The Exchanges

Q kind of speaking about those very early stages, when I asked him, what should I, what should I ask John when he's on the show? He said, you've got to ask him, how does John think about empowering risk and not being afraid to fail at the early stages? So I'd love to hear your thoughts by stealing Tony's question there on empowering risk and not being afraid to fail.

A Yeah, so the way we think about it, again, if you think that the creative founder is, is our society's most Precious resource, which I do, and, and we as a firm believe that, then their time, the founder's time, is worth way more than all of the capital we have at True. So we manage now seven funds, a 1,000,000,004 or so, something like that in capital, but what, just one founder's time and opportunity cost is so much more than that, so much more valuable than that, and so with that in mind, we want to try big things. We want to be out in the frontier, and we want to empower those founders to try big things, and Not worry about failing. And when I say not worry about failing, of course, nobody likes to fail or not have things work out. That's not it. But to be not just structurally aligned to be bold and take a big swing at a market and be far ahead, but also psychologically aligned and empowered. And so what we say when we write, so our average initial investment is, you know, somewhere between one and three million dollars. We're currently operating out of a three hundred million dollar fund. So our initial check is less than one percent of the fund. And every time we write A check to a seed founder. We, of course, are fully bought in. So we're, we're not, you know, in any, what I'm about to say is not in any way a hedge or anything like that. We're fully there. But on the ot…

AI assessment note: “empower those founders to try big things, and Not worry about failing.”

Q I thought you were, I thought you were going to say Brad Feld Venture Deals. I was, I was about to go, yes, I am with you, John. And then you were like, Moby Dick. I was like, what the fuck? Yeah. Fantastic. Why Moby Dick?

A If you're good at what we do, you're out chasing the whale in the middle of the ocean, and there's nobody else around, and the elements are against you, and there are sharks in the ocean, and there are crazy captains on the ship, And there are strange other things just all around you. If you're really, really good at early stage venture, that's where you want to be. You don't want to be at the Rosewood schmoozing with other VCs trying to figure out what they did and what, you know, what, what you can do to be a, to be a, you know, a little copy of that. You've got to be out in the frontier, way, way out there. And Moby Dick is just the classic, like in search of the white whale. We are all searching for the white whale. It might be called Google or Facebook or Peloton or whatever it is. But that's what we're after, and so that book to me, and there's, there's kind of a newer version, a really phenomenal newer version called The North Sea, but that book to me just epitomizes the really grandness of our quest, and also where we should be when we're trying to, to pursue that quest, and it is not, it's really out in the ocean. I mean, you've got to be so far ahead in this industry, and I, we just constantly think about that at true, is how can we be out in those very, very uncomfortable Not forgiving places.

AI assessment note: “Moby Dick is just the classic, like in search of the white whale.”

Q kind of speaking about those very early stages, when I asked him, what should I, what should I ask John when he's on the show? He said, you've got to ask him, how does John think about empowering risk and not being afraid to fail at the early stages? So I'd love to hear your thoughts by stealing Tony's question there on empowering risk and not being afraid to fail.

A Yeah, so the way we think about it, again, if you think that the creative founder is, is our society's most Precious resource, which I do, and, and we as a firm believe that, then their time, the founder's time, is worth way more than all of the capital we have at True. So we manage now seven funds, a 1,000,000,004 or so, something like that in capital, but what, just one founder's time and opportunity cost is so much more than that, so much more valuable than that, and so with that in mind, we want to try big things. We want to be out in the frontier, and we want to empower those founders to try big things, and Not worry about failing. And when I say not worry about failing, of course, nobody likes to fail or not have things work out. That's not it. But to be not just structurally aligned to be bold and take a big swing at a market and be far ahead, but also psychologically aligned and empowered. And so what we say when we write, so our average initial investment is, you know, somewhere between one and three million dollars. We're currently operating out of a three hundred million dollar fund. So our initial check is less than one percent of the fund. And every time we write A check to a seed founder. We, of course, are fully bought in. So we're, we're not, you know, in any, what I'm about to say is not in any way a hedge or anything like that. We're fully there. But on the ot…

AI assessment note: “we want to empower those founders to try big things, and Not worry about failing”

Q Why, why, why does it not fit? And then how should it change? Do you think?

