The Exchanges

Q of cool to how, how I think, and so totally aligned with you there. I do want to dig in then. If we take it one step further to almost more of the structure, which is original capital today, if we think about it as a fund in itself, is it like any other micro fund? How does the process and thinking work on an individual investment basis to meet?

A Yeah, so the similarities end from a fund size perspective. So we're similar size to many of our micro funds. However, whereas most of our micro funds will target seed stage investments and make investments in the 250 K to two million dollar range, we're stage agnostic and we've written checks as large as eight million dollars. And a lot of micro funds will take an approach of being diverse in the investments they make and consistent check size. You know, we take a different approach where despite the fact that we've written over 50 checks a day and made investments in 42 different companies, Five of those companies account for 93% of our capital today. So, you know, we're pretty different structurally when it comes to our fund. And also, in terms of how we think about individual investments, we have three criteria that we look at when we're trying to make decisions as to whether or not we should partner with a particular founder and company. You know, number one, is the company solving an intense pain point? We spend a lot of time looking into that. I mean, you know, oftentimes, like, we'll spend six months Plus, as we're going to know a company, examining that point. And, you know, another way of saying that, and like what we're trying to get to the core of is, it has this team built a product that meets a need in the market. And, you know, team product market area, three thi…

AI assessment note: “Five of those companies account for 93% of our capital today.”

Q So I totally am with you in terms of this distribution centricity. I guess my question is, we see a lot of companies today who rely on other people's distribution channels, be it social, be it SEO, whatever that may be. How important do you think it is to own your own lines of distribution?

A Yeah, honestly, the biggest and best companies ever, you know, generational businesses today, the Cisco's, Facebook's, Apple's, Amazon's of the world, they don't rely on those channels very much. Like, in fact, they do become those channels. And like, you look at Facebook, Google, Apple, Amazon, those are the channels that everyone else that doesn't have a distribution advantage is trying to use in order to get distribution. And the truly unique companies that go on to become enduring and generational, let's take an example like Salesforce, They have an initial product, but they get so good at then being able to sell additional products to their customer base, and then cross-selling products across different product lines to their customers. That is a unique distribution advantage, and then you're able to then build additional advantage by then becoming the ecosystem itself, whatever market you're in. I mean, I mean, that's pretty unique. If you're trying to get distribution through social media or like traditional advertising, it's a tough way to build a business, and if you're already in a market where, you know, the product is Modified. Like at some point, your attack is just going to be unsustainable. And I think that's a, that's a reason a lot of these companies that you see today have uncontrollable burn rates, because the only way that they are growing is spending money …

AI assessment note: “the biggest and best companies ever... they don't rely on those channels very much”

Q they will give you the time and energy that you deserve. When you're a quarter of a percent of a fund, that you will be in one of the mega funds that is doing this seed or pre-seed check. Honestly, you will not get GP time just because it's so difficult for them to even justify it. Would you agree with me there? And how do you think about that?

A I think it's a fund to fund consideration. There are funds out there that are large funds that may take for seed commitments just as seriously as, you know, for later stage commitments. And I think those are the funds who are still very disciplined about the number of investments that founders make per year. So, you know, you look at the likes of Andreessen Horowitz or Sequoia, our founder's fund, for example. They're pretty disciplined in terms of the absolute number of investments they make per person. And so I think it depends on it, honestly, on the fund and the fund that you're going to be working with. I would say, yes, it's true. In many cases, it's just optionality for later stage funds to be doing these earlier stage rides. And we're looking at it as a way of like trying to keep optionality to deploy larger amounts into you. But, and in those cases, I would recommend like, Hey, it's much easier to go with a dedicated seed stage or, um, you know, pre-seed stage. Fund, you know, there's a lot of great funds out there, you know, you guys at Stride, Manu Kamara K-Nine, they get Tima Homebrew, but there's a lot of great early stage funds that you can partner with. At the same time, if there's a larger fund that has shown that they have a track record of being dedicated to founders that they invest with at any stage, I don't think you can go wrong by taking their capital eit…

AI assessment note: “I think it's a fund to fund consideration. There are funds out there that are”

Q I'm excited too. It's been so much fun researching for this one, but I want to get the ball rolling today by discussing a little bit about you. So, so much to unpack, but you're both an operator and an investor. So, how did you make your way into venture finance? First, let's start with that as a ground zero.

