The Exchanges

Q I have to ask, you know, you've been in a early stage Silicon Valley deal making with very, very fast deal cycles. Do you think there's really that time with such speed of deal cycle for both the founder and the VC to determine that alignment?

A So I think the only times I see the deal cycle get very, very tight are when the company has all the leverage and can force it to happen. So if you're the founder and the deal time is really, really tight, and you feel like you need another two hours to spend with the partners at the three funds you're thinking about working with, you have all the leverage. I could see the allure of just rushing through and closing it and capitalizing, but I think the long-term best move is to take the extra six hours to spend two hours with each of the people you might work with. They're going to sit on your board. I don't think there's a lot of risk in a scenario where you have more leverage.

AI assessment note: “the long-term best move is to take the extra six hours”

Q In terms of the terms, what are your thoughts on founders accepting super pro rata and maybe also angels demanding it?

A Yeah, so angels demanding it, I don't totally understand. The common scenario is big fun, writes small check, wants Rights for more money. My thought is, obviously, if it's the only option you have, I wouldn't say shut your company down and not take it. But I don't like to reward people for things they haven't earned. You know, if an investor says, I want to work hard to show you that I could take a piece of the next round larger, it's like, great, do that. But giving someone the option to have something down the road, it doesn't seem like a great thing for founders. I think most VCs, at least on the vocal front, agree. You want external investors to come in and lead your next round and set the price And if you are in a situation where the insiders have all of their pro rata rights, super pro rata rights, you get to a point that if you want to raise 20%, or you want to sell 20% of the company in your next round, and insiders are taking 15, it's going to be harder to find an external investor who's only interested in taking five percent.

AI assessment note: “giving someone the option to have something down the road, it doesn't seem like a great thing”

Q with ownership becoming kind of ever more a part of venture importance, especially in the ecosystems that we see. I'm intrigued, how do you think about preemptive rounds, whereby companies are going very well, and funds will preempt a fundraiser, Ahead of time with a certain amount of capital. What are your thoughts and advice to founders on that and the need to expand their cap table to other investors?

A Yeah, we thought about this at Grove a bit as those conversations happen, and ultimately, you have to look at what are you giving up if someone wants to preempt you at a price that you think is where you'll be six months from now, and that can make more sense than if they want to preempt you at a price that you're at now when you don't need the money. What are you blocking off? If the best investor in the world that you think could be the best partner is not the one preempting you, you know, you're closing off the right to work with that other fund, so what do you get in exchange for that? Obviously, you could de-risk the process by closing a round earlier, but I personally would want to make sure if someone wanted to preempt a round by six months, the round would need to be priced as if we were six months further along.

AI assessment note: “if someone wanted to preempt a round by six months, the round would need to be priced”

Q But for those that maybe should raise money and where you feel that kind of additional capital will give you additional leverage and growth potential, I'm intrigued. You've stated before the importance of running a process I want to walk through this process from scratch. So in terms of running the process, what's the first move here, Chris?

A So look, raising money is a huge amount of time and focus taken away from the company. Almost every founder has done this less than the VCs they're talking to. So you need all the advantage you can get. So I think the first process is, what's the narrative you want to tell? Practice it for a long time. I had a conversation with one of our investors yesterday, and he said, in advance of a Series A, you should be giving the pitch for about 40 hours of practice and rehearsal before you give it to the first investor. So that would be like step one. Step two would be kind of figure out whether you're ready for VCs or you're really ready for kind of smaller angels, family and friends kind of round and pitch whoever makes sense and work your way through the process and try to keep it very time bound. Try to keep people all in the same step so that you don't have someone jumping ahead. And then you have to figure out, okay, now I've got to tell these other people to Speed up, and the more you can keep it like that, the better, because VCs have all the advantage.

AI assessment note: “I think the first process is, what's the narrative you want to tell?”

