The Exchanges

Q And who are your mentors today then? Who do you look up to and aspire to?

A Uh, wow, that's a great question. So I'd say I've been, I've been very lucky to find, uh, To find venture mentors that, uh, I view as, uh, as really some of the best VCs, certainly in New York and, and, and maybe across the country. Um, and, and these folks, and these folks were not just, were not just mentors in the sense that they, uh, helped me learn the business, but, um, but actually they helped us raise Notations First Fund in many ways, and so, um, uh, Andy Weissman has been Uh, has been a mentor to us, who's a, who's a partner at Union Square Ventures. And then I'd say there's a, you know, there's a group of, of younger VCs that, um, that, uh, have done really well in, in New York, um, recently that, uh, that we look to as kind of newer folks in the business of, you know, folks like Chris Peake and, um, some of the folks at, uh, at Collaborative Fund. So, uh, I think it's important to, to surround yourself with people that, uh, Uh, you both look up to and view as peers that, uh, that have both been in the venture industry for a really long time, and for folks that may be, you know, a fund or two ahead of you, but, um, uh, but have kind of a fresher perspective on kind of building a new firm and, and, uh, and raising a fund for the first time.

AI assessment note: “Andy Weissman has been Uh, has been a mentor to us, who's a, who's a partner”

Q Yeah, I agree with that. Nick, how, how are VCs and founders misaligned in your eyes?

A Certainly, I think you see this in the big, the big AUM firms. I think there are many companies in the market that, um, could get to where they're going and win. With significantly less money. And what that means is that, uh, the founders and the early investors own a lot more of that company in the end. I think there is a perception that you need to raise vast amounts of money To win. VCs are obviously incentivized for founders to think that or to be scared of that. Some ways it's a threat and there's all sorts of weird incentives in the middle, right? It's, um, I'm raising my fund. I need to show some markups or I'm a, I'm a trying to get a promotion at a firm. I need my companies to raise money. Some companies just take time. Uh, some companies would be better served to focus on building a business rather than raising money. And again, if you have a very long-term view and you don't care about short-term markups, you don't care about raising the next fund within two years, um, I think you can play Different games with companies, where you're thinking about actually de-risking the company, proving experiments, building a real business model, rather than focusing on how to raise the next round. Now, there, there, and there are others, I think, in the market, like, I, I'm, I, I think IndieVC, uh, has done a great job of this over the years, and Bryce, I think Slow is talking a …

AI assessment note: “VCs are obviously incentivized for founders to think that or to be scared of that.”

Q What happened? You don't say the name of the company, but what, what happened?

A Definitely. I mean, we've been doing this a long time. There's one that comes to mind around, uh, Aquihire that we, um, that you kind of talked about many years ago where, uh, we actually introduced the portfolio company to the acquirer. It was understood that the cap table would sort of get Taken care of. Um, like not, again, not make any money, but like, get a little bit back. Um, and at the last minute, the deal was changed, so the investors got nothing, and the founders got really big retention backers. I think there was probably an opportunity for the founders to push back. Look, it did not end up moving the needle for us, and so like, I, I generally move on from these things pretty quickly. I think it could have been handled. Differently. And, um, I won't forget it.

AI assessment note: “at the last minute, the deal was changed, so the investors got nothing”

Q Yeah, I agree with that. Nick, how, how are VCs and founders misaligned in your eyes?

A Certainly, I think you see this in the big, the big AUM firms. I think there are many companies in the market that, um, could get to where they're going and win. With significantly less money. And what that means is that, uh, the founders and the early investors own a lot more of that company in the end. I think there is a perception that you need to raise vast amounts of money To win. VCs are obviously incentivized for founders to think that or to be scared of that. Some ways it's a threat and there's all sorts of weird incentives in the middle, right? It's, um, I'm raising my fund. I need to show some markups or I'm a, I'm a trying to get a promotion at a firm. I need my companies to raise money. Some companies just take time. Uh, some companies would be better served to focus on building a business rather than raising money. And again, if you have a very long-term view and you don't care about short-term markups, you don't care about raising the next fund within two years, um, I think you can play Different games with companies, where you're thinking about actually de-risking the company, proving experiments, building a real business model, rather than focusing on how to raise the next round. Now, there, there, and there are others, I think, in the market, like, I, I'm, I, I think IndieVC, uh, has done a great job of this over the years, and Bryce, I think Slow is talking a …

AI assessment note: “I'm raising my fund. I need to show some markups or I'm a, I'm a trying to get a promotion”

Q What was the single biggest mistake you made in Zerp? I mentioned mine not selling.

