The Exchanges

Q think we've swung, you're like, we have this schedule, Harry, why do you go off it so soon? Do you think we've swung to a time of too much founder MPS? We often actually see that investors Don't perform their duties in a rigorous way like they maybe would have done, and they're too focused on having a great NPS. Do you find we've swung too far the other way?

A I don't think it's NPS. I think it's the speed. There's something about the speed that is not, that is not fair. It's literally speed dating. It's speed dating where the outcome is actually a marriage proposal, because that's what founders are doing when they're choosing their VC and partner. They're essentially adding another Founder of sorts. Now, of course, they don't get common shares, they don't get that, that rights, but there's a higher likelihood that that partner from that VC will be on your board than your co-founder will, just statistically. And yet, you want to make a decision as an entrepreneur within two meetings, within seven days? That, to me, is horrible. And as, obviously, from an investor standpoint, having been on the board of companies for 10 plus years, I realize that I also don't like that. My worst decisions have been the ones that I made Uh, in the, in the least amount of time, due to pressure.

AI assessment note: “I don't think it's NPS. I think it's the speed.”

Q What happens more often, a mismatch between the talent and the entrepreneurial style, or a mismatch between the talent and the stage of company that they'd be entering into?

A The latter because, uh, hopefully I've done my work and I've figured out the, the personal chemistry and the founders pretty good at that themselves, which I, again, I look for when I fund people. Uh, but sometimes it's a mismatch in the stage. There's a big difference between being the first like VP of sales, let's say. Um, it's often the first executive hire because they're not one of the founders. Uh, being the first VP of sales when there are no customers or when the only few customers they have are really friends of the founders. And coming in when there are 20 customers, or a hundred. It's a very different type of workload. Um, and it's not just sales. It requires a lot of thinking. It requires a lot of patience. Um, and so, that's often where you get it wrong. The person just was not ready, uh, to handle that stage. Or they, you realize that, you know what, they can't do anything on their own anymore. They really need everybody else to do the work for them.

AI assessment note: “The latter because, uh, hopefully I've done my work”

Q So do you do those deals? I mean, I'm looking at a deal now, and like, honestly, it's a very competitive deal. I'm meeting for the second time tonight. I'll probably have a third meeting on Wednesday, Thursday, and then I've got to make a decision. Do you do those deals?

A I, I don't, but I think when it's a smaller check, when you're amongst other VCs that may, that, that could take your place if you bow out, um, I think there's a place There's a place for that. I'm talking about the types of, of deals where I'm the, I'm the only VC in the round. I'm leading it. Uh, if I move forward, it's me. I assume all the burden going forward. I can't withdraw at any point, or if I do withdraw, it's the end of the company. Those are, those are, uh, uh, you know, real decisions, fateful decisions, and, uh, to force that to happen in such a short amount of time is crazy. I mean, I remember a time when it was three months To diligence the company and get to know one another. And I actually enjoyed that process. But when it's so concentrated in time, you're going to make a lot of mistakes.

AI assessment note: “I, I don't, but I think when it's a smaller check”

Q flow. We mentioned kind of head in the clouds, and you mentioned valuation there. I do have to ask on price. I interviewed Peter Fenton years ago, but he said something that always stuck with me, which is that price is a mental trap, um, and it's a litmus test for conviction. How do you feel about price sensitivity, willingness to pay up, and when you will and won't stretch?

A I'm typically the first institutional investor, sometimes the second. Uh, rarely have I turned down deals in the very early stages due to price alone. Uh, that price is often a function of raising too much money, meaning they didn't ask for a forty million dollar pre-money valuation. They asked for twenty-five million dollars in their first round of financing. That was the problem. Now, I realized that as a result, it required a high valuation, but the issue for me in that situation was much more about what do they think they're going to do with so much money? They don't know what they're doing yet, and that was a mismatch for me. Uh, so rarely is valuation alone the issue that, that caused me to, to back off. Um, again, being early stage, I'm not exposed to some of the growth stage valuations where really you get into exit territory, And that is, that is very challenging. I'm, I'm very conscious of that. I try and make sure my, my companies I back never raise at valuations that they want to sell the company at, and I warn them of that. Um, and again, I have the scars to explain what, what would it, what exactly that looks like when your last round valuation is essentially ahead of the valuation you want to sell now, and how acquirers interpret that, How do you work with different sets of preferred shareholders? One that's in the money, one that's completely out of the money. I…

AI assessment note: “rarely have I turned down deals in the very early stages due to price alone.”

