The Exchanges

Q to the partnership element, which we actually touched on when you mentioned Hayley, because I chatted to many of your partners before the show, and I spoke to Finn Barnett explicitly, and he said to me that VC has to be a picker of companies, but a founder has to pick two. And so he asked you, how do you think about the founder and the pick to start with?

A So I've never had the time to write a book, but if I was going to write a book, it would be called the pick. There are a ton of books focused on marketing. There are a ton of books focused on hiring. There are very few books that are focused on the skill of picking, and I believe that picking is a skill. As a VC, for example, I might spend 50% of my time helping companies after we've invested. I might spend I spend 40% of my time sourcing network building at the top of funnel, and maybe when you sort of look at the amount of time we spend in partner meetings and in diligence sort of doing the pick, it's 10% of our time, but it probably drives 80 plus percent of the return. I would argue that for entrepreneurs, that time ratio is even more exacerbated. You know, most founders spend less than five to 10 weeks picking an idea. But they're going to then spend five to 10 years executing on that idea, and so if I had to give one critique of founders, like, the most common critique I give is I feel like they're rushing their pick, and it's not a muscle that they use often. So, you know, like, when I sit down and look, like, who are the best pickers I've worked with? It's founders like Nat and Zach from Invite Media and Flatiron, but they spent months on their pick, And so I think that the first advice I give to founders is don't set an arbitrary time. When you set an arbitrary time, y…

AI assessment note: “the most common critique I give is I feel like they're rushing their pick”

Q Okay, so I want to start on an element that I always struggle on, and it's price sensitivity. As a seed investor, it's commonly suggested So the price doesn't really matter. Peter Fenton said never turn down a deal based on valuation, Harry. It's a mental trap. How do you think about your own price sensitivity stay, Josh?

A I go back to some of our earliest investments, and also some of our earliest mistakes, right? Like, first round offered Twitter their first term sheet months before Union Square led their round. We offered Dropbox their first term sheet, and I'd say we lost both of those due to sticking to price. So it's clearly scarred in me that there needs to be flexibility on price. That said, it is a slippery slope. You look at a company and you say five pre, seven pre, 10 pre, 15 pre. The difference between five and 15, it's three X. That by itself could take a fund from a nine X fund to a three X fund from a three X fund to a one X fund. So while I agree with Peter Fenton, I also agree with Jim Breyer, who once told me that valuation is both art and science. The science is picking a price, and the art is knowing which five percent of the deals to invest in at any price. So I think first round and myself, we fluctuated over time, like after the Dropbox and the Twitter thing, we became very price insensitive, and I think now we found a real middle ground where we kind of understand that it's rare that price will be the only reason to lose an investment opportunity, but we also have to have some discipline if we aspire to produce top-tier returns.

AI assessment note: “I think now we found a real middle ground where we kind of understand”

Q I absolutely love that story, and I'd love to see that original email. Speaking of kind of that first insertion point there being the first check, I'm always a big believer, Josh, the best investments are made not once but twice on reserve. How do you think about reserve allocation today with first round? I'd love to hear that.

A So we've learned a lot. Right. Our first fund was a seven million dollar fund with three and a half million set aside for initial investments and three and a half million for follow-on. So, fifty-fifty split. Over time, that shifted. There was a point in time where I think we had a quarter of our fund being reserved for initial investments and three quarters for follow-on. Today, we're putting a little more up front. We're kind of back to where we started. We're pretty close to fifty-fifty, primarily because what we've seen is later stage valuations have increased Far faster and far greater than seed stage valuations, and as a result, when we sit down and say, where do we want our blended capital deployed? We want to make sure that we're buying sufficient ownership up front, you know, but we are a fairly large fund. What's interesting is the fund we're investing out of now is a hundred and eighty million dollar fund. We're still investing at a super early stage. We're still investing at pre-seed, at seed, and therefore we know that there's going to be a lot of Downstream rounds, and if you look at some of the companies that have gone public, whether it's Blue Apron or On Deck, we did follow on materially, which did produce stronger returns.

AI assessment note: “Today, we're putting a little more up front. We're pretty close to fifty-fifty”

Q companies, and that's a very bold one. But speaking of kind of venture partnerships and transforming over time, as you mentioned there, great venture firms are commonly suggested to succeed in generational transition. Sequoia often comes to mind as kind of one of the best. I'd love to hear, what's your thinking on generational transition, Josh, and what do you think is required for it to be done really successfully?