A Hey man, you can bring that, you can bring those learnings for you forever. I think my two biggest mistakes In, at, at notation over the last, call it 1012 years, and, you know, I was, I was an investor at Betaworks before that. Um, I think my mistakes tend to be, um, getting antsy. I haven't made an investment in a while, and I start to think about that, and it gets in my head, and now I'm much more aware of it, but, um, I don't make many investments a year. I make three to five investments a year. And when that happens, and sometimes those, those come in chunks. So like, there'll be long periods where I haven't made an investment. Um, I think it is human nature to start thinking, am I not seeing the right stuff? Am I overthinking these things? What are my LPs going to say? What do they think I'm doing? Right? Like these are toxic, toxic little people in your head. Um, I've learned To listen to them and understand where I'm at and to be patient. So I've made some mistakes there. Um, I think I've made some mistakes, mistakes around, we talked about valuation. I think I've made some mistakes about being, uh, too precious. Around valuation. So like, there's a big difference between a five million dollar post and a twenty-five million dollar post. Like, that I think you need to really think about and consider. Um, if it's five or eight, and it means you potentially, you know, winn…

AI assessment note: “I think my mistakes tend to be, um, getting antsy.”

Q What happened? You don't say the name of the company, but what, what happened?

A Definitely. I mean, we've been doing this a long time. There's one that comes to mind around, uh, Aquihire that we, um, that you kind of talked about many years ago where, uh, we actually introduced the portfolio company to the acquirer. It was understood that the cap table would sort of get Taken care of. Um, like not, again, not make any money, but like, get a little bit back. Um, and at the last minute, the deal was changed, so the investors got nothing, and the founders got really big retention backers. I think there was probably an opportunity for the founders to push back. Look, it did not end up moving the needle for us, and so like, I, I generally move on from these things pretty quickly. I think it could have been handled. Differently. And, um, I won't forget it.

AI assessment note: “at the last minute, the deal was changed, so the investors got nothing”

Q Do you think that everyone is an entrepreneur?

A No. I, we, we've, we've talked about this. I think, I think there's an, there's an, uh, there's another, uh, Silicon Valley meme where, um, Everyone should be a founder. I think it's similar to like the meme back in the day where everyone needed to learn to code. We've been playing around with different taglines at Asylum, um, one of which is don't do this. I don't know if that will actually be, I think that might get cut, but like the, the basic idea is that people say this, but I don't think they really internalize it. Like building a startup is, um, truly awful. It's like a truly, truly bad experience. Um, and it will ruin your life basically in various different ways. And by the way, that's if it goes well or if it doesn't go well. Either way, it goes well, problems get harder, um, huge teams, uh, often lots of capital raised, lots of pressure, um, like it is going to take a lot out of you. Um, and I've seen this through relationship breakups, founder breakups, divorces, bankruptcies, like Um, what I will say is after many years of doing this, I have more respect for the founder journey than I ever have. Like it actually, even just really thinking about it makes me like a little sick to my stomach. Like actually physically sick. I'm like, this is going to be a truly awful experience.

AI assessment note: “No. I, we, we've, we've talked about this.”

Q it or not in terms of naming. And I should have been much more proactive in terms of managing positions and exiting when I could have done. Is there a way to navigate in your mind this much more banker-like mindset towards positions, position sizing, liquidity timing, but also retaining the artisanal element that you like? Because I think we're both in the same camp of you do need both.

