The Exchanges

Q And so, and so, yeah, what were the takeaways then from operating that vehicle, having seen all you had done with the starkly contrasting periods?

A Yeah, I would say that that managing that five million dollar fund or 4.6, uh, was probably the most seminal moment for me in my venture capital career in the sense that you got a, a front row seat of, you know, what it means to be a fiduciary of your investors capital and And, and having to make those investment decisions and living with all, you know, all of those from start to finish. And then I think the, the part about, I didn't have a lot of money, obviously. So I was kind of drawn to companies that were more interested in the, those smaller rounds that could get them started. And then based upon a lot of traction in the market, they could go out and raise further capital. So it was a really important time for me to kind of become that investment coach. Fund manager. Everyone talks about being an investor in X, Y, and Z company. You can invest in any number of different companies that you want, but kind of having a fund and, you know, with, with returns and quarterly reports and annual, you know, kind of, uh, investment return metrics that you're showing, those were really important days for me as, as a fund manager.

AI assessment note: “managing that five million dollar fund or 4.6, uh, was probably the most seminal moment”

Q Can I ask, what does it take to make the transition from investor in companies and board member to a real fund manager, kind of managing the whole vehicle?

A I think you just kind of have to look at it as within the holistic view of what it means to be a venture capital fund manager. So, you know, there are major blocks of time that you have to spend on that, right? Which is you have to talk to your investors, raise your capital, and then there is the investing phase, which is probably in the two to four year time frame. And then there is the working with all of those companies as they succeed or fail. And then there is the liquidity element, the exit element, Uh, from those companies. So I think as a fund manager, you have to be cognizant of the major leverage points in each of those, you know, kind of major blocks. Uh, and then you rinse and repeat, obviously, cause you know, you go back to your investors and you talk about all the wonderful investments you made and all the progress they've made and all the exits you've had. That is a complete life cycle of, of being a fund manager. And I think that's a little bit different than just like, oh, I love this company and I've invested and I'm on the board and it's doing incredibly well. So, um, that is one part of the whole, but, but the whole is what I think is the element that I really, I really took away from on, on my little blacksmith fund.

AI assessment note: “you just kind of have to look at it as within the holistic view”

Q And then I'm intrigued in terms of kind of, with particular respect to True, how do you look to operate at such early stages today? Today with, with considerable kind of, uh, assets under management as you do have with true.

A Well, you kind of go back to your first principles and what is it that we started true based upon? And that was based upon the idea that the things that we care about are founders going after big, what we call blue ocean markets. So not yet formed necessarily, and that we're raising an amount of money at a price that we were, that we were comfortable with. Those three things haven't changed. So we, today we're still looking for an outstanding founder or founders, usually one to four, going after a big market opportunity. And the markets are different. We're never going to go after another fitness counter, a step counter kind of idea. That's old and in the market now. But in 2008, Fitbit was a really intriguing investment opportunity to us. So we just have to stay current with kind of what's on the horizon and But the, but the first principle upon how we want to go after those investments has not changed, and I think that allows us to rally the entire firm around, you know, a common ideal and a common investment thesis that is, I think, very powerful for us as a firm as we, you know, as we have more capital.

AI assessment note: “Well, you kind of go back to your first principles”

Q And then I'm intrigued in terms of kind of, with particular respect to True, how do you look to operate at such early stages today? Today with, with considerable kind of, uh, assets under management as you do have with true.

A Well, you kind of go back to your first principles and what is it that we started true based upon? And that was based upon the idea that the things that we care about are founders going after big, what we call blue ocean markets. So not yet formed necessarily, and that we're raising an amount of money at a price that we were, that we were comfortable with. Those three things haven't changed. So we, today we're still looking for an outstanding founder or founders, usually one to four, going after a big market opportunity. And the markets are different. We're never going to go after another fitness counter, a step counter kind of idea. That's old and in the market now. But in 2008, Fitbit was a really intriguing investment opportunity to us. So we just have to stay current with kind of what's on the horizon and But the, but the first principle upon how we want to go after those investments has not changed, and I think that allows us to rally the entire firm around, you know, a common ideal and a common investment thesis that is, I think, very powerful for us as a firm as we, you know, as we have more capital.

AI assessment note: “first principle upon how we want to go after those investments has not changed”

Q So what were the takeaways for you from seeing that kind of stark contrast?

