The Exchanges

Q about, as you said, kind of piling into the winners. Often it's the belief that really for the massive outlier companies that are very obviously performing incredibly well, as you said, Ring, Zimogen, Peloton, the best come in, especially now, preempt rounds and swoop them up early. Your Sequoias, Benchmarks, you name the tier one fundamentals. So do you think you can build ownership over time in your very best?

A No. So I would say our model really is predicated on the idea that we will lead the round, we'll take the most risk early on market size, market timing, product, constrained downside by our initial capital, and really working with people that are truly special, who often come through existing relationships, often the founders in our portfolio. And then over time, as they continue to raise subsequent financing, I would say the most of them will raise money from later stage firms, and we will continue to invest our pro rata throughout. And so our, you know, call it 20 to 25% at the beginning. If we do everything right, we'll own between 17 and 20% at outcome. But I think it's very difficult over time with success to continue to buy ownership.

AI assessment note: “it's very difficult over time with success to continue to buy ownership.”

Q Yeah, no, I haven't actually read that paper, so I'm going to include links to that in the show notes. Tell me, the best board member that you've sat on a board with, and why were they so good?

A I'm going to name a few because they're all different in their style and approach. I would say David Scott at Matrix. He has such a level, deep level of knowledge on software metrics and how to create a predictable, repeatable, scalable business model. It is awesome to watch him work. Randy Glein of DFJ Growth, As a growth investor, Randy's unique in the way he embraces risk, takes a very human approach in their business. Andy Weissman at USB, who's my favorite example of having a small syndicate of aligned co-investors and how that can help make a company more successful. And then Pat Grady at Sequoia, who I know you've had on here before, who is a kind of a peer in age, but I think has incredible depth of knowledge on being a good board member and partner to CEOs. So I aspire to be more like Pat all the time.

AI assessment note: “I would say David Scott at Matrix. He has such a level, deep level”

Q on kind of the importance of high ownership. I really hate this low ownership model that we see so predicated around the Valley today. But my question to you is entrepreneurs often recoil when I say anything above 15%. So how do you help me to Adam? How do you position it where they understand and they actually align and agree with your view on the importance of high ownership?

A Yeah. I mean, part of it is we lead with the story. So the name true comes to the idea of truing a bike wheel. And so if you align a bike wheel or tru it, it thins effortlessly. And so what we say to founders is, listen, we do one thing. We do that one thing really well. We back really great founders early. We invest one to three million where we tend to own 20 to 25%. What this does for us as a firm, it constrains the downside to less than one percent of the cost in the fund. And then on the upside, it means that we can generate fund level returns. What that means for you as a founder is we're going to be really aligned with you to go and take a lot of risk. So let's go maximize risk on product, market size, market timing. Let's go to the most ambitious thing you can do because your time as a founder is super valuable. And so often what we'll say is, listen, if it doesn't work, that's okay. Because of our fund model, we'll go and do something else together. We've backed 28 people twice. We've backed eight people three times. Often in the, the first thing didn't work, what do you want to spend time on now? And if it does work, we have meaningful amounts of capital to continue to invest. And so in some of our biggest companies, things like Ring or Peloton or Zymergen, we started with a small check and over time invested 50, sixty million dollars. That is a differentiated product…

AI assessment note: “What that means for you as a founder is we're going to be really aligned”

Q on kind of the importance of high ownership. I really hate this low ownership model that we see so predicated around the Valley today. But my question to you is entrepreneurs often recoil when I say anything above 15%. So how do you help me to Adam? How do you position it where they understand and they actually align and agree with your view on the importance of high ownership?

A Yeah. I mean, part of it is we lead with the story. So the name true comes to the idea of truing a bike wheel. And so if you align a bike wheel or tru it, it thins effortlessly. And so what we say to founders is, listen, we do one thing. We do that one thing really well. We back really great founders early. We invest one to three million where we tend to own 20 to 25%. What this does for us as a firm, it constrains the downside to less than one percent of the cost in the fund. And then on the upside, it means that we can generate fund level returns. What that means for you as a founder is we're going to be really aligned with you to go and take a lot of risk. So let's go maximize risk on product, market size, market timing. Let's go to the most ambitious thing you can do because your time as a founder is super valuable. And so often what we'll say is, listen, if it doesn't work, that's okay. Because of our fund model, we'll go and do something else together. We've backed 28 people twice. We've backed eight people three times. Often in the, the first thing didn't work, what do you want to spend time on now? And if it does work, we have meaningful amounts of capital to continue to invest. And so in some of our biggest companies, things like Ring or Peloton or Zymergen, we started with a small check and over time invested 50, sixty million dollars. That is a differentiated product…

AI assessment note: “what we say to founders is, listen, we do one thing. We do that one thing”

Q I do want to kick off as well, though, with a little bit on you. And so this is a wonderful, but it's quite a weird world of venture. And so how did you make your way into the world of venture and come to be a partner at True today?