A So, we've started having conversations on this very early, because I've seen more great Funds get killed and die, or just great brands get damaged because of failed generational transition. And I think there are a few things that are needed. The first is open and honest conversation. So my co-founder Howard Morgan was older than I am, but we had transparent conversations about generational transition for several funds before he stepped back. And as a partnership, we get together often to discuss our personal goals as well as our funds goals. So I think that we all know where we stand on our own personal journeys, what we're solving for, and it enables us to be really transparent about where we are on our journey at first round. And I think the second thing is a realization that each fund is a new company. It's a clean cap table, and it should be divided up based on each partner's contributions to the current fund. I've just seen too many firms get destroyed when the old partners try to hold on to too much economics in new funds. They're trying to sort of claim future credit for past actions, and so at first round, we really view each new fund as a new cap table so that there isn't that partner tax from the prior generations of partners, and I, I wouldn't say it's perfect and it's still a work in progress, but as Howard has stepped back, he kind of set a path for other partners …

AI assessment note: “The first is open and honest conversation... the second thing is a realization”

Q Not at all, but I want to get started today with a little on you. So how did you make your way into the wonderful world of venture, Josh? And what was the original founding story of First Round?

A Sure, so I wasn't sure I wanted to be a venture capitalist. I came at first round like I came at a company, which is I saw a market opportunity. Before first round, I'd started and exited three companies. The first company in 91 took five million dollars to get the first product ship. The second company in 98 took two and a half million dollars to get to first product ship, and the third company took 500 to 750,000. So in the course of my own career, there was an order of magnitude drop in the cost to get to first product ship. Not to grow, but to at least just get a product to touch a customer. During that same period of time, the average venture fund had tripled in size, and the average initial investment had tripled in size. So when you look at a VC seeking three X increase in capital inefficiency, and a 10 X increase in capital efficiency, that's a 30 X gap. And I was angel investing during this time and sort of said, you know, there seems to be a real opportunity to create a fund that could institutionalize angel. And that led us to create First round capital. I co-founded it with my partner, Howard Morgan. And our first fund was just a seven million dollar fund raised in 2004, primarily our capital with some friends. And it was a part time job. And then we kept raising these little annual funds until we could figure out that, you know what, we have something here. And it …

AI assessment note: “there seems to be a real opportunity to create a fund that could institutionalize angel”

Q Those were two cases where maybe you didn't have the flexibility so early on kind of thinking on price. If you look back at the ones where you maybe did win the deals, and they've turned out very well, where you did flex on price, is there one that comes to mind? And is that kind of a subsequent reasoning behind that willingness to flex on price?

A Sure. So, uh, if Twitter is the painful example, I'd say Square is the counterpoint to that, right? So, we offered Twitter a term sheet at a five million pre-money valuation. We were an investor in Odeo, Eb Prior companies. So I think I was user Twitter user number 275. We were right there. We offered five. Fred came in at 20 a few months later, and to make it even more painful, called me and said, you know, we're doing a round at 20, and I, I know I didn't take your term sheet of five, but if you want to put money in on this round, you can, and I didn't do it. We just didn't do it. So he said, no, that's too expensive. At the time, we didn't know what we were doing. It was our first or second year of business, and at the time, we'd never invested in a company greater than a ten million pre- So we said, you know, this is two, this is four X higher than our term sheet, and this is two X higher than our all time high. Thanks, but no thanks. I have that email like taped up on my computer monitor, but it was very painful and we learned something. So when Jack was starting square and we met with him, he said, well, you know, if you thought Twitter was expensive, this is going to be even more expensive. And his first round was at a 40 pre and we learned our lesson and we were fortunate enough to be the Second largest investor behind Coastland in that first round there, and so I think…

AI assessment note: “Square is the counterpoint... that was an example where we were willing to flex on price.”

Q just incredible to hear that relationship, and it goes without saying that Nat said the many incredible experiences you guys have had together, But I do want to switch sides of the table now, and before we move into the quickfire round, and quickly discuss the first round partnership. We mentioned Haley, we mentioned Finn. I want to start on how do you think about an approach choosing partners, Josh?

A So, I believe that when I look back at my career in venture, I would rather be known as a better picker of partners than a picker of companies, because that's what enables a venture firm to scale, grow, and endure just beyond any one person. And I'm thrilled with the partners we have today. I do think if there's one thing I would do differently early on, it would be to go a little further outside my network. In the beginning, I was very focused on people who I'd worked with before and known before. So my co-founder Howard, you know, he was my first angel investor, 15 years before we started First Round. My partner, Chris Freilich, was the first executive hire at my company, Half.com, and I'd known him for 10 years. And Bill Trenchard, I knew since he was in college, so, and when we added Haley, we had known Haley for six years through our experience at Birchbox, so I think that that enabled us to start with a high degree of trust, a high degree of respect, but I think it also locked us into a very closed network and probably prevented us from attracting a more diverse partnership, you know, as Finn has talked about, you have technical debt and diversity debt, I think we're paying off some diversity debt now as a result.

AI assessment note: “In the beginning, I was very focused on people who I'd worked with before”

Q Not at all, but I want to get started today with a little on you. So how did you make your way into the wonderful world of venture, Josh? And what was the original founding story of First Round?

A Sure, so I wasn't sure I wanted to be a venture capitalist. I came at first round like I came at a company, which is I saw a market opportunity. Before first round, I'd started and exited three companies. The first company in 91 took five million dollars to get the first product ship. The second company in 98 took two and a half million dollars to get to first product ship, and the third company took 500 to 750,000. So in the course of my own career, there was an order of magnitude drop in the cost to get to first product ship. Not to grow, but to at least just get a product to touch a customer. During that same period of time, the average venture fund had tripled in size, and the average initial investment had tripled in size. So when you look at a VC seeking three X increase in capital inefficiency, and a 10 X increase in capital efficiency, that's a 30 X gap. And I was angel investing during this time and sort of said, you know, there seems to be a real opportunity to create a fund that could institutionalize angel. And that led us to create First round capital. I co-founded it with my partner, Howard Morgan. And our first fund was just a seven million dollar fund raised in 2004, primarily our capital with some friends. And it was a part time job. And then we kept raising these little annual funds until we could figure out that, you know what, we have something here. And it …

AI assessment note: “And that led us to create First round capital. I co-founded it with my partner”

Q Now, this is just where I love doing the show because I ruthlessly use it for my own self-improvement, but I have to ask, I just gained my first institutional board seat with Stride. What would you advise me, given your wealth of knowledge? Think back to that first What would you advise me?

A The first and second board meeting you should go to should be listening far more than participating. I think it's important to context load, to learn how an entrepreneur thinks about a problem, and so I find that my engagement kicks in far higher in meetings three, four, five, et cetera, than meetings one and two. The other thing I would do is I would spend time at the company and with the direct reports Before the first board meeting, you don't want the board meeting to be sort of the only way you're collecting information. I think a board meeting is a concentrated point of discussion, but it shouldn't be the only opportunity to collect information about the company. If your only real interaction with the founder and his or her team is in the board meeting, I think you're doing it wrong.

AI assessment note: “first and second board meeting you should go to should be listening far more”

Q Those were two cases where maybe you didn't have the flexibility so early on kind of thinking on price. If you look back at the ones where you maybe did win the deals, and they've turned out very well, where you did flex on price, is there one that comes to mind? And is that kind of a subsequent reasoning behind that willingness to flex on price?

A Sure. So, uh, if Twitter is the painful example, I'd say Square is the counterpoint to that, right? So, we offered Twitter a term sheet at a five million pre-money valuation. We were an investor in Odeo, Eb Prior companies. So I think I was user Twitter user number 275. We were right there. We offered five. Fred came in at 20 a few months later, and to make it even more painful, called me and said, you know, we're doing a round at 20, and I, I know I didn't take your term sheet of five, but if you want to put money in on this round, you can, and I didn't do it. We just didn't do it. So he said, no, that's too expensive. At the time, we didn't know what we were doing. It was our first or second year of business, and at the time, we'd never invested in a company greater than a ten million pre- So we said, you know, this is two, this is four X higher than our term sheet, and this is two X higher than our all time high. Thanks, but no thanks. I have that email like taped up on my computer monitor, but it was very painful and we learned something. So when Jack was starting square and we met with him, he said, well, you know, if you thought Twitter was expensive, this is going to be even more expensive. And his first round was at a 40 pre and we learned our lesson and we were fortunate enough to be the Second largest investor behind Coastland in that first round there, and so I think…

AI assessment note: “if Twitter is the painful example, I'd say Square is the counterpoint to that”

Q Final element I have to touch on today, Josh. You mentioned, uh, credit there. How do you think about attribution today with first round?

A I could go on for a long time about attribution. So there are clearly two schools of thought, and I don't think there's any one right answer, but at first round, we've chosen to play the venture game as a team. And what I've seen is that when people are obsessed over building their own track records, sometimes they optimize for the wrong thing. If there's a deal referral source that Bill and Finn and I all know the three of us shouldn't be working that same relationship to try to refer entrepreneurs to us. One of us should, but obviously if you have attribution and a personal track record, you're thinking about that. You want to build a firm where the founder works with the partner who's best suited to help him or her. So when I first got introduced to Matt Salzberg at Blue Apron, well, the company was in New York. Finn was in New York at the time. It was subscription commerce. Finn was point on Birch Fox, a subscription commerce company at the time. And Finn had recently investigated a few companies in the food space. It made a ton of sense to transfer that company to Finn. We've had companies where one partner has brought a company into a partner meeting, and then during the meeting got backward leaning, got spooked by something, and then another partner said, no, we should do that deal. How do you give attribution for that? It also creates challenges around follow-on investm…

AI assessment note: “at first round, we've chosen to play the venture game as a team.”