Q you and our mission with the company, and then instantly I find that engagement massively increased. So yeah, I couldn't agree with you more. I'm intrigued, though. In terms of the raise itself, and going back to that, you know, I often hear that founders should set a timeline for the raise itself. What do you think about that from kind of the initial starting points and setting that parameter?

A Yeah, I mean, I tell people, line up meetings, pick a time that you want to start the process. It could happen in two weeks. It could happen in two months. But the idea of, oh, I'll take this coffee. Oh, I'll take this meeting. And next thing you know, like a day a week for six months is dedicated to investor conversations in advance of raising. And that's time that you could have been spending getting the company to a point that if you did it all at once, that those conversations would have more meat behind them because you got back maybe two, three weeks of time to work. So I just tell people, pick the time you want to start and punt on all the meetings until then.

AI assessment note: “pick the time you want to start and punt on all the meetings until then”

Q No, I couldn't agree with you more. Actually, so much so, Wayne Chang, former founder of Crashlytics, said that hiring a recruiter, an internal recruiter, should be one of your first hires. Would you agree with that?

A I don't know at what stage that was said. I think at a seed stage of company, if you're not going to consistently be hiring more than a few open recs in perpetuity, I don't know if that makes sense for us. Our hiring ramp was a lot, slowed down a little while we focused on product, went up a little, focused a bit more on iterating on milestones. And so if we had hired an internal recruiter, there were times where we weren't necessarily hiring and that wouldn't have been a good use of money. I think that after our next round, and you look at the plan we're on, we will probably have two to four, if not more, open recs for the rest of the lifetime of the company, if not, you know, a lot more, and so I think it makes sense at the point that you're really ready to grow, but I would say at most people's seed round, it's all about finding product market fit, and series A, it's all about taking what you found and running with it, and I think the growth and the recruiting challenges come a lot harder at the taking what you have and running with it.

AI assessment note: “at a seed stage of company... I don't know if that makes sense for us.”

Q In terms of the terms, what are your thoughts on founders accepting super pro rata and maybe also angels demanding it?

A Yeah, so angels demanding it, I don't totally understand. The common scenario is big fun, writes small check, wants Rights for more money. My thought is, obviously, if it's the only option you have, I wouldn't say shut your company down and not take it. But I don't like to reward people for things they haven't earned. You know, if an investor says, I want to work hard to show you that I could take a piece of the next round larger, it's like, great, do that. But giving someone the option to have something down the road, it doesn't seem like a great thing for founders. I think most VCs, at least on the vocal front, agree. You want external investors to come in and lead your next round and set the price And if you are in a situation where the insiders have all of their pro rata rights, super pro rata rights, you get to a point that if you want to raise 20%, or you want to sell 20% of the company in your next round, and insiders are taking 15, it's going to be harder to find an external investor who's only interested in taking five percent.

AI assessment note: “giving someone the option to have something down the road, it doesn't seem like a great thing”

Q Taking a step back from the room itself, I get a lot of tweets from founders that maybe can't get into that room for lack of a warm intro. What advice would you have for those founders in this kind of warm intro culture that we live in?

A Yeah, so I always say, like, if you don't have a warm intro, make a warm intro. Starting a company is hard, and that's just another thing that will be hard. You want to talk to a specific firm, look at who their portfolio companies are, find a way to get a warm intro to a company there. Never ask. I get tons of emails. Oh, could you introduce me to whoever investors you think are best? No one wants to do that. If you go to someone and say, here is a specific blurb on why I want to talk to this person at this fund who I think you know, because I've done my LinkedIn, Facebook, Twitter homework, and that goes a lot further. And so I would say you can always create a warm intro if you find people and it might have to go three degrees. It takes time. You have to build relationships. But the good thing is that experience is super correlated to actually being a founder and running a company. So if Just consider it practice for what you need to do to be successful down the road.