A So I joined True full-time June of 2010. At the time, the firm was super small, so nine people total in the middle of Investing their second fund. I met the true team through one of their portfolio companies, B-Stock Solutions, who I had worked for the summer prior, summer of 2009. As I was getting ready to graduate, I reached out to Phil, John, and others on the team for advice on an introduction to potential roles in the Bay Area. I knew I wanted to work at the intersection of technology and finance, but didn't entirely know where to start. And the University of Florida, where I went to school, isn't as well known in this region as other schools. I definitely didn't think venture capital was a role that I wanted, nor did I think role at True was a potential option at the time, but ultimately Phil offered me a role at the firm. At the time, it was mostly undefined, but effectively, we like you. We've never hired someone junior at the firm, but come here, and we'll figure it out together. Pause here to say, I've been super fortunate in my life to be in a position to work with great people who believe in me, and lucky that those roles have worked out over time. Looking back, joining True is actually the best decision. If you're going to join a venture fund, joining one that is new, where they have lots to do with people that you like, and you're aligned with their values, is sup…

AI assessment note: “met the true team through one of their portfolio companies, B-Stock Solutions”

Q I totally agree with you. I do want to ask you, you said there about kind of being so early and obviously ring and then right through to act. And, uh, this is so unfair of me because I'm totally going off schedule on most of these questions, but that must've been an incredible experience. What was the biggest learning for you that you can share? That's not private.

A I think Jamie Siminoff is an amazing founder and I learned a ton from him. I would say the biggest learning is how fast you can grow as much faster than you think. And as you're thinking of building a venture scale startup, your ability to take asymmetric risk within the business in the earliest of stages is really valuable. And so an example I will share is that You know, in the beginning, we, you know, we invested in a company called DoorBot, and Jamie's like, no, we're going to rebrand. It's going to be great. Between the process of signing the term sheet in closing, he found the Ring.com domain. At the time, the company was going to raise three and a half million dollars. Between signing the term sheet in closing, he came to us and said, listen, found the brand. We're going to do Ring, and I have the opportunity to buy Ring.com. At the time, you know, we were only raising three and a half million dollars. The ultimate cost for Ring.com would be a million dollars. But he said, hey, I have an option to buy it for a million dollars, but spending 200 K a day. And his point was, if it works, and Ring.com is ultimately the business we build, it will be worth way more than a million dollars up front. 200 K is worth the experiment to go run it. Really interesting asymmetric risk at the earliest of stages.

AI assessment note: “I would say the biggest learning is how fast you can grow”

Q about, as you said, kind of piling into the winners. Often it's the belief that really for the massive outlier companies that are very obviously performing incredibly well, as you said, Ring, Zimogen, Peloton, the best come in, especially now, preempt rounds and swoop them up early. Your Sequoias, Benchmarks, you name the tier one fundamentals. So do you think you can build ownership over time in your very best?

A No. So I would say our model really is predicated on the idea that we will lead the round, we'll take the most risk early on market size, market timing, product, constrained downside by our initial capital, and really working with people that are truly special, who often come through existing relationships, often the founders in our portfolio. And then over time, as they continue to raise subsequent financing, I would say the most of them will raise money from later stage firms, and we will continue to invest our pro rata throughout. And so our, you know, call it 20 to 25% at the beginning. If we do everything right, we'll own between 17 and 20% at outcome. But I think it's very difficult over time with success to continue to buy ownership.

AI assessment note: “No. So I would say our model really is predicated on the idea”

Q in the grassroots of the company building level when there's 40 or 50 companies in the portfolio? We do, we do kind of 18 to 20 because it's an easier amount to grapple with just in terms of really spending the time and quality time with them. How do you think about really getting involved in whatever that specific function is when there's 40 or 50? Help me out here.