Q I absolutely love that story, and I'd love to see that original email. Speaking of kind of that first insertion point there being the first check, I'm always a big believer, Josh, the best investments are made not once but twice on reserve. How do you think about reserve allocation today with first round? I'd love to hear that.

A So we've learned a lot. Right. Our first fund was a seven million dollar fund with three and a half million set aside for initial investments and three and a half million for follow-on. So, fifty-fifty split. Over time, that shifted. There was a point in time where I think we had a quarter of our fund being reserved for initial investments and three quarters for follow-on. Today, we're putting a little more up front. We're kind of back to where we started. We're pretty close to fifty-fifty, primarily because what we've seen is later stage valuations have increased Far faster and far greater than seed stage valuations, and as a result, when we sit down and say, where do we want our blended capital deployed? We want to make sure that we're buying sufficient ownership up front, you know, but we are a fairly large fund. What's interesting is the fund we're investing out of now is a hundred and eighty million dollar fund. We're still investing at a super early stage. We're still investing at pre-seed, at seed, and therefore we know that there's going to be a lot of Downstream rounds, and if you look at some of the companies that have gone public, whether it's Blue Apron or On Deck, we did follow on materially, which did produce stronger returns.

AI assessment note: “Today, we're putting a little more up front. We're kind of back to where we started.”

Q companies, and that's a very bold one. But speaking of kind of venture partnerships and transforming over time, as you mentioned there, great venture firms are commonly suggested to succeed in generational transition. Sequoia often comes to mind as kind of one of the best. I'd love to hear, what's your thinking on generational transition, Josh, and what do you think is required for it to be done really successfully?

A So, we've started having conversations on this very early, because I've seen more great Funds get killed and die, or just great brands get damaged because of failed generational transition. And I think there are a few things that are needed. The first is open and honest conversation. So my co-founder Howard Morgan was older than I am, but we had transparent conversations about generational transition for several funds before he stepped back. And as a partnership, we get together often to discuss our personal goals as well as our funds goals. So I think that we all know where we stand on our own personal journeys, what we're solving for, and it enables us to be really transparent about where we are on our journey at first round. And I think the second thing is a realization that each fund is a new company. It's a clean cap table, and it should be divided up based on each partner's contributions to the current fund. I've just seen too many firms get destroyed when the old partners try to hold on to too much economics in new funds. They're trying to sort of claim future credit for past actions, and so at first round, we really view each new fund as a new cap table so that there isn't that partner tax from the prior generations of partners, and I, I wouldn't say it's perfect and it's still a work in progress, but as Howard has stepped back, he kind of set a path for other partners …

AI assessment note: “I think there are a few things that are needed. The first is open”

Q that to heart before the show, because I actually spoke to one of your founders, Nat at Flatiron, before the show, and I also spoke to Finn about your relationship with Nat. I promise I'm not stalking, but they told me about your relationship, and Finn specifically suggested I asked this one, but how do you describe your relationship with Nat, and what do you think makes it so effective?

A So I've known Nat now for well over a decade. I met him when he was 18 years old, when he was a freshman at Penn, and was blown away by his maturity, his entrepreneurial instincts, and by his entrepreneurial experiences at such a young age that he became first round's first intern, and then the following summer, when he wanted to get experience in Silicon Valley, we helped him get a job at one of our companies, and then the following summer, we Funded his company, Invite Media, as the first venture fund, but what's been fascinating about that relationship has been really the transformation. You know, I think I might have been one of Nat's mentors and advisors early on, but it's now transitioned to the point where Nat has built a company to far larger than I've ever built a company. He's managed teams far larger than I've ever managed. He's had an exit with his fraud iron exit far larger than I've ever had. It's so rewarding that I'm learning from him now, and as he's become an angel investor, we get to work together in that capacity as well, so what I love about the relationship, it's probably one of the most rewarding professional relationships I've ever had, but where maybe the student has become teacher, and it's now far more of a two-way street.

AI assessment note: “where maybe the student has become teacher, and it's now far more of a two-way street.”

Q I absolutely agree with that. In terms of the investment decision-making process, how does that Look like internally, and does it differ when looking at reserve versus initial?