A My view has always been, uh, trying to find alignment with the founder. We have seen many experiences. Now, when a founder is selling a company, right? You're selling with them, right? So that's, that's aligned. Um, we have sold, uh, shares in founders companies over the years. Um, actually a number of times. Um, we will only do that when the founder is selling. Um, at, but, but I will say when the founder is selling, we almost always do it. I want to be aligned with the founder. I think there are many investors that are, that are actually terrified to have those, even those conversations, which also, again, goes back to honest conversations and trust. My approach has always been, if I built trust with the founder, if they are choosing to sell shares in a round, I give them a call. By the way, we've, in most every situation, we're basically the first investor in the company. And I say, Hey, look, Been amazing working with you for many years, as it is. Um, you're selling a little bit. Hey, it would be really helpful and valuable to us if we could sell a little bit alongside you. And by the way, valuable to us and to our investors, and it allows us to continue to do what we do. Uh, we never sell, we never sell all of it.

AI assessment note: “trying to find alignment with the founder... we will only do that when the founder is selling”

Q And who are your mentors today then? Who do you look up to and aspire to?

A Uh, wow, that's a great question. So I'd say I've been, I've been very lucky to find, uh, To find venture mentors that, uh, I view as, uh, as really some of the best VCs, certainly in New York and, and, and maybe across the country. Um, and, and these folks, and these folks were not just, were not just mentors in the sense that they, uh, helped me learn the business, but, um, but actually they helped us raise Notations First Fund in many ways, and so, um, uh, Andy Weissman has been Uh, has been a mentor to us, who's a, who's a partner at Union Square Ventures. And then I'd say there's a, you know, there's a group of, of younger VCs that, um, that, uh, have done really well in, in New York, um, recently that, uh, that we look to as kind of newer folks in the business of, you know, folks like Chris Peake and, um, some of the folks at, uh, at Collaborative Fund. So, uh, I think it's important to, to surround yourself with people that, uh, Uh, you both look up to and view as peers that, uh, that have both been in the venture industry for a really long time, and for folks that may be, you know, a fund or two ahead of you, but, um, uh, but have kind of a fresher perspective on kind of building a new firm and, and, uh, and raising a fund for the first time.

AI assessment note: “Andy Weissman has been Uh, has been a mentor to us”

Q And how do you evaluate then the broader valuation, uh, ecosystem? Have you seen massively inflated valuations in the kind of frothy ecosystem?

A Yeah, I mean, I think, you know, valuations are all over the map, and it depends, um, depends on who you ask and at what stage and in what location. Um, I think that what we've seen in terms of seed and pre-seed and even Series A in New York is, uh, is much more, um, uh, much more practical valuations. I mean, I don't think it's, uh, uh, it's super crazy here, here in New York. Um, certainly out in the valley, I think you're seeing, um, I think you're seeing much more inflated relative valuations. Um, And so, look, I mean, the reality is that as a, as a, as a small fund, um, we are, uh, we are somewhat more evaluation sensitive than, than some of our peers, and, uh, the reality is that hasn't really been a major hurdle in terms of us trying to come to terms with, uh, you know, with, with founders that we want to partner with.

AI assessment note: “out in the valley, I think you're seeing much more inflated relative valuations.”

Q And how important, then, do you think it is for investors to be very close in proximity to their startups?

A Uh, again, I think it, it, it totally depends on the investor and the model and the stage. So, you know, I think if you, if you're a pre-IPO growth investor, for the most part, you are a purely financial investor. And so, uh, and so I don't think it's nearly as critical to be close to the founders that you're, that you're working with. I think as you, as you get early and earlier in the stack, um, Uh, I do think it's, it's more important to, uh, to be able to meet with and, and interact with on a somewhat regular basis and in person. Um, And so, you know, what, what, what we do, our approach is, uh, you know, we have, we have an office in Brooklyn. Um, some of our, our founders are welcome to work there, uh, with us if they so choose. Um, and, uh, and we're available on call and in person, um, whenever it makes sense. I don't, you know, we don't, we don't require time spent from our founders, you know, for the folks that just want to, Focus and be heads down and build. Uh, we, we let them do that. Uh, but for the folks that, um, that need help in, in key areas, and I'd say, you know, we spend a lot of time around technical team building and recruiting. We spend a lot of time around building out the initial version of the product and, and product architecture. Um, uh, and then we spend a lot of time around capital raising stuff. And so, um, I find that those, those conversations…

AI assessment note: “I think it totally depends on the investor and the model and the stage.”

Q And how do you evaluate then the broader valuation, uh, ecosystem? Have you seen massively inflated valuations in the kind of frothy ecosystem?

