The Exchanges

Q In terms of the, you said there about kind of adequate cushion. What is an adequate cushion for you? I'm always in the quandary of, Is 24 months too much? Is 18 months perfect? What's the kind of sweet spot for you?

A Depends on, it depends on the project. At the series seed stage, right, you may answer a bunch of questions in six months, because you're devising a set of experiments to do so. And then at the series seed, I always say, like, you want to basically double your money, so it's going to take you 600 grand to answer three or four top hypotheses, try to raise a million to. In the series A, hopefully you've answered one or two hypotheses, and you're starting to find You know, traction in one direction or another and answering some bigger hypotheses. So you might think about it roughly the same way, maybe a little less, maybe you don't double the money, but you sort of think, okay, you know, it's going to take me nine months to figure out or 12 months to figure out the key hypotheses I need right now. So let me add another, you know, nine to 12 months of runway onto that. So that puts you kind of into the range you mentioned, that kind of 20 to 24 month range. That usually feels pretty good. You said 18 or 24, and like, I don't think there's a science to it. I think that just Sort of feels like the right amount of time to answer a set of questions. Sometimes it takes longer. Sometimes it takes shorter.

AI assessment note: “that kind of 20 to 24 month range. That usually feels pretty good.”

Q And we kind of spoke about kind of post-investment there. I do want to touch on the investment process there because with Mayfield now you've seen a ton of companies raising large series A's. So firstly, why are we seeing more of these large series A's as time progresses, do you think?

A You know, it's funny. It reminds me a lot of the late nineties and what happened just after the late nineties where people see big outcomes and I think there's a few different dynamics at play. People see big outcomes, meaning that if I invest capital at an early stage, I'm going to have the potential for creating a billion dollar company. And we had a lot of exits and had a lot of great outcomes over the last several years. So there's that feeling in the marketplace. The second thing is that founders have credibility because they've been at a Facebook or they've sold a company to brain tree or whatever it is they've done. And so as a result, they can command the marketplace sort of premium attention. And when that happens, sometimes have more leverage over investors and Who want to get into backing these founders no matter what. The third thing is, very structurally, when you have new platforms that have been created, like the internet period, or in the last seven years, the mobile revolution, there's just bigger opportunities to go and fix, to go after. People want to raise more capital to protect them against a downturn. And actually, that's the fourth reason. Fear of, uh, when the good times are rolling, that the good times will end. And I think there's some of that in the marketplace today as well. Now, the problem is And every business is different, but generally speaking…

AI assessment note: “I think there's a few different dynamics at play. People see big outcomes”

Q If you're looking at a prospective investment and it started off with four co-founders and now there's two, uh, and you're kind of Doing the DD and looking at it more closely, how much of a kind of history role does that play in your kind of approach to the investment?

A It's a great question. You know what? It should, it entirely depends on the nature of that discussion. If it was one of those things where there was honest conversations, even if they were painful, where founders had to decide in the best interest of the business what the right personnel or founding team was to move the business forward, and they were willing to make hard choices, In order to do so, that's usually a good sign. If instead you've got founder dynamics that rapidly sort of broke apart, or where there's still bad blood, or where there's a lack of understanding about why things ended up the way they are, that may suggest that founders aren't willing to have hard conversations with each other as much as you want them to. And you can suss this out by doing the natural thing that people do, which is just diligencing whether, you know, what the circumstances was of a founder's departure. If a founder is very reluctant to have you speak to the ex-founder, usually that's a signal as well. So I've always found that a willingness towards transparency is extremely confidence building. And I don't mean this just when it comes to investing. It's just sort of a good rule for life in general and for doing business in general. And so a willingness towards transparency, leaning into transparency is, is sort of a key factor or filter that I look for in founders.

AI assessment note: “it entirely depends on the nature of that discussion.”

Q No, I'm very much with you on both, uh, Strategery and on Wait But Why. But then social media, obviously you spent time at Twitter. What's next? Is this platform diversification or monopoly tendencies ahead?

A It's funny. I think we're going to be in this world of a, of a controlled, but ever expanding oligopoly. And this is an evolving perspective of mine, but I think we've witnessed no less than seven sort of social platforms achieve more than a million, a hundred million users in the last seven years, which is unprecedented creation of wholly owned new media platforms. And, you know, I don't think you're going to create another seven tomorrow, but I won't be surprised if in the next couple, three years, we see one or two more. Because there are, when consumers sort of find a social media platform they love, they use it, they really dig it, um, but eventually they grow and they want new kinds of expression. They want to think about new sorts of things and new platforms do come along to provide that. That's why you people are on Snapchat and WhatsApp and Facebook and Instagram and Twitter, right? It's very common. So I think we'll continue to see slight evolutions where users will find new ways to express their identities on new social media platforms. Maybe not a scale, but there's a couple of use cases that still aren't solved, um, At scale meetings, there's not going to be 10 of them. There'll be one or two. There's a couple of cases that still aren't solved, and I see companies coming to the fore and hope to back companies coming to the fore that can solve those problems.