A Yeah, of course. So my entry into venture capital came from a process of figuring out what I didn't want to do versus knowing what I wanted to do. I grew up in Scotland. I originally came to the U.S. to go to college, and my move to the U.S. coincided with the financial crisis. And at that time, my parents had a family business which got wrapped up in a dispute with a lender multiplying our bank. And since I was unable to work in the U.S. because I was saving up my work eligibility for after I graduated, I ended up managing that dispute on behalf of my parents for the best part of four years, and the reason I bring this up is the only employers at that time who were recruiting at my college and were willing to sponsor foreign students were banks, but it was safe to say that my love for banks at that moment was pretty low, and I actually made an intentional decision to avoid banking as a career path. The downside of that was I had essentially eliminated any chance I had of finding a job to remain in the U.S., because at that point, no one else was recruiting and sponsoring international kids at my scope. And then one day in career net came across an opportunity, a growth equity firm based in New York, and they were willing to sponsor me. So I applied, I got a first run interview. And as soon as I got it, I stopped going to class for a week. I read everything I could on growth eq…

AI assessment note: “my entry into venture capital came from a process of figuring out what I didn't want to do”

Q I'm so pleased you said about the LP set, because we have a huge amount of emerging managers and people who are looking to start their own funds that are listening to the show. Can I ask, what advice would you give to other managers who are raising, given the many, many LP meetings that you've been in and experienced?

A Yeah, so I think you do need to have a unique value prop. There's a lot of capital in the ecosystem today, and what most LPs want to know is, given that there's so much capital out there, given that, you know, the best funds will always have an advantage in terms of they get to see more deals, and I'm an emerging fund manager. What is your unique value prop, which is going to help you get into companies and get founders to want to work with you and over time drive a fund, which is top quartile or, you know, an outlier fund. And I think if you have a eloquent explanation as to why you have an advantage there, LPs are going to want to partner with you. And oftentimes it is going to be, you have to talk to a number of LPs, find the ones that align best with you. But again, if you have a unique value prop, you're always going to find people that will want to put Money behind you. If you can't really differentiate yourself, then yeah, you're, you're, you're going to have trouble. And those are the funds which I think have the hardest time to raise capital.

AI assessment note: “I think you do need to have a unique value prop.”

Q to finish on one final observation, though, before we move into my favorite being the quickfire. And it's actually one that Samuel Shaw tweeted. And I definitely see it too. And it's the best founders are actually bypassing seed rounds and seed firms. We see it often with the very large seed rounds that we see today. Would you agree with this perception? And how do you think about it?

A Yeah. So I think there are probably elements to this perception, which are true, but I would say that I'm not seeing a lot of founders bypass seed rounds in the early stages. I think what I am seeing though, is the time between those seed rounds in the series A's getting compressed. And as a result, I think founders are actually choosing to, in certain cases, bypass seed funds that can only diverse seed rounds and really go target, call it early stage funds, who do series A's and B's. And those funds will get involved in these companies at the seed stage and then double down quite quickly to do a series A thereafter. So I'm seeing more of that in the market than I am with companies just completely avoiding seed stage rounds. And yeah, I think the people that are missing out on occasion are Seed funds that have ownership requirements and are unable to get involved in some of these rounds, which are being led by typically later stage firms.

AI assessment note: “I'm not seeing a lot of founders bypass seed rounds in the early stages.”

Q there in the beginning about the importance of the relationship of trust, honesty, and almost intimacy really between the investor and the founder. My question is with the compression of fundraising timelines, Today, I think founders don't get the time they need with investors and vice versa to really build that relationship. Would you agree with me in saying that we are seeing this, and are you concerned by it?

A So I think there are occasions in the market today where, you know, people are making decisions in compressed timeframes. I don't know if it's unique to this environment, though, because, you know, even if you go back 15 or 20 years, all of the hottest companies have always had very quick fundraising cycles, and so I don't think it's actually unique to the time we live in today. I think what I do see a lot more now, though, is Founders that will not talk to investors until their point of fundraising, and I think that's disadvantageous to both them and the investors that are getting to know, because, you know, at this point in the market, there are a lot of investors. You know, in the US today, there's over a thousand different venture funds, and if you don't spend some of your time getting to know of a market, investors are either, and the only time you come out to market is when you are fundraising. I think that is the big disadvantage for you as a founder, because, you know, you've not had the opportunity to get to know these people, but you're going to be in business for a potentially long period of time. And at the same time, you haven't been able to like communicate your narrative and your story to people and sort of had that ability to go back and forth prior to a fundraising brand and sort of narrow in on, you know, what, what is that narrative that you want to use when …

AI assessment note: “I don't think it's actually unique to the time we live in today.”

Q interesting, because Carter in the early days, it didn't look like the biggest of markets. Now everyone sees with the multi-product incredible suite that you've built out. It's much more apparent, but in the early days, it didn't look like the biggest of markets. I'm interested for you as an investor now with the investing hat on, how do you think about an approach market size with that in mind?

