The Exchanges

Q uh, August, 2009, the seed environment in SF was crowded, but much less crowded than it is today. To a huge extent. How have you seen the kind of seed ecosystem develop, and has it made your role, I'm always intrigued by this, has it made your role more challenging in terms of competing for deals, or easier in terms of kind of coopetition in terms of having deal co-investors?

A Yeah, absolutely. I mean, it's, the environment really has changed a lot, uh, and we think for, for the better. You know, we love the fact that there are so many more seed funds and angel investors out there that are focused on seed, pre-seed, and Really at the end of the day, they're focused on giving entrepreneurs a chance to have their dreams come true and, you know, build a company and build, you know, have a, have a lasting impact. So we love it that there are a lot more investors focused on the seed stage. Um, and it really, it really hasn't affected us too much on the, on the competition side. Like I said, our, our checks are smaller. They're a hundred to 200 K checks. So we rely on all the other investors to participate in the round. We, we never lead rounds ourselves. So we really, it really is cooperation amongst all the investors. Uh, every investor brings a different skillset to the table as well. And so for founders, it's, it's great that they can bring together a group of investors that can help them at different phases and different times of their business. Um, and we think that's a great advantage for founders. And so we work very closely with, I mean, I think we're probably co-investors with almost every seed fund in the Valley, every venture fund, most angel investors as well.

AI assessment note: “it really hasn't affected us too much on the, on the competition side”

Q check size. In terms of the, the portfolio construction for you guys at SV, uh, how much of a role does kind of ownership and valuation play for you? Because with a hundred K check to kind of gain the significant ownership to get the cash on cash obviously needed, it needs to be significant. So how do you guys think about valuation and ownership when making the investment decisions?

A Sure. So we don't, we don't really think about it That much at all. Unless it's something totally out of whack or, you know, out of line with where the company is in the founder's background, that's probably the only time that it'll really play into our decision. Other than that, we're pretty much ownership and valuation insensitive. You know, if the company's, if it's going to be a big, successful company, you know, if you're investing at a six million cap or an eight million dollar cap, it doesn't really matter. Um, and there's no point in discussing it. You know, if we spend more than, you know, we've always had this kind of internal rule is if, You know, if we spend more than five minutes talking about valuation with a founder, then something's wrong. Something's awry there. And so, yes, the valuation and ownership, value and ownership ends up being pretty small in these companies. But like I said, if it becomes very successful, then it doesn't really matter what the ownership is. You know, a very small percentage of Snapchat is still very valuable.

AI assessment note: “we don't, we don't really think about it That much at all.”

Q How do you SV approach and evaluate pivots? I mean, we've seen the likes of goat, uh, pivot entirely. Um, so, so how do you guys approach that? How's your interaction with the founder look with that? Is it a nice try guys capital back or is it a keep going with the runway and start iterating? How does it look for you?

A Like I said, we, we only invest in the founders. So we are in it with them from beginning to end, no matter what the end looks like. So if a founder wants to pivot the business and do something totally different, we completely support them. And we know, you know, they, they work on their company, 24, seven, you know, we interact with them throughout that period, but they know 10 times, a hundred times more than, more than, uh, more than we know about their business. So if they say that it's not working and they want to try something else, absolutely go for it. We're in this until The very end, if it's a win or the company goes out of business, you know, we're in it for the founders and to support them on their journey. You know, we have about 40% of our portfolio goes out of business and that's fine. That's, that's the cost of doing business.

AI assessment note: “if a founder wants to pivot the business and do something totally different, we completely support them”

Q uh, August, 2009, the seed environment in SF was crowded, but much less crowded than it is today. To a huge extent. How have you seen the kind of seed ecosystem develop, and has it made your role, I'm always intrigued by this, has it made your role more challenging in terms of competing for deals, or easier in terms of kind of coopetition in terms of having deal co-investors?

A Yeah, absolutely. I mean, it's, the environment really has changed a lot, uh, and we think for, for the better. You know, we love the fact that there are so many more seed funds and angel investors out there that are focused on seed, pre-seed, and Really at the end of the day, they're focused on giving entrepreneurs a chance to have their dreams come true and, you know, build a company and build, you know, have a, have a lasting impact. So we love it that there are a lot more investors focused on the seed stage. Um, and it really, it really hasn't affected us too much on the, on the competition side. Like I said, our, our checks are smaller. They're a hundred to 200 K checks. So we rely on all the other investors to participate in the round. We, we never lead rounds ourselves. So we really, it really is cooperation amongst all the investors. Uh, every investor brings a different skillset to the table as well. And so for founders, it's, it's great that they can bring together a group of investors that can help them at different phases and different times of their business. Um, and we think that's a great advantage for founders. And so we work very closely with, I mean, I think we're probably co-investors with almost every seed fund in the Valley, every venture fund, most angel investors as well.