Q Would you not be a better investor if you didn't have that risk aversion? Given your ability to pick, clearly, with 23.

A Every decision you make just affects your next decision, so it's really hard to, to do as kind of counterfactuals. I may have been, gotten ahead of my, my skis, so to speak, in some of these investments, where all of a sudden I, I doubled down, let's say, on Wix, and, and then there was a, there was a challenge, um, and there were challenges, and that may have affected my, my, Confidence to then invest the next company, which in this case might have been Fiverr. And I might have said, you know what? I've gone too far away because I'm going to hold back on Fiverr. So you have to think about every decision you make and how it might, how, whether it's successful or not, how it might impact your next, next decision.

AI assessment note: “it's really hard to, to do as kind of counterfactuals.”

Q What do you think are the biggest misalignments between founders and investors? Like you said there, you know, when you have a hundred million, you bring a very different mindset to risk. What do you think are the biggest misalignments between founders and investors?

A Well, early stage, there's not that much because Generally at a certain point, you know, you've, you've acquired enough, and, uh, hopefully the company's accreted in value, and you're kind of both in the money. I think for later stage investors, there's, there's a misalignment, especially when founders start to sell secondary, and those growth stage investors are, are kind of stuck. Um, uh, and I think it's just less appreciation for that growth stage, where founders tell themselves, listen, I, I worked to get to this point. I spent seven years, you know, toiling, and, Getting a low salary. I deserve to sell. But the growth investors don't care what they did in the past. All they care is about the future that didn't happen as they hoped it would. And so there's, there's, there's true misalignment. I just don't think the same is true of, of early stage.

AI assessment note: “I think for later stage investors, there's, there's a misalignment, especially when founders start to sell secondary”

Q Okay, so if we have that as, like, a foundational, we like outsiders who are innovating in markets with some elements of naivety, then there's the question of, like, category creation versus working in an existing market. How do you think about that trade-off? Often we see the biggest wins in category creation, but it's also fucking hard. It's expensive. Which do you prefer in that lens?

A I think if you're, from the get-go, if you're talking about creating a category, you're making a mistake. I think a lot of times when we talk about category creation, it's in retrospect that we see that a category was created. It wasn't started that way. It became an independent category, and it's typically not because that one company created it, but because there were multiple companies with very similar mindset, and sometimes that also includes some of the incumbents who are also moving in that same direction, and luckily you were ahead of the curve. But if I was to start and make an investment, That is trying to create a category out of nothing. It's challenging. I think where category creation makes sense is when they've identified a new type of customer or a new type of buyer. Perhaps it's a new vertical industry. You know, if you decided all of a sudden that e-commerce was a new vertical segment that I wanted to sell into, meaning e-commerce shops, that would be an insight. It's not so much a category creation. The category is being created. You're now creating a product for that category. Or if you were to decide that I'm going to sell into the developers within organizations from the bottoms up, they exist. You're not creating that category, but you're essentially identifying a need in a new buyer with a product. That makes sense. Again, in retrospect, you'll say they …

AI assessment note: “if you're, from the get-go, if you're talking about creating a category, you're making a mistake.”

Q price, which we can get to, but where I've most commonly gone wrong, ah, I just, it's great, I love the founder, I just don't think it's a big enough market. It's so common for our industry. How do you think about market size? Do you need the massive market day one, or do you quite like the niche vertical approach which can expand? How do you think about that?

A Well, there's some markets that any way you cut it, you look at it, you just say, I just, this is never going to be a big market. Uh, and that's, that's, that's a fair assessment. Uh, I, I think I've more often been right than wrong on those. I think, but there's a problem that investors make when, or even entrepreneurs as well, when they, they think it's a large market, but what they're really focused on is a small subset of that market, and that doesn't make it, uh, really any easier. Um, I personally like to invest in, in smaller markets, uh, for two reasons. The first is that there's unlikely to be competition focused on those same, on that same market. Um, and the second is that if you price it right, uh, the deal that is, and you've come in at the right valuation, you can still achieve an exit in that smaller market, what you would might call a niche. Now, a niche that has no potential of expanding, that, that is problematic. I like, uh, niche areas where there are adjacent sectors where you can understand they can grow this way, they can grow that way, they can go up market, uh, they can go into a second related niche. I think that's a, that's a fine way to grow into a bigger market.