A Yeah, I mean, I think, you know, valuations are all over the map, and it depends, um, depends on who you ask and at what stage and in what location. Um, I think that what we've seen in terms of seed and pre-seed and even Series A in New York is, uh, is much more, um, uh, much more practical valuations. I mean, I don't think it's, uh, uh, it's super crazy here, here in New York. Um, certainly out in the valley, I think you're seeing, um, I think you're seeing much more inflated relative valuations. Um, And so, look, I mean, the reality is that as a, as a, as a small fund, um, we are, uh, we are somewhat more evaluation sensitive than, than some of our peers, and, uh, the reality is that hasn't really been a major hurdle in terms of us trying to come to terms with, uh, you know, with, with founders that we want to partner with.

AI assessment note: “out in the valley, I think you're seeing much more inflated relative valuations”

Q And are you solely investing in New York?

A Yeah, so yeah, so at least today we're, we're on New York, very much a New York City focused fund. Uh, the, so, so every single one of our companies that we work with will be primarily based in New York. Um, We've, we've actually just, we've just kind of settled on that recently. So up until, ah, the last couple months, we were, we were trying to work through whether or not there might be opportunities to work with founders, um, to founders out west, and particularly those founders that we may have worked with in the past. Um, where we came out is that ultimately, um, one of the things that we're, that we're building, um, out in this, in this first fund Is, um, is a network of fantastic people that might help one another as much as we might hopefully be, work with, work with the founders directly, and so, um, having that network of founders, uh, all based locally here in New York City, we think, um, we think will provide a lot of value to them, and then a lot of value to us as we build the firm, um, over the course of the next years and decades.

AI assessment note: “every single one of our companies that we work with will be primarily based in New York.”

Q And how important, then, do you think it is for investors to be very close in proximity to their startups?

A Uh, again, I think it, it, it totally depends on the investor and the model and the stage. So, you know, I think if you, if you're a pre-IPO growth investor, for the most part, you are a purely financial investor. And so, uh, and so I don't think it's nearly as critical to be close to the founders that you're, that you're working with. I think as you, as you get early and earlier in the stack, um, Uh, I do think it's, it's more important to, uh, to be able to meet with and, and interact with on a somewhat regular basis and in person. Um, And so, you know, what, what, what we do, our approach is, uh, you know, we have, we have an office in Brooklyn. Um, some of our, our founders are welcome to work there, uh, with us if they so choose. Um, and, uh, and we're available on call and in person, um, whenever it makes sense. I don't, you know, we don't, we don't require time spent from our founders, you know, for the folks that just want to, Focus and be heads down and build. Uh, we, we let them do that. Uh, but for the folks that, um, that need help in, in key areas, and I'd say, you know, we spend a lot of time around technical team building and recruiting. We spend a lot of time around building out the initial version of the product and, and product architecture. Um, uh, and then we spend a lot of time around capital raising stuff. And so, um, I find that those, those conversations…

AI assessment note: “I think it, it, it totally depends on the investor and the model and the stage.”

Q What was the single biggest mistake you made in Zerp? I mentioned mine not selling.

A Hey man, you can bring that, you can bring those learnings for you forever. I think my two biggest mistakes In, at, at notation over the last, call it 1012 years, and, you know, I was, I was an investor at Betaworks before that. Um, I think my mistakes tend to be, um, getting antsy. I haven't made an investment in a while, and I start to think about that, and it gets in my head, and now I'm much more aware of it, but, um, I don't make many investments a year. I make three to five investments a year. And when that happens, and sometimes those, those come in chunks. So like, there'll be long periods where I haven't made an investment. Um, I think it is human nature to start thinking, am I not seeing the right stuff? Am I overthinking these things? What are my LPs going to say? What do they think I'm doing? Right? Like these are toxic, toxic little people in your head. Um, I've learned To listen to them and understand where I'm at and to be patient. So I've made some mistakes there. Um, I think I've made some mistakes, mistakes around, we talked about valuation. I think I've made some mistakes about being, uh, too precious. Around valuation. So like, there's a big difference between a five million dollar post and a twenty-five million dollar post. Like, that I think you need to really think about and consider. Um, if it's five or eight, and it means you potentially, you know, winn…

AI assessment note: “I think my two biggest mistakes In, at, at notation over the last”

Q And now you're a partner at Notation, and you've been head of investments at Betaworks, but can you kick us off by telling us where it all started for you, and how you made your move into the venture industry?