A Part of it is our team is really big. So there's 10 of us who invest for true, which means that, you know, just on a math basis, we will have less portfolio companies per person. The second piece is that the biggest value we will add to a potential investment is kind of access to the other founders in the true network. Often our team will not have the specific answer, but across the portfolio, we have domain experts in everything. One of the things we say in founder camp is whatever you need, the answer is in the room. But I think that has proven to be true over time. On your specific question on hiring, I think more than anything, it's not about necessarily sourcing or bringing lots of top of the funnel candidates, but it's about helping them interview, understand what good looks like, and then ultimately close. And a benefit of working across a large number of companies is you start to understand what good looks like at each stage, and being able to help the founder understand that and make that decision together, I think is super valuable.

AI assessment note: “Part of it is our team is really big. So there's 10 of us”

Q I totally agree with you. I do want to ask you, you said there about kind of being so early and obviously ring and then right through to act. And, uh, this is so unfair of me because I'm totally going off schedule on most of these questions, but that must've been an incredible experience. What was the biggest learning for you that you can share? That's not private.

A I think Jamie Siminoff is an amazing founder and I learned a ton from him. I would say the biggest learning is how fast you can grow as much faster than you think. And as you're thinking of building a venture scale startup, your ability to take asymmetric risk within the business in the earliest of stages is really valuable. And so an example I will share is that You know, in the beginning, we, you know, we invested in a company called DoorBot, and Jamie's like, no, we're going to rebrand. It's going to be great. Between the process of signing the term sheet in closing, he found the Ring.com domain. At the time, the company was going to raise three and a half million dollars. Between signing the term sheet in closing, he came to us and said, listen, found the brand. We're going to do Ring, and I have the opportunity to buy Ring.com. At the time, you know, we were only raising three and a half million dollars. The ultimate cost for Ring.com would be a million dollars. But he said, hey, I have an option to buy it for a million dollars, but spending 200 K a day. And his point was, if it works, and Ring.com is ultimately the business we build, it will be worth way more than a million dollars up front. 200 K is worth the experiment to go run it. Really interesting asymmetric risk at the earliest of stages.

AI assessment note: “I would say the biggest learning is how fast you can grow”

Q I do want to kick off as well, though, with a little bit on you. And so this is a wonderful, but it's quite a weird world of venture. And so how did you make your way into the world of venture and come to be a partner at True today?

A So I joined True full-time June of 2010. At the time, the firm was super small, so nine people total in the middle of Investing their second fund. I met the true team through one of their portfolio companies, B-Stock Solutions, who I had worked for the summer prior, summer of 2009. As I was getting ready to graduate, I reached out to Phil, John, and others on the team for advice on an introduction to potential roles in the Bay Area. I knew I wanted to work at the intersection of technology and finance, but didn't entirely know where to start. And the University of Florida, where I went to school, isn't as well known in this region as other schools. I definitely didn't think venture capital was a role that I wanted, nor did I think role at True was a potential option at the time, but ultimately Phil offered me a role at the firm. At the time, it was mostly undefined, but effectively, we like you. We've never hired someone junior at the firm, but come here, and we'll figure it out together. Pause here to say, I've been super fortunate in my life to be in a position to work with great people who believe in me, and lucky that those roles have worked out over time. Looking back, joining True is actually the best decision. If you're going to join a venture fund, joining one that is new, where they have lots to do with people that you like, and you're aligned with their values, is sup…

AI assessment note: “I met the true team through one of their portfolio companies, B-Stock Solutions”

Q So given the ownership, and I do want to touch on, you've said there about kind of really piling into the winners, as you Peloton rings. I imagine that many in the true portfolio, but with the ownership being where it is, as you said, 20 and above, does that mean the days of kind of co-leads is really over today, do you think?

A Again, for our business, our main product is we will lead a pre-seed or seed round with that investment amount and target that ownership. There are other ways for founders to raise money. You can raise money without a lead. You can raise money with co-leads. We have a meaningful bias towards priced equity rounds with a single lead who have really deep pockets. Somewhat self-serving, but we also think it's the best way to go build very important companies. And so it's not to say there will not be co-leads. And often what's interesting about the market today is if you go back to oh seven, many of the groups we worked with back then, soft tech first round have grown fund size and now compete more directly with us. But there's a new group of firms where tend to lead these rounds, but we'll often work with one or two emerging managers that have smaller funds that the founders want to bring in as well. And so we target an ownership number that we think is good, but also not to the point where it's greedy and we don't want others to be in the cap table.

