The Exchanges

Q I totally agree with you. Do you have mentors who challenge you on your bullshit? I found that very helpful.

A I do. In fact, um, I have a, I have a handful of mentors who challenged me on it. And, and interestingly enough, um, they can be extremely different. Like some of them will tell me one thing and another will tell me the exact opposite. And in many ways that's interesting. Uh, you know, the other day, um, I was talking to one of my foremost mentors, Fred Wilson from Union Square Ventures, and he literally was screaming at me on the phone and I loved it. Like, I honestly loved it, and it's totally Fred, and he knows with me, he can just kind of let it loose and say what he feels, and I was sort of recounting to him something that another one of my mentors had shared, and he was like, no, that is total bullshit. Like, absolutely not. Don't listen to that. You have to take risk. That's what venture is all about. Like, et cetera, et cetera, et cetera, and I I value that tremendously. So, so to the point, um, I always want people to call bullshit on me, and, um, if they're right, I will take it in stride.

AI assessment note: “I have a handful of mentors who challenged me on it.”

Q Okay, so let's take the hundred and twenty five million fund here. What does that look like from a number of lines per fund and a capital per company basis?

A So we did about 25 deals in fund one. That is generally the right number for us, given that we do both seed and series A investing, and we tend to be a, um, uh, lead, lean in, active, engaged investor. Um, granted in fund one, um, we did do some experimentation with some smaller checks. Um, especially around crypto as we were legging into some web three investing, but for the most part, we like to lead or co-lead rounds. Um, and we're typically writing for a seed, call it one and a half to three million dollars to lead around and for an A, six to eight million dollars to lead around, and if we really push it, we could probably go up to 10.

AI assessment note: “we did about 25 deals in fund one... seed, call it one and a half”

Q I totally agree with you. Do you have mentors who challenge you on your bullshit? I found that very helpful.

A I do. In fact, um, I have a, I have a handful of mentors who challenged me on it. And, and interestingly enough, um, they can be extremely different. Like some of them will tell me one thing and another will tell me the exact opposite. And in many ways that's interesting. Uh, you know, the other day, um, I was talking to one of my foremost mentors, Fred Wilson from Union Square Ventures, and he literally was screaming at me on the phone and I loved it. Like, I honestly loved it, and it's totally Fred, and he knows with me, he can just kind of let it loose and say what he feels, and I was sort of recounting to him something that another one of my mentors had shared, and he was like, no, that is total bullshit. Like, absolutely not. Don't listen to that. You have to take risk. That's what venture is all about. Like, et cetera, et cetera, et cetera, and I I value that tremendously. So, so to the point, um, I always want people to call bullshit on me, and, um, if they're right, I will take it in stride.

AI assessment note: “I do. In fact, um, I have a, I have a handful of mentors”

Q Tell me, is one 25 enough then? Because when we think about reserves, people forget, you know, one 25, you take away the fees, which is 20% or whatever that is, and then you take away reserves, and suddenly a one 25 fund size is actually 62 and a half.

A Yeah, I mean, honestly, um, no, is the answer. Not for our strategy. Um, it could be enough for, um, other strategies, more seed-oriented strategies. It could be enough For a more concentrated portfolio of people want to run a much more concentrated book. I like our concentration where it is having been doing this now for 16 years. I believe in having enough ways to win in the fund. Um, and ultimately one 25 was a bit small for our first fund. I'll tell you a story about that, which is that, um, the recent Again, not to harp on USV, but the reason we capped our first fund at one 25 is, um, that was the size of USV's first fund, and we shared one LP who was like, why don't we just cap it at one 25? Um, it's, it's, uh, it worked for Fred. Why, why, why wouldn't it work for you? And in general in life, that's a, that's a pretty good, um, that's, that's, that's a pretty good, uh, uh, tact to take. Um, but, um, what happened was we capped it at one 25 during COVID. So, I had the unfortunate reality of raising fund one. Literally we started in the late fall of, um, um, 2019 and like got hit by COVID like four months into our first fundraise. Um, and really just wanted to constrain the problem, create scarcity value around the fund and use that as a way to attract capital. In hindsight, it's funny when we did our final close on the fund, um, I actually went to our LPAC and asked them …

AI assessment note: “no, is the answer. Not for our strategy.”

Q bigger. USV and Benchmark, obviously, both very limited in terms of their fund sizes compared to what they could raise. Investment firms tend to scale a lot more when we look at the biggest incumbents today. And you said to me before, getting bigger is inversely correlated with getting better. Uh, as a manager looking to scale, I was interested to hear your thoughts. What did you mean by this?