AI assessment note: “if you don't have a warm intro, make a warm intro”

Q No, I do get you. In terms of you mentioned that kind of closing the round, I spoke to Michael Deering on the show recently, and he stated his dislike for safes on the show. What are your thoughts on this and that kind of structure? Versus maybe more traditional equity rounds. Maybe also with you raising now, how are you thinking about that?

A Yeah, so we raised a round that was a price round first. Safes, convertible debt, they're all kind of based on future guesses. You kind of figure out the dilution later. It allows for this continual raising process that, you know, I know YC's talked a lot about that I think can be a huge distraction. There's a lot of satisfaction to being like, this is the round. We're done. We're focused on the company until the next one. And you know, there's some minor little things about Dilution and whether the dilution includes the option pool for the seed round and the A round if you don't do the conversion until the next round, and there's some minor reasons that you could argue, you know, safes or notes are less advantageous. I know the safe terms in terms of being founder friendly might be much better, but I think there are a lot of reasons not to do it as well.

AI assessment note: “Yeah, so we raised a round that was a price round first.”

Q your rounds with Groves, I'm really intrigued to hear about the kind of distinction between seed and series A, and we've discussed how series A is a different game to seed before. So I'd love to hear what are your thoughts on this maybe, and the fundamental differences, and even more interestingly, how you think about this with the approaching of that with you now as an operator with growth?

A Yeah, so at the seed round, most seed investors are doing dozens of deals. Whether it's angels or seed funds, most series A investors are doing a couple deals a year. So the bar is just much higher for the investor and For the fund. And so I just think it takes more practice, more iteration. I think the general sense is that money in seed is more free flowing. So people are taking bets on people and ideas. When you get to the series a, like there has to be a real piece of, you know, a meaty company there. There has to be something there. The bar is a lot higher. So it just means the amount of practice, the amount of thought that goes into the months of before and making sure that the metrics are right, making sure that you're actually executing on what you want and you can show progress. All of that is necessary, whereas in the seed round, depending on the person, the industry, the company, it's possible to raise with a whole lot less. People in the seed round are also not always as concerned with getting to 20% ownership as they are in the series A, and so it just seems like there's a lot more flexibility on what can happen, and a lot more people that can participate, and at the series A, there's just a higher bar all around.

AI assessment note: “at the seed round, most seed investors are doing dozens of deals”

Q But for those that maybe should raise money and where you feel that kind of additional capital will give you additional leverage and growth potential, I'm intrigued. You've stated before the importance of running a process I want to walk through this process from scratch. So in terms of running the process, what's the first move here, Chris?

A So look, raising money is a huge amount of time and focus taken away from the company. Almost every founder has done this less than the VCs they're talking to. So you need all the advantage you can get. So I think the first process is, what's the narrative you want to tell? Practice it for a long time. I had a conversation with one of our investors yesterday, and he said, in advance of a Series A, you should be giving the pitch for about 40 hours of practice and rehearsal before you give it to the first investor. So that would be like step one. Step two would be kind of figure out whether you're ready for VCs or you're really ready for kind of smaller angels, family and friends kind of round and pitch whoever makes sense and work your way through the process and try to keep it very time bound. Try to keep people all in the same step so that you don't have someone jumping ahead. And then you have to figure out, okay, now I've got to tell these other people to Speed up, and the more you can keep it like that, the better, because VCs have all the advantage.

AI assessment note: “I think the first process is, what's the narrative you want to tell?”

Q you and our mission with the company, and then instantly I find that engagement massively increased. So yeah, I couldn't agree with you more. I'm intrigued, though. In terms of the raise itself, and going back to that, you know, I often hear that founders should set a timeline for the raise itself. What do you think about that from kind of the initial starting points and setting that parameter?

A Yeah, I mean, I tell people, line up meetings, pick a time that you want to start the process. It could happen in two weeks. It could happen in two months. But the idea of, oh, I'll take this coffee. Oh, I'll take this meeting. And next thing you know, like a day a week for six months is dedicated to investor conversations in advance of raising. And that's time that you could have been spending getting the company to a point that if you did it all at once, that those conversations would have more meat behind them because you got back maybe two, three weeks of time to work. So I just tell people, pick the time you want to start and punt on all the meetings until then.