AI assessment note: “And so it's not to say there will not be co-leads.”

Q Wow. I haven't read bills. Okay. Absolutely. Add it to the list. Well, what was the single biggest challenge of your role with true today?

A So I think VC is a strange job where doing more doesn't often correlate to improve performance. And I argue filling your calendar with lots of meetings doesn't create the space for luck and serendipity to occur. You know, some examples with Mitchell and HashiCorp. Mitchell was the first engineering hire to fund two company. When he left that company, he didn't plan to raise money, but we built relationships with him over time and worked to We're really hard to be his earliest investment partner. With Kim at Prime Roots, we'd spent two years meeting companies in the alternative protein space, thought something interesting could be there, but didn't click until we met her and hurt her vision. You know, with Steve and Splice, we initially met at a conference in Bogota, Colombia, hosted by a mutual friend, and I happened to run into him at New York City for breakfast. These are just like a handful of examples, but I think it's difficult to plan for these types of outcomes, but having the space for serendipity to strike is super important, and the challenge being that you don't know which activity is the right one, and without thinking about it, your calendar fills up. So each year I think about this a little bit differently, but the goal continues to be do a little bit less better and be more present.

AI assessment note: “and the challenge being that you don't know which activity is the right one”

Q in the grassroots of the company building level when there's 40 or 50 companies in the portfolio? We do, we do kind of 18 to 20 because it's an easier amount to grapple with just in terms of really spending the time and quality time with them. How do you think about really getting involved in whatever that specific function is when there's 40 or 50? Help me out here.

A Part of it is our team is really big. So there's 10 of us who invest for true, which means that, you know, just on a math basis, we will have less portfolio companies per person. The second piece is that the biggest value we will add to a potential investment is kind of access to the other founders in the true network. Often our team will not have the specific answer, but across the portfolio, we have domain experts in everything. One of the things we say in founder camp is whatever you need, the answer is in the room. But I think that has proven to be true over time. On your specific question on hiring, I think more than anything, it's not about necessarily sourcing or bringing lots of top of the funnel candidates, but it's about helping them interview, understand what good looks like, and then ultimately close. And a benefit of working across a large number of companies is you start to understand what good looks like at each stage, and being able to help the founder understand that and make that decision together, I think is super valuable.

AI assessment note: “just on a math basis, we will have less portfolio companies per person.”

Q So given the ownership, and I do want to touch on, you've said there about kind of really piling into the winners, as you Peloton rings. I imagine that many in the true portfolio, but with the ownership being where it is, as you said, 20 and above, does that mean the days of kind of co-leads is really over today, do you think?

A Again, for our business, our main product is we will lead a pre-seed or seed round with that investment amount and target that ownership. There are other ways for founders to raise money. You can raise money without a lead. You can raise money with co-leads. We have a meaningful bias towards priced equity rounds with a single lead who have really deep pockets. Somewhat self-serving, but we also think it's the best way to go build very important companies. And so it's not to say there will not be co-leads. And often what's interesting about the market today is if you go back to oh seven, many of the groups we worked with back then, soft tech first round have grown fund size and now compete more directly with us. But there's a new group of firms where tend to lead these rounds, but we'll often work with one or two emerging managers that have smaller funds that the founders want to bring in as well. And so we target an ownership number that we think is good, but also not to the point where it's greedy and we don't want others to be in the cap table.

AI assessment note: “And so it's not to say there will not be co-leads.”

Q going as well as planned, or it's not going well at all, Maybe in a more negative situation. And you're going to, you know, reserve capital away from the company and not do your pro rata. How do you communicate that to the founders? What's the right way with the EQ centrality that I love that you guys have with True? How do you communicate that to me, the founder?