A Yeah. Well, to be clear, investment firms can grow and continue to perform quite well against their stated return objectives, um, and increase their assets under management. So like, I'm not making a damning comment on the entirety of the investment management business. And I think, Um, we could talk about that at another date, but, but what I'm really referring to, what I was really referring to, uh, with that comment is specifically the business of early stage investing, which you and I both practice and, um, not to harp on Fred, but it's a great example of, um, mentorship and, um, getting good guidance and advice from your mentors. When I started shine, um, Fred and, and Joanne Wilson were my first investors. And when Fred told me they were going to invest in the fund, he gave me a sliding scale of how much capital he wanted to put into the fund. The larger the fund, the less money he was willing to invest. Simple as that. And his lesson to me was very straightforward. Larger early stage funds always lead to lesser returns over time. And it's not simply because it is harder to return larger pools of capital. What he was teaching me in that moment, and it was a lesson that I had learned before, but needed to learn again, um, is that the reason, um, um, larger pool of capitals, uh, end up performing, uh, poorly or less well than smaller pools of capital and early stage investi…

AI assessment note: “Keeping early stage funds relatively small imposes constraints”

Q Okay, so let's take the hundred and twenty five million fund here. What does that look like from a number of lines per fund and a capital per company basis?

A So we did about 25 deals in fund one. That is generally the right number for us, given that we do both seed and series A investing, and we tend to be a, um, uh, lead, lean in, active, engaged investor. Um, granted in fund one, um, we did do some experimentation with some smaller checks. Um, especially around crypto as we were legging into some web three investing, but for the most part, we like to lead or co-lead rounds. Um, and we're typically writing for a seed, call it one and a half to three million dollars to lead around and for an A, six to eight million dollars to lead around, and if we really push it, we could probably go up to 10.

AI assessment note: “about 25 deals... typically writing for a seed, call it one and a half”

Q reserves, Mo? It's the fact that often, you know, the companies that need reserves most, uh, either the massive winners who come back fast or strugglers who come back fast, and you have to kind of proactively forecast in an unknown world what could happen with reserves well ahead of time, not knowing. How do you think about embracing that mental challenge Of allocations on unknowns as a fund manager?

A Yeah, it's a really interesting point, and it harkens back to your question around, uh, the lessons I learned from Spark. Um, one of the, you know, reserves is, is extremely tricky. It's a very, very tricky business. It's especially tricky in a partnership model because, you know, what happens in venture partnerships is you have Investors at different stages in their careers, optimizing for different things and their own personal Um, desires and positioning within the firm and biases, what they're trying to signal will enter into the discussion. And that you often see that leading to suboptimal reserve decisions and sub suboptimal follow on investment decisions. So I took a totally different tack to doing reserves at shine, which is we don't actually reserve per company when we do a deal at all. Um, I actually reserve a bucket for the entire fund, and then, you know, my old partner, one of the founders of Shine, Todd Degris used to refer to it as, uh, they're not reserves, they're deserves, um, and that always stuck in my head. But the reality was in practice, um, they always became reserves. And so I tried to structure it and shine where they actually were deserves. So when we make an initial investment, especially early on in a company, we actually don't attach formal reserves to the company. We do some math in the background. And I work on that with my CFO to make sure that …

AI assessment note: “I took a totally different tack to doing reserves at shine”

Q bigger. USV and Benchmark, obviously, both very limited in terms of their fund sizes compared to what they could raise. Investment firms tend to scale a lot more when we look at the biggest incumbents today. And you said to me before, getting bigger is inversely correlated with getting better. Uh, as a manager looking to scale, I was interested to hear your thoughts. What did you mean by this?

A Yeah. Well, to be clear, investment firms can grow and continue to perform quite well against their stated return objectives, um, and increase their assets under management. So like, I'm not making a damning comment on the entirety of the investment management business. And I think, Um, we could talk about that at another date, but, but what I'm really referring to, what I was really referring to, uh, with that comment is specifically the business of early stage investing, which you and I both practice and, um, not to harp on Fred, but it's a great example of, um, mentorship and, um, getting good guidance and advice from your mentors. When I started shine, um, Fred and, and Joanne Wilson were my first investors. And when Fred told me they were going to invest in the fund, he gave me a sliding scale of how much capital he wanted to put into the fund. The larger the fund, the less money he was willing to invest. Simple as that. And his lesson to me was very straightforward. Larger early stage funds always lead to lesser returns over time. And it's not simply because it is harder to return larger pools of capital. What he was teaching me in that moment, and it was a lesson that I had learned before, but needed to learn again, um, is that the reason, um, um, larger pool of capitals, uh, end up performing, uh, poorly or less well than smaller pools of capital and early stage investi…

AI assessment note: “Is because of the lack of constraints.”