A Yeah, so I think market size both matters and doesn't matter. I think it matters in the sense of if you have a single product company and the market opportunity here is constrained, if the founder isn't able to eloquently tell you what's next if they win this market, it makes it difficult to put money in because then, you know, it's unlikely to hit a 10 X threshold, it's unlikely to hit a 25 X threshold, and so that's where market size matters. Where it doesn't matter is where, you know, you have a company like Carta where, yeah, the initial market size is small, but that's actually a good feature of this because it means that you can dominate that small market very early, and when finders have clarity and vision around all the other possibilities that lie ahead of them, if they're able to dominate this initial market, it makes it possible to then buy into the idea that there's a larger market out there. And, you know, in the case of Carta, it was always dominate cap tables. You're able to lay the foundation for a new financial market Infrastructure. And then you're able to go and try to rebuild what exists in the public world and private world. And, you know, that opportunity is huge. And so for me, it's always the market size only matters negatively if you don't have the ability to go beyond it. I mean, it doesn't matter if there is that clarity of vision as to what was next.

AI assessment note: “market size only matters negatively if you don't have the ability to go beyond it”

Q Listen, looking at the underlying companies, it absolutely does. The other element, though, that I did want to discuss is the other conventionally held wisdom, which is reserves is where the money is made. How do you feel about reserve allocation, and what's your strategy with the original today?

A Yeah, so we, we actually don't have a reserve policy, and I think, again, this goes back to how we're structurally set up against a lot of other funds, where most funds will go out, they'll raise, call it two, three hundred million dollars, they'll invest in an initial set of investments into 20, 40 companies, and, you know, then you have to look for the winners and then double down behind them. And that strategy works, where you do have a single fund, and you're typically trying to deploy that fund. Our approach is a little different, where We are able to make concentrated bets in these companies that we build a lot of conviction over. And so if a company hits the free criteria that we're looking for to make an investment, and then on top of that, we build a lot of conviction behind, it wouldn't make sense from our fund model to, you know, deploy capital over multiple rounds. And we should try to buy as much of that company in that initial investment. And the goal is until, until we hit the constraint of 20% in the fund, we keep going and putting more money into that company as early as possible. And the other advantage we have is we can SPV after we hit that 20% threshold into the company. So in a way, like, you know, reserves are basically an artifact of, you know, hey, you're using a fund to your investments versus we already have pre-existing understandings over LPs where …

AI assessment note: “we actually don't have a reserve policy”

Q single products to the multi-product company that it is today, and I spoke to Henry before the episode, and he said how, kind of, you've mastered this and led it so brilliantly. Can I ask then a meta question that I hope's not too broad, but what's been some of your biggest lessons from turning Carter from the single product company to the suite of products that we have today?

A Yeah, so... I think one thing which I underappreciated when I got into the operating side of things was I thought that, you know, you build a product and become, I was very much of the product innovation mindset. So actually learning how you build distribution, you know, how you leverage a company's existing distribution in order to, A, figure out what the next products that you should build are, but then also to get adoption. That's been very helpful for me so far in the last night of being able to buy across a lot of other companies. I'd say the second thing is the people matter a lot. Oftentimes when you're thinking about additional product lines that you're trying to get into and scale a company, I think it does matter that you have the best people working on these products and projects. And I think oftentimes when companies choose to go into a new area, you'll put people that may already work at the company or maybe people that don't have some expertise in this market onto the problem. And what I find is there's, there's a blend you need to have between finding the right domain experts wherever inside of the company or outside the company and bring them on board. And then also, um, working with people that have been at the company and understand your existing customers, understand what your distribution advantages are, being able to align them together in order to get the …

AI assessment note: “one thing which I underappreciated when I got into the operating side of things”

Q Okay, so what's your favorite book and why?

A Yeah, the two pieces of literature that have had the biggest impact on how I think about company building and investing are Zero to One by Peter Thiel, which took away a lot of the conventional wisdom I'd accumulated for college in the early parts of my career. I think what Peter does well is that he places an emphasis on courage and optimism, which is I had certainly underappreciated until that point from a conscious perspective. Those weren't traits or views of a world that actually thought differentiated people, be it founders or yourself. So I think, you know, zero to one does a really good job in terms of, you know, taking away a lot of conventional wisdom you may have. And the other is actually a memo by Howard Marks, which is titled, The Value of Predictions Are Where All This Rain Come From. And the emphasis of the memo is that the only way to have above market returns is to make non-consensus I think what Howard very concisely is able to convey is making non-consensus decisions is hard because most people predict the future using models that incorporate data from the past. A non-consensus event is by definition something most people fail to predict, and this means it most likely breaks from the historical data that you have accumulated. So it's actually the idea that these non-consensus events which will occur in the future can't be predicted that well using historical…

AI assessment note: “Zero to One by Peter Thiel, which took away a lot of the conventional wisdom”

Q I mean, you're giving me so much to unpack here. I mean, you mentioned, let's start with the founder itself. You mentioned Ananda there, Instabase. I do want to ask, because I spoke to Henry Ward, your CEO at Carter, and he said you're the The best when it comes to founder picking. And so he asked, what's your internal framework for picking which founders will change the world?

