The Exchanges

Q How do you think, I want to deep dive on your personal perspective. How do you think about founder friendly, especially in today's age versus company friendly? What's your take on this?

A Yeah, I think really they are, what's appropriate is very tied to the stage of the business. As an investor, you are legally, if you're on a board, you are legally responsible for being company friendly. You are violating your obligations if you are founder friendly or if you are investor friendly. You're supposed to be company friendly to all stakeholders. And I think that early on in a business, The company is really the founders. So if you're not founder friendly at the beginning in the seed series a, you know, series B stage, then you're not really being company friendly because most of what the company is, is the founders, the founding team, and that sort of vision and inertia that's been created. But as companies stay private longer and longer, I think that that's going to change. I think what you're going to see is investors become more company friendly. And what that manifests itself in is looking at all shareholders, not just the founders.

AI assessment note: “what's appropriate is very tied to the stage of the business.”

Q Speaking of the nitty gritty there, you've said to me before that funds make big mistakes in the internal setup. Talk to me, what are these mistakes?

A Yeah, it's funny because venture investors spend so much of their time critiquing the management styles of Their portfolio. And I think most of them are incredibly under optimized with the way they manage themselves. So the two big areas that I see are first, I don't think that they do a great job of developing talent or even valuing talent appropriately. There's many, many incredibly smart people that work in venture funds relatively early on in their careers. And I don't know that most venture funds are very well equipped to really develop that talent and or to keep it. Now you can build a fund with the idea that Young talent will continually cycle through. It's certainly not the way that we built ABC, but I think that is one thing, which is just a sort of a lack of management and talent development with internal talent. The second is that most venture funds are set up to be highly internally competitive, which I think is crazy in a market that's as externally competitive as venture. So things like deal by deal carry, things like giving credit based off sourcing deals or serving on a board, these things are relatively I think poisonous to an internal culture because it disincentivizes you from collaborating with your colleagues to try and win investments to try and source investments. And also ultimately it disincentivizes you from spending time on other people's investments …

AI assessment note: “So the two big areas that I see are first, I don't think”

Q Speaking of the nitty gritty there, you've said to me before that funds make big mistakes in the internal setup. Talk to me, what are these mistakes?

A Yeah, it's funny because venture investors spend so much of their time critiquing the management styles of Their portfolio. And I think most of them are incredibly under optimized with the way they manage themselves. So the two big areas that I see are first, I don't think that they do a great job of developing talent or even valuing talent appropriately. There's many, many incredibly smart people that work in venture funds relatively early on in their careers. And I don't know that most venture funds are very well equipped to really develop that talent and or to keep it. Now you can build a fund with the idea that Young talent will continually cycle through. It's certainly not the way that we built ABC, but I think that is one thing, which is just a sort of a lack of management and talent development with internal talent. The second is that most venture funds are set up to be highly internally competitive, which I think is crazy in a market that's as externally competitive as venture. So things like deal by deal carry, things like giving credit based off sourcing deals or serving on a board, these things are relatively I think poisonous to an internal culture because it disincentivizes you from collaborating with your colleagues to try and win investments to try and source investments. And also ultimately it disincentivizes you from spending time on other people's investments …

AI assessment note: “the two big areas that I see are first, I don't think that they”

Q How do you think, I want to deep dive on your personal perspective. How do you think about founder friendly, especially in today's age versus company friendly? What's your take on this?

A Yeah, I think really they are, what's appropriate is very tied to the stage of the business. As an investor, you are legally, if you're on a board, you are legally responsible for being company friendly. You are violating your obligations if you are founder friendly or if you are investor friendly. You're supposed to be company friendly to all stakeholders. And I think that early on in a business, The company is really the founders. So if you're not founder friendly at the beginning in the seed series a, you know, series B stage, then you're not really being company friendly because most of what the company is, is the founders, the founding team, and that sort of vision and inertia that's been created. But as companies stay private longer and longer, I think that that's going to change. I think what you're going to see is investors become more company friendly. And what that manifests itself in is looking at all shareholders, not just the founders.

AI assessment note: “what's appropriate is very tied to the stage of the business”

Q I have a lot of suggestions on this next one, but what advice would you give to young people who maybe want an accelerated career path?

A Yeah, I think there's two major things. The first is know fundamentally what motivates you, and I don't mean this in some sort of rainbows and unicorns kind of way. I mean it is, you know, there are things that you might be uncomfortable to admit publicly about things that motivate you, because it may not be socially acceptable to say, I'm motivated by money, but if you go into a career where, and you are, And that doesn't pay you. You might be upset. If you want to feel like a hero every day, you may not get as much benefit from being in a career that has meta impact like investing versus one that has very direct impact like being a surgeon. So you have to really know what it is that motivates you and don't use your career as a method of therapy. So if you don't like what motivates you and you think that that's wrong, deal with that with your therapist, with your mom in your place of worship. Don't deal with that out in the job market. So that's the first part. Know your motivating factors. The second part is focus. And we've talked about this before, you know, when you're young, you, you always have nothing but time, right? Time is the one thing you have an advantage over everyone else. And so if you focus for one, two, three, four, five years on something, and it ends up not working out most of the time, the worst case scenario for you is not very bad. So if you try to do so…

AI assessment note: “Yeah, I think there's two major things. The first is know fundamentally what motivates you”

Q Speaking of changes in the ecosystem, I'm really intrigued. We've seen this rise of young investors in the ecosystem. I'd probably be considered one of them. So would you, founding partner at 26, I believe it was. So I'm really interested to hear, what were your challenges coming in at a much earlier age to your counterparts, maybe?

A I think, I think the biggest challenge ultimately is trying to identify all the things you don't know and learning. It's how to learn efficiently. I mean, most of the mechanical parts of venture are relatively easy to pick up, or honestly, you can outsource them and hire people that are much smarter than you and more efficient to do those things. But the things that you can't are sort of the lessons learned through years and years of experience. A lot of those have to deal with, with basically interpersonal things. So the stuff that I've found most challenging is how do you bootstrap learning that most people accumulate over a Decades of experience and examples. And really, it comes down to one, I think, enforcing humility upon yourself. So even like the concept of saying, oh, I'm a managing partner at 26, what does that mean? It doesn't mean anything, right? It doesn't, it doesn't, there's been no success associated with that other than basically a lot of good fortune and being in the right place at the right time and having a lot of people trust you. So you have to have that humility. That humility opens up the ability to learn very quickly. And the real benefit of being young, and I'm sure that you've experienced this, is that people are really willing to help you. Partially, that's Because they probably don't see you as that competitive. And so they don't see you as threate…

AI assessment note: “biggest challenge ultimately is trying to identify all the things you don't know and learning”

Q the show the other day, and he said that often founders will maintain a very steady state margin and maintain very good unit economics, and then in their massive pursuit for top-line growth, They'll let everything go out the window, so to speak, and really those unit economics rely in the pursuit of growth. To what extent do you think you've seen this, and this is really a problem today?

A Yeah, I think that there is a massive misunderstanding over when growth creates value and when it destroys value. Growth creates value when there's an argument or there is evidence of operating leverage, because then it creates more profitability. If I set up a website and I sold dollar bills for I would grow infinitely fast. Everyone would want to buy dollar bills for 50 cents, but it would be a terrible business. I could do a trillion dollars in top line, and I would lose five hundred billion dollars. It would not be a great business. So top line in itself is not a great metric. Top line, most of the time, is attached to a better business model than just losing 50 cents, and so it becomes more confusing than that. But fundamentally, what you want to see is that businesses lose money for a finite Period of time as they set up an operational platform, a home base, and they use that home base to continue to generate highly growing revenue, but the home base costs don't grow. And so I think what you see a lot of times is an ignorance around unit economics. So if I sell one good, how much profit comes from that one good? How much cost is there to sell that one good? And there's a lot of fudging that happens. Should I include customer support costs? Should I, you Is going to, as I scale, the marginal cost of logistics is going to go down. So that's okay. We'll just budget that in. …

AI assessment note: “I think what you see a lot of times is an ignorance around unit economics.”