A In many ways, I think like, like many BCs, I, I, I stumbled into a role in venture. I think because it's, It's in many ways a, a boutique industry. The reality is that it's hard to, it's hard to plan for in many ways. And so, um, and so, you know, I, I've been building and investing in, in startups here in, in New York, uh, since 2008. I, I, I started, uh, uh, my first company in, in 28 and 2008, uh, and, um, Initially, kind of built a skill set around operating and product building. Um, I, I had been, I think, like, like many folks have been, have been fascinated with With the Betaworks model and the ability to both, uh, build and invest in startups out of one, out of one corporate entity. And so, uh, I joined Betaworks in 2011. Uh, the, the role there was, was in many ways, uh, was, was nebulous. So, um, I think, you know, I'd recommend to most people when you're, when you're fascinated with a, with a company or a product, uh, worry less about the role and, um, and just find a way to become part of it, and so, uh, and so I joined in 2011. I had a couple different, different roles there, as, as most folks do. Uh, I spent the bulk of my time running, running the seed investing business, and, uh, and that was mainly because a couple of folks that, that had been doing it actually at the company It left, and so, uh, and so with, you know, really knowing, knowing very little about …

AI assessment note: “I joined Betaworks in 2011... spent the bulk of my time running, running the seed investing business”

Q And are you solely investing in New York?

A Yeah, so yeah, so at least today we're, we're on New York, very much a New York City focused fund. Uh, the, so, so every single one of our companies that we work with will be primarily based in New York. Um, We've, we've actually just, we've just kind of settled on that recently. So up until, ah, the last couple months, we were, we were trying to work through whether or not there might be opportunities to work with founders, um, to founders out west, and particularly those founders that we may have worked with in the past. Um, where we came out is that ultimately, um, one of the things that we're, that we're building, um, out in this, in this first fund Is, um, is a network of fantastic people that might help one another as much as we might hopefully be, work with, work with the founders directly, and so, um, having that network of founders, uh, all based locally here in New York City, we think, um, we think will provide a lot of value to them, and then a lot of value to us as we build the firm, um, over the course of the next years and decades.

AI assessment note: “Yeah, so yeah, so at least today we're, we're on New York”

Q At such an early stage, there's often not many metrics or analysis to go on, so what do you hone in on at that early stage?

A Yeah, I mean, so this is, I mean, this is somewhat cliche at this point, but, uh, you know, to us, the team and the people, uh, are everything. So we look for, uh, we look for really top-notch, typically technical teams, uh, that are in the very early stages of building a product. And then number two is we, we, we really look for, uh, a reason or some sort of unique insight into, into why that team is building what they're building. And so, you know, we are happy to invest, uh, as early as something that is pre-launch or even in some cases pre-product. What we look for is a really fantastic, motivated technical team that has a real reason to Or, or, or unique insight into, into, into why they're doing what they're doing.

AI assessment note: “to us, the team and the people, uh, are everything.”

Q with you. You'll also hear when I don't agree, but I want to unpack quite a few different elements that you said there. Starting on one element, you said about packaging up for different rounds, And it reminded me of something you said to me before, which is, you know, essentially that venture is basically a Ponzi scheme. Why has venture turned into a Ponzi scheme? Do you think Nick?

A So like, I have this view that every particularly private, uh, asset class has its own version of a Ponzi scheme. So like, I'll walk you through like the hedge fund Ponzi scheme. The hedge fund Ponzi scheme is you take a lot of money, you take insane amount of risk, you double that money one year, you take your Of the bonus in cash. The next year it goes to zero and you don't have to give that money back. That's the hedge fund Ponzi scheme. By the way, I saw this at Lehman Brothers back in the day. Traders, you're, you're gambling with someone else's money. So you're incentivized to take as much risk as humanly possible with the bank's money. They, they've sort of changed regulations to, uh, make this harder to do, but like you take a ton of risk, you get a twenty million dollar bonus that year. Great. You lose all the money next year. You get fired. You go across the street to another bank and do it again. I, I think hedge funds are sort of a similar proposition. The private equity scam is like, we probably all know this is like, you can invest in a company. It doesn't actually matter how well that company does. Um, you can take a lot of money out of that company, and if it goes bankrupt, it doesn't matter. The venture, uh, Ponzi is you raise a fund, you take two percent management fees for 10 years guaranteed, it does not matter how well that fund does, and you've taken 20% o…