A Early and often. And so I think, you know, for us, part of the benefit of being an early part of the benefit of being the larger shareholder, part of being very clear about expectations of what success looks like is that we have these conversations early and often with founders as they are going through the business. And I think again, the going back to the piece on alignment, I have not yet had an experience where someone was surprised when we said it wasn't working. And often it's a conversation with them where they are aware before we are. And often the founders we have worked with are very relieved when we say like, listen, let's have a talk about this. Like, do you think it's working? Because often they know it's not working and they wanted to go do something else, or often they're already doing something else on the side for fun. And that's where their attention lies. And so at some level, like kind of, you know, the That was a conversation around, hey, do you think this is working? How are you spending your time? You know, would you want to go do that? And often we've helped them shut down company one and roll into company two, where we also then led the kind of seed financing.

AI assessment note: “Early and often.”

Q going as well as planned, or it's not going well at all, Maybe in a more negative situation. And you're going to, you know, reserve capital away from the company and not do your pro rata. How do you communicate that to the founders? What's the right way with the EQ centrality that I love that you guys have with True? How do you communicate that to me, the founder?

A Early and often. And so I think, you know, for us, part of the benefit of being an early part of the benefit of being the larger shareholder, part of being very clear about expectations of what success looks like is that we have these conversations early and often with founders as they are going through the business. And I think again, the going back to the piece on alignment, I have not yet had an experience where someone was surprised when we said it wasn't working. And often it's a conversation with them where they are aware before we are. And often the founders we have worked with are very relieved when we say like, listen, let's have a talk about this. Like, do you think it's working? Because often they know it's not working and they wanted to go do something else, or often they're already doing something else on the side for fun. And that's where their attention lies. And so at some level, like kind of, you know, the That was a conversation around, hey, do you think this is working? How are you spending your time? You know, would you want to go do that? And often we've helped them shut down company one and roll into company two, where we also then led the kind of seed financing.

AI assessment note: “Early and often... we have these conversations early and often with founders”

Q Yeah, no, totally. And, uh, I completely see that in the portfolio. I do want to ask, and sorry, this is off schedule, but I'm intrigued. In terms of boards, what's your attitude to boards with the portfolio? Do you take a board seat on every check? What does that look like?

A So I'll talk philosophically how we think about it, because I think it's probably more interesting. So when we invest at the seed stage, it tends to be 65% is at or near company inception, some are a little bit later, but it tends to be one to three founders. Big idea, but you know, super, super early. At that point, the board is less about kind of structured quarterly reporting and more, you have access to whoever you were working closely, most closely with the true, plus the entire team, our investment team, plus the founder network as often as you need it. And what we have found to be successful there is either you set up a monthly call for an hour, you may or may not keep it, but as you have it on the calendar, you feel good about it, or at some level, it's call me when you learn something, because You know, you may wake up tomorrow and say, this is really interesting. And so being able to have what we call board coffees, which is be available for 15 minutes, either by phone or in person, just to talk about what they've learned. And so the goal is to enable the founders to move really, really quickly. The board seat, because we are such large shareholders, and often the largest shareholder at that stage, we kind of have that relationship already, or at least by choosing to work with us, you would like us in that relationship. Over time, as the company starts to evolve, the …

AI assessment note: “Post seed going into A through B tends to be, we will often take a board seat”

Q have an IR team, you don't have a marketing team, you don't have associates, analysts necessarily, everything baked out. There's not as much structure, and it's kind of like a, hey, Adam, come hang out. Would you advise that for graduates, or would you advise the more structured multi-stage fund of come join as an analyst, and there's very much kind of structure and rigor to the kind of hierarchy?

A I think I was very fortunate. It definitely could not have worked out well, so I would say higher risk, higher Volatility. You know, so like in my initial role when I joined, I had the opportunity to work on all the functions in the firm, from helping design content for Foundercamp, to helping build fundraising decks for LPs, to helping partners model potential financing rounds, all of which provided incredible context for the business of venture capital, which is much broader than picking companies. So over time, that work evolved to sourcing new investments and ultimately to work more independently as a partner on the investment team. But without the context of all the work and to your question on, there's just a lot to do and lots of opportunity. At least for me, I think it was super valuable to learn that because I think it makes me better at the job that I do today.

AI assessment note: “I would say higher risk, higher Volatility.”

Q Wow. I haven't read bills. Okay. Absolutely. Add it to the list. Well, what was the single biggest challenge of your role with true today?