A Yeah. So for me, and this may come across as a somewhat controversial statement, I'm a very market first investor, but there was this great presentation given by Don Valentine, which you can find on YouTube at Stanford university. And he spoke about the importance of markets and picking the right companies. And so for me, a lot of it often comes down to, Hey, is this a pain point that I have a lot of conviction over? Is this a market, which is going to matter in the future? And if that's the case, I can then go and spend time looking for founders or trying to go after this market. And sometimes you meet them in the first six months when you're ever trying to look for someone solving those pain points. Other times you'll wait years and years before you meet the right person. And so I think because I have a perspective on the market itself, when me and the founder are getting to know one another, you start to realize, I mean, the things that you start to focus in terms of like, does this founder know the best way to go win this market? You know, you can, you get a sense for their clarity of thought. You get a sense for, do you have no secrets that other people don't know about these markets? Do you have approaches which are not just product innovation led, but also distribution led, which can help win these markets? And so for me, like by having an opinion on the market first, th…

AI assessment note: “I'm a very market first investor”

Q but they're two conventional held beliefs that LPs have. That it requires in the proposition to be successful in venture. One is like diversification, and it's the common feeling that the more diversified, the safer the asset. How do you think about the benefits of diversification versus concentration, and how do you normally explain it to an LP when they say, actually, what are the benefits of concentration over diversification?

A Yeah, of course. So I think typically when an LP thinks about diversification, it comes from the construct of how Most funds typically operate, which is they get to know companies at the points of fundraising, and they have to make a decision, and you don't have, usually, the opportunity to build that relationship with a company and founder before you pull the trigger, oftentimes. And in order to, um, sort of diversify your risk from having to make your decisions in that way, yeah, like, you'll typically make 20 to 30 investments in a fund, and over time, you'll be able to double down on companies that look like your winners. And I think that's the way that venture has worked for, you know, the most part of the last 24 years. When I talk to LPs, what I emphasize to them is the places where I place the majority of my capital are not founders I met last week. The place where my capital goes is founders where, you know, I've already been spending time with them solving business problems, and we've already been working together before I've ever, you know, usually written a dollar into the company. And as a result of actually building that close relationship, we're de-risking it together. And because Because of my model where I actually go and work with these companies and spend a lot of time with them, I mean, I'm also able to de-risk other risks that other funds can't de-risk, whi…

AI assessment note: “it makes more sense for me to then be able to make concentrated bets”

Q there in the beginning about the importance of the relationship of trust, honesty, and almost intimacy really between the investor and the founder. My question is with the compression of fundraising timelines, Today, I think founders don't get the time they need with investors and vice versa to really build that relationship. Would you agree with me in saying that we are seeing this, and are you concerned by it?

A So I think there are occasions in the market today where, you know, people are making decisions in compressed timeframes. I don't know if it's unique to this environment, though, because, you know, even if you go back 15 or 20 years, all of the hottest companies have always had very quick fundraising cycles, and so I don't think it's actually unique to the time we live in today. I think what I do see a lot more now, though, is Founders that will not talk to investors until their point of fundraising, and I think that's disadvantageous to both them and the investors that are getting to know, because, you know, at this point in the market, there are a lot of investors. You know, in the US today, there's over a thousand different venture funds, and if you don't spend some of your time getting to know of a market, investors are either, and the only time you come out to market is when you are fundraising. I think that is the big disadvantage for you as a founder, because, you know, you've not had the opportunity to get to know these people, but you're going to be in business for a potentially long period of time. And at the same time, you haven't been able to like communicate your narrative and your story to people and sort of had that ability to go back and forth prior to a fundraising brand and sort of narrow in on, you know, what, what is that narrative that you want to use when …

AI assessment note: “I don't think it's actually unique to the time we live in today.”

Q You said about prep status there, and again, off schedule, so totally unfairly, but I am too interested. We've seen a massive rise, I think, really, in terms of secondaries kind of becoming much more prominent earlier in Even series A in some cases, but definitely the series B. How do you think about founder secondaries, and what's your, again, advice there when, when founders think about it?

A Yeah, so I think it's a very personal decision for the founders to be making. I know that in the market today, it's becoming more available, it's more fancy to get positions in some of these companies. I think depending on the context and the founder situation, it can be okay to take some money off the table. Like, you know, if you've only held salaried jobs up until that point, and You would like to de-risk yourself. You would like to have some additional money in the bank for a rainy day fund. Take a small portion of your, um, ownership off the table and, you know, get some liquidity. I think that can be quite healthy in many cases. I think where I do get concerned is like when you have these early series BC runs and founders are taking large percentages of our ownership off the table. That can be quite concerning because I think that it's not a good formula for a long-term success, especially if you're trying to align incentives between all shareholders, not just investors and founders, but also founders and And so I get concerned when founders are doing something which we're not opening up to, for example, their employees. So for me, it's a fairness question, but B, is this founder really aligned for the long term in terms of like, you know, solving this problem and this pain point? And if we're taking too much capital off the table too early, that might scare me off from b…

AI assessment note: “depending on the context and the founder situation, it can be okay”

Q I'm excited too. It's been so much fun researching for this one, but I want to get the ball rolling today by discussing a little bit about you. So, so much to unpack, but you're both an operator and an investor. So, how did you make your way into venture finance? First, let's start with that as a ground zero.

