The Ledger
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Jain: Success in venture capital requires staying small and resisting expansion
“Success and venture actually means you have to fight that inherent desire to expand and grow. Success and venture means you have to get really, really good at what you set out to do. You stay within your lane. And that's counterintuitive because it's staying s…”
Frankel: Founder Collective spends minimal time on seed-stage TAM assessment
“We do very little of that. We spend a huge amount of time on the team and what they could do early on.”
Founder Collective will keep its next fund size capped at $75M
“If you keep your fund small enough, which is something that we really believe in, we've kept the fund. The last fund was 75. This, the next fund is 75. We haven't grown it.”
East Coast VCs gain clarity by avoiding Silicon Valley's echo chamber
“I think starting our career on the East coast kept us a little outside the eco, you know, the echo chamber. And I think that did give us some perspective. We weren't around all the VCs every day.”
Financial modeling for seed startups is a complete waste of time
“There's no model. We're not building discounted flat cash flows or weighted average cost models or black shoals. We're just not doing that stuff. There's not enough data to do it. You'd waste your time.”
Customers validate startups, not venture capital, says Eric Paley
“Ultimately, your customers validate your business. Venture capital doesn't.”
Eric Paley says capital efficiency gives founders more control and lowers risk
“So, so at Founder Collective, we've been actively talking about what we call efficient entrepreneurship, the efficient use of capital, which ultimately leads to much more founder ownership, much more founder control, and actually, believe it or not, much less …”
Paley argues stage-specific VC funds are healthier than multi-stage funds
“I would love to see more funds focus on specific stage instead of being life cycle funds. I actually think that would be extremely healthy for the ecosystem broadly.”
Harris disagrees with seed funds that refrain from follow-on investing
“I don't agree with the idea of not following on in your good companies.”
Eric Paley claims Founder Collective is among the top funds globally
“I think our fund is performing you know, people like to say top quartile, top decibel I think we're, I mean, I think our fund's truly one of the very, you know, Count on your hands the number of funds performing as well right now. So I don't know if we're goin…”
David Frankel and Eric Paley's angel portfolio quadrupled top-quartile VC returns
“We saw that that body of that portfolio, that body of work was performing way better. I mean, four times as well as these top quartile PCs”
Frankel: Founder Collective still holds every share in 2010 investment SeatGeek
“Harry, we still own every last share in SeatGeek. That was an investment I made in 2010.”
Frankel: Founder Collective has never led a follow-on round
“We've never, ever led another round. So we have this view of like, it would be negative correlation bias. It would be unfair to everybody if we didn't be somewhat kind of uniform.”
Frankel: Founder Collective Is Too Small for LPs Requiring $50M Checks
“A lot of them, like, have minimum size checks now, so we're too small for quite a few of them. It's like, if I can't put fifty million dollars to it, and I think there's, it just reflects the inflation of the entire environment, and there are a bunch that real…”
Frankel: Founder Collective passed on Klaviyo due to its valuation framework
“So Klaviyo loved Andrew, loved Ed, came to me first, came through Hugo van Furen, who also sent us Suno, and didn't do it because of the framework. And the framework allowed me to easily say no.”
Frankel: The early seed-stage valuation arbitrage has completely disappeared
“There was an arbitrage. There was a real arbitrage because the risk premium at the seed stage was way overstated. That has changed completely.”
Frankel: Suno experienced far lower dilution than Whoop due to rapid momentum
“Like we're so proