Opinion
Chalfen: Formal boards at the seed stage are net negative
“So my view is that at seed stage, a board is of limited value. The most value is weekly, bi-weekly spending time with teams, helping them solve problems quickly so that they're not waiting for the board in order to say, by the way, I've got this problem. And t…”
Opinion
Mike Chalfen: VC board seats should have a three-year limit
“Like, what drives me mad is everyone's accruing the right to be on the boards round by round. One or two board members get added. There should be a statute of limitations. But after three years, you no longer have the right to be on the board. Boom. And then i…”
Insight
Chalfen: Anti-Fragile VC Portfolios Diversify Risk Types, Not Company Count
“I think what's important to me is that you sort of have a reasonably sort of anti-fragile portfolio construction, not by virtue of having 30 or 20 or whatever number of investments, but by virtue of having different kinds of risks. That you're taking with your…”
Insight
Chalfen: Mid-level VC investors prioritize career management over fund returns
“If you're a mid-level person, if you were a mid-level person at Apex, you would do the right thing in order to look good, further your career rather than optimize returns.”
Insight
Chalfen: Most Venture Capitalists Are Bad at Building Firms
“And actually I think a lot of VCs are not good at building firms.”
Insight
Chalfen: Products VCs Personally Want Address Markets That Are Too Small
“But I learned early in my career that any business opportunity where I or my partners thought was a very good service that they would definitely use, that was almost certainly addressing way too small a market opportunity, right?”
Insight
Mike Chalfen requires 10x return potential for follow-on venture investments
“You've got to believe that the new money is tenx money. I do. That's how I think of it.”
Disclosure
Chalfen discloses being fired by Apax Partners after dot-com bust
“And you know, I got divorced, and then dumped, like Apex fired me.”
Opinion
Chalfen: Venture capitalists without personal adversity worry me
“What worries me in the venture business to a degree is people for whom nothing's ever really gone wrong. And life's been pretty easy.”
Opinion
Chalfen: VC market overfunded startups as scale-ready from 2020 to 2022
“And that's a way that the whole market, in my opinion, the last two years has overfunded businesses as if they're ready to scale.”
Insight
Chalfen: Poor Unit Economics Leave Startups Dependent on Greater Fools
“Poor unit economics mean you're always relying on the next investor and ultimately the greater fool.”
Disclosure
Chalfen: Failed Multiple Times Investing in Service-to-Software Startups
“I think businesses that start in certain services and the objective is to build out and use the service process to build out software to automate. I think that's very, very, very, I found that very hard to do. And so I've invested in businesses like that a cou…”
Insight
Chalfen: Board meetings fail when treated as reporting forums
“You know, I think too many boards are talking shops, but even good boards I think are inefficient. So, you know, with the board, you want to clarify any factual questions up front. Then, you know, so information should come out early, factual questions clarifi…”
Insight
Chalfen: Carry handcuffs in VC firms suppress internal dissent
“The venture partnerships solve for stability because it's such a long-term business. And there are these sort of carry handcuffs that sort of you know, vesting that encourage people to try and stick around. And I think that as a result, dissent is very, like, …”
Insight
Chalfen: Recycling capital from 3x to 10x deals optimizes VC returns
“We build a portfolio and if you can take money that looks like it's going to make another three X and put it into a 10 X opportunity that's earlier. That recycling is, is actively good.”
Insight
Chalfen: VCs who won't re-invest in a company are logically sellers
“Businesses where you are not prepared to invest. Logically, if not emotionally, you're a seller.”
Opinion
Chalfen: Young VCs today are vastly superior to his generation
“Young people today are so much better. In the industry than when I was the equivalent age in the industry when I was starting. I mean, really, it's no contest.”
Assertion Contradicted
Chalfen: Only three VC firms existed in London in 1996
“There were only three firms in London that did VC.”
Prediction Held up
Chalfen: Macroeconomic headwinds will persist for a couple of years
“It looks like there's going to be economic headwinds for a couple of years, and in 2000, it was really a sort of our corner of the market was suffering, but the wider world didn't suffer in quite the same way.”
Insight
Chalfen: Initial VC checks shouldn't exceed 11% of fund capital
“So I think you wouldn't want to get over, you wouldn't want to get over, I don't know, 10% of the fund, 10, 11% of the fund with the first check, my view. But if you can pick two businesses which you want to become 15 to 20% of the fund, then that's sort of a …”
Disclosure
Mike Chalfen operates sub-$100M funds to minimize follow-on signaling pressure
“So by sort of removing that possibility from my funds by virtue of size, you know, they're sort of sub hundred million dollars. You know, it's, I'm under less pressure to invest a lot in the next round typically.”
Disclosure
Chalfen: Recommended passing on investment in Mark Suster during dot-com crash
“And we said, no, and that was my recommendation was not to put A dollar in.”
Assertion Partly supported
Chalfen: The Foundry produced 35-40% profit margins for 10 years capital-free
“So, you know, an example is a winner for me from. 1112 years ago called the foundry, which was making the 35 or 40% margins when it was really not very big. And it didn't grow that fast, but it produced a 40% margin, 35, 40% margins for 10 years, growing at, y…”
Disclosure
Mike Chalfen was the first investor to commit to Illumio
“I was the first person to Commit to Illumio, which turned into a very good, good business and investment.”