AI assessment note: “I think we're going to be in this world of a, of a controlled, but ever expanding oligopoly.”

Q So talk to me, Rishi, then. How do you, how do you interact with founders who do want to raise the big Series A in CAM? They're a successful repeat entrepreneur Entrepreneur. And they've got good seed investors, good angels. How do you negotiate that interaction with founders in terms of being realistic in terms of the series A?

A You know, I, I, what I, with this and with almost every kind of question like this, I try to focus on data, right? What is it that the entrepreneur wants to prove? And by the way, this should, this should apply for every round. It comes up more frankly in series seed than in series A, but the basic idea is that the purpose, the progress of a startup is the progress of having hypotheses that you then want to try to answer. And so, When you're constructing around, you should be able to think about what are the few things I know? What are the things I don't know? How much money is it going to take to figure out the things I don't know that are really important? And then how do I have an adequate cushion so that when I figure out the things I don't know, and it turns out a lot of great ideas I had won't help me build my business. I have enough capital to learn from those hypotheses and then formulate several new hypotheses to go and test. And that should give you some sense of how much money you should raise. Now, the way that most things happen, especially for seeds and series A's, is people say, I have a certain amount of dilution I want to take. I don't want to take more than X, right, dilution. That means I back into a certain round size, and that means I back into a budget. And it happens more often than you think. And I think that's sort of the tail wagging the dog. This proc…

AI assessment note: “I try to focus on data, right? What is it that the entrepreneur wants to prove?”

Q No, I'm very much with you on both, uh, Strategery and on Wait But Why. But then social media, obviously you spent time at Twitter. What's next? Is this platform diversification or monopoly tendencies ahead?

A It's funny. I think we're going to be in this world of a, of a controlled, but ever expanding oligopoly. And this is an evolving perspective of mine, but I think we've witnessed no less than seven sort of social platforms achieve more than a million, a hundred million users in the last seven years, which is unprecedented creation of wholly owned new media platforms. And, you know, I don't think you're going to create another seven tomorrow, but I won't be surprised if in the next couple, three years, we see one or two more. Because there are, when consumers sort of find a social media platform they love, they use it, they really dig it, um, but eventually they grow and they want new kinds of expression. They want to think about new sorts of things and new platforms do come along to provide that. That's why you people are on Snapchat and WhatsApp and Facebook and Instagram and Twitter, right? It's very common. So I think we'll continue to see slight evolutions where users will find new ways to express their identities on new social media platforms. Maybe not a scale, but there's a couple of use cases that still aren't solved, um, At scale meetings, there's not going to be 10 of them. There'll be one or two. There's a couple of cases that still aren't solved, and I see companies coming to the fore and hope to back companies coming to the fore that can solve those problems.

AI assessment note: “we're going to be in this world of a, of a controlled, but ever expanding oligopoly”

Q If you're looking at a prospective investment and it started off with four co-founders and now there's two, uh, and you're kind of Doing the DD and looking at it more closely, how much of a kind of history role does that play in your kind of approach to the investment?

A It's a great question. You know what? It should, it entirely depends on the nature of that discussion. If it was one of those things where there was honest conversations, even if they were painful, where founders had to decide in the best interest of the business what the right personnel or founding team was to move the business forward, and they were willing to make hard choices, In order to do so, that's usually a good sign. If instead you've got founder dynamics that rapidly sort of broke apart, or where there's still bad blood, or where there's a lack of understanding about why things ended up the way they are, that may suggest that founders aren't willing to have hard conversations with each other as much as you want them to. And you can suss this out by doing the natural thing that people do, which is just diligencing whether, you know, what the circumstances was of a founder's departure. If a founder is very reluctant to have you speak to the ex-founder, usually that's a signal as well. So I've always found that a willingness towards transparency is extremely confidence building. And I don't mean this just when it comes to investing. It's just sort of a good rule for life in general and for doing business in general. And so a willingness towards transparency, leaning into transparency is, is sort of a key factor or filter that I look for in founders.

AI assessment note: “it entirely depends on the nature of that discussion.”

Q And we kind of spoke about kind of post-investment there. I do want to touch on the investment process there because with Mayfield now you've seen a ton of companies raising large series A's. So firstly, why are we seeing more of these large series A's as time progresses, do you think?