A Yeah, of course. So my entry into venture capital came from a process of figuring out what I didn't want to do versus knowing what I wanted to do. I grew up in Scotland. I originally came to the U.S. to go to college, and my move to the U.S. coincided with the financial crisis. And at that time, my parents had a family business which got wrapped up in a dispute with a lender multiplying our bank. And since I was unable to work in the U.S. because I was saving up my work eligibility for after I graduated, I ended up managing that dispute on behalf of my parents for the best part of four years, and the reason I bring this up is the only employers at that time who were recruiting at my college and were willing to sponsor foreign students were banks, but it was safe to say that my love for banks at that moment was pretty low, and I actually made an intentional decision to avoid banking as a career path. The downside of that was I had essentially eliminated any chance I had of finding a job to remain in the U.S., because at that point, no one else was recruiting and sponsoring international kids at my scope. And then one day in career net came across an opportunity, a growth equity firm based in New York, and they were willing to sponsor me. So I applied, I got a first run interview. And as soon as I got it, I stopped going to class for a week. I read everything I could on growth eq…

AI assessment note: “So my entry into venture capital came from a process of figuring out”

Q Listen, looking at the underlying companies, it absolutely does. The other element, though, that I did want to discuss is the other conventionally held wisdom, which is reserves is where the money is made. How do you feel about reserve allocation, and what's your strategy with the original today?

A Yeah, so we, we actually don't have a reserve policy, and I think, again, this goes back to how we're structurally set up against a lot of other funds, where most funds will go out, they'll raise, call it two, three hundred million dollars, they'll invest in an initial set of investments into 20, 40 companies, and, you know, then you have to look for the winners and then double down behind them. And that strategy works, where you do have a single fund, and you're typically trying to deploy that fund. Our approach is a little different, where We are able to make concentrated bets in these companies that we build a lot of conviction over. And so if a company hits the free criteria that we're looking for to make an investment, and then on top of that, we build a lot of conviction behind, it wouldn't make sense from our fund model to, you know, deploy capital over multiple rounds. And we should try to buy as much of that company in that initial investment. And the goal is until, until we hit the constraint of 20% in the fund, we keep going and putting more money into that company as early as possible. And the other advantage we have is we can SPV after we hit that 20% threshold into the company. So in a way, like, you know, reserves are basically an artifact of, you know, hey, you're using a fund to your investments versus we already have pre-existing understandings over LPs where …

AI assessment note: “we actually don't have a reserve policy”

Q single products to the multi-product company that it is today, and I spoke to Henry before the episode, and he said how, kind of, you've mastered this and led it so brilliantly. Can I ask then a meta question that I hope's not too broad, but what's been some of your biggest lessons from turning Carter from the single product company to the suite of products that we have today?

A Yeah, so... I think one thing which I underappreciated when I got into the operating side of things was I thought that, you know, you build a product and become, I was very much of the product innovation mindset. So actually learning how you build distribution, you know, how you leverage a company's existing distribution in order to, A, figure out what the next products that you should build are, but then also to get adoption. That's been very helpful for me so far in the last night of being able to buy across a lot of other companies. I'd say the second thing is the people matter a lot. Oftentimes when you're thinking about additional product lines that you're trying to get into and scale a company, I think it does matter that you have the best people working on these products and projects. And I think oftentimes when companies choose to go into a new area, you'll put people that may already work at the company or maybe people that don't have some expertise in this market onto the problem. And what I find is there's, there's a blend you need to have between finding the right domain experts wherever inside of the company or outside the company and bring them on board. And then also, um, working with people that have been at the company and understand your existing customers, understand what your distribution advantages are, being able to align them together in order to get the …

AI assessment note: “learning how you build distribution... I'd say the second thing is the people matter a lot”

Q I mean, I love that as a start, and it reminds me of mine now, going home and reading everything I could from the likes of Brad Fell, but I guess my question after that then is, okay, we have that initial passion. You do make the way into the industry there. Can I ask, why did you leave then for the world of operating with Carter?