A Board meetings in later companies are designed to report the progress of the management team to effectively the shareholders. That is the, you know, legally the official construct, right? Shareholders elect the board, the board, in official, in corporate law, the board hires and monitors management teams. So in later stage companies, even, even B and C stage companies, that construct tends to be more appropriate. You know, there's a lot of things happening at a company. There are lots of different shareholders or lots of different constituents that the board reports. Needs to represent. And so it's a very appropriate construct. The problem is in early stage companies. And by the way, so again, I just said the word reporting a lot. So the job of the board is essentially to be reported to. We don't think that that's really appropriate. It's one small role for a board in a seed or series A stage company. And really the board needs to, again, embolden, empower, protect, you know, focus, you Right. Uh, try and remove obstacles. And of course, every board has some of that. I would just say that the percentage of time devoted to strategy leadership versus reporting in an early stage company is kind of like 90% on the first two and 10% reporting. If you're doing your job as an early stage investor with, with just with a founding team, you should really know what's going on at the compa…

AI assessment note: “percentage of time devoted to strategy leadership versus reporting in an early stage company”

Q I thought you were, I thought you were going to say Brad Feld Venture Deals. I was, I was about to go, yes, I am with you, John. And then you were like, Moby Dick. I was like, what the fuck? Yeah. Fantastic. Why Moby Dick?

A If you're good at what we do, you're out chasing the whale in the middle of the ocean, and there's nobody else around, and the elements are against you, and there are sharks in the ocean, and there are crazy captains on the ship, And there are strange other things just all around you. If you're really, really good at early stage venture, that's where you want to be. You don't want to be at the Rosewood schmoozing with other VCs trying to figure out what they did and what, you know, what, what you can do to be a, to be a, you know, a little copy of that. You've got to be out in the frontier, way, way out there. And Moby Dick is just the classic, like in search of the white whale. We are all searching for the white whale. It might be called Google or Facebook or Peloton or whatever it is. But that's what we're after, and so that book to me, and there's, there's kind of a newer version, a really phenomenal newer version called The North Sea, but that book to me just epitomizes the really grandness of our quest, and also where we should be when we're trying to, to pursue that quest, and it is not, it's really out in the ocean. I mean, you've got to be so far ahead in this industry, and I, we just constantly think about that at true, is how can we be out in those very, very uncomfortable Not forgiving places.

AI assessment note: “Moby Dick is just the classic, like in search of the white whale.”

Q Why, why, why does it not fit? And then how should it change? Do you think?

A Board meetings in later companies are designed to report the progress of the management team to effectively the shareholders. That is the, you know, legally the official construct, right? Shareholders elect the board, the board, in official, in corporate law, the board hires and monitors management teams. So in later stage companies, even, even B and C stage companies, that construct tends to be more appropriate. You know, there's a lot of things happening at a company. There are lots of different shareholders or lots of different constituents that the board reports. Needs to represent. And so it's a very appropriate construct. The problem is in early stage companies. And by the way, so again, I just said the word reporting a lot. So the job of the board is essentially to be reported to. We don't think that that's really appropriate. It's one small role for a board in a seed or series A stage company. And really the board needs to, again, embolden, empower, protect, you know, focus, you Right. Uh, try and remove obstacles. And of course, every board has some of that. I would just say that the percentage of time devoted to strategy leadership versus reporting in an early stage company is kind of like 90% on the first two and 10% reporting. If you're doing your job as an early stage investor with, with just with a founding team, you should really know what's going on at the compa…

AI assessment note: “percentage of time devoted to strategy leadership versus reporting in an early stage company”

Q that is, but I do want to touch on something that Tony, your colleague, actually said to me relating to the operating experience elements. Saying that he likes to straddle the role between founder and investor. I'm intrigued with the operational and kind of entrepreneurial experience that you described there. Is this very much something that you like to do in terms of straddling the role between founder and investor?