AI assessment note: “I personally like to invest in, in smaller markets, uh, for two reasons.”

Q through this process, and we now want to do the deal, okay? Um, we get to the deal-making stage, and Keith Raboi actually said on the show the other day, it's such a competitive world. You have to know why the best founders choose you. If you can't answer that question, you shouldn't be in venture. How would you answer that question? Why did the best founders choose Adam Fisher?

A Well, in my local market, they choose me based on reputation. I, I hope it's, ah, personal reputation, not just the brand of Bessemer, although the brand of Bessemer definitely helps. Ah, I've been doing this for a long time, ah, one of the few that are still very active and, and very active across many sectors. So I've done everything from, as I mentioned, semiconductors to consumer software to SaaS and infrastructure. I hope that my name and, and precedes me, but in a way that relates to the ups and downs. I mean, I, Make it very clear to the entrepreneur that I'm choosing them more than I'm choosing the market or the particular product, and that I'm choosing them because I'm also not just choosing somebody that I hope will succeed or, or, or, or want to succeed, but somebody that I look forward to working with even if ultimately we fail. And there are companies that I look back at and I think, wow, we didn't really do that well, but that was fun. I liked working with him or her, and you know what? I'd do it again. And so I think when you go back to what I said before about looking, thinking about an investor as a partner, as a quasi founder of sorts, somebody's going to be with you really through ups and downs is really important. You know, I see my role as a VC as, um, picking up an entrepreneur when they're like on the ground because of some kind of a disappointment or a c…

AI assessment note: “in my local market, they choose me based on reputation.”

Q course you wouldn't have made those mistakes, but you waste months and months doing them. I find second time founders do not make those very foundational mistakes. Do you agree with me in terms of my kind of fear of the first time founder, because of those very obvious mistakes that they make commonly, And lean towards second time founders. And how do you think about that and advise me?

A Like I said before, there are two types of second time entrepreneurs. There are those that don't recognize the luck that was involved. They think that building something big is just more ambition. And I steer clear of those. And then there's those that are much more rational that, and those I will back again. But do I prefer them over first time? Not, not really. I actually love first-time entrepreneurs. The, the key for looking at first-time entrepreneurs is, is, is identifying somebody that you have chemistry with, uh, that you have back and forth from, that they can learn from you, you're learning from then. It's also people who, uh, progress very fast on the learning curve. Meaning from meeting to meeting, you can witness what they've discovered, what they've learned, other people that they've discussed it with. That is generally, uh, an indication of what The next several years are going to look like. Uh, and the fact that I haven't created a company before doesn't mean they can't learn from other people's experiences and from your own experience. And so for me, that's fantastic. Uh, I, I, I often look at my portfolio and I, again, I have a lot of second time entrepreneurs, but I often say, you know, I need, I need more first timers. I shouldn't have such a bias, uh, to second timers.

AI assessment note: “do I prefer them over first time? Not, not really. I actually love first-time entrepreneurs.”

Q totally agree with you. Have you ever got in trouble, though, for having that contrarian approach in terms of follow-on funding? You see the world in a way that venture investors maybe don't, and you do a non-competitive deal that's outside. That probably is not going to have the same magneticism for follow-on investors, and you might have to carry the bag for a lot longer. Have you had that?

A Of course, and I think about that when I invest. As much as I am willing to be contrarian, I'm not willing to invest in something that others are not going to fund. So I need to find, it's a fine line, but I need to find something That perhaps is not mainstream, perhaps is not, uh, and yet a headline in TechCrunch, but is also not going to be dismissed by other investors as not interested. It may be because they're entrepreneur, it may be because some of the trends that this company's riding on, but I'm not going to go completely contrarian and do something that, that everybody says that they no longer do. Um, Making sure that next round of funding is, uh, is accessible and doable is a critical part of my strategy. Uh, it's so easy to fail by simply not being able to raise that next round of fund funding.

AI assessment note: “Of course, and I think about that when I invest.”

Q like, when I feel icky. You know when someone makes you just feel, like, uncomfortable, and it just feels off? I never write that check. Um, can I ask, you know, you mentioned Wix there, obviously being an incredible success, and the lesson from it. In terms of a mistake, and one that didn't go right, what's one that comes to mind there, and how did that change your thinking?