A So I think VC is a strange job where doing more doesn't often correlate to improve performance. And I argue filling your calendar with lots of meetings doesn't create the space for luck and serendipity to occur. You know, some examples with Mitchell and HashiCorp. Mitchell was the first engineering hire to fund two company. When he left that company, he didn't plan to raise money, but we built relationships with him over time and worked to We're really hard to be his earliest investment partner. With Kim at Prime Roots, we'd spent two years meeting companies in the alternative protein space, thought something interesting could be there, but didn't click until we met her and hurt her vision. You know, with Steve and Splice, we initially met at a conference in Bogota, Colombia, hosted by a mutual friend, and I happened to run into him at New York City for breakfast. These are just like a handful of examples, but I think it's difficult to plan for these types of outcomes, but having the space for serendipity to strike is super important, and the challenge being that you don't know which activity is the right one, and without thinking about it, your calendar fills up. So each year I think about this a little bit differently, but the goal continues to be do a little bit less better and be more present.

AI assessment note: “the challenge being that you don't know which activity is the right one”

Q have an IR team, you don't have a marketing team, you don't have associates, analysts necessarily, everything baked out. There's not as much structure, and it's kind of like a, hey, Adam, come hang out. Would you advise that for graduates, or would you advise the more structured multi-stage fund of come join as an analyst, and there's very much kind of structure and rigor to the kind of hierarchy?

A I think I was very fortunate. It definitely could not have worked out well, so I would say higher risk, higher Volatility. You know, so like in my initial role when I joined, I had the opportunity to work on all the functions in the firm, from helping design content for Foundercamp, to helping build fundraising decks for LPs, to helping partners model potential financing rounds, all of which provided incredible context for the business of venture capital, which is much broader than picking companies. So over time, that work evolved to sourcing new investments and ultimately to work more independently as a partner on the investment team. But without the context of all the work and to your question on, there's just a lot to do and lots of opportunity. At least for me, I think it was super valuable to learn that because I think it makes me better at the job that I do today.

AI assessment note: “so I would say higher risk, higher Volatility.”

Q before about, you know, what you wanted to discuss in the show, and you said to me, probably the thing that makes me most happy to hear, not enough people talk about portfolio construction, I'm by this point elated, or the firm business model of VC. So obviously it makes me incredibly happy to hear, but how do you think about portfolio construction today with True? Let's start with that.

A Yeah, so I'd say one of the benefits coming on this podcast after your partners is that you get to fill in a different piece of the firm story. And I think the context of business model is often underemphasized in discussions on venture capital investing. Highest level, you know, venture capital is a type of asset allocation business where we manage funds on behalf of our limited partners. So for true, those are nonprofits, foundations, endowments, groups that need to generate a return on their capital to continue their important work. I don't think there's one correct type of business model in venture. And at some level, the system works because there are many different ways to finance innovation. But I think the best venture funds focus on fund level returns, because that's ultimately what's important to our limited partners. And so, you know, to dive in on True, we manage funds of roughly three hundred million, and really focus on leading the first round of institutional capital, usually pre-seed or seed, with investments of 500 K to three and a half million, targeting 20 to 25% initial ownership. Put specific numbers on it, our median initial investment is roughly two million for 22.2%.

AI assessment note: “we manage funds of roughly three hundred million, and really focus on leading”

Q between you and them in terms of kind of risk kind of upside maximization, so to speak. Some would argue that's not actually aligned from the founder perspective, because, you know, you have a portfolio, so absolutely, it's in mind and your incentive to be like, run as hard as you can, go for big or broke. For them, it's their only company. Maybe it's not aligned for them, no?

A I think the question is, I think we also self-select into a type of founder where I think before this call, you talk to Steve and Jamie, you know, at some level, these are incredibly talented people who do many things. Starting a company is not always the most rational decision in a way that it's from relative basis, probably not the best economic, best social, best personal health decision, but they tend to see something that others don't. And so at some level, Amy Errett, when she started Madison Reed came to us and said, Hey, I have this crazy idea around building a better for you hair care product company, but I need two million dollars to get it off the ground. I'm happy to trade ownership for that because I want you all in the business, because I think if it works, I will need meaningful amounts of capital. I want a trusted partner at the table, but like it is very likely to not work. And so I think that kind of awareness goes into it. That's really interesting.

AI assessment note: “we also self-select into a type of founder”

Q an interesting one in terms of you can't continuously be on boards with the portfolio expanding as it does with every fund. It's, it's a challenge that I often think about in this, how do you think about the right time to do it? And then how do you communicate that? Cause it's a difficult thing to roll off the board and kind of lead the team, so to speak.