AI assessment note: “pick a time that you want to start the process”

Q with ownership becoming kind of ever more a part of venture importance, especially in the ecosystems that we see. I'm intrigued, how do you think about preemptive rounds, whereby companies are going very well, and funds will preempt a fundraiser, Ahead of time with a certain amount of capital. What are your thoughts and advice to founders on that and the need to expand their cap table to other investors?

A Yeah, we thought about this at Grove a bit as those conversations happen, and ultimately, you have to look at what are you giving up if someone wants to preempt you at a price that you think is where you'll be six months from now, and that can make more sense than if they want to preempt you at a price that you're at now when you don't need the money. What are you blocking off? If the best investor in the world that you think could be the best partner is not the one preempting you, you know, you're closing off the right to work with that other fund, so what do you get in exchange for that? Obviously, you could de-risk the process by closing a round earlier, but I personally would want to make sure if someone wanted to preempt a round by six months, the round would need to be priced as if we were six months further along.

AI assessment note: “ultimately, you have to look at what are you giving up”

Q No, I couldn't agree with you more. Actually, so much so, Wayne Chang, former founder of Crashlytics, said that hiring a recruiter, an internal recruiter, should be one of your first hires. Would you agree with that?

A I don't know at what stage that was said. I think at a seed stage of company, if you're not going to consistently be hiring more than a few open recs in perpetuity, I don't know if that makes sense for us. Our hiring ramp was a lot, slowed down a little while we focused on product, went up a little, focused a bit more on iterating on milestones. And so if we had hired an internal recruiter, there were times where we weren't necessarily hiring and that wouldn't have been a good use of money. I think that after our next round, and you look at the plan we're on, we will probably have two to four, if not more, open recs for the rest of the lifetime of the company, if not, you know, a lot more, and so I think it makes sense at the point that you're really ready to grow, but I would say at most people's seed round, it's all about finding product market fit, and series A, it's all about taking what you found and running with it, and I think the growth and the recruiting challenges come a lot harder at the taking what you have and running with it.

AI assessment note: “at a seed stage of company... I don't know if that makes sense for us”

Q No, I love that. I think you're totally right, especially in the world of on-demand that we live in. But we mentioned that kind of companies that are meant for VC funding and then those that maybe aren't. How do you differentiate between a company that should versus should not raise money out of the gate? And are there any blurred lines?

A Yeah, there's certainly blurred lines. I think at first glance, you might say that a number of companies like Warby Parker or Casper traditionally wouldn't be venture backed companies because they're kind of traditional e-commerce product companies. But I think as you dive into the supply chain, you dive into the technology they're using on the e-commerce side, you can kind of see that. So there's a lot of blurred lines, a lot in e-commerce. I think the real question is, does a lot of money unlock your ability to grow a lot faster and get a lot more accomplished and be able to kind of create multipliers on that investment that can be sustainable? And that's kind of how I thought about it, though, at the very early stage, you don't really have a lot of indications of all of these things. It's like, do I think that might be possible one day?

AI assessment note: “does a lot of money unlock your ability to grow a lot faster”

Q Taking a step back from the room itself, I get a lot of tweets from founders that maybe can't get into that room for lack of a warm intro. What advice would you have for those founders in this kind of warm intro culture that we live in?

A Yeah, so I always say, like, if you don't have a warm intro, make a warm intro. Starting a company is hard, and that's just another thing that will be hard. You want to talk to a specific firm, look at who their portfolio companies are, find a way to get a warm intro to a company there. Never ask. I get tons of emails. Oh, could you introduce me to whoever investors you think are best? No one wants to do that. If you go to someone and say, here is a specific blurb on why I want to talk to this person at this fund who I think you know, because I've done my LinkedIn, Facebook, Twitter homework, and that goes a lot further. And so I would say you can always create a warm intro if you find people and it might have to go three degrees. It takes time. You have to build relationships. But the good thing is that experience is super correlated to actually being a founder and running a company. So if Just consider it practice for what you need to do to be successful down the road.