Q Can I ask, do you really believe in proprietary deal flow now with, uh, you know, when you move later down the funnel, there's data sourcing tools that all the multi-stage funds have. Do you believe in such, uh, proprietary deal flow?

A I think I do because, uh, There's a big thing about venture, which is that 90% of the time, or a majority of the time, you are selling primary equity. So you care who holds it. The same way that companies care a lot about how their employees sell their equity, and they control it, they care about who their investors are that own their equity, and they, they have control over it. So because of that, there is fundamentally an opportunity for proprietary deal flow. Secondly, I do agree that as you get later and later stage, the opportunities are relatively understood. But at the C and Series A, and even sometimes Series B, these companies may not even have been written about in TechCrunch. They don't even know who they are. So I very strongly believe in proprietary deal flow at the earlier stages of the stack.

AI assessment note: “I very strongly believe in proprietary deal flow at the earlier stages of the stack.”

Q Speaking of changes in the ecosystem, I'm really intrigued. We've seen this rise of young investors in the ecosystem. I'd probably be considered one of them. So would you, founding partner at 26, I believe it was. So I'm really interested to hear, what were your challenges coming in at a much earlier age to your counterparts, maybe?

A I think, I think the biggest challenge ultimately is trying to identify all the things you don't know and learning. It's how to learn efficiently. I mean, most of the mechanical parts of venture are relatively easy to pick up, or honestly, you can outsource them and hire people that are much smarter than you and more efficient to do those things. But the things that you can't are sort of the lessons learned through years and years of experience. A lot of those have to deal with, with basically interpersonal things. So the stuff that I've found most challenging is how do you bootstrap learning that most people accumulate over a Decades of experience and examples. And really, it comes down to one, I think, enforcing humility upon yourself. So even like the concept of saying, oh, I'm a managing partner at 26, what does that mean? It doesn't mean anything, right? It doesn't, it doesn't, there's been no success associated with that other than basically a lot of good fortune and being in the right place at the right time and having a lot of people trust you. So you have to have that humility. That humility opens up the ability to learn very quickly. And the real benefit of being young, and I'm sure that you've experienced this, is that people are really willing to help you. Partially, that's Because they probably don't see you as that competitive. And so they don't see you as threate…

AI assessment note: “I think the biggest challenge ultimately is trying to identify all the things you don't know”

Q I have a lot of suggestions on this next one, but what advice would you give to young people who maybe want an accelerated career path?

A Yeah, I think there's two major things. The first is know fundamentally what motivates you, and I don't mean this in some sort of rainbows and unicorns kind of way. I mean it is, you know, there are things that you might be uncomfortable to admit publicly about things that motivate you, because it may not be socially acceptable to say, I'm motivated by money, but if you go into a career where, and you are, And that doesn't pay you. You might be upset. If you want to feel like a hero every day, you may not get as much benefit from being in a career that has meta impact like investing versus one that has very direct impact like being a surgeon. So you have to really know what it is that motivates you and don't use your career as a method of therapy. So if you don't like what motivates you and you think that that's wrong, deal with that with your therapist, with your mom in your place of worship. Don't deal with that out in the job market. So that's the first part. Know your motivating factors. The second part is focus. And we've talked about this before, you know, when you're young, you, you always have nothing but time, right? Time is the one thing you have an advantage over everyone else. And so if you focus for one, two, three, four, five years on something, and it ends up not working out most of the time, the worst case scenario for you is not very bad. So if you try to do so…

AI assessment note: “there's two major things. The first is know fundamentally what motivates you”

Q the show the other day, and he said that often founders will maintain a very steady state margin and maintain very good unit economics, and then in their massive pursuit for top-line growth, They'll let everything go out the window, so to speak, and really those unit economics rely in the pursuit of growth. To what extent do you think you've seen this, and this is really a problem today?