A Yeah, so I spent three and a half years working in growth equity in New York, where I had a good fortune of A, learning the tools of a trade at a re-established firm, and then also got to meet over a thousand founders in that timeframe. It was during those meetings of founders, I got more clarity in what I enjoyed, which was working with founders closer to the point of creation. And something which I had just started doing on the side when I was working was actually spending time with a lot of these founders I met and talking about company building and actually, in certain cases, just helping them with problems that are coming up in their own businesses. And I got to the point where I decided I wanted to move to the Bay so I could be closer to a lot of these companies that I was talking to. And the initial plan was go interview at firms in Sandville Road and go work your way up the ladder. But there'd be a couple of things which I had realized in my journey so far, which was if you want to pick the people that you get to work with, you have to be more than a junior member of the investment team. Typically, if you want to pick the investments, you have to be a voting member of the IC. At this point, I was 24, 25, and those job offers were not coming for those types of roles. And secondly, there'd been this long-held debate, I think, in VC circles as to, hey, what's the best path…

AI assessment note: “I got more clarity in what I enjoyed, which was working with founders closer”

Q I'm so pleased you said about the LP set, because we have a huge amount of emerging managers and people who are looking to start their own funds that are listening to the show. Can I ask, what advice would you give to other managers who are raising, given the many, many LP meetings that you've been in and experienced?

A Yeah, so I think you do need to have a unique value prop. There's a lot of capital in the ecosystem today, and what most LPs want to know is, given that there's so much capital out there, given that, you know, the best funds will always have an advantage in terms of they get to see more deals, and I'm an emerging fund manager. What is your unique value prop, which is going to help you get into companies and get founders to want to work with you and over time drive a fund, which is top quartile or, you know, an outlier fund. And I think if you have a eloquent explanation as to why you have an advantage there, LPs are going to want to partner with you. And oftentimes it is going to be, you have to talk to a number of LPs, find the ones that align best with you. But again, if you have a unique value prop, you're always going to find people that will want to put Money behind you. If you can't really differentiate yourself, then yeah, you're, you're, you're going to have trouble. And those are the funds which I think have the hardest time to raise capital.

AI assessment note: “I think you do need to have a unique value prop.”

Q differentiation, especially today. I do want to take some of the elements so that you said that a little bit deeper, and you said specifically about distribution and one of your core advice providing areas being really helping in terms of go to market. Can we talk about this in distribution versus product? What did you mean when you say kind of you help founders think about distribution versus product?

A Yeah, of course. So I think if you look at Silicon Valley over the last 20 years, founders and CEOs have changed quite a lot. In 1999, there was a good chance that the CEO of a given tech company wasn't the founder, their background was business orientated. Fast forward to 2019, your typical CEO probably is a founder, and they likely come from a product engineering background. That often means that they have had less go to market exposure, and therefore business is not their own skill set. It doesn't mean that they can't pick it up over time, but it does mean that there's a gap in the market, in my opinion, for when you partner with founders to help provide a lot of expertise across, um, you know, things that go to market and scaling up their businesses and then fundraising. So for me, when it comes to the topic of distribution versus product, a lot of founders that you meet that come from product or engineering backgrounds, the thing that they put the largest emphasis on is, um, product-led innovation. Like, hey, well, we're going to build one product, then we're going to build another product, and they're both going to be successful. But you look at what, as Mark Andreessen says, the general model for successful tech companies is that they become distribution centric rather than product centric. And so when I partner with founders, the goal is like, look, you've got product m…

AI assessment note: “general model for successful tech companies is that they become distribution centric rather than product centric”

Q to ask, you know, you've helped so many founders with their fundraisers, including Carter. If you were to take it from the beginning of the funnel, how did you do it? What's your approach? This one's from Ryan at Thrive, who says you're the best fundraiser he's ever seen. So how do you do it from step one? What's the approach on how much is the right amount to raise?

A Yeah, so do you mind if I take this question a little bit differently, Harry? Listen, I'll freestyle it to the end, totally. Yeah, because I, I'll get to like, you know, how much to raise, but, um, when I start working with a founder on a fundraise, it's typically, call it six to nine months before they actually want to go to market, and the two things that we're trying to sort of decipher, first is, hey, who are the investors that you'd most like to work with? Like, in a perfect world, who do we think today just Looking at the ecosystem out there, who would be the best partners for you if you're building this business? And we identify them, we will start to build relationships with those investors from that moment in time. The second thing we start to spend time on is narrative. You know, what is the narrative of the company that you're building? Because I honestly think that for the best businesses ever, and also for the most successful fundraisers, what matters more is the narrative that you're able to tell, and then you have KPIs which are, you know, backing up the narrative that you're sharing with. But I think, I think that's where the most important part of what you're going to be sharing with a market is when you go out and run that fundraising process. And so you actually take these two things together, which is, you know, over about, you know, call a six month period,…

AI assessment note: “when I start working with a founder on a fundraise, it's typically”

Q Now this one is probably the one that I'm most interested by out of any of them before, and it's what are the next five years hold for you to meet? What are the grand plans?

A Quite honestly, it's been an absolute privilege and blessing to be able to partner with so many great founders today. And you know, the only grand plan I have is to continue to fight like heck every day for these founders. So in five years time, I still have the privilege of being able to do this every day. Anything which takes away from that is a distraction for me. Like, I think I have the best job in the world. I'm very blessed to be here. And I just want to make sure that every day for, you know, to the limit, I'm able to do this. And so, yeah, no grand plans ever. And I hope I'm still doing this in five years time.