A The ones that haven't gone right, um, I can think about four companies that I've, I've written off. Um, they're not enormous investments. I've, I've, I've yet to have an investment where I kind of doubled down and kept raising the stakes and then, and then, and then failed. I'm not saying I won't, but, uh, I'm nervous about those big losses. Um, the four losses I have are all about between 10 and fifteen million dollars a piece. Uh, The one I can think about, ah, most, I think about most is, ah, it was a chip kind of company, where they're actually doing something in the area of memory, and it was an incredible, ah, technology and team, had literally 90 patents to their name, and they were pursuing a, what we'd call an IP strategy. They actually wanted to sell the IP, um, both because it's a more efficient model, but I thought it made a lot of sense for the types of customers they were selling into. I just, I was, I convinced myself that this is the right strategy. Uh, whereas their competitor was actually developing a chip, and I just said to myself, wow, but the customers that they're selling into are themselves large chip companies. They don't wanna, they're not gonna buy another chip company. They want, they want the IP so that they can incorporate in it. Um, ultimately I was wrong, um, and I, I mentioned this because I was convinced that that was the right strategy, meanin…

AI assessment note: “at the end of the day, that was my thesis, and the underlying thesis was, was completely wrong”

Q What happens more often, a mismatch between the talent and the entrepreneurial style, or a mismatch between the talent and the stage of company that they'd be entering into?

A The latter because, uh, hopefully I've done my work and I've figured out the, the personal chemistry and the founders pretty good at that themselves, which I, again, I look for when I fund people. Uh, but sometimes it's a mismatch in the stage. There's a big difference between being the first like VP of sales, let's say. Um, it's often the first executive hire because they're not one of the founders. Uh, being the first VP of sales when there are no customers or when the only few customers they have are really friends of the founders. And coming in when there are 20 customers, or a hundred. It's a very different type of workload. Um, and it's not just sales. It requires a lot of thinking. It requires a lot of patience. Um, and so, that's often where you get it wrong. The person just was not ready, uh, to handle that stage. Or they, you realize that, you know what, they can't do anything on their own anymore. They really need everybody else to do the work for them.

AI assessment note: “The latter because, uh, hopefully I've done my work”

Q comes to hiring, I want them to meet Daniel, as I want them to meet Adam, and I want you as part of that interview process for candidates. I, I would love to understand from you how you do this, because I don't have a process, I don't have, I'd like to learn from you. How do you structure the process of interviewing a candidate? What does that look like?

A I don't structure it much. I think, ah, I, I don't want to duplicate the interview that the CEO had, um, which is about their background and, and they know what they're doing and what they did. I assume that he or she has already done that. I'm trying to find things that I may not have asked. So I'm going to ask different types of questions. I'm going to assess their personality, their temperament, um, uh, with the goal to see if they're a right match for this entrepreneur, who hopefully at this point I also know their personality and temperament and style, and for the company. And for the company, that's often really just the stage of the company. So often it's just a mismatch. And so similar to what I said before, I'm not so much looking for, is this the best candidate? So as much as I'm looking, is this going to be a horrible hire that you're going to regret? Because as you know, if you've hired somebody and they end up being a disaster, you've lost an incredible amount of time. And there's also damage. And then your next hire, you're even more hesitant about making that hire. So I'm much more interested in not making a mistake with a hire than making sure that this is the Best possible candidate we could hire. And a lot of that rests on the personality. Do they understand what it's like working for an entrepreneur? Do they understand what the stage is like and what they act…

AI assessment note: “I don't structure it much. I think, ah, I, I don't want to duplicate”

Q What happens for those generation of companies that are in that position now? We've seen many with multi-billion dollar valuations on ten million ARR, not excessively growth by high growth rates. What happens to them?

A I think it's a combination. It really depends on the strength of different shareholder classes. Uh, there are some time if they need a lot more money, it's a recap opportunity, uh, or it's a sale at a very depressed price in which the latter investors just want to get their money back. Uh, it's not pretty either way. It's, it's, I don't, I don't think that, uh, entrepreneurs and their investors understand how bad that situation is, and it's, it's not so much that it's a potential down round. Down rounds are not problematic. Much more problematic, again, are valuations that, uh, that are essentially in exit territory, or far in excess of, of exit territory. It's really hard to recover from that.

AI assessment note: “it's a recap opportunity, uh, or it's a sale at a very depressed price”

Q flow. We mentioned kind of head in the clouds, and you mentioned valuation there. I do have to ask on price. I interviewed Peter Fenton years ago, but he said something that always stuck with me, which is that price is a mental trap, um, and it's a litmus test for conviction. How do you feel about price sensitivity, willingness to pay up, and when you will and won't stretch?