Q reserves, Mo? It's the fact that often, you know, the companies that need reserves most, uh, either the massive winners who come back fast or strugglers who come back fast, and you have to kind of proactively forecast in an unknown world what could happen with reserves well ahead of time, not knowing. How do you think about embracing that mental challenge Of allocations on unknowns as a fund manager?

A Yeah, it's a really interesting point, and it harkens back to your question around, uh, the lessons I learned from Spark. Um, one of the, you know, reserves is, is extremely tricky. It's a very, very tricky business. It's especially tricky in a partnership model because, you know, what happens in venture partnerships is you have Investors at different stages in their careers, optimizing for different things and their own personal Um, desires and positioning within the firm and biases, what they're trying to signal will enter into the discussion. And that you often see that leading to suboptimal reserve decisions and sub suboptimal follow on investment decisions. So I took a totally different tack to doing reserves at shine, which is we don't actually reserve per company when we do a deal at all. Um, I actually reserve a bucket for the entire fund, and then, you know, my old partner, one of the founders of Shine, Todd Degris used to refer to it as, uh, they're not reserves, they're deserves, um, and that always stuck in my head. But the reality was in practice, um, they always became reserves. And so I tried to structure it and shine where they actually were deserves. So when we make an initial investment, especially early on in a company, we actually don't attach formal reserves to the company. We do some math in the background. And I work on that with my CFO to make sure that …

AI assessment note: “we don't actually reserve per company when we do a deal at all”

Q say, we will blindly give you pro rata regardless, which I see very often. And I'm worried communicating to founders who do say, what's your take on pro rata? And when you say, hey, It's a meritocracy, and it goes to the person who deserves it. I worry that I'm losing a competitive edge to the free-flowing cash that comes from a big firm who says, yeah, pro rata always.

A I, I don't, um, first of all, I'm not even sure I buy that. Like, anybody that says they do pro rata always, I think, is lying. I, I just, I don't believe that to be the case, and I've seen enough, I've been in venture long enough to know that that's total bullshit. And by the way, um, to be clear on pro rata, Um, we always do pro rata if the company deserves it or if the situation warrants it. So to be clear, there are times when a round is getting done and in a vacuum, if you asked me, does this company deserve pro rata on a standalone basis for what they've achieved today vis-a-vis what you underwrote at the beginning, I might say, no, I don't think they do. But if there's a round coming together and somebody in the market is willing to pay forward and give the entrepreneur credit that they will actually achieve what we all from the beginning set out to achieve together, and us doing our pro rata is essential to getting that round done to the right signaling, et cetera, et cetera. I'm never going to hurt a company by not doing pro rata ever. I will never do that. The only time I won't do pro rata is if I don't need to, or I know it's the best thing for the company. So in hot markets, for instance, it turns out that over the last few years, you don't have to do your pro rata. You never had to do pro rata because every new investor under the sun will gladly take your pro rata …

AI assessment note: “anybody that says they do pro rata always, I think, is lying.”

Q more amenable, and it's the ultimate sign, they're also LPs with me, ah, but it's the ultimate sign of, like, fucking greed, beyond belief, given they're at 20%. Like, they're not at 10, they're at 20, and they won't move .6 for me, like a friend, LP. I'm like, but it's the ultimate sign that it's never been less collaborative in venture right now, in my eyes. Do you agree?

A Um, yes. Um, and no, like everything else, there are exceptions, like Um, some of the best in the business continue to be collaborative. Um, but yes, we, I've had that issue where, you know, they wouldn't even budge a little bit, um, to make room. And even though we're so helpful and additive to the company, both before the investment, after the investment, et cetera. And I, I do agree. I do agree that there has been, um, a lot of, um, Just a lot of shortsightedness in the business. And I think these are the kinds of cycles where those sorts of behaviors. End up being laid bare, and it comes back to bite people in the ass. I believe in karma, um, and-

AI assessment note: “I do agree that there has been, um, a lot of, um, Just a lot of shortsightedness”

Q good decision or not, we shall see in the coming years. But my question to you is, you know, we've seen multi-stage firms move earlier and earlier and promise the world, and we're fighting against it in many ways if we're transparent. How do you advise founders contemplating taking multi-stage money At pre-seed or seed when they're promised the world from the, you know, multi-stage firms that we compete against?