AI assessment note: “no grand plans ever. And I hope I'm still doing this in five years”

Q Can I ask, how open should they be with their numbers? This is the real question, because obviously all investors will want the data. How open should they be in terms of providing that data in between meetings?

A Yeah, so, um, I always tell founders that, you know, it depends on the stage of your business. If you're an early stage company, and you know, you're still looking for product market fit, and you're trying to figure out what the best KPIs and metrics are, but represent your business, it doesn't really make as much sense to talk about that when you meet with investors. I think a lot more about what you need to focus on is your approach to market and the narrative in terms of the company that you're trying to build. And that's why it's important to communicate. At the same time, but like once you're a company at scale, call it series, you know, D, series E, the metrics are just table stakes at this point, which is You're going to communicate them to people. And oftentimes there's an expectation. If you meet with people, like, you know, you have a discussion around that because it shows how good of a handle you have in your company and your ability to like influence it and pull levers and grow it. And I think that's what, and you know, especially late stage investors look for, which is if we put a hundred million dollar check in this company, is this team, is this founder going to be able to like, you know, take this capital and like buy it and make best use of it. And so I think it really just depends on the stage of your company. In the early days, I don't think metrics matter t…

AI assessment note: “I always tell founders that, you know, it depends on the stage of your business.”

Q Listen, we clearly both have an absolute love of Howard Martin, so I'm absolutely thrilled to hear that, and I couldn't agree with you more there in terms of that book. I, I do want to ask one question from Dion at Forethought, who said, what's one contrarian opinion you hold that everyone else is wrong about?

A Yeah, so I actually go through life as if death is not a possibility. I think at the end of the day, humans are wrong about a lot of things, and you know, if you look at the last 200 years, one thing people have been wrong about quite a lot is lifespan, and so you should make decisions in life as if death is not a possibility, and the reason I take that approach is humans over the last 200 years have been wrong quite frequently on a number of issues, but lifespan and being wrong on it is one reason a lot of governments A lot of people, a lot of businesses have gone into trouble with just being able to run their own businesses. The reason that all these governments are racking up all this debt is because they got the lifespan of Amber citizens wrong, and so for me, I don't know what's going to happen in the future in terms of medical advance, and I don't know what's going to happen in the future with regards to, you know, people being able to merge themselves with technology, and so I take a different approach where I think, you know, a lot of people will say, hey, you should live today like it's your last, and I say, oh, you should live today like, you know, you're gonna be around forever because, I think, actually, the idea that you are going to be around for a long time will change the way that you act and you behave with other people, and I always tell founders and people I'…

AI assessment note: “I actually go through life as if death is not a possibility.”

Q picking the investor. My question, and I'm sorry for going off schedule this early, but I spoke to one of your founders, Paul, obviously, who was acquired by AppFront. And he asked, oh, Sumed, how does he build relationships of trust so early with founders? So I'd love your advice. How do you advise investors in terms of really building that environment of trust and safety with founders early on?

A I think a lot of this comes from mindset. I think if you're talking to a founder and they realize that there's no empathy for a founder, that, you know, you're there to solve your own needs, which are, you know, you have capital and you want to invest it versus, hey, like this is a founder of There's more founders in the world that you can help and you can actually invest in practically. If you go into those meetings, I think that you, you know, you're focused on helping the founder solve their problems and looking for ways in which, you know, you could be value add. I think it just sets a tone from the very beginning. You're there and you want to do what's best for the company and the founders versus what's best for you. And if that's what you can relay in early conversations, I think it helps build trust a lot faster. I think another mindset I have is I always try to make decisions in anything I do in life as if it's seven years in the future. If I were to look back, I wouldn't regret the decision. And so for me, like I look at these interactions I have with founders with other investors, the ecosystem with just people in general as not the first interaction I'll have with them in my lifetime. But if a founder start multiple companies, investors, you will co-invest with them multiple occasions. You kind of want to be in a position where like, even if you don't partner this ti…

AI assessment note: “if that's what you can relay in early conversations, I think it helps build trust”

Q me, I'm absolutely loving this, but I do want to pick up on a couple of elements there. First, the concentration of capital, and then, as you said there about the very, very few outliers that really make it to those high multiples. Given the two combining, I'd love to hear, how does that mean, then, you think about an approach portfolio construction, given the two that we just discussed?