A So part of the reason we raised our select funds in 2013 is, is a reality that our pitch to founders is listen, We're going to be here day one. We're going to be your aligned partner. We're going to continue to invest throughout each subsequent financing round. And so part of the conversation we have with them is what's best for the company at this stage more than anything else. And so I was on the board of ring through the acquisition by Amazon. My partner, John is still on the board of Peloton at some level, because we were there early, we've been fortunate that founders would like to keep us there. And I think if our pitches were going to be there through the entire life cycle of business, I think that's an important thing to keep.

AI assessment note: “if our pitches were going to be there through the entire life cycle”

Q Can I dive in? Sorry, this is just too interesting. So many things to unpack. First, I'm honestly not seeing that it's that possible to get the 22 and a half percent, even 20% these days, in the rounds that are coming thick and fast Are you not seeing kind of ownership compression, so to speak, given the environment we're in today?

A I'll take two steps back, and I'll say part of the reason I think it's important to have this discussion on business model for us is that we can go in and understand what is good, what is bad for us, and so with founders, these numbers I'm sharing here, like in our first meeting with a new founder, we will share them. When we talk to our existing portfolio, we share these numbers, and we say, hey, if you're someone great that we should meet, this is the type of deal we do, and so Part of it is there's a self-selection bias into this is the type of thing we do at True. And I can talk to you kind of why we think it's a better product for founders. But at some level, we were very upfront with the type of investment we make and not make by related to that. And part of that is then people can say, oh, this is interesting. This is not interesting. Highest level. We don't have to do every great investment in the world. But if we only do great investments over time, we will consistently outperform and generate, I would say, predictable returns. Ideally, create predictable returns for our LPs. Which I think is important.

AI assessment note: “Part of it is there's a self-selection bias into this is the type of thing we do”

Q an interesting one in terms of you can't continuously be on boards with the portfolio expanding as it does with every fund. It's, it's a challenge that I often think about in this, how do you think about the right time to do it? And then how do you communicate that? Cause it's a difficult thing to roll off the board and kind of lead the team, so to speak.

A So part of the reason we raised our select funds in 2013 is, is a reality that our pitch to founders is listen, We're going to be here day one. We're going to be your aligned partner. We're going to continue to invest throughout each subsequent financing round. And so part of the conversation we have with them is what's best for the company at this stage more than anything else. And so I was on the board of ring through the acquisition by Amazon. My partner, John is still on the board of Peloton at some level, because we were there early, we've been fortunate that founders would like to keep us there. And I think if our pitches were going to be there through the entire life cycle of business, I think that's an important thing to keep.

AI assessment note: “our pitches were going to be there through the entire life cycle of business”

Q with Rich last night. He is an all-time hero and I'm desperately sad about him leaving the UK to go to the Valley. We're losing a great, but I do want to touch on the decision-making process because we mentioned that kind of initial investment. We mentioned reserve investment. They're different decisions though. So what does the initial decision-making process look like? And then how does it differ for reinvestments?

A Yeah, I'm going to take one step back and go a little bit deeper on the model, because I think it will be important here. And so, like, in each fund, we'll make between 45 and 50 initial investments in reserve really heavily. And the goal is to be able to continue to invest and support the best performing companies through an entire life cycle. And our current data would say in each fund, we've shown an ability to partner with one or two founders where our investment in the company over time will end up returning the entire fund. It, Duo Security, HashiCorp, Peloton. And six to eight investments will generate kind of a fund level return, which we talk about as 25% plus of the cost of the fund. Magic here is how we think about decisions internally, and our goal isn't to be certain about individual investment success, but rather focus on the inputs to each investment. And so, great founder, taking tons of product, market size, market timing risk, raising our type of money at our type of price. What that does is, as a group, you know, there's 10 of us who each week kind of know what we're looking for, and it makes the decisions really easy. And so, the second part of the model I don't think John and Phil get enough credit for is the culture they've created the firm, which gives us the security and confidence to embrace the This type of early risk and lean in as good partners to th…

AI assessment note: “at True, decisions are driven by an individual protagonist on the investment team”

Q Can I ask, what do you actually think about the rise of preemptive rounds? And today, they're almost the norm in many cases. How do you feel about that?