AI assessment note: “if you don't have a warm intro, make a warm intro.”

Q No, I do get you. In terms of you mentioned that kind of closing the round, I spoke to Michael Deering on the show recently, and he stated his dislike for safes on the show. What are your thoughts on this and that kind of structure? Versus maybe more traditional equity rounds. Maybe also with you raising now, how are you thinking about that?

A Yeah, so we raised a round that was a price round first. Safes, convertible debt, they're all kind of based on future guesses. You kind of figure out the dilution later. It allows for this continual raising process that, you know, I know YC's talked a lot about that I think can be a huge distraction. There's a lot of satisfaction to being like, this is the round. We're done. We're focused on the company until the next one. And you know, there's some minor little things about Dilution and whether the dilution includes the option pool for the seed round and the A round if you don't do the conversion until the next round, and there's some minor reasons that you could argue, you know, safes or notes are less advantageous. I know the safe terms in terms of being founder friendly might be much better, but I think there are a lot of reasons not to do it as well.

AI assessment note: “we raised a round that was a price round first. Safes, convertible debt”

Q your rounds with Groves, I'm really intrigued to hear about the kind of distinction between seed and series A, and we've discussed how series A is a different game to seed before. So I'd love to hear what are your thoughts on this maybe, and the fundamental differences, and even more interestingly, how you think about this with the approaching of that with you now as an operator with growth?

A Yeah, so at the seed round, most seed investors are doing dozens of deals. Whether it's angels or seed funds, most series A investors are doing a couple deals a year. So the bar is just much higher for the investor and For the fund. And so I just think it takes more practice, more iteration. I think the general sense is that money in seed is more free flowing. So people are taking bets on people and ideas. When you get to the series a, like there has to be a real piece of, you know, a meaty company there. There has to be something there. The bar is a lot higher. So it just means the amount of practice, the amount of thought that goes into the months of before and making sure that the metrics are right, making sure that you're actually executing on what you want and you can show progress. All of that is necessary, whereas in the seed round, depending on the person, the industry, the company, it's possible to raise with a whole lot less. People in the seed round are also not always as concerned with getting to 20% ownership as they are in the series A, and so it just seems like there's a lot more flexibility on what can happen, and a lot more people that can participate, and at the series A, there's just a higher bar all around.

AI assessment note: “most seed investors are doing dozens of deals... most series A investors are doing a couple”

Q I have to ask, you know, you've been in a early stage Silicon Valley deal making with very, very fast deal cycles. Do you think there's really that time with such speed of deal cycle for both the founder and the VC to determine that alignment?

A So I think the only times I see the deal cycle get very, very tight are when the company has all the leverage and can force it to happen. So if you're the founder and the deal time is really, really tight, and you feel like you need another two hours to spend with the partners at the three funds you're thinking about working with, you have all the leverage. I could see the allure of just rushing through and closing it and capitalizing, but I think the long-term best move is to take the extra six hours to spend two hours with each of the people you might work with. They're going to sit on your board. I don't think there's a lot of risk in a scenario where you have more leverage.

AI assessment note: “the long-term best move is to take the extra six hours”

Q No, absolutely. I love that from a risk tolerance. I do want to start with a stream of conversation that we've had before that maybe isn't traditional for a former VC. And you've said before your belief that fundraising maybe should not be the first thing that every founder does. So let's start with that. And why do you believe this?

A Yeah. So when we started Grove and what we're doing is, you know, we're like a personal trainer for your money. We help people create a strategy for their financial life. And that's not inherently by description, a company that is a venture scale company. And I meet lots of founders who think the first jumping off point is to go raise capital so they can build a All around the world that are great that don't need venture capital to scale, and if it's too early and you don't even know what you're doing, you don't know what the product experience is or what the product market fit is, it's hard to know that you have to have venture capital to scale, and once you raise it, it kind of puts you on this path that's pretty hard to get off of, and I always tell founders that the further you can get in the confidence that that's the right path for your company, the better.