A Yeah, of course. So, at Original Capital, we have a very simple objective to be the highest returning venture capital fund in the world, and I think there's a lot of literature out there which Talks about how to drive returns, but the crux of it usually is the same. Make parallel investments, as you just said, which, you know, hit those outliers. And I don't think there's one particular path to building an outlier fund. If you look at Andreessen Horowitz, Sequoia, Union Square Ventures, and Benchmark, they've all built funds which deploy diverse fund structures and portfolio construction, and they're extremely successful, and if my fund could be as good as them or better, that'd be wonderful. They also have, I think, different models as to how they operate their funds versus what I do, where they're looking at companies and Points of fundraising. We get to know companies before fundraising, but you know, I think a lot of companies will go to a series A, they'll get to know these funds. One of these funds will win. And oftentimes these funds will not be able to invest again until the company comes back to the market for series B. And so as a result of that, the business model, which is employed by a lot of these funds, outside of having a diverse portfolio construction, is that they will spend a lot of time getting to know a lot of companies because then they really have to inve…

AI assessment note: “what are the 10 to 20 companies of this generation that are going to matter?”

Q me, I'm absolutely loving this, but I do want to pick up on a couple of elements there. First, the concentration of capital, and then, as you said there about the very, very few outliers that really make it to those high multiples. Given the two combining, I'd love to hear, how does that mean, then, you think about an approach portfolio construction, given the two that we just discussed?

A Yeah, of course. So, at Original Capital, we have a very simple objective to be the highest returning venture capital fund in the world, and I think there's a lot of literature out there which Talks about how to drive returns, but the crux of it usually is the same. Make parallel investments, as you just said, which, you know, hit those outliers. And I don't think there's one particular path to building an outlier fund. If you look at Andreessen Horowitz, Sequoia, Union Square Ventures, and Benchmark, they've all built funds which deploy diverse fund structures and portfolio construction, and they're extremely successful, and if my fund could be as good as them or better, that'd be wonderful. They also have, I think, different models as to how they operate their funds versus what I do, where they're looking at companies and Points of fundraising. We get to know companies before fundraising, but you know, I think a lot of companies will go to a series A, they'll get to know these funds. One of these funds will win. And oftentimes these funds will not be able to invest again until the company comes back to the market for series B. And so as a result of that, the business model, which is employed by a lot of these funds, outside of having a diverse portfolio construction, is that they will spend a lot of time getting to know a lot of companies because then they really have to inve…

AI assessment note: “My approach is a little different because I spend all of my time trying to figure out”

Q I am worried about valuations that I'm seeing. One million ARR companies going for a hundred million pre's. Honestly, it scares the shit out of me. Like, am I wrong? Are you not scared by these valuations that we're seeing, one? And then, two, I guess, for you working with founders, how do you advise them on maintaining enough rationale that it's not actually a hurdle for the next round?

A Yeah, of course. So when we're making investment decisions, as I mentioned previously, you know, we're typically going into the runs where we're deploying the most capital with a high degree of conviction. We can't control where the price for a run lands. So, you know, if market comes back to you and says, hey, like, you know, this run is going to get done at a hundred million dollars for series A, you as a fund have a decision to make, which is, hey, like, you know, this company is not worth a hundred million dollars in It's out of whack with market multiples. So we're going to pass in this one, and maybe we'll take a look at the next one. The other way of looking at it is, if you actually have high degree of conviction in this founder, in this team, and the pain point that we're solving, and the valuation is six or 12 months ahead of where it should be, I think that's just your choice in the fund, and it's a decision that we sometimes make, which is, we have conviction. This conviction probably isn't going to change a lot between this round and the next round, because it's already very high. You know, we'd rather pull the trigger and go in in this round, because At the end of the day, look, if this works and more of a market buys into this company being successful, the next valuation is going to go up a lot. And you see that in the market today with certain companies where, y…

AI assessment note: “if you actually have high degree of conviction in this founder... the valuation is six or 12 months ahead”

Q I am worried about valuations that I'm seeing. One million ARR companies going for a hundred million pre's. Honestly, it scares the shit out of me. Like, am I wrong? Are you not scared by these valuations that we're seeing, one? And then, two, I guess, for you working with founders, how do you advise them on maintaining enough rationale that it's not actually a hurdle for the next round?

A Yeah, of course. So when we're making investment decisions, as I mentioned previously, you know, we're typically going into the runs where we're deploying the most capital with a high degree of conviction. We can't control where the price for a run lands. So, you know, if market comes back to you and says, hey, like, you know, this run is going to get done at a hundred million dollars for series A, you as a fund have a decision to make, which is, hey, like, you know, this company is not worth a hundred million dollars in It's out of whack with market multiples. So we're going to pass in this one, and maybe we'll take a look at the next one. The other way of looking at it is, if you actually have high degree of conviction in this founder, in this team, and the pain point that we're solving, and the valuation is six or 12 months ahead of where it should be, I think that's just your choice in the fund, and it's a decision that we sometimes make, which is, we have conviction. This conviction probably isn't going to change a lot between this round and the next round, because it's already very high. You know, we'd rather pull the trigger and go in in this round, because At the end of the day, look, if this works and more of a market buys into this company being successful, the next valuation is going to go up a lot. And you see that in the market today with certain companies where, y…

AI assessment note: “We can't control where the price for a run lands.”