. And it was a hundred percent about their own timing, right? It's like, were…

AI assessment note: “don't try to manage it too tightly because you actually don't know enough”

Q What do you advise founders going out today in terms of those materials that they have going on to raise from those first LPs?

A What I've found is most LPs care about deck, track record, and then it's really deck and track record are the main two things that they care about. Everything else is just fodder for them to use as ammunition to sell into their, uh, investment committees. And so, you know, you think about like, what's, what are the assets you have at your disposal, right? Like if you have a great media company that is powering the fund, you put tons of stuff about the media company, right? And tons of stats about that. Um, if you have other assets that are, you're just supposed to put other things there that, that matter, uh, uh, for that purpose. But like, really, I think most LPs, they spend like 90% of the time on the deck. And the track record, and that's all there is.

AI assessment note: “most LPs care about deck, track record, and then it's really deck and track record”

Q What was the best ever LP meeting you had?

A I'll tell you the LP meetings I most enjoy are ones that focus a lot on the human beings and the kind of nature of the team dynamic, the why behind what we do. Um, you know, the touchy-feely meetings. There is a class of LPs, and I'm trying to figure out where, I think that there's a lot of roots in the way that, like, the Yale management, uh, company has trained, um, investors. Like, I, I think a lot of folks who, who have this approach, um, have a heritage at Yale, so I really enjoy those meetings. Another meeting I remember was, uh, with Horsley Bridge. Um, they're not LPs in our fund, but I remember actually a follow-up Where we were talking about portfolio construction, and one of the, one of the folks there said, you know, the best portfolio construction in the world is to invest in one company and put all your money into the first round and be right. And every derivative from that basically is allowing for uncertainty and risk. Uh, and I always kind of remember that. I really, I kind of enjoyed there, like probing, taking ideas to an extreme, just to stretch your thinking, because I felt like I learned something from that. And, you know, obviously that's not what anybody does, but I kind of appreciated that point of view and it changed the way that, um, I sometimes think about portfolio construction myself.

AI assessment note: “Another meeting I remember was, uh, with Horsley Bridge.”

Q hate reserves, because I don't think I'm that good a picker on Trajectory. If I had picked on Trajectory, I would have gone into a load of hyped companies, um, and, bluntly, they would not have been good in sustainable investments, and so I actually prefer a no-reserves model. How do you think about, like, bluntly, picking sustainable winners, not hyped companies, just because they're faster to grow with Trajectory?

A I have a couple answers to this. Uh, one, I think we have a similar perspective because we think that our most important investment is actually the first investment. That's when we need to buy most of our ownership. And even though it's, and when I think about reserves, you know, Uh, we're doing pre-seed and seed, and in this market, right, sometimes you're taking a couple bites at the apple, and so we want to make sure that we can support founders that we invest in really early with some additional capital to get them to Series A. So there's, there's a piece of it that's that. Um, but for the most part, we're trying to buy our ownership up front. Like, this isn't really a strategy of, like, let's, let's sprinkle some dollars in the beginning and, like, pile in at the end. We have a process internally in handling follow-on financings. Um, We basically, uh, do a, a ranking of the portfolio, um, every quarter from a perspective of where we want to deploy or follow on capital. And we do that because we want to make the decision apart from a financing, um, opportunity, right? Because what ends up happening is when some fancy firm comes in, wants to lead a series B, you're, you convince yourself that this is the best opportunity in the world. But then if you look back and say, like, well, a quarter ago, You know, this was not necessarily a company that we were, we were as bullish on…

AI assessment note: “we do that because we want to make the decision apart from a financing opportunity”

Q What do you advise founders going out today in terms of those materials that they have going on to raise from those first LPs?

A What I've found is most LPs care about deck, track record, and then it's really deck and track record are the main two things that they care about. Everything else is just fodder for them to use as ammunition to sell into their, uh, investment committees. And so, you know, you think about like, what's, what are the assets you have at your disposal, right? Like if you have a great media company that is powering the fund, you put tons of stuff about the media company, right? And tons of stats about that. Um, if you have other assets that are, you're just supposed to put other things there that, that matter, uh, uh, for that purpose. But like, really, I think most LPs, they spend like 90% of the time on the deck. And the track record, and that's all there is.

AI assessment note: “most LPs care about deck, track record, and then it's really deck and track record”

Q And then the morning routine, what does it look like for you?