A I'm typically the first institutional investor, sometimes the second. Uh, rarely have I turned down deals in the very early stages due to price alone. Uh, that price is often a function of raising too much money, meaning they didn't ask for a forty million dollar pre-money valuation. They asked for twenty-five million dollars in their first round of financing. That was the problem. Now, I realized that as a result, it required a high valuation, but the issue for me in that situation was much more about what do they think they're going to do with so much money? They don't know what they're doing yet, and that was a mismatch for me. Uh, so rarely is valuation alone the issue that, that caused me to, to back off. Um, again, being early stage, I'm not exposed to some of the growth stage valuations where really you get into exit territory, And that is, that is very challenging. I'm, I'm very conscious of that. I try and make sure my, my companies I back never raise at valuations that they want to sell the company at, and I warn them of that. Um, and again, I have the scars to explain what, what would it, what exactly that looks like when your last round valuation is essentially ahead of the valuation you want to sell now, and how acquirers interpret that, How do you work with different sets of preferred shareholders? One that's in the money, one that's completely out of the money. I…

AI assessment note: “rarely have I turned down deals in the very early stages due to price alone”

Q The thing that I did find was the commonality of the name Ido, or Ido. When I was speaking to him, I'm like, Ido? I have 50% of Ido. I'm like, Ido? Ah, it's me. Ok, good. Um, tell me, what's the best investment advice you've received?

A I would say it's a, there are two pieces of advice which are contrary. The first is that when things are just going awfully right in the beginning, like, just get out. Like, stop right there. In other words, within like, if within, if within 12 months or 18 months, just, I mean, all your assumptions are wrong, the entrepreneur is awful to work with, the market doesn't look right, just, just stop right there. Don't, don't try and fix it. Um, but the second piece of advice that I received was that oftentimes, 90% of the value that Is created in the company happens in the last 12 or 18 months of the company's life, and so that requires both patience, but also recognition that sometimes that's the way it works out, and there are companies that that's the way it's gonna manifest itself, and so it's that combination of being able to cut, but also being patient and knowing when to apply what.

AI assessment note: “there are two pieces of advice which are contrary. The first is”

Q But do you think like there is even liquidity windows open in any ways for these one axis back?

A I think there, I think there will be. I think it's just a matter of price, um, and matching it. A lot of these companies grew very quickly, burned a lot of money, but without burning a lot, they can't grow at all. And, uh, they have to right size and all of a sudden that company that was doing, it was growing a hundred percent and is at fifty million is now still at fifty million and, and not growing at all. Um, and still burning money, and how much is that worth? It's, it's worth a very low multiple of that, and I do think there are acquirers for these companies, um, but it's, it's, it's hard, it's hard to get there, you know. It's, like, you always want the previous deal. This is the stage where you always want the previous deal. You want what they off, what you could have had before, and, and you have to preempt, you have to preempt that, meaning you have to realize that it only gets worse from here, and so you, you actually have to Get ahead of it and accept what is ostensibly a low offer, because if you wait, you're going to want that offer, but it won't be around anymore.

AI assessment note: “I think there will be. I think it's just a matter of price”

Q price, which we can get to, but where I've most commonly gone wrong, ah, I just, it's great, I love the founder, I just don't think it's a big enough market. It's so common for our industry. How do you think about market size? Do you need the massive market day one, or do you quite like the niche vertical approach which can expand? How do you think about that?

A Well, there's some markets that any way you cut it, you look at it, you just say, I just, this is never going to be a big market. Uh, and that's, that's, that's a fair assessment. Uh, I, I think I've more often been right than wrong on those. I think, but there's a problem that investors make when, or even entrepreneurs as well, when they, they think it's a large market, but what they're really focused on is a small subset of that market, and that doesn't make it, uh, really any easier. Um, I personally like to invest in, in smaller markets, uh, for two reasons. The first is that there's unlikely to be competition focused on those same, on that same market. Um, and the second is that if you price it right, uh, the deal that is, and you've come in at the right valuation, you can still achieve an exit in that smaller market, what you would might call a niche. Now, a niche that has no potential of expanding, that, that is problematic. I like, uh, niche areas where there are adjacent sectors where you can understand they can grow this way, they can grow that way, they can go up market, uh, they can go into a second related niche. I think that's a, that's a fine way to grow into a bigger market.