A You know, at the time that you had all this increasing money coming into the market, and then There being no liquidity, it really underscores for you as an investor that one of the four major risks of venture capital investing is financing risk. And financing risk is one of those things that, you know, you don't notice until it's right there up on you. And then you, as a company, you can be in trouble if you're exposed to that kind of financing risk at the time of the, in that market. So to me, the contrast was tremendous amounts of capital every And then there was this capital efficiency movement, and kind of by necessity, as well as the decreasing costs required to start businesses, which started happening, you know, in that 2000 time frame. So I had a very small angel fund. I now refer to it as the first super angel fund, although I would have never thought of that at the time.

AI assessment note: “one of the four major risks of venture capital investing is financing risk”

Q their business and gain traction with two and a half million, give or take, and under. So, I mean, I'm intrigued with that, and how you'd advise founders in the early days raising capital in terms of really raising the right amount first And how long is the right runway to go for? Is it the Jeff Clavier, 24 months? Is it the more traditional 18? What would you suggest?

A Yeah, I think, you know, the, the number is a little bit of function of the time, right? So for us, in 2005, 2006, our real sweet spot was a 250,000 dollar investment to two and a half million or so. And that was, we felt like that was the right number to probably have somewhere between 12 to 18, maybe 20 months or so, A runway to be able to prove what you were, you know, attempting to, to complete the, the decreasing costs. I think what it, what it unleashed is a whole raft of new founders who didn't have to go through a three month excruciating process to try and get five million to then have to go out and raise another five or 10,000,012 months later, because they'd spend all that and, you know, all the capital had been used on, on what is now on a much more expensive resources in the past. Those resources today are much, much less expensive. To me, there is, there is probably, you know, there's a Goldilocks moment of just the right amount of capital, right? But I think that that's a little bit case specific, and each founder kind of has to, um, to find their own sweet spot of what they're comfortable with. What I like to talk about is, from a fundraising standpoint, you want time to be your friend. And when it is not your friend, and you're trying to raise capital, and you're trying to do it in a In a rushed frame of mind, or with, with as limit, more limited data than what…

AI assessment note: “you need to raise enough money that allows for you to have that time”

Q And so, and so, yeah, what were the takeaways then from operating that vehicle, having seen all you had done with the starkly contrasting periods?

A Yeah, I would say that that managing that five million dollar fund or 4.6, uh, was probably the most seminal moment for me in my venture capital career in the sense that you got a, a front row seat of, you know, what it means to be a fiduciary of your investors capital and And, and having to make those investment decisions and living with all, you know, all of those from start to finish. And then I think the, the part about, I didn't have a lot of money, obviously. So I was kind of drawn to companies that were more interested in the, those smaller rounds that could get them started. And then based upon a lot of traction in the market, they could go out and raise further capital. So it was a really important time for me to kind of become that investment coach. Fund manager. Everyone talks about being an investor in X, Y, and Z company. You can invest in any number of different companies that you want, but kind of having a fund and, you know, with, with returns and quarterly reports and annual, you know, kind of, uh, investment return metrics that you're showing, those were really important days for me as, as a fund manager.

AI assessment note: “what it means to be a fiduciary of your investors capital”

Q But speaking of realizations, I think, you know, you must credit yourself, as you said, the first Super Angel Fund, with kind of foreseeing that decreasing cost of capital proliferate throughout the startup ecosystem. So I'm intrigued, though, how that means you view the proliferation of seed funds that we've seen since then, and the early stage landscape then at present. How do you view that?

A You know, my co-founder, John Callahan, and I, we, um, when we started out in the I like to say that if you start a brand new firm, you need to be able to answer two questions. One, which is why in the world does the world need yet another new venture capital fund? And secondly, if, if that, if you answer that question, then, you know, why are you all the ones to do that? And for us, the answer to question number one was that the angel money had kind of dried up because so many people had just been burned not too many years ago on all their, you know, internet.com bust stocks. So they didn't feel very rich. And the large firms had gotten larger, and they had large initial capital requirements for their checks. So, we were able to have an institutional fund at a hundred and sixty-five million, and we could say, well, whatever size check you want, Ms. or Mr. Entrepreneur. And that was, for us, you know, that two 50 to two and a half million. And that was kind of unique back then. Fast forward to today, there's, there are tremendous sources of capital in lots of different corners of the world, and many of those corners are here, obviously, in the Bay Area. But I, I think that More capital for the system is to start businesses is, is probably a good thing. We will never be able to do all the early stage seed deals that are out there, nor should we. And so I think it's fine. We as a…

AI assessment note: “More capital for the system is to start businesses is, is probably a good thing.”

Q So what were the takeaways for you from seeing that kind of stark contrast?