AI assessment note: “it really hasn't affected us too much on the, on the competition side”

Q In terms of helping founders when they need it the most, and at this stage, it's often frequently, and in challenging times, it's such an early stage. In terms of the balance, do you think there's a difficult balance to achieve between friend and investor, or do you think you can have a healthy relationship as both?

A I think you can have a very healthy relationship as both. One of the things that we, we have the, the, the joy of doing is helping founders at inflection points. So we help a lot around financings, biz dev and corp dev. So those are the three main areas that we really focus on when it comes to helping founders in our portfolio. And so those three areas are areas where they're, they're very challenging to navigate. And really a lot of that relies on relationships. So we have a pretty vast relationship network, both with founders, but then also with other investors, three companies, You know, most VCs, um, and then corporate partners, if you think about, you know, Apple and Google and Facebook and companies like that. And so, you know, helping on those, on those points really helps build that relationship with, with the founders. And that's where, you know, we, we also don't take board seats. We think that, you know, we always want to align ourselves with founders, um, and be the advocate for them. We think that at some point in the business boardroom will get contentious and founder will, and the, and the board won't agree on something. And so we never want to put ourselves in that position. We always want to be on the founder's side and the founder's advocate. And so by helping on those inflection points, you know, not taking board seats and just always being the advocate for t…

AI assessment note: “I think you can have a very healthy relationship as both.”

Q Now I always feel being an external kind of member of the advisory teams, easier to build a relationship than a board member. Uh, in terms of, in terms of kind of boards, so in those early days, when do you think founders should look to establish a board and what do you think should be kind of the components of their organization? Board building desires.

A You know, that can come probably post seed closer to series a, you know, when the company is just getting off the ground, really all that matters is, is the team's execution, right? Their ability to build and ship product, listen to their users and continue to iterate. And, you know, but when it comes time to really start building the business, that's, that's when I think the board really becomes helpful. The founders should really focus on, you know, where I think they need the most help and then offset that with the board with the With particular board members that can help fill those gaps that are either on their management team or just, you know, if they know that they need more development on a particular skill set, they can bring that in, whether it's an advisory role or a board member and get that mentorship at that phase. You know, it's never, you know, you can always bring on angel investors and advisory board members earlier on in the life cycle of the company, but when it comes to really constructing a board, you know, doing that post series seed going into the series a, you know, that's probably when it's the most important in our opinion.

AI assessment note: “that can come probably post seed closer to series a”

Q check size. In terms of the, the portfolio construction for you guys at SV, uh, how much of a role does kind of ownership and valuation play for you? Because with a hundred K check to kind of gain the significant ownership to get the cash on cash obviously needed, it needs to be significant. So how do you guys think about valuation and ownership when making the investment decisions?

A Sure. So we don't, we don't really think about it That much at all. Unless it's something totally out of whack or, you know, out of line with where the company is in the founder's background, that's probably the only time that it'll really play into our decision. Other than that, we're pretty much ownership and valuation insensitive. You know, if the company's, if it's going to be a big, successful company, you know, if you're investing at a six million cap or an eight million dollar cap, it doesn't really matter. Um, and there's no point in discussing it. You know, if we spend more than, you know, we've always had this kind of internal rule is if, You know, if we spend more than five minutes talking about valuation with a founder, then something's wrong. Something's awry there. And so, yes, the valuation and ownership, value and ownership ends up being pretty small in these companies. But like I said, if it becomes very successful, then it doesn't really matter what the ownership is. You know, a very small percentage of Snapchat is still very valuable.

AI assessment note: “we're pretty much ownership and valuation insensitive.”

Q the show last couple of weeks ago and he said, bridge rounds are fine as long as it's a bridge and not a peer that is Kind of merely going into the sea. Do you agree then by saying bridge rounds are fine if there's a clear milestone, or do you think it's just a sign that you failed to hit your series A and you need an extended runway?

A I totally agree with Mike that it's a, you know, if there's, if there are clear milestones, then a bridge round is absolutely okay. And sometimes we'll even participate in a bridge round. You know, if we didn't see the company in the seed and we're, you know, now we're seeing it at the bridge. Again, to us, it doesn't really matter if it's a great company. It's, it doesn't matter which stage you get in at. And so, yeah, as long as there are those clear milestones and it's very clear of why they're, why they're raising a bridge round, you just have to dig in and see, you know, what, what, what really happened here. Sometimes companies just need the extra runway and that's completely fine. And we're, and we're happy to help there.