A It does not. As a partnership, we decide investments together. It's two-thirds. We don't need unanimity. No partner has a veto, and fundamentally, it's a pretty collaborative process. You know, I would say that it's evolved over the years. We're all type A. We're all driven. We're all competitive, and venture is a business where you don't have short-term milestones, so I'd say In the early days of our partnership, I think that the partners viewed it as a tournament to win, right? You bring a company into a, into a partner meeting, and obviously you're excited by it, so your goal of the partner meeting is to get a deal done. And I'd say, specifically when Haley joined us, she really challenged us and framed the meeting differently, so that today when companies come in, and I bring a company in either for an initial investment or a follow-on investment, the goal isn't to sort of win, but rather the goal is to find truth. And a successful outcome could be when I learn something from my partners, and we don't invest in a company that I brought in, and vice versa. So for us, it's really conversational, and it tends to be really focused on, like, what is the objective truth, what's knowable, and what's not, and what are the risks we're taking?

AI assessment note: “It does not. As a partnership, we decide investments together. It's two-thirds.”

Q Now, this is just where I love doing the show because I ruthlessly use it for my own self-improvement, but I have to ask, I just gained my first institutional board seat with Stride. What would you advise me, given your wealth of knowledge? Think back to that first What would you advise me?

A The first and second board meeting you should go to should be listening far more than participating. I think it's important to context load, to learn how an entrepreneur thinks about a problem, and so I find that my engagement kicks in far higher in meetings three, four, five, et cetera, than meetings one and two. The other thing I would do is I would spend time at the company and with the direct reports Before the first board meeting, you don't want the board meeting to be sort of the only way you're collecting information. I think a board meeting is a concentrated point of discussion, but it shouldn't be the only opportunity to collect information about the company. If your only real interaction with the founder and his or her team is in the board meeting, I think you're doing it wrong.

AI assessment note: “The first and second board meeting you should go to should be listening far more”

Q I mean, I'm sure you'll get many outreach from publishers post this episode on the pick as a serial book coming out, but I do have to ask, while we're on the pick, How do you think about kind of advising founders on picking the right investors for them for their journey?

A I think that, and it's an area where I think people are rushing that pick as well right now. An investor is oftentimes more than just capital in both good ways and bad ways. I've seen investors help founders and try to create tremendous value, and I've also seen investors destroy a tremendous amount of value. And I think that founders should be self-aware to know what are they looking for in an investor. And how does an investor's temperament work with them? How does an investor's view on their role work with them? How does an investor's credibility within their fund work with them? And so much of this comes from A, spending time together, and B, doing reference calls. It's amazing to me how few founders ask me for references when I am asking them for references. And the ability to do VC references, specifically off reference sheets, Of companies that didn't work out. It's never a straight line. This is a tough journey, and you can't fire your board member. You can't fire your investor. So I think it's critical to sort of understand how does this investor work, and how does the fund work, right? If you're raising money from a seed fund, you should know what percentage of time does this seed fund follow on in the next round, right? Like first round, we pretty much tell founders when you get the first round, the second round comes free. We will take our prorata and a hundred perc…

AI assessment note: “so much of this comes from A, spending time together, and B, doing reference calls.”

Q that to heart before the show, because I actually spoke to one of your founders, Nat at Flatiron, before the show, and I also spoke to Finn about your relationship with Nat. I promise I'm not stalking, but they told me about your relationship, and Finn specifically suggested I asked this one, but how do you describe your relationship with Nat, and what do you think makes it so effective?

A So I've known Nat now for well over a decade. I met him when he was 18 years old, when he was a freshman at Penn, and was blown away by his maturity, his entrepreneurial instincts, and by his entrepreneurial experiences at such a young age that he became first round's first intern, and then the following summer, when he wanted to get experience in Silicon Valley, we helped him get a job at one of our companies, and then the following summer, we Funded his company, Invite Media, as the first venture fund, but what's been fascinating about that relationship has been really the transformation. You know, I think I might have been one of Nat's mentors and advisors early on, but it's now transitioned to the point where Nat has built a company to far larger than I've ever built a company. He's managed teams far larger than I've ever managed. He's had an exit with his fraud iron exit far larger than I've ever had. It's so rewarding that I'm learning from him now, and as he's become an angel investor, we get to work together in that capacity as well, so what I love about the relationship, it's probably one of the most rewarding professional relationships I've ever had, but where maybe the student has become teacher, and it's now far more of a two-way street.

AI assessment note: “where maybe the student has become teacher, and it's now far more of a two-way street.”

Q Final element I have to touch on today, Josh. You mentioned, uh, credit there. How do you think about attribution today with first round?