A Yeah, I think that there is a massive misunderstanding over when growth creates value and when it destroys value. Growth creates value when there's an argument or there is evidence of operating leverage, because then it creates more profitability. If I set up a website and I sold dollar bills for I would grow infinitely fast. Everyone would want to buy dollar bills for 50 cents, but it would be a terrible business. I could do a trillion dollars in top line, and I would lose five hundred billion dollars. It would not be a great business. So top line in itself is not a great metric. Top line, most of the time, is attached to a better business model than just losing 50 cents, and so it becomes more confusing than that. But fundamentally, what you want to see is that businesses lose money for a finite Period of time as they set up an operational platform, a home base, and they use that home base to continue to generate highly growing revenue, but the home base costs don't grow. And so I think what you see a lot of times is an ignorance around unit economics. So if I sell one good, how much profit comes from that one good? How much cost is there to sell that one good? And there's a lot of fudging that happens. Should I include customer support costs? Should I, you Is going to, as I scale, the marginal cost of logistics is going to go down. So that's okay. We'll just budget that in. …

AI assessment note: “I think what you see a lot of times is an ignorance around unit economics.”

Q Can I ask, do you really believe in proprietary deal flow now with, uh, you know, when you move later down the funnel, there's data sourcing tools that all the multi-stage funds have. Do you believe in such, uh, proprietary deal flow?

A I think I do because, uh, There's a big thing about venture, which is that 90% of the time, or a majority of the time, you are selling primary equity. So you care who holds it. The same way that companies care a lot about how their employees sell their equity, and they control it, they care about who their investors are that own their equity, and they, they have control over it. So because of that, there is fundamentally an opportunity for proprietary deal flow. Secondly, I do agree that as you get later and later stage, the opportunities are relatively understood. But at the C and Series A, and even sometimes Series B, these companies may not even have been written about in TechCrunch. They don't even know who they are. So I very strongly believe in proprietary deal flow at the earlier stages of the stack.

AI assessment note: “I very strongly believe in proprietary deal flow at the earlier stages of the stack.”

Q You said there about kind of the protraction of exit cycles. I'm really interested, you know, PE often has Four to seven year hold cycles, venture seven to 12. Do you think the current fund structures are set up for such protracted exit cycles?

A It's interesting. I think they are, but just barely. And I'm not sure that on the sort of for the best companies, they, they will be set up. Most funds are sort of 10 year funds with one to four year, you know, discretionary extension periods. And I think that's probably just enough. But when you look at some of the most successful private companies, Some of them have surpassed that before having a sort of a major liquidity event. So I do think that may get turned It's usually very quickly figured out within the sort of time cycle of a normal fund, and because of that, I don't think very many people are going to be concerned with, you know, waiting a couple extra years or figuring out how to do that on, on companies that have become worth tens of billions of dollars.

AI assessment note: “I think they are, but just barely.”

Q You said there about kind of the protraction of exit cycles. I'm really interested, you know, PE often has Four to seven year hold cycles, venture seven to 12. Do you think the current fund structures are set up for such protracted exit cycles?

A It's interesting. I think they are, but just barely. And I'm not sure that on the sort of for the best companies, they, they will be set up. Most funds are sort of 10 year funds with one to four year, you know, discretionary extension periods. And I think that's probably just enough. But when you look at some of the most successful private companies, Some of them have surpassed that before having a sort of a major liquidity event. So I do think that may get turned It's usually very quickly figured out within the sort of time cycle of a normal fund, and because of that, I don't think very many people are going to be concerned with, you know, waiting a couple extra years or figuring out how to do that on, on companies that have become worth tens of billions of dollars.

AI assessment note: “I think they are, but just barely.”