AI assessment note: “I personally like to invest in, in smaller markets, uh, for two reasons.”

Q The thing that I did find was the commonality of the name Ido, or Ido. When I was speaking to him, I'm like, Ido? I have 50% of Ido. I'm like, Ido? Ah, it's me. Ok, good. Um, tell me, what's the best investment advice you've received?

A I would say it's a, there are two pieces of advice which are contrary. The first is that when things are just going awfully right in the beginning, like, just get out. Like, stop right there. In other words, within like, if within, if within 12 months or 18 months, just, I mean, all your assumptions are wrong, the entrepreneur is awful to work with, the market doesn't look right, just, just stop right there. Don't, don't try and fix it. Um, but the second piece of advice that I received was that oftentimes, 90% of the value that Is created in the company happens in the last 12 or 18 months of the company's life, and so that requires both patience, but also recognition that sometimes that's the way it works out, and there are companies that that's the way it's gonna manifest itself, and so it's that combination of being able to cut, but also being patient and knowing when to apply what.

AI assessment note: “there are two pieces of advice which are contrary. The first is”

Q course you wouldn't have made those mistakes, but you waste months and months doing them. I find second time founders do not make those very foundational mistakes. Do you agree with me in terms of my kind of fear of the first time founder, because of those very obvious mistakes that they make commonly, And lean towards second time founders. And how do you think about that and advise me?

A Like I said before, there are two types of second time entrepreneurs. There are those that don't recognize the luck that was involved. They think that building something big is just more ambition. And I steer clear of those. And then there's those that are much more rational that, and those I will back again. But do I prefer them over first time? Not, not really. I actually love first-time entrepreneurs. The, the key for looking at first-time entrepreneurs is, is, is identifying somebody that you have chemistry with, uh, that you have back and forth from, that they can learn from you, you're learning from then. It's also people who, uh, progress very fast on the learning curve. Meaning from meeting to meeting, you can witness what they've discovered, what they've learned, other people that they've discussed it with. That is generally, uh, an indication of what The next several years are going to look like. Uh, and the fact that I haven't created a company before doesn't mean they can't learn from other people's experiences and from your own experience. And so for me, that's fantastic. Uh, I, I, I often look at my portfolio and I, again, I have a lot of second time entrepreneurs, but I often say, you know, I need, I need more first timers. I shouldn't have such a bias, uh, to second timers.

AI assessment note: “But do I prefer them over first time? Not, not really. I actually love first-time entrepreneurs.”

Q Okay, so if we have that as, like, a foundational, we like outsiders who are innovating in markets with some elements of naivety, then there's the question of, like, category creation versus working in an existing market. How do you think about that trade-off? Often we see the biggest wins in category creation, but it's also fucking hard. It's expensive. Which do you prefer in that lens?

A I think if you're, from the get-go, if you're talking about creating a category, you're making a mistake. I think a lot of times when we talk about category creation, it's in retrospect that we see that a category was created. It wasn't started that way. It became an independent category, and it's typically not because that one company created it, but because there were multiple companies with very similar mindset, and sometimes that also includes some of the incumbents who are also moving in that same direction, and luckily you were ahead of the curve. But if I was to start and make an investment, That is trying to create a category out of nothing. It's challenging. I think where category creation makes sense is when they've identified a new type of customer or a new type of buyer. Perhaps it's a new vertical industry. You know, if you decided all of a sudden that e-commerce was a new vertical segment that I wanted to sell into, meaning e-commerce shops, that would be an insight. It's not so much a category creation. The category is being created. You're now creating a product for that category. Or if you were to decide that I'm going to sell into the developers within organizations from the bottoms up, they exist. You're not creating that category, but you're essentially identifying a need in a new buyer with a product. That makes sense. Again, in retrospect, you'll say they …

AI assessment note: “if you're talking about creating a category, you're making a mistake.”

Q totally agree with you. Have you ever got in trouble, though, for having that contrarian approach in terms of follow-on funding? You see the world in a way that venture investors maybe don't, and you do a non-competitive deal that's outside. That probably is not going to have the same magneticism for follow-on investors, and you might have to carry the bag for a lot longer. Have you had that?