AI assessment note: “The venture, uh, Ponzi is you raise a fund, you take two percent management fees”

Q with you. You'll also hear when I don't agree, but I want to unpack quite a few different elements that you said there. Starting on one element, you said about packaging up for different rounds, And it reminded me of something you said to me before, which is, you know, essentially that venture is basically a Ponzi scheme. Why has venture turned into a Ponzi scheme? Do you think Nick?

A So like, I have this view that every particularly private, uh, asset class has its own version of a Ponzi scheme. So like, I'll walk you through like the hedge fund Ponzi scheme. The hedge fund Ponzi scheme is you take a lot of money, you take insane amount of risk, you double that money one year, you take your Of the bonus in cash. The next year it goes to zero and you don't have to give that money back. That's the hedge fund Ponzi scheme. By the way, I saw this at Lehman Brothers back in the day. Traders, you're, you're gambling with someone else's money. So you're incentivized to take as much risk as humanly possible with the bank's money. They, they've sort of changed regulations to, uh, make this harder to do, but like you take a ton of risk, you get a twenty million dollar bonus that year. Great. You lose all the money next year. You get fired. You go across the street to another bank and do it again. I, I think hedge funds are sort of a similar proposition. The private equity scam is like, we probably all know this is like, you can invest in a company. It doesn't actually matter how well that company does. Um, you can take a lot of money out of that company, and if it goes bankrupt, it doesn't matter. The venture, uh, Ponzi is you raise a fund, you take two percent management fees for 10 years guaranteed, it does not matter how well that fund does, and you've taken 20% o…

AI assessment note: “The venture, uh, Ponzi is you raise a fund, you take two percent management fees”

Q So what do you do? Three million for first, and then five for follow-on?

A So, yeah, good question. I mean, that's something we think about often. Uh, you know, the, the, the, the tension with, with a very small fund like ours is, you know, how much capital do you save for follow on versus how large is the initial check, um, in order to, to, to get meaningful ownership in the companies that we work with. And so, um, and so for a number of different reasons, um, I'm actually in a Process of writing a blog post about it for a number of different reasons. We're, we're, we're focusing on, um, having initially, uh, relatively high ownership in the companies that we work with. That's usually high single-digit percentage. And, um, and I, and our strategy is to, uh, find ways to do follow-on investments and pro rata, um, outside of the fund, either through, uh, SBVs with RLPs, or, or at some point we might, we might raise a follow-on fund, um, Um, uh, separately.

AI assessment note: “our strategy is to, uh, find ways to do follow-on investments... outside of the fund”

Q And do you find that with those, you said it's all about the founders and the team there. If you have a serial entrepreneur, do you find that the valuation reflects this? And in that case, do you find it difficult to get in on such an early round?

A Yeah, so that's a, that's a, that's a, that's a really good question. I mean, certainly we get asked that by, by our, our LPs all the time. Um, you know, the question really is, um, Is there some sort of, uh, um, are we gonna basically, are we gonna, are we gonna lose out On the best founders by, by investing in these relatively small rounds early on. And, you know, six to 12 months ago, I would have said, you know, I'm not sure. Uh, today, having, having been, been running the fund for, uh, for about six months now, and, uh, and we've, we've made eight investments now. Um, I don't think that's the case at all. So I think that, um, I think that we can, That we can still work with really top notch founders, um, that are disciplined around, um, the amount of money that they raise early on. And, and, you know, there's, there's, I'd also say there's an, there's an assumption that, you know, the best founders are one, repeat founders, which I don't think is the case. I think if you look at some of the, the biggest, most important companies over the last 10 years, they're first time founders, you know, uh, including Mark Zuckerberg at Facebook. So, you know, I, I, I don't, uh, I don't think repeat founders are always the best founders. And then, you know, number two, it, it assumes that, uh, That repeat founders or serial entrepreneurs that can raise these very large initial rounds o…

AI assessment note: “I don't think that's the case at all.”