A I could go on for a long time about attribution. So there are clearly two schools of thought, and I don't think there's any one right answer, but at first round, we've chosen to play the venture game as a team. And what I've seen is that when people are obsessed over building their own track records, sometimes they optimize for the wrong thing. If there's a deal referral source that Bill and Finn and I all know the three of us shouldn't be working that same relationship to try to refer entrepreneurs to us. One of us should, but obviously if you have attribution and a personal track record, you're thinking about that. You want to build a firm where the founder works with the partner who's best suited to help him or her. So when I first got introduced to Matt Salzberg at Blue Apron, well, the company was in New York. Finn was in New York at the time. It was subscription commerce. Finn was point on Birch Fox, a subscription commerce company at the time. And Finn had recently investigated a few companies in the food space. It made a ton of sense to transfer that company to Finn. We've had companies where one partner has brought a company into a partner meeting, and then during the meeting got backward leaning, got spooked by something, and then another partner said, no, we should do that deal. How do you give attribution for that? It also creates challenges around follow-on investm…

AI assessment note: “at first round, we've chosen to play the venture game as a team.”

Q to the partnership element, which we actually touched on when you mentioned Hayley, because I chatted to many of your partners before the show, and I spoke to Finn Barnett explicitly, and he said to me that VC has to be a picker of companies, but a founder has to pick two. And so he asked you, how do you think about the founder and the pick to start with?

A So I've never had the time to write a book, but if I was going to write a book, it would be called the pick. There are a ton of books focused on marketing. There are a ton of books focused on hiring. There are very few books that are focused on the skill of picking, and I believe that picking is a skill. As a VC, for example, I might spend 50% of my time helping companies after we've invested. I might spend I spend 40% of my time sourcing network building at the top of funnel, and maybe when you sort of look at the amount of time we spend in partner meetings and in diligence sort of doing the pick, it's 10% of our time, but it probably drives 80 plus percent of the return. I would argue that for entrepreneurs, that time ratio is even more exacerbated. You know, most founders spend less than five to 10 weeks picking an idea. But they're going to then spend five to 10 years executing on that idea, and so if I had to give one critique of founders, like, the most common critique I give is I feel like they're rushing their pick, and it's not a muscle that they use often. So, you know, like, when I sit down and look, like, who are the best pickers I've worked with? It's founders like Nat and Zach from Invite Media and Flatiron, but they spent months on their pick, And so I think that the first advice I give to founders is don't set an arbitrary time. When you set an arbitrary time, y…

AI assessment note: “most common critique I give is I feel like they're rushing their pick”

Q I mean, I'm sure you'll get many outreach from publishers post this episode on the pick as a serial book coming out, but I do have to ask, while we're on the pick, How do you think about kind of advising founders on picking the right investors for them for their journey?

A I think that, and it's an area where I think people are rushing that pick as well right now. An investor is oftentimes more than just capital in both good ways and bad ways. I've seen investors help founders and try to create tremendous value, and I've also seen investors destroy a tremendous amount of value. And I think that founders should be self-aware to know what are they looking for in an investor. And how does an investor's temperament work with them? How does an investor's view on their role work with them? How does an investor's credibility within their fund work with them? And so much of this comes from A, spending time together, and B, doing reference calls. It's amazing to me how few founders ask me for references when I am asking them for references. And the ability to do VC references, specifically off reference sheets, Of companies that didn't work out. It's never a straight line. This is a tough journey, and you can't fire your board member. You can't fire your investor. So I think it's critical to sort of understand how does this investor work, and how does the fund work, right? If you're raising money from a seed fund, you should know what percentage of time does this seed fund follow on in the next round, right? Like first round, we pretty much tell founders when you get the first round, the second round comes free. We will take our prorata and a hundred perc…

AI assessment note: “so much of this comes from A, spending time together, and B, doing reference calls.”

Q Go on, it reminds you of what? I, I'm too intrigued. You're leaving me a venture nerd on a cliffhanger.

A I, at that moment in time, I had just as much experience as On the internet, as a veteran did, and sort of, this was a magical time because the gap between veteran and rookie kind of got, like, thrown out of whack. Normally, the veteran has so much of an advantage, and this new platform kind of nullified a lot of that advantage, and I think we've seen that in other, like, re-platforms. We're seeing it now in crypto, for example, where I'd argue that there are seniors in college who have just more experience in crypto than derivative traders at Goldman Sachs. It's this dislocation in the experience curve. That creates real opportunities for rookies. And when you sit down and look at life science and healthcare companies and their medicinal chemists and their traditional drug discovery flows and all of those assets, I would argue that AI right now is such a disruptive platform that it really is reducing, not eliminating, but reducing the gap between veteran and rookie. And Ben Kamen, let's bring discovery was just, was an exceptional rookie that I wanted to bet on here.