A At the end of the day, the more an investment matters to an investor, the better investor they will be for you. So long as, so long as, this is the key caveat, they are not in a structure that they can't control. What I mean by that is, You know, firms are great, but partners matter, and at bigger firms especially, It's not just, you're not just taking money from a firm. You're taking money from an individual. Is that individual going to even be at the firm for a decade? Are they doing their own positioning at the firm? Like you don't necessarily even know what you're getting when you take it from somebody at one of these very large institutions. These are, these are people, these are businesses with hundreds of people working there. The odds that all of those same people are going to be there in five years are zero. Okay. So So, you know, at the end of the day, when you take like what, when, so that's why, when I, what I mean by that is you want to take money from people where it really means something to them, where they are deeply invested in your success. When you take money from a very big firm, definitionally at the early stage, definitionally, they can only be so invested in your success because it is a tiny amount of overall capital for the firm. And more so you have that added complexity that you don't know. You're not actually getting the firm's money. You're getting …

AI assessment note: “You're taking the risk that you're a pimple on the ass of that firm.”

Q so they can say, no, I'm not letting in Harry for an extra . Six percent, and actually, I'm your lead, you're lucky to have me as your lead, I'm ex-firm, Thank you. Whereas before in capital rich times, it was like, hey, no, no, take our term sheet over the seven others. Oh, you want us to cut down by .6? Yeah, yeah. Do you see my concern there?

A I do. And I think that'll happen in some instances. But I also think in markets like this, building strong, durable syndicates matters. And so If some VCs want to play that game and take on all the risk and shoulder all the burden, then God bless them. You know, I will fight against that, and I will position against that. I'm in a slightly different bucket than you, in that I'm not trying to tuck into that VCs deal. I'm trying to beat them to the punch. I'm trying to convince the entrepreneur that I'm the better investor for them, that I'm going to care more about their company, that I'm actually going to roll up my sleeves and be there for them, and I'm not just one of, I don't know how many investments that Um, they don't care about as much. And by the way, the interesting thing about that is the firms that tend to be that greedy and that aggressive are also the ones that'll drop you like a bad habit that pay less attention to you that are much, much bigger and where you are much less relevant to them. And so, you know, to me, I like when firms sort of take that approach because It's such a stark contrast to what we do. It's kind of an intelligence test for the entrepreneur or even, and if it's not an intelligence test, it's a test of like, what are you looking for? One of the things I realized over the many years I've been doing this now is not every deal is right for me. Um…

AI assessment note: “I do. And I think that'll happen in some instances.”

Q ask you, you know, you spent a lot of your early, more formative years investing at Spark. We mentioned going off schedule. It's a skill I have. When you think about, like, the biggest takeaways and how they impacted your mindset in the founding of Shine, what are some of your biggest takeaways from your time with Spark, and how do you think that impacted your mindset of founding Shine?

A Yeah, I mean, Honestly, what I learned at Spark most importantly is that I love early stage investing. Um, and I also realized that I had learned a tremendous amount, both at Spark and at IAC. And after having a little bit of time and separation and distance to sort of, um, you know, I think it's really important to have perspective in life. I needed some time to separate myself Both when I left IEC, I took six months. And when I left a spark, I took a team. I had non-competes and non-solicits to roll off and all that stuff. But most importantly, I wanted perspective. And what I realized is that I love early stage investing. I'd learned a tremendous amount and I was very eager to apply that to new businesses, new entrepreneurs and new challenges. And I also realized there was no better time to start a firm in New York city. That's ultimately how shine was born. One of the core things I learned beyond that to your question is really around the difference in structures of venture capital firms. Um, you know, when I came up in venture, many firms were built as partnerships, and this was often a function of previously successful entrepreneurs and investors. Banding together to create a structure that provided for maximal individual freedom while leveraging their collective expertise to build venture capital portfolios. And while the partnership structure has many advantages from an…

AI assessment note: “One of the core things I learned beyond that to your question is really around the difference”

Q done a thousand investments, literally a thousand, and the outperformance of the five that I've done from your Stripes to Notions to Miros to OpenSeas is so big that actually you should just be in everything. With low ownerships. It doesn't because it's such high outcomes in the ones that work. How do you feel about the centrality of ownership and how should I think about those two opposing thoughts?