A I would say in most of our successful companies over time, they were not perceived as successful in the beginning. Things like Ring or Splice are companies that Today, I think people are like, that's, those are really interesting businesses, but there were kind of weird markets. They're doing kind of weird things. And so at some level in the earliest stages, them having us as a group that had meaningful amounts of capital to deploy into them, we're able to continue to support them until they were able to get to a point where people are like, oh yes, they should do it. Companies all need meaningful amounts of downstream capital to continue to work. You know, very few companies out of the gate will be profitable. And I think it creates kind of this have, have not situation where we're excited to see Trey.io and others continue to grow and have the capital to grow, but also I think there's a meaningful opportunity for other companies who may not be as to have or have not to be really interesting returners for us.

AI assessment note: “I think it creates kind of this have, have not situation”

Q with Rich last night. He is an all-time hero and I'm desperately sad about him leaving the UK to go to the Valley. We're losing a great, but I do want to touch on the decision-making process because we mentioned that kind of initial investment. We mentioned reserve investment. They're different decisions though. So what does the initial decision-making process look like? And then how does it differ for reinvestments?

A Yeah, I'm going to take one step back and go a little bit deeper on the model, because I think it will be important here. And so, like, in each fund, we'll make between 45 and 50 initial investments in reserve really heavily. And the goal is to be able to continue to invest and support the best performing companies through an entire life cycle. And our current data would say in each fund, we've shown an ability to partner with one or two founders where our investment in the company over time will end up returning the entire fund. It, Duo Security, HashiCorp, Peloton. And six to eight investments will generate kind of a fund level return, which we talk about as 25% plus of the cost of the fund. Magic here is how we think about decisions internally, and our goal isn't to be certain about individual investment success, but rather focus on the inputs to each investment. And so, great founder, taking tons of product, market size, market timing risk, raising our type of money at our type of price. What that does is, as a group, you know, there's 10 of us who each week kind of know what we're looking for, and it makes the decisions really easy. And so, the second part of the model I don't think John and Phil get enough credit for is the culture they've created the firm, which gives us the security and confidence to embrace the This type of early risk and lean in as good partners to th…

AI assessment note: “I'm going to take one step back and go a little bit deeper on the model”

Q Can I dive in? Sorry, this is just too interesting. So many things to unpack. First, I'm honestly not seeing that it's that possible to get the 22 and a half percent, even 20% these days, in the rounds that are coming thick and fast Are you not seeing kind of ownership compression, so to speak, given the environment we're in today?

A I'll take two steps back, and I'll say part of the reason I think it's important to have this discussion on business model for us is that we can go in and understand what is good, what is bad for us, and so with founders, these numbers I'm sharing here, like in our first meeting with a new founder, we will share them. When we talk to our existing portfolio, we share these numbers, and we say, hey, if you're someone great that we should meet, this is the type of deal we do, and so Part of it is there's a self-selection bias into this is the type of thing we do at True. And I can talk to you kind of why we think it's a better product for founders. But at some level, we were very upfront with the type of investment we make and not make by related to that. And part of that is then people can say, oh, this is interesting. This is not interesting. Highest level. We don't have to do every great investment in the world. But if we only do great investments over time, we will consistently outperform and generate, I would say, predictable returns. Ideally, create predictable returns for our LPs. Which I think is important.

AI assessment note: “I'll take two steps back, and I'll say part of the reason”

Q Can I ask, what do you actually think about the rise of preemptive rounds? And today, they're almost the norm in many cases. How do you feel about that?

A I would say in most of our successful companies over time, they were not perceived as successful in the beginning. Things like Ring or Splice are companies that Today, I think people are like, that's, those are really interesting businesses, but there were kind of weird markets. They're doing kind of weird things. And so at some level in the earliest stages, them having us as a group that had meaningful amounts of capital to deploy into them, we're able to continue to support them until they were able to get to a point where people are like, oh yes, they should do it. Companies all need meaningful amounts of downstream capital to continue to work. You know, very few companies out of the gate will be profitable. And I think it creates kind of this have, have not situation where we're excited to see Trey.io and others continue to grow and have the capital to grow, but also I think there's a meaningful opportunity for other companies who may not be as to have or have not to be really interesting returners for us.

AI assessment note: “I would say in most of our successful companies over time, they were not perceived”