A Of course, and I think about that when I invest. As much as I am willing to be contrarian, I'm not willing to invest in something that others are not going to fund. So I need to find, it's a fine line, but I need to find something That perhaps is not mainstream, perhaps is not, uh, and yet a headline in TechCrunch, but is also not going to be dismissed by other investors as not interested. It may be because they're entrepreneur, it may be because some of the trends that this company's riding on, but I'm not going to go completely contrarian and do something that, that everybody says that they no longer do. Um, Making sure that next round of funding is, uh, is accessible and doable is a critical part of my strategy. Uh, it's so easy to fail by simply not being able to raise that next round of fund funding.

AI assessment note: “Of course, and I think about that when I invest.”

Q you said there about efficient, um, before we get to a second point, um, you're like, God, I really drill down, but you said about efficient. For founders that listen, is there been a fundamental mindset shift in you and how other investors think in terms of when analyzing a company, I want to see efficiency, not just growth, or actually does growth still rule all at the early stage?

A You know, it's a combination. Um, it's rarely growth at all costs in my book that just doesn't last, and it's very painful, um, when it's, when it stops. Everything about your model to your culture to where you source funding to your evaluation becomes a serious problem for the company. Uh, having said that, trying to focus on KPIs when a company has half a million dollars of ARR also doesn't make much sense. Um, those numbers are, if, if it's, if they're fantastic numbers, I say it's anecdotal. And if they're horrible numbers, I say, well, we need a bit more scale to get a set, make sense of it. Uh, the important things that the company and the CEO in particular is thinking about efficiency, that it's an important, uh, attribute for them, that, that, that, that, that they care about it, that they're not just trying to satisfy me as an investor, that they also view it as a key to their own success.

AI assessment note: “You know, it's a combination. Um, it's rarely growth at all costs”

Q like, when I feel icky. You know when someone makes you just feel, like, uncomfortable, and it just feels off? I never write that check. Um, can I ask, you know, you mentioned Wix there, obviously being an incredible success, and the lesson from it. In terms of a mistake, and one that didn't go right, what's one that comes to mind there, and how did that change your thinking?

A The ones that haven't gone right, um, I can think about four companies that I've, I've written off. Um, they're not enormous investments. I've, I've, I've yet to have an investment where I kind of doubled down and kept raising the stakes and then, and then, and then failed. I'm not saying I won't, but, uh, I'm nervous about those big losses. Um, the four losses I have are all about between 10 and fifteen million dollars a piece. Uh, The one I can think about, ah, most, I think about most is, ah, it was a chip kind of company, where they're actually doing something in the area of memory, and it was an incredible, ah, technology and team, had literally 90 patents to their name, and they were pursuing a, what we'd call an IP strategy. They actually wanted to sell the IP, um, both because it's a more efficient model, but I thought it made a lot of sense for the types of customers they were selling into. I just, I was, I convinced myself that this is the right strategy. Uh, whereas their competitor was actually developing a chip, and I just said to myself, wow, but the customers that they're selling into are themselves large chip companies. They don't wanna, they're not gonna buy another chip company. They want, they want the IP so that they can incorporate in it. Um, ultimately I was wrong, um, and I, I mentioned this because I was convinced that that was the right strategy, meanin…

AI assessment note: “The one I can think about... was a chip kind of company”

Q and I don't, like, I've lost money in healthcare, for example, and I go, it is so hard to make money if you're selling to any public healthcare provider, it is long sales cycles, I know all of these things, ugh, I don't want to touch it. And pattern recognition is really impacting my future decision making, positively or negatively, but is it a good thing or a bad thing?

A On the whole, it's a good thing. Uh, I think it, it, it definitely helps you recognize, um, uh, winners that you've, that you've seen before, and it gives you the confidence to move much more quickly than you otherwise would. At the same time, you're absolutely right. Uh, when you've lost money, or you've seen others not, not succeed in that particular thing, it, it's, it's very hard to say this time is right. This time it's gonna work. But I would say that the best thing about pattern recognition over time is that you recognize what won't work. It's not what will work. Now, if you recognize what won't work, it will help you avoid spending time on, on bad deals, or bad entrepreneurs, or if you're on the board of a company, bad strategies. That is where patent recognition is priceless, and it takes time and experience to develop that, but that's ultimately, um, what I think I'm paid for, and why entrepreneurs are attracted to me. It's not because I know the right way. It's because I know all the wrong ways.

AI assessment note: “On the whole, it's a good thing.”