A I mean, look, there's a lot, there's different ways to play the venture capital business. And we've certainly seen that evolve over the last bunch of years. And, you know, you have folks like Ron Conway that have been playing that model, uh, and getting into the best startups is, is the only thing that matters. Um, You know, I sit somewhere in between, to be honest. Namely, I mean, I think both things are true. The only thing that matters in venture capital is getting into enough of the biggest winners. And the other thing that matters in venture capital is making sure that you own enough of those winners When they're really big. That's my strategy because I run a classic venture capital fund where we're not investing in a hundred companies. We're investing in, you know, 25 per fund. And so for us, like the only way to play the It doesn't matter. You just need to get into all of the businesses. Doesn't matter how much you own. The winners will take care of everything else. That only works if you invest in a ton of companies and you are convinced that you can get into the winners. So you have to be like, you have to be elite, so to speak. You have to be one of those seed firms that sees every deal, That is doesn't want board seats. Doesn't care about ownership. Isn't going deep. Like is playing more of an index role is comfortable with that role and believes in those that they c…

AI assessment note: “I think both things are true. The only thing that matters in venture capital”

Q So I guess, like, what would you say your biggest lessons are from your successes and from your failures?

A Um, you know, it's interesting. I try not to learn, ah, lessons from my successes. I've actually found, um, that learning lessons from successes is extremely dangerous because of the risk of confirmation bias. We will convince ourselves Of whatever we want to convince ourselves is the proximal cause of the success, you know, because it was successful. So I, I honestly believe that, um, you can only really learn from your failures. Um, I don't believe you can learn from your successes and what I've learned from my failures time and time again, both in terms of my misses, my mistakes. Is that it, it always tends to be very entrepreneur driven, like where I misjudge the entrepreneur in some way. Um, and that has been a consistent lesson for me in investing. And it's why shine is such an entrepreneur, such a founder, such a people focused firm, uh, and why I don't sweat it when, you know, an entrepreneur makes a decision that like, to your point, it doesn't allow us in, or, or they, they pick a different firm with a different ethos. It just means it's meant to be. Um, this is a people business. These are long relationships, especially when you're writing lead or co-lead checks and taking a meaningful role around the table, whether you're on the board or not. Um, so, so I, uh, that my biggest lesson is really to, to, to lean into and learn and understand people and figure out if you…

AI assessment note: “what I've learned from my failures... is that it always tends to be very entrepreneur driven”

Q What do you know now that you wish you'd known when you started shine?

A Honestly, I just, just that I could do it, you know, like I don't, I took a, a longer path to becoming an entrepreneur. I didn't start shine until I was 42. I was on a, an extremely traditional path. Um, you know, I was a bear for a couple of years, almost. I worked for Barry for six years. I spent eight years, um, um, at Spark, and then I started Shine, um, and I took some time, uh, in between Spark and, in between, uh, uh, Spark and Shine. I guess if I had to do it all over again, I, I, um, I would have done it a bit sooner, and my advice to anybody with the entrepreneurial inclination out there is that if you, if you have it, go for it, But, you know, as they say, uh, the best time to plant a tree was 20 years ago and the next best time is today. So, so here we are.

AI assessment note: “Honestly, I just, just that I could do it”

Q say, we will blindly give you pro rata regardless, which I see very often. And I'm worried communicating to founders who do say, what's your take on pro rata? And when you say, hey, It's a meritocracy, and it goes to the person who deserves it. I worry that I'm losing a competitive edge to the free-flowing cash that comes from a big firm who says, yeah, pro rata always.

A I, I don't, um, first of all, I'm not even sure I buy that. Like, anybody that says they do pro rata always, I think, is lying. I, I just, I don't believe that to be the case, and I've seen enough, I've been in venture long enough to know that that's total bullshit. And by the way, um, to be clear on pro rata, Um, we always do pro rata if the company deserves it or if the situation warrants it. So to be clear, there are times when a round is getting done and in a vacuum, if you asked me, does this company deserve pro rata on a standalone basis for what they've achieved today vis-a-vis what you underwrote at the beginning, I might say, no, I don't think they do. But if there's a round coming together and somebody in the market is willing to pay forward and give the entrepreneur credit that they will actually achieve what we all from the beginning set out to achieve together, and us doing our pro rata is essential to getting that round done to the right signaling, et cetera, et cetera. I'm never going to hurt a company by not doing pro rata ever. I will never do that. The only time I won't do pro rata is if I don't need to, or I know it's the best thing for the company. So in hot markets, for instance, it turns out that over the last few years, you don't have to do your pro rata. You never had to do pro rata because every new investor under the sun will gladly take your pro rata …

AI assessment note: “anybody that says they do pro rata always, I think, is lying.”