A You know, at the time that you had all this increasing money coming into the market, and then There being no liquidity, it really underscores for you as an investor that one of the four major risks of venture capital investing is financing risk. And financing risk is one of those things that, you know, you don't notice until it's right there up on you. And then you, as a company, you can be in trouble if you're exposed to that kind of financing risk at the time of the, in that market. So to me, the contrast was tremendous amounts of capital every And then there was this capital efficiency movement, and kind of by necessity, as well as the decreasing costs required to start businesses, which started happening, you know, in that 2000 time frame. So I had a very small angel fund. I now refer to it as the first super angel fund, although I would have never thought of that at the time.

AI assessment note: “it really underscores for you as an investor that one of the four major risks”

Q But speaking of realizations, I think, you know, you must credit yourself, as you said, the first Super Angel Fund, with kind of foreseeing that decreasing cost of capital proliferate throughout the startup ecosystem. So I'm intrigued, though, how that means you view the proliferation of seed funds that we've seen since then, and the early stage landscape then at present. How do you view that?

A You know, my co-founder, John Callahan, and I, we, um, when we started out in the I like to say that if you start a brand new firm, you need to be able to answer two questions. One, which is why in the world does the world need yet another new venture capital fund? And secondly, if, if that, if you answer that question, then, you know, why are you all the ones to do that? And for us, the answer to question number one was that the angel money had kind of dried up because so many people had just been burned not too many years ago on all their, you know, internet.com bust stocks. So they didn't feel very rich. And the large firms had gotten larger, and they had large initial capital requirements for their checks. So, we were able to have an institutional fund at a hundred and sixty-five million, and we could say, well, whatever size check you want, Ms. or Mr. Entrepreneur. And that was, for us, you know, that two 50 to two and a half million. And that was kind of unique back then. Fast forward to today, there's, there are tremendous sources of capital in lots of different corners of the world, and many of those corners are here, obviously, in the Bay Area. But I, I think that More capital for the system is to start businesses is, is probably a good thing. We will never be able to do all the early stage seed deals that are out there, nor should we. And so I think it's fine. We as a…

AI assessment note: “More capital for the system is to start businesses is, is probably a good thing.”

Q Can I ask, what does it take to make the transition from investor in companies and board member to a real fund manager, kind of managing the whole vehicle?

A I think you just kind of have to look at it as within the holistic view of what it means to be a venture capital fund manager. So, you know, there are major blocks of time that you have to spend on that, right? Which is you have to talk to your investors, raise your capital, and then there is the investing phase, which is probably in the two to four year time frame. And then there is the working with all of those companies as they succeed or fail. And then there is the liquidity element, the exit element, Uh, from those companies. So I think as a fund manager, you have to be cognizant of the major leverage points in each of those, you know, kind of major blocks. Uh, and then you rinse and repeat, obviously, cause you know, you go back to your investors and you talk about all the wonderful investments you made and all the progress they've made and all the exits you've had. That is a complete life cycle of, of being a fund manager. And I think that's a little bit different than just like, oh, I love this company and I've invested and I'm on the board and it's doing incredibly well. So, um, that is one part of the whole, but, but the whole is what I think is the element that I really, I really took away from on, on my little blacksmith fund.

AI assessment note: “look at it as within the holistic view of what it means to be”

Q their business and gain traction with two and a half million, give or take, and under. So, I mean, I'm intrigued with that, and how you'd advise founders in the early days raising capital in terms of really raising the right amount first And how long is the right runway to go for? Is it the Jeff Clavier, 24 months? Is it the more traditional 18? What would you suggest?

A Yeah, I think, you know, the, the number is a little bit of function of the time, right? So for us, in 2005, 2006, our real sweet spot was a 250,000 dollar investment to two and a half million or so. And that was, we felt like that was the right number to probably have somewhere between 12 to 18, maybe 20 months or so, A runway to be able to prove what you were, you know, attempting to, to complete the, the decreasing costs. I think what it, what it unleashed is a whole raft of new founders who didn't have to go through a three month excruciating process to try and get five million to then have to go out and raise another five or 10,000,012 months later, because they'd spend all that and, you know, all the capital had been used on, on what is now on a much more expensive resources in the past. Those resources today are much, much less expensive. To me, there is, there is probably, you know, there's a Goldilocks moment of just the right amount of capital, right? But I think that that's a little bit case specific, and each founder kind of has to, um, to find their own sweet spot of what they're comfortable with. What I like to talk about is, from a fundraising standpoint, you want time to be your friend. And when it is not your friend, and you're trying to raise capital, and you're trying to do it in a In a rushed frame of mind, or with, with as limit, more limited data than what…

AI assessment note: “12 to 18, maybe 20 months or so, A runway to be able to prove”