AI assessment note: “reducing the gap between veteran and rookie”

Q speak to Hayley before the show. I do want to discuss another element that I'd love your advice on, to be honest. Steve Sam, I tried to estimate how many hours on a board. Uh, my estimations led to 3000 hours. With that incredible experience in mind, how have you seen yourself evolve as a board member, Josh? Have there been kind of fundamental transformations in you, do you think?

A And I see this with a lot of early board members. I probably, in the very beginning, when I look at the boards I was on, I was coming from being an operator. So I was probably overly prescriptive in offering feedback and trying to sort of weigh in on too many things. Entrepreneurs are getting a ton of data. They're getting data from the market. They're getting data from customers. They're getting data from press. They're From competitors. They're getting data from investors and data from board members. And I think it's important to realize that as a board member, you don't have the full context of what's going on in the business. So what I've come to learn oftentimes is that the best board member isn't always the person that has all the right answers or thinks they have all the right answers. But oftentimes the best board member is the person who asks the right questions by asking the questions. You are enabling and empowering the person who has far more data than you do. The founder, the management team to make a better decision. And I think that's been a meaningful shift in my approach to boards. It's probably just, it just comes with, with experience and humility and realizing that my job isn't to have the answers. My job is to ask the questions. I also think it's really important to focus. Oftentimes if you get a board deck in advance and you have the You know, I might come…

AI assessment note: “that's been a meaningful shift in my approach to boards”

Q What do you know now, Josh, that you wish you'd known at the beginning of the first round journey?

A I'm wrong a lot. Um, you know, venture is an amazing, amazingly humbling business. You know, going back to Annie Duke, right, Annie Duke says in her book that, like, The more you play poker, the more you realize how much you have to learn. And I look back now at the table banging, where I bang the table with conviction for this or against this, and I had such certainty, and it was very binary. With time, I look back with amazing regret on so many of those binary decisions that in reality weren't binary. In reality, there's, there's a spectrum of probabilities and a spectrum of perspectives that And I think it's important not just to have a perspective and a point of view, but to have an understanding of your confidence in that perspective. It shouldn't always be a hundred percent or zero percent. It's fine to truly sort of understand that there's nuance, and I wish I had known that earlier.

AI assessment note: “there's nuance, and I wish I had known that earlier.”

Q The final element that I have to touch on is the element of time allocation. How do you spend your time across So often the big question is, you know, do you spend it with the winners, the outperformers, or do you spend it with maybe the more struggling companies, maybe salvaging cents on dollars? How do you think about that time allocation across the portfolio?

A So one of the things that I believe is that the first 18 to 24 months are a magical time in a company's life. So much is getting baked. The hunt for product market fit. It's the discovery of go-to-market and distribution and pricing and branding and hiring and The culture is being baked. Like, it's a magical time, and so one of the things that I've optimized for, rather than trying to divide my time company by company, is I try to think a bit about stage. We really, and I really try to focus my engagement on companies during that stage, so I tend to be far more proactive during that first 18 to 24 months, where I think we've built up a skill set and a competency around those go-to-market muscle movements, around the hunt for product market fit, And then we kind of shift to be a little more reactive when a company has gone on and raised to series A and series B. And what's interesting is those first 18 to 24 months, you don't know who the winners are yet, and you don't know who the strugglers are yet. You know, there are going to be companies that get an early start that stall, and there are going to be companies that are struggling for the first 18 months and then finally hit their groove. So I think of it less in terms of progress per company, And instead, think of it in terms of life stage of company, and for us, that first 24 months is just a point of maximum impact and maxi…

AI assessment note: “I think of it less in terms of progress per company”

Q I do want to ask though, Josh, because I actually asked Finn this same question. I asked, when was that moment for you when you really realized that investing was your life's work? You mentioned the element of serendipity there of getting into the game. Was there a moment where you realized that this was really what you were born to do?

A Yeah. I don't know if it's any one specific moment, but I think what I've come to realize is as an operator, you have to wear a hundred different hats. First meeting, you can be dealing with PR. Next meeting is career pathing. Next meeting is product. Next meeting is engineering. You just deal with so many things. And when I did a naked and honest assessment of my capabilities, I saw that of those hundred hats, maybe I'm average at 60 of them. I don't add incremental value or I don't destroy value. I'm probably value subtracting at 20 of them. And maybe add some marginal value add on 20. And I think what I learned very quickly when we were starting first round is that this is an opportunity that lets me focus on the 20% where I might have some marginal value add and eliminate the 80% where I'm average to value destroying. And that just seemed magical to me. The ability to craft a job where you could play to your strengths and you didn't have to worry and spend the time on the areas where maybe you didn't have a marginal contribution to make.

AI assessment note: “what I learned very quickly when we were starting first round is that this”

Q The final element that I have to touch on is the element of time allocation. How do you spend your time across So often the big question is, you know, do you spend it with the winners, the outperformers, or do you spend it with maybe the more struggling companies, maybe salvaging cents on dollars? How do you think about that time allocation across the portfolio?