Q so they can say, no, I'm not letting in Harry for an extra . Six percent, and actually, I'm your lead, you're lucky to have me as your lead, I'm ex-firm, Thank you. Whereas before in capital rich times, it was like, hey, no, no, take our term sheet over the seven others. Oh, you want us to cut down by .6? Yeah, yeah. Do you see my concern there?

A I do. And I think that'll happen in some instances. But I also think in markets like this, building strong, durable syndicates matters. And so If some VCs want to play that game and take on all the risk and shoulder all the burden, then God bless them. You know, I will fight against that, and I will position against that. I'm in a slightly different bucket than you, in that I'm not trying to tuck into that VCs deal. I'm trying to beat them to the punch. I'm trying to convince the entrepreneur that I'm the better investor for them, that I'm going to care more about their company, that I'm actually going to roll up my sleeves and be there for them, and I'm not just one of, I don't know how many investments that Um, they don't care about as much. And by the way, the interesting thing about that is the firms that tend to be that greedy and that aggressive are also the ones that'll drop you like a bad habit that pay less attention to you that are much, much bigger and where you are much less relevant to them. And so, you know, to me, I like when firms sort of take that approach because It's such a stark contrast to what we do. It's kind of an intelligence test for the entrepreneur or even, and if it's not an intelligence test, it's a test of like, what are you looking for? One of the things I realized over the many years I've been doing this now is not every deal is right for me. Um…

AI assessment note: “I do. And I think that'll happen in some instances.”

Q So I guess, like, what would you say your biggest lessons are from your successes and from your failures?

A Um, you know, it's interesting. I try not to learn, ah, lessons from my successes. I've actually found, um, that learning lessons from successes is extremely dangerous because of the risk of confirmation bias. We will convince ourselves Of whatever we want to convince ourselves is the proximal cause of the success, you know, because it was successful. So I, I honestly believe that, um, you can only really learn from your failures. Um, I don't believe you can learn from your successes and what I've learned from my failures time and time again, both in terms of my misses, my mistakes. Is that it, it always tends to be very entrepreneur driven, like where I misjudge the entrepreneur in some way. Um, and that has been a consistent lesson for me in investing. And it's why shine is such an entrepreneur, such a founder, such a people focused firm, uh, and why I don't sweat it when, you know, an entrepreneur makes a decision that like, to your point, it doesn't allow us in, or, or they, they pick a different firm with a different ethos. It just means it's meant to be. Um, this is a people business. These are long relationships, especially when you're writing lead or co-lead checks and taking a meaningful role around the table, whether you're on the board or not. Um, so, so I, uh, that my biggest lesson is really to, to, to lean into and learn and understand people and figure out if you…

AI assessment note: “my biggest lesson is really to, to, to lean into and learn and understand people”

Q done a thousand investments, literally a thousand, and the outperformance of the five that I've done from your Stripes to Notions to Miros to OpenSeas is so big that actually you should just be in everything. With low ownerships. It doesn't because it's such high outcomes in the ones that work. How do you feel about the centrality of ownership and how should I think about those two opposing thoughts?

A I mean, look, there's a lot, there's different ways to play the venture capital business. And we've certainly seen that evolve over the last bunch of years. And, you know, you have folks like Ron Conway that have been playing that model, uh, and getting into the best startups is, is the only thing that matters. Um, You know, I sit somewhere in between, to be honest. Namely, I mean, I think both things are true. The only thing that matters in venture capital is getting into enough of the biggest winners. And the other thing that matters in venture capital is making sure that you own enough of those winners When they're really big. That's my strategy because I run a classic venture capital fund where we're not investing in a hundred companies. We're investing in, you know, 25 per fund. And so for us, like the only way to play the It doesn't matter. You just need to get into all of the businesses. Doesn't matter how much you own. The winners will take care of everything else. That only works if you invest in a ton of companies and you are convinced that you can get into the winners. So you have to be like, you have to be elite, so to speak. You have to be one of those seed firms that sees every deal, That is doesn't want board seats. Doesn't care about ownership. Isn't going deep. Like is playing more of an index role is comfortable with that role and believes in those that they c…

AI assessment note: “I think both things are true. The only thing that matters in venture capital”

Q Tell me, is one 25 enough then? Because when we think about reserves, people forget, you know, one 25, you take away the fees, which is 20% or whatever that is, and then you take away reserves, and suddenly a one 25 fund size is actually 62 and a half.