Q through this process, and we now want to do the deal, okay? Um, we get to the deal-making stage, and Keith Raboi actually said on the show the other day, it's such a competitive world. You have to know why the best founders choose you. If you can't answer that question, you shouldn't be in venture. How would you answer that question? Why did the best founders choose Adam Fisher?

A Well, in my local market, they choose me based on reputation. I, I hope it's, ah, personal reputation, not just the brand of Bessemer, although the brand of Bessemer definitely helps. Ah, I've been doing this for a long time, ah, one of the few that are still very active and, and very active across many sectors. So I've done everything from, as I mentioned, semiconductors to consumer software to SaaS and infrastructure. I hope that my name and, and precedes me, but in a way that relates to the ups and downs. I mean, I, Make it very clear to the entrepreneur that I'm choosing them more than I'm choosing the market or the particular product, and that I'm choosing them because I'm also not just choosing somebody that I hope will succeed or, or, or, or want to succeed, but somebody that I look forward to working with even if ultimately we fail. And there are companies that I look back at and I think, wow, we didn't really do that well, but that was fun. I liked working with him or her, and you know what? I'd do it again. And so I think when you go back to what I said before about looking, thinking about an investor as a partner, as a quasi founder of sorts, somebody's going to be with you really through ups and downs is really important. You know, I see my role as a VC as, um, picking up an entrepreneur when they're like on the ground because of some kind of a disappointment or a c…

AI assessment note: “Well, in my local market, they choose me based on reputation.”

Q and he said that great, great venture funds are due to capital concentration in the best companies, and capital concentration limits are the enemy of great returns. Do you agree with that in terms of the importance of capital concentration on a per company basis to really get great alpha in venture? Or as you said there, do you prefer the more bets and get lucky on one or two?

A Uh, I don't know if I fit either. I, I, I, there's no question that, at the end of the day, you, most of your returns are gonna come from very few deals. It's not gonna be spread evenly. That's, that's a fact. The question is, can you recognize it early on, or can you recognize it really at any point? And I don't think you can. I think we delude ourselves into thinking we know exactly which company is going to be a big outcome. We don't. Um, these are all retrospective stories that we tell ourselves, and we do it over and over again, and even I do it myself, and I have to go back and look at what I actually wrote to see what I actually thought and remind myself, no, Adam, you didn't think that was going to happen. It wasn't that, you didn't, that was not yet a term, that was not yet a concept, uh, and you've, you've just kind of Told yourself the story that makes you feel good.

AI assessment note: “The question is, can you recognize it early on... And I don't think you can.”

Q What do you think are the biggest misalignments between founders and investors? Like you said there, you know, when you have a hundred million, you bring a very different mindset to risk. What do you think are the biggest misalignments between founders and investors?

A Well, early stage, there's not that much because Generally at a certain point, you know, you've, you've acquired enough, and, uh, hopefully the company's accreted in value, and you're kind of both in the money. I think for later stage investors, there's, there's a misalignment, especially when founders start to sell secondary, and those growth stage investors are, are kind of stuck. Um, uh, and I think it's just less appreciation for that growth stage, where founders tell themselves, listen, I, I worked to get to this point. I spent seven years, you know, toiling, and, Getting a low salary. I deserve to sell. But the growth investors don't care what they did in the past. All they care is about the future that didn't happen as they hoped it would. And so there's, there's, there's true misalignment. I just don't think the same is true of, of early stage.

AI assessment note: “I think for later stage investors, there's, there's a misalignment, especially when founders start to sell secondary”

Q But do you think like there is even liquidity windows open in any ways for these one axis back?

A I think there, I think there will be. I think it's just a matter of price, um, and matching it. A lot of these companies grew very quickly, burned a lot of money, but without burning a lot, they can't grow at all. And, uh, they have to right size and all of a sudden that company that was doing, it was growing a hundred percent and is at fifty million is now still at fifty million and, and not growing at all. Um, and still burning money, and how much is that worth? It's, it's worth a very low multiple of that, and I do think there are acquirers for these companies, um, but it's, it's, it's hard, it's hard to get there, you know. It's, like, you always want the previous deal. This is the stage where you always want the previous deal. You want what they off, what you could have had before, and, and you have to preempt, you have to preempt that, meaning you have to realize that it only gets worse from here, and so you, you actually have to Get ahead of it and accept what is ostensibly a low offer, because if you wait, you're going to want that offer, but it won't be around anymore.

AI assessment note: “I think there will be. I think it's just a matter of price”