A So one of the things that I believe is that the first 18 to 24 months are a magical time in a company's life. So much is getting baked. The hunt for product market fit. It's the discovery of go-to-market and distribution and pricing and branding and hiring and The culture is being baked. Like, it's a magical time, and so one of the things that I've optimized for, rather than trying to divide my time company by company, is I try to think a bit about stage. We really, and I really try to focus my engagement on companies during that stage, so I tend to be far more proactive during that first 18 to 24 months, where I think we've built up a skill set and a competency around those go-to-market muscle movements, around the hunt for product market fit, And then we kind of shift to be a little more reactive when a company has gone on and raised to series A and series B. And what's interesting is those first 18 to 24 months, you don't know who the winners are yet, and you don't know who the strugglers are yet. You know, there are going to be companies that get an early start that stall, and there are going to be companies that are struggling for the first 18 months and then finally hit their groove. So I think of it less in terms of progress per company, And instead, think of it in terms of life stage of company, and for us, that first 24 months is just a point of maximum impact and maxi…

AI assessment note: “think of it less in terms of progress per company, And instead... life stage”

Q speak to Hayley before the show. I do want to discuss another element that I'd love your advice on, to be honest. Steve Sam, I tried to estimate how many hours on a board. Uh, my estimations led to 3000 hours. With that incredible experience in mind, how have you seen yourself evolve as a board member, Josh? Have there been kind of fundamental transformations in you, do you think?

A And I see this with a lot of early board members. I probably, in the very beginning, when I look at the boards I was on, I was coming from being an operator. So I was probably overly prescriptive in offering feedback and trying to sort of weigh in on too many things. Entrepreneurs are getting a ton of data. They're getting data from the market. They're getting data from customers. They're getting data from press. They're From competitors. They're getting data from investors and data from board members. And I think it's important to realize that as a board member, you don't have the full context of what's going on in the business. So what I've come to learn oftentimes is that the best board member isn't always the person that has all the right answers or thinks they have all the right answers. But oftentimes the best board member is the person who asks the right questions by asking the questions. You are enabling and empowering the person who has far more data than you do. The founder, the management team to make a better decision. And I think that's been a meaningful shift in my approach to boards. It's probably just, it just comes with, with experience and humility and realizing that my job isn't to have the answers. My job is to ask the questions. I also think it's really important to focus. Oftentimes if you get a board deck in advance and you have the You know, I might come…

AI assessment note: “realizing that my job isn't to have the answers. My job is to ask the questions.”

Q What do you know now, Josh, that you wish you'd known at the beginning of the first round journey?

A I'm wrong a lot. Um, you know, venture is an amazing, amazingly humbling business. You know, going back to Annie Duke, right, Annie Duke says in her book that, like, The more you play poker, the more you realize how much you have to learn. And I look back now at the table banging, where I bang the table with conviction for this or against this, and I had such certainty, and it was very binary. With time, I look back with amazing regret on so many of those binary decisions that in reality weren't binary. In reality, there's, there's a spectrum of probabilities and a spectrum of perspectives that And I think it's important not just to have a perspective and a point of view, but to have an understanding of your confidence in that perspective. It shouldn't always be a hundred percent or zero percent. It's fine to truly sort of understand that there's nuance, and I wish I had known that earlier.

AI assessment note: “I'm wrong a lot. Um, you know, venture is an amazing, amazingly humbling business.”

Q I do want to ask though, Josh, because I actually asked Finn this same question. I asked, when was that moment for you when you really realized that investing was your life's work? You mentioned the element of serendipity there of getting into the game. Was there a moment where you realized that this was really what you were born to do?

A Yeah. I don't know if it's any one specific moment, but I think what I've come to realize is as an operator, you have to wear a hundred different hats. First meeting, you can be dealing with PR. Next meeting is career pathing. Next meeting is product. Next meeting is engineering. You just deal with so many things. And when I did a naked and honest assessment of my capabilities, I saw that of those hundred hats, maybe I'm average at 60 of them. I don't add incremental value or I don't destroy value. I'm probably value subtracting at 20 of them. And maybe add some marginal value add on 20. And I think what I learned very quickly when we were starting first round is that this is an opportunity that lets me focus on the 20% where I might have some marginal value add and eliminate the 80% where I'm average to value destroying. And that just seemed magical to me. The ability to craft a job where you could play to your strengths and you didn't have to worry and spend the time on the areas where maybe you didn't have a marginal contribution to make.

AI assessment note: “I don't know if it's any one specific moment, but I think what I've come to realize”