A Yeah, absolutely. We started true and we actually named the firm true because we thought that entrepreneurs deserved a better, more aligned partner in their cap table and better, more aligned partner on their board. And so as their investor for the life of the business and frankly, We really thought the needs of the startup, the creative, what we call the creative founder, the founder at the beginning and their teams, we thought they were underserved. And we think that the role of the early stage investor is to fully support and fully embolden those founders to take major, major risk and be bold and daring. And so the answer, the answer to that question is yes, we think the entrepreneurial mindset and also the, as, as Tony would say, the sort of founder mindset is Is essential to your role as an early stage investor, certainly here at true, because you know, let's face it, the most creative people in our economy today are the startup founders and the most daring and bold, and also frankly, the least supported are those startup founders. And so it's not just about raising your, your first initial seed rent of capital. It's about all of the other things you as a founder need to succeed, recruiting a team, building a culture, you know, access to the industry downstream capital, which we'll talk about in a bit. So We think it's essential to be fully aligned with the founder from da…

AI assessment note: “Yeah, absolutely. We started true and we actually named the firm true”

Q How do LPs respond to that in a time when we've really seen quite a few VCs return to the batting average model, as you said, of loss aversion? Is there an instant reaction from the LP community to the maximizing risk?

A I think it's not meant to be provocative, but sometimes it does provoke reaction, and the short answer is people say, tell me more. How? And then we describe a lot of elements to our strategy at true, which is not just about, again, the asset allocation was structurally aligns us to take big risk, the size of the funds, the size of our team. You know, we have by far the largest and most talented entrepreneur team in our segment. There's nobody even close in terms of in the seed segment that has, you know, Tony Conrad, Tony Schneider, Ohm, Kevin, I could just go on and on. And we have just an enormously talented and deep team, all of the Whom have started companies in their careers? So anyway, so the answer to that is not, you can't just say it. You have to then describe your strategy of how you do it, and we have a very cohesive strategy for doing so, and we're very public about it. We talk about it all the time, and the good news is now we're 11 years old, and it works. The strategy consistently puts us early in big markets, whether it's, you know, in MakerBot or Fitbit or WordPress or Peloton or, you know, all these names and things, but what really what True is all about is being consistently early in very large markets with the best entrepreneurs.

AI assessment note: “the short answer is people say, tell me more. How?”

Q How do LPs respond to that in a time when we've really seen quite a few VCs return to the batting average model, as you said, of loss aversion? Is there an instant reaction from the LP community to the maximizing risk?

A I think it's not meant to be provocative, but sometimes it does provoke reaction, and the short answer is people say, tell me more. How? And then we describe a lot of elements to our strategy at true, which is not just about, again, the asset allocation was structurally aligns us to take big risk, the size of the funds, the size of our team. You know, we have by far the largest and most talented entrepreneur team in our segment. There's nobody even close in terms of in the seed segment that has, you know, Tony Conrad, Tony Schneider, Ohm, Kevin, I could just go on and on. And we have just an enormously talented and deep team, all of the Whom have started companies in their careers? So anyway, so the answer to that is not, you can't just say it. You have to then describe your strategy of how you do it, and we have a very cohesive strategy for doing so, and we're very public about it. We talk about it all the time, and the good news is now we're 11 years old, and it works. The strategy consistently puts us early in big markets, whether it's, you know, in MakerBot or Fitbit or WordPress or Peloton or, you know, all these names and things, but what really what True is all about is being consistently early in very large markets with the best entrepreneurs.

AI assessment note: “the short answer is people say, tell me more. How?”

Q that is, but I do want to touch on something that Tony, your colleague, actually said to me relating to the operating experience elements. Saying that he likes to straddle the role between founder and investor. I'm intrigued with the operational and kind of entrepreneurial experience that you described there. Is this very much something that you like to do in terms of straddling the role between founder and investor?