AI assessment note: “puts you on this path that's pretty hard to get off of”

Q No, absolutely. I love that from a risk tolerance. I do want to start with a stream of conversation that we've had before that maybe isn't traditional for a former VC. And you've said before your belief that fundraising maybe should not be the first thing that every founder does. So let's start with that. And why do you believe this?

A Yeah. So when we started Grove and what we're doing is, you know, we're like a personal trainer for your money. We help people create a strategy for their financial life. And that's not inherently by description, a company that is a venture scale company. And I meet lots of founders who think the first jumping off point is to go raise capital so they can build a All around the world that are great that don't need venture capital to scale, and if it's too early and you don't even know what you're doing, you don't know what the product experience is or what the product market fit is, it's hard to know that you have to have venture capital to scale, and once you raise it, it kind of puts you on this path that's pretty hard to get off of, and I always tell founders that the further you can get in the confidence that that's the right path for your company, the better.

AI assessment note: “once you raise it, it kind of puts you on this path that's”

Q You've seen hundreds of pitches as a VC. Now, as a founder pitching that narrative of Grove, I'm intrigued. What do you think makes the best pitches, and what makes the worst, and how do you think your experience on VC has enabled you to give the best narrative for Grove that you can?

A Yeah, I think one of the interesting things that I saw go wrong with a lot of pitches was founders focused so much on the story and not on the room. So I spent a lot of time helping founders that were going out to raise more money that we'd invested in. Think about how do you make sure you know the people in the room? How do you make sure you understand what that fund wants? How do you make sure that if a question gets asked, you focus on the people and not jump back to your deck and try to walk through slide to slide. And so I think it's just really being able to read the room, understand what you're going into ahead of time and being comfortable adapting from whatever you planned to drive the conversation wherever it needs to go.

AI assessment note: “founders focused so much on the story and not on the room.”

Q No, I love that. I think you're totally right, especially in the world of on-demand that we live in. But we mentioned that kind of companies that are meant for VC funding and then those that maybe aren't. How do you differentiate between a company that should versus should not raise money out of the gate? And are there any blurred lines?

A Yeah, there's certainly blurred lines. I think at first glance, you might say that a number of companies like Warby Parker or Casper traditionally wouldn't be venture backed companies because they're kind of traditional e-commerce product companies. But I think as you dive into the supply chain, you dive into the technology they're using on the e-commerce side, you can kind of see that. So there's a lot of blurred lines, a lot in e-commerce. I think the real question is, does a lot of money unlock your ability to grow a lot faster and get a lot more accomplished and be able to kind of create multipliers on that investment that can be sustainable? And that's kind of how I thought about it, though, at the very early stage, you don't really have a lot of indications of all of these things. It's like, do I think that might be possible one day?

AI assessment note: “does a lot of money unlock your ability to grow a lot faster”

Q You've seen hundreds of pitches as a VC. Now, as a founder pitching that narrative of Grove, I'm intrigued. What do you think makes the best pitches, and what makes the worst, and how do you think your experience on VC has enabled you to give the best narrative for Grove that you can?

A Yeah, I think one of the interesting things that I saw go wrong with a lot of pitches was founders focused so much on the story and not on the room. So I spent a lot of time helping founders that were going out to raise more money that we'd invested in. Think about how do you make sure you know the people in the room? How do you make sure you understand what that fund wants? How do you make sure that if a question gets asked, you focus on the people and not jump back to your deck and try to walk through slide to slide. And so I think it's just really being able to read the room, understand what you're going into ahead of time and being comfortable adapting from whatever you planned to drive the conversation wherever it needs to go.

AI assessment note: “founders focused so much on the story and not on the room.”