AI assessment note: “I totally agree with Mike that it's a, you know, if there are clear milestones”

Q Now I always feel being an external kind of member of the advisory teams, easier to build a relationship than a board member. Uh, in terms of, in terms of kind of boards, so in those early days, when do you think founders should look to establish a board and what do you think should be kind of the components of their organization? Board building desires.

A You know, that can come probably post seed closer to series a, you know, when the company is just getting off the ground, really all that matters is, is the team's execution, right? Their ability to build and ship product, listen to their users and continue to iterate. And, you know, but when it comes time to really start building the business, that's, that's when I think the board really becomes helpful. The founders should really focus on, you know, where I think they need the most help and then offset that with the board with the With particular board members that can help fill those gaps that are either on their management team or just, you know, if they know that they need more development on a particular skill set, they can bring that in, whether it's an advisory role or a board member and get that mentorship at that phase. You know, it's never, you know, you can always bring on angel investors and advisory board members earlier on in the life cycle of the company, but when it comes to really constructing a board, you know, doing that post series seed going into the series a, you know, that's probably when it's the most important in our opinion.

AI assessment note: “that can come probably post seed closer to series a”

Q How do you SV approach and evaluate pivots? I mean, we've seen the likes of goat, uh, pivot entirely. Um, so, so how do you guys approach that? How's your interaction with the founder look with that? Is it a nice try guys capital back or is it a keep going with the runway and start iterating? How does it look for you?

A Like I said, we, we only invest in the founders. So we are in it with them from beginning to end, no matter what the end looks like. So if a founder wants to pivot the business and do something totally different, we completely support them. And we know, you know, they, they work on their company, 24, seven, you know, we interact with them throughout that period, but they know 10 times, a hundred times more than, more than, uh, more than we know about their business. So if they say that it's not working and they want to try something else, absolutely go for it. We're in this until The very end, if it's a win or the company goes out of business, you know, we're in it for the founders and to support them on their journey. You know, we have about 40% of our portfolio goes out of business and that's fine. That's, that's the cost of doing business.

AI assessment note: “if a founder wants to pivot the business and do something totally different, we completely support them”

Q In terms of helping founders when they need it the most, and at this stage, it's often frequently, and in challenging times, it's such an early stage. In terms of the balance, do you think there's a difficult balance to achieve between friend and investor, or do you think you can have a healthy relationship as both?

A I think you can have a very healthy relationship as both. One of the things that we, we have the, the, the joy of doing is helping founders at inflection points. So we help a lot around financings, biz dev and corp dev. So those are the three main areas that we really focus on when it comes to helping founders in our portfolio. And so those three areas are areas where they're, they're very challenging to navigate. And really a lot of that relies on relationships. So we have a pretty vast relationship network, both with founders, but then also with other investors, three companies, You know, most VCs, um, and then corporate partners, if you think about, you know, Apple and Google and Facebook and companies like that. And so, you know, helping on those, on those points really helps build that relationship with, with the founders. And that's where, you know, we, we also don't take board seats. We think that, you know, we always want to align ourselves with founders, um, and be the advocate for them. We think that at some point in the business boardroom will get contentious and founder will, and the, and the board won't agree on something. And so we never want to put ourselves in that position. We always want to be on the founder's side and the founder's advocate. And so by helping on those inflection points, you know, not taking board seats and just always being the advocate for t…

AI assessment note: “I think you can have a very healthy relationship as both.”

Q the show last couple of weeks ago and he said, bridge rounds are fine as long as it's a bridge and not a peer that is Kind of merely going into the sea. Do you agree then by saying bridge rounds are fine if there's a clear milestone, or do you think it's just a sign that you failed to hit your series A and you need an extended runway?

A I totally agree with Mike that it's a, you know, if there's, if there are clear milestones, then a bridge round is absolutely okay. And sometimes we'll even participate in a bridge round. You know, if we didn't see the company in the seed and we're, you know, now we're seeing it at the bridge. Again, to us, it doesn't really matter if it's a great company. It's, it doesn't matter which stage you get in at. And so, yeah, as long as there are those clear milestones and it's very clear of why they're, why they're raising a bridge round, you just have to dig in and see, you know, what, what, what really happened here. Sometimes companies just need the extra runway and that's completely fine. And we're, and we're happy to help there.

AI assessment note: “I totally agree with Mike that it's a, you know, if there's”