A Yeah, I mean, honestly, um, no, is the answer. Not for our strategy. Um, it could be enough for, um, other strategies, more seed-oriented strategies. It could be enough For a more concentrated portfolio of people want to run a much more concentrated book. I like our concentration where it is having been doing this now for 16 years. I believe in having enough ways to win in the fund. Um, and ultimately one 25 was a bit small for our first fund. I'll tell you a story about that, which is that, um, the recent Again, not to harp on USV, but the reason we capped our first fund at one 25 is, um, that was the size of USV's first fund, and we shared one LP who was like, why don't we just cap it at one 25? Um, it's, it's, uh, it worked for Fred. Why, why, why wouldn't it work for you? And in general in life, that's a, that's a pretty good, um, that's, that's, that's a pretty good, uh, uh, tact to take. Um, but, um, what happened was we capped it at one 25 during COVID. So, I had the unfortunate reality of raising fund one. Literally we started in the late fall of, um, um, 2019 and like got hit by COVID like four months into our first fundraise. Um, and really just wanted to constrain the problem, create scarcity value around the fund and use that as a way to attract capital. In hindsight, it's funny when we did our final close on the fund, um, I actually went to our LPAC and asked them …

AI assessment note: “no, is the answer. Not for our strategy.”

Q more amenable, and it's the ultimate sign, they're also LPs with me, ah, but it's the ultimate sign of, like, fucking greed, beyond belief, given they're at 20%. Like, they're not at 10, they're at 20, and they won't move .6 for me, like a friend, LP. I'm like, but it's the ultimate sign that it's never been less collaborative in venture right now, in my eyes. Do you agree?

A Um, yes. Um, and no, like everything else, there are exceptions, like Um, some of the best in the business continue to be collaborative. Um, but yes, we, I've had that issue where, you know, they wouldn't even budge a little bit, um, to make room. And even though we're so helpful and additive to the company, both before the investment, after the investment, et cetera. And I, I do agree. I do agree that there has been, um, a lot of, um, Just a lot of shortsightedness in the business. And I think these are the kinds of cycles where those sorts of behaviors. End up being laid bare, and it comes back to bite people in the ass. I believe in karma, um, and-

AI assessment note: “I do agree that there has been, um, a lot of, um, Just a lot of shortsightedness”

Q Will we? The big funds and so many funds have so much money. Will we?

A Um, I don't know. Uh, it's honestly, here's what I'd say. I think, um, I think there will be a lot of folks that go away in this cycle. I watched it in the last go round. Um, you know, Spark and USV and all these firms didn't exist, um, before the last cycle. And they really made their names coming out of the O eight crisis. And, and on the other end of that cycle, I think we'll have a similar reckoning in the venture world over the next few years. Um, I don't think it means that, um, And by the way, and I think some of the late stage and the crossover guys are kind of pulling back from that business. So yeah, I, I do think the amount of capital that has been poured into startups will shrink. Um, I don't think it's going back. You know, uh, to levels we used to see, you know, things when they grow and they reach a new plateau and they come down a bit and they grow up. So, so I think, you know, capital will continue to come into the technology business because it's obviously a great place to deploy and a great place to create value. But I do, I do think we will have some rationalizing of capital and I think we'll have a lot of tourists leave the system. And I think we will separate winners from losers through this cycle. And I think that'll be healthy for the ecosystem.

AI assessment note: “I do think the amount of capital that has been poured into startups will shrink.”

Q ask you, you know, you spent a lot of your early, more formative years investing at Spark. We mentioned going off schedule. It's a skill I have. When you think about, like, the biggest takeaways and how they impacted your mindset in the founding of Shine, what are some of your biggest takeaways from your time with Spark, and how do you think that impacted your mindset of founding Shine?

A Yeah, I mean, Honestly, what I learned at Spark most importantly is that I love early stage investing. Um, and I also realized that I had learned a tremendous amount, both at Spark and at IAC. And after having a little bit of time and separation and distance to sort of, um, you know, I think it's really important to have perspective in life. I needed some time to separate myself Both when I left IEC, I took six months. And when I left a spark, I took a team. I had non-competes and non-solicits to roll off and all that stuff. But most importantly, I wanted perspective. And what I realized is that I love early stage investing. I'd learned a tremendous amount and I was very eager to apply that to new businesses, new entrepreneurs and new challenges. And I also realized there was no better time to start a firm in New York city. That's ultimately how shine was born. One of the core things I learned beyond that to your question is really around the difference in structures of venture capital firms. Um, you know, when I came up in venture, many firms were built as partnerships, and this was often a function of previously successful entrepreneurs and investors. Banding together to create a structure that provided for maximal individual freedom while leveraging their collective expertise to build venture capital portfolios. And while the partnership structure has many advantages from an…

AI assessment note: “One of the core things I learned beyond that to your question is really around”

Q because they say, that doesn't work, that doesn't work. No, I don't like that. No, I don't like that. And actually, I need to create an environment where they can say Yes, I want to do this, or no, I don't think we should do that. How do you think about giving them the oxygen and freedom to, with both the hierarchy and clear delineation, and also your opinionated self?