Q And how did you learn the basics then? Were you surrounded by, kind of, investors themselves, or was it from founders?

A Uh, you know, I think, number one, by doing. So I think, uh, you know, you start out feeling like a fraud, and, um, and in some ways, some ways you are, and, and, uh, you know, the, the, the first few months of, of, uh, of running the investment business there, I just, I was, uh, constantly terrified of, uh, Of, uh, of, uh, you know, screwing everything up and, and being found out, and so, um, and so really I, I learned from surrounding myself with folks that, that had been, um, that had been making and, and doing investments and, and, uh, had been working in venture for, for a lot longer than I have, and so, um, certainly that included, uh, John Borthwick, who was, uh, who was the CEO of Betaworks, and, and I found, um, Uh, I found a couple really, really wonderful, um, mentors, uh, outside of Betaworks as well that, um, that I, I view as mentors today that have been doing a lot longer, and, um.

AI assessment note: “I learned from surrounding myself with folks that, that had been, um, that had been making”

Q And how did you learn the basics then? Were you surrounded by, kind of, investors themselves, or was it from founders?

A Uh, you know, I think, number one, by doing. So I think, uh, you know, you start out feeling like a fraud, and, um, and in some ways, some ways you are, and, and, uh, you know, the, the, the first few months of, of, uh, of running the investment business there, I just, I was, uh, constantly terrified of, uh, Of, uh, of, uh, you know, screwing everything up and, and being found out, and so, um, and so really I, I learned from surrounding myself with folks that, that had been, um, that had been making and, and doing investments and, and, uh, had been working in venture for, for a lot longer than I have, and so, um, certainly that included, uh, John Borthwick, who was, uh, who was the CEO of Betaworks, and, and I found, um, Uh, I found a couple really, really wonderful, um, mentors, uh, outside of Betaworks as well that, um, that I, I view as mentors today that have been doing a lot longer, and, um.

AI assessment note: “I learned from surrounding myself with folks that, that had been making and, and doing investments”

Q At such an early stage, there's often not many metrics or analysis to go on, so what do you hone in on at that early stage?

A Yeah, I mean, so this is, I mean, this is somewhat cliche at this point, but, uh, you know, to us, the team and the people, uh, are everything. So we look for, uh, we look for really top-notch, typically technical teams, uh, that are in the very early stages of building a product. And then number two is we, we, we really look for, uh, a reason or some sort of unique insight into, into why that team is building what they're building. And so, you know, we are happy to invest, uh, as early as something that is pre-launch or even in some cases pre-product. What we look for is a really fantastic, motivated technical team that has a real reason to Or, or, or unique insight into, into, into why they're doing what they're doing.

AI assessment note: “to us, the team and the people, uh, are everything.”

Q And do you find that with those, you said it's all about the founders and the team there. If you have a serial entrepreneur, do you find that the valuation reflects this? And in that case, do you find it difficult to get in on such an early round?

A Yeah, so that's a, that's a, that's a, that's a really good question. I mean, certainly we get asked that by, by our, our LPs all the time. Um, you know, the question really is, um, Is there some sort of, uh, um, are we gonna basically, are we gonna, are we gonna lose out On the best founders by, by investing in these relatively small rounds early on. And, you know, six to 12 months ago, I would have said, you know, I'm not sure. Uh, today, having, having been, been running the fund for, uh, for about six months now, and, uh, and we've, we've made eight investments now. Um, I don't think that's the case at all. So I think that, um, I think that we can, That we can still work with really top notch founders, um, that are disciplined around, um, the amount of money that they raise early on. And, and, you know, there's, there's, I'd also say there's an, there's an assumption that, you know, the best founders are one, repeat founders, which I don't think is the case. I think if you look at some of the, the biggest, most important companies over the last 10 years, they're first time founders, you know, uh, including Mark Zuckerberg at Facebook. So, you know, I, I, I don't, uh, I don't think repeat founders are always the best founders. And then, you know, number two, it, it assumes that, uh, That repeat founders or serial entrepreneurs that can raise these very large initial rounds o…

AI assessment note: “I don't think that's the case at all.”