A Yeah, absolutely. We started true and we actually named the firm true because we thought that entrepreneurs deserved a better, more aligned partner in their cap table and better, more aligned partner on their board. And so as their investor for the life of the business and frankly, We really thought the needs of the startup, the creative, what we call the creative founder, the founder at the beginning and their teams, we thought they were underserved. And we think that the role of the early stage investor is to fully support and fully embolden those founders to take major, major risk and be bold and daring. And so the answer, the answer to that question is yes, we think the entrepreneurial mindset and also the, as, as Tony would say, the sort of founder mindset is Is essential to your role as an early stage investor, certainly here at true, because you know, let's face it, the most creative people in our economy today are the startup founders and the most daring and bold, and also frankly, the least supported are those startup founders. And so it's not just about raising your, your first initial seed rent of capital. It's about all of the other things you as a founder need to succeed, recruiting a team, building a culture, you know, access to the industry downstream capital, which we'll talk about in a bit. So We think it's essential to be fully aligned with the founder from da…

AI assessment note: “And so the answer, the answer to that question is yes”

Q iteration and results back. One thing that obviously comes back is the data. And when the data is potentially unclear, I'd love to hear your thoughts as to how you selectively allocate reserve capital. As you said, you have a further maybe two hundred and ninety seven million to follow on in funding. How do you look to selectively allocate reserve capital? Capital. And what's your thought process around that?

A Yeah, absolutely. And it's a critical part. You know, the dirty little secret of venture capital is half the time we lose more than half the time, but half the time straight off the bat as an industry, we lose. I always say to friends starting in this business, the number one thing you have to do is get good at losing because it's going to happen way more number of times if you're doing this right than winning. Winning's by the way, pretty easy. It's not easy to do, but it's easy to enjoy and you know, everything goes right, but losing is really hard. And so Instrumenting both the firm and again, coming back to the psychology of your team, right? And structuring your team and your decision-making process so that you actually support risk in the early check. What we say is in the first check, you must dream, right? It's the first check is art. The first check is really understanding whether or not the initial, the second first check is probably a bad, but it's probably a bad phrase, but like the initial decision, when you decide to support an entrepreneur's vision is You need to dream because the best things are not easy to see. The best markets, there's no one operating in them today, right? So if we're doing our job right, we're out in the wild with very few data points to look at, but we have a methodology for being out in the wild, and we have a methodology for thinking abou…

AI assessment note: “the second, third, and fourth check, that's challenging... switch into much more of a... judgy”

Q iteration and results back. One thing that obviously comes back is the data. And when the data is potentially unclear, I'd love to hear your thoughts as to how you selectively allocate reserve capital. As you said, you have a further maybe two hundred and ninety seven million to follow on in funding. How do you look to selectively allocate reserve capital? Capital. And what's your thought process around that?

A Yeah, absolutely. And it's a critical part. You know, the dirty little secret of venture capital is half the time we lose more than half the time, but half the time straight off the bat as an industry, we lose. I always say to friends starting in this business, the number one thing you have to do is get good at losing because it's going to happen way more number of times if you're doing this right than winning. Winning's by the way, pretty easy. It's not easy to do, but it's easy to enjoy and you know, everything goes right, but losing is really hard. And so Instrumenting both the firm and again, coming back to the psychology of your team, right? And structuring your team and your decision-making process so that you actually support risk in the early check. What we say is in the first check, you must dream, right? It's the first check is art. The first check is really understanding whether or not the initial, the second first check is probably a bad, but it's probably a bad phrase, but like the initial decision, when you decide to support an entrepreneur's vision is You need to dream because the best things are not easy to see. The best markets, there's no one operating in them today, right? So if we're doing our job right, we're out in the wild with very few data points to look at, but we have a methodology for being out in the wild, and we have a methodology for thinking abou…

AI assessment note: “second, third, and fourth check, that's challenging... switch into much more of a... judgy”