A Yeah, um, you know, I live my life by a very simple moniker, uh, in this regard, which is strong opinions, weakly held. And, um, I feel this way to my core, And, um, I know you'll ask me about this, this later, but as a presage to that, you know, having strong opinions is both a blessing and a curse, right? It is, it can be one's greatest strength and their greatest weakness. Um, but I think it's really, really important to have strong opinions. I think, um, people who don't take strong points of view tend to be quite boring and uninteresting, um, Um, and I have no interest in being boring. Um, I, and I don't look for people that are boring. I'm drawn to people that are interesting and almost definitionally to be interesting. You have to have a point of view on anything that you're talking about at any given time. You have to take a stance. You have to have a point of view. So my approach to the world is to have strong points of view, not being shared, uh, not being scared to share them and to articulate them and to present A compelling case for them, but I am deeply compelled by data and I am very open to be proving, proven wrong. In fact, I like it. And a lot of this comes from my education. You know, I grew up as I've alluded to in a, in a very traditional Jewish household. Um, and so much of the Jewish tradition is around, um, this kind of study. And learning and exegesis. …

AI assessment note: “I live my life by a very simple moniker... strong opinions, weakly held.”

Q Not at all, but it is a fantastic opportunity. I want to start with a little bit of context, and so talk to me, how did you make your way into the world of venture that I clearly love so much, having done 3000 episodes, and then how did you come to found Shine most recently?

A Yeah. You know, honestly, it was an accident. Uh, if you would have asked me about venture capital when I was in college, I literally wouldn't have known what it was or barely knew what it was. And I'm dating myself here, but that is the truth. Um, as my old boss, Barry Diller liked to say, I just put one dumb foot in front of the other. Um, to be honest, my family background has a lot to do, uh, with where I am today. Uh, my father is an immigrant from the former Soviet Union who came to America when he was 35. He didn't speak a word of English, and he didn't have a penny in his pocket. All he had was his intelligence, his education, he was an electrical and mechanical engineer by trade, and his determination. He was helped by a Jewish refugee organization called HIAS and spent his first few months in the US learning English, after which he started as a draftsman At an engineering firm in Manhattan, where he met his eventual business partner. Six years later, they started their own engineering firm and they grew it over the next 30 years to be one of the preeminent MEP shops in the city. MEP stood for mechanical electrical plumbing, but since they've added telecommunications, because obviously that is a core part of infrastructure for commercial real estate today. My mother, on the other hand, was the child of immigrants and grew up in Brooklyn. Uh, they didn't have much, but …

AI assessment note: “Honestly, it was an accident... my family background has a lot to do”

Q because they say, that doesn't work, that doesn't work. No, I don't like that. No, I don't like that. And actually, I need to create an environment where they can say Yes, I want to do this, or no, I don't think we should do that. How do you think about giving them the oxygen and freedom to, with both the hierarchy and clear delineation, and also your opinionated self?

A Yeah, um, you know, I live my life by a very simple moniker, uh, in this regard, which is strong opinions, weakly held. And, um, I feel this way to my core, And, um, I know you'll ask me about this, this later, but as a presage to that, you know, having strong opinions is both a blessing and a curse, right? It is, it can be one's greatest strength and their greatest weakness. Um, but I think it's really, really important to have strong opinions. I think, um, people who don't take strong points of view tend to be quite boring and uninteresting, um, Um, and I have no interest in being boring. Um, I, and I don't look for people that are boring. I'm drawn to people that are interesting and almost definitionally to be interesting. You have to have a point of view on anything that you're talking about at any given time. You have to take a stance. You have to have a point of view. So my approach to the world is to have strong points of view, not being shared, uh, not being scared to share them and to articulate them and to present A compelling case for them, but I am deeply compelled by data and I am very open to be proving, proven wrong. In fact, I like it. And a lot of this comes from my education. You know, I grew up as I've alluded to in a, in a very traditional Jewish household. Um, and so much of the Jewish tradition is around, um, this kind of study. And learning and exegesis. …

AI assessment note: “I live my life by a very simple moniker... strong opinions, weakly held.”