A I would actually say, you know, my morning routine probably starts the night before. I'm, I'm kind of in a habit of, like, this is very out of vogue, but, like, I'm a, I'm a, you know, evangelical Christian guy, um, which is very unusual in the, in the tech scene. Um, I read a psalm. I mean, there's this thing where I read a psalm the night before, and I kind of meditate on that, and that sort of sets me, uh, in a right frame of mind, uh, for the evening and for the next morning. Um, but then the morning, it's kind of like a normal, um, Normal existence, right? Like, I roll out of bed, I get ready. I always weigh myself. I have a whiting scale, so I always weigh myself, which is kind of odd, every day. So, you know, and the nice thing is that, like, I have this, this, uh, chart of my, of my weight every single day, so that, that's kind of odd, I suppose.

AI assessment note: “I roll out of bed, I get ready. I always weigh myself.”

Q hate reserves, because I don't think I'm that good a picker on Trajectory. If I had picked on Trajectory, I would have gone into a load of hyped companies, um, and, bluntly, they would not have been good in sustainable investments, and so I actually prefer a no-reserves model. How do you think about, like, bluntly, picking sustainable winners, not hyped companies, just because they're faster to grow with Trajectory?

A I have a couple answers to this. Uh, one, I think we have a similar perspective because we think that our most important investment is actually the first investment. That's when we need to buy most of our ownership. And even though it's, and when I think about reserves, you know, Uh, we're doing pre-seed and seed, and in this market, right, sometimes you're taking a couple bites at the apple, and so we want to make sure that we can support founders that we invest in really early with some additional capital to get them to Series A. So there's, there's a piece of it that's that. Um, but for the most part, we're trying to buy our ownership up front. Like, this isn't really a strategy of, like, let's, let's sprinkle some dollars in the beginning and, like, pile in at the end. We have a process internally in handling follow-on financings. Um, We basically, uh, do a, a ranking of the portfolio, um, every quarter from a perspective of where we want to deploy or follow on capital. And we do that because we want to make the decision apart from a financing, um, opportunity, right? Because what ends up happening is when some fancy firm comes in, wants to lead a series B, you're, you convince yourself that this is the best opportunity in the world. But then if you look back and say, like, well, a quarter ago, You know, this was not necessarily a company that we were, we were as bullish on…

AI assessment note: “we have a process internally in handling follow-on financings.”

Q What was the worst LP meeting you've had?

A The worst LP meetings are just when it's clear the person doesn't want to be there. Um, we actually very rarely have those meetings now, and for the most part it's because We don't, like, fight that hard to get a meeting. Like, in the beginning, we were, I was like, oh, you know, I just need to get in the room, and if we can get in the room, we can convince somebody that they want us. I know the opinion that, like, if somebody doesn't want you, like, they don't want you. Like, and I'm not that charming, I'm not that great, you know, I'm not that great of a salesperson, so, like, it does me no good to walk in to somebody who's already, like, leaning way back. Like, life's too short. There's other opportunities out there, and so, um, I just don't worry too much about that. So I would almost say, like, you want to scrape and fight really hard to get great introductions, but if somebody doesn't want to take a meeting, like, there's no, there's not that much value in, like, forcing it. That's my point of view, at least.

AI assessment note: “The worst LP meetings are just when it's clear the person doesn't want to”

Q What was the worst LP meeting you've had?

A The worst LP meetings are just when it's clear the person doesn't want to be there. Um, we actually very rarely have those meetings now, and for the most part it's because We don't, like, fight that hard to get a meeting. Like, in the beginning, we were, I was like, oh, you know, I just need to get in the room, and if we can get in the room, we can convince somebody that they want us. I know the opinion that, like, if somebody doesn't want you, like, they don't want you. Like, and I'm not that charming, I'm not that great, you know, I'm not that great of a salesperson, so, like, it does me no good to walk in to somebody who's already, like, leaning way back. Like, life's too short. There's other opportunities out there, and so, um, I just don't worry too much about that. So I would almost say, like, you want to scrape and fight really hard to get great introductions, but if somebody doesn't want to take a meeting, like, there's no, there's not that much value in, like, forcing it. That's my point of view, at least.

AI assessment note: “The worst LP meetings are just when it's clear the person doesn't want”