A You know, it's funny. It reminds me a lot of the late nineties and what happened just after the late nineties where people see big outcomes and I think there's a few different dynamics at play. People see big outcomes, meaning that if I invest capital at an early stage, I'm going to have the potential for creating a billion dollar company. And we had a lot of exits and had a lot of great outcomes over the last several years. So there's that feeling in the marketplace. The second thing is that founders have credibility because they've been at a Facebook or they've sold a company to brain tree or whatever it is they've done. And so as a result, they can command the marketplace sort of premium attention. And when that happens, sometimes have more leverage over investors and Who want to get into backing these founders no matter what. The third thing is, very structurally, when you have new platforms that have been created, like the internet period, or in the last seven years, the mobile revolution, there's just bigger opportunities to go and fix, to go after. People want to raise more capital to protect them against a downturn. And actually, that's the fourth reason. Fear of, uh, when the good times are rolling, that the good times will end. And I think there's some of that in the marketplace today as well. Now, the problem is And every business is different, but generally speaking…

AI assessment note: “there's a few different dynamics at play. People see big outcomes”

Q Can I ask, do you, do you personally as a VC and do you think VCs in general should play a role in the future founder dynamics post investment?

A Well, that's a tricky subject. I mean, ideally, you know, you're never in a place where the VC has to Barter or negotiate between founders. What I think the role of VC is, is to support the same way they support other strategic questions, choices, et cetera, that founders and entrepreneurs are dealing with as they build their businesses. The role of VC is to call out that this is an important consideration. That is something they should spend time on, right? Put attention to, and then suggest means of doing so. And I think that's the right level of role to play. The same way that pattern recognition is That a venture capitalist would have when investing in a company that could help serve the company along things like how do you hire and strategy and stuff like that comes to the fore. So I think that's the right way to implement it.

AI assessment note: “What I think the role of VC is, is to support”

Q In terms of the, you said there about kind of adequate cushion. What is an adequate cushion for you? I'm always in the quandary of, Is 24 months too much? Is 18 months perfect? What's the kind of sweet spot for you?

A Depends on, it depends on the project. At the series seed stage, right, you may answer a bunch of questions in six months, because you're devising a set of experiments to do so. And then at the series seed, I always say, like, you want to basically double your money, so it's going to take you 600 grand to answer three or four top hypotheses, try to raise a million to. In the series A, hopefully you've answered one or two hypotheses, and you're starting to find You know, traction in one direction or another and answering some bigger hypotheses. So you might think about it roughly the same way, maybe a little less, maybe you don't double the money, but you sort of think, okay, you know, it's going to take me nine months to figure out or 12 months to figure out the key hypotheses I need right now. So let me add another, you know, nine to 12 months of runway onto that. So that puts you kind of into the range you mentioned, that kind of 20 to 24 month range. That usually feels pretty good. You said 18 or 24, and like, I don't think there's a science to it. I think that just Sort of feels like the right amount of time to answer a set of questions. Sometimes it takes longer. Sometimes it takes shorter.

AI assessment note: “20 to 24 month range. That usually feels pretty good.”

Q So talk to me, Rishi, then. How do you, how do you interact with founders who do want to raise the big Series A in CAM? They're a successful repeat entrepreneur Entrepreneur. And they've got good seed investors, good angels. How do you negotiate that interaction with founders in terms of being realistic in terms of the series A?

A You know, I, I, what I, with this and with almost every kind of question like this, I try to focus on data, right? What is it that the entrepreneur wants to prove? And by the way, this should, this should apply for every round. It comes up more frankly in series seed than in series A, but the basic idea is that the purpose, the progress of a startup is the progress of having hypotheses that you then want to try to answer. And so, When you're constructing around, you should be able to think about what are the few things I know? What are the things I don't know? How much money is it going to take to figure out the things I don't know that are really important? And then how do I have an adequate cushion so that when I figure out the things I don't know, and it turns out a lot of great ideas I had won't help me build my business. I have enough capital to learn from those hypotheses and then formulate several new hypotheses to go and test. And that should give you some sense of how much money you should raise. Now, the way that most things happen, especially for seeds and series A's, is people say, I have a certain amount of dilution I want to take. I don't want to take more than X, right, dilution. That means I back into a certain round size, and that means I back into a budget. And it happens more often than you think. And I think that's sort of the tail wagging the dog. This proc…

AI assessment note: “I try to focus on data, right? What is it that the entrepreneur wants to prove?”

Q Can I ask, do you, do you personally as a VC and do you think VCs in general should play a role in the future founder dynamics post investment?

A Well, that's a tricky subject. I mean, ideally, you know, you're never in a place where the VC has to Barter or negotiate between founders. What I think the role of VC is, is to support the same way they support other strategic questions, choices, et cetera, that founders and entrepreneurs are dealing with as they build their businesses. The role of VC is to call out that this is an important consideration. That is something they should spend time on, right? Put attention to, and then suggest means of doing so. And I think that's the right level of role to play. The same way that pattern recognition is That a venture capitalist would have when investing in a company that could help serve the company along things like how do you hire and strategy and stuff like that comes to the fore. So I think that's the right way to implement it.

AI assessment note: “The role of VC is to call out that this is an important consideration.”