Q And then, as a smaller VC firm with less resources than the larger firms with legal and marketing teams, how do you compete in the immense pool of capital, and have you seen crowdfunding platforms, uh, compete with you for deal flow?

A Yeah, so that, that's a good question. I, I do think that, um, because there is, is so much capital available today, uh, particularly, I would say particularly in, in, in San Francisco and the Valley, um, it is really hard, um, To legitimately differentiate, um, yourself as an investor. Um, And so, you know, I think you see all the time, both, both venture firms pitching to LPs and venture firms pitching to founders, that they are, uh, fundamentally different in, in some way. And I think the reality is that that's, that's rarely the case. Um, you know, I think our advantage is, uh, is one is working in New York, in New York City at, at the stage that we are. And so, um, our view is that there is Uh, there are very few, uh, really top tier, uh, firms and investors that are comfortable investing at what we call the pre-seed stage, um, in New York City. And so, and so for us, I think it's much more, it's much easier to, um, uh, to differentiate from a lot of the, from a lot of the noise in the market at, at, at that, at that stage.

AI assessment note: “our advantage is, uh, is one is working in New York, in New York City”

Q And then, as a smaller VC firm with less resources than the larger firms with legal and marketing teams, how do you compete in the immense pool of capital, and have you seen crowdfunding platforms, uh, compete with you for deal flow?

A Yeah, so that, that's a good question. I, I do think that, um, because there is, is so much capital available today, uh, particularly, I would say particularly in, in, in San Francisco and the Valley, um, it is really hard, um, To legitimately differentiate, um, yourself as an investor. Um, And so, you know, I think you see all the time, both, both venture firms pitching to LPs and venture firms pitching to founders, that they are, uh, fundamentally different in, in some way. And I think the reality is that that's, that's rarely the case. Um, you know, I think our advantage is, uh, is one is working in New York, in New York City at, at the stage that we are. And so, um, our view is that there is Uh, there are very few, uh, really top tier, uh, firms and investors that are comfortable investing at what we call the pre-seed stage, um, in New York City. And so, and so for us, I think it's much more, it's much easier to, um, uh, to differentiate from a lot of the, from a lot of the noise in the market at, at, at that, at that stage.

AI assessment note: “our advantage is, uh, is one is working in New York, in New York City”

Q But then as to what, to what extent are we truly founder-led investors? Truly, truly.

A I would say I'm, I'm, I'm looking for founders. Now, now, okay, I've, I've made, I've made founder bets, right? Um, but the founder, I think those founders will often do a really good job of explaining it. In simple terms. So I, I think if you really don't understand it, if you really can't understand it, then, uh, in some ways, like, I, I actually think that's, that's, it's on the, it's the founder's job to explain it. In really simple terms. If they can't do it, even for really technical things, like we've invested in some bio companies and other, I'm not a scientist, but like those founders, they can explain that thing to anybody. In simple terms, and they have to, it, it can't just be for the investor. It has to be for employees. It has to be for customers. You have to be able to explain the, the, the special unique thing that you're doing that no one else understands yet. If you can't explain that and make me A dummy, understand it, then like, yeah, then, then, then there's a bigger problem than just me not understanding it.

AI assessment note: “I would say I'm, I'm, I'm looking for founders.”

Q So what do you do? Three million for first, and then five for follow-on?

A So, yeah, good question. I mean, that's something we think about often. Uh, you know, the, the, the, the tension with, with a very small fund like ours is, you know, how much capital do you save for follow on versus how large is the initial check, um, in order to, to, to get meaningful ownership in the companies that we work with. And so, um, and so for a number of different reasons, um, I'm actually in a Process of writing a blog post about it for a number of different reasons. We're, we're, we're focusing on, um, having initially, uh, relatively high ownership in the companies that we work with. That's usually high single-digit percentage. And, um, and I, and our strategy is to, uh, find ways to do follow-on investments and pro rata, um, outside of the fund, either through, uh, SBVs with RLPs, or, or at some point we might, we might raise a follow-on fund, um, Um, uh, separately.

AI assessment note: “our strategy is to, uh, find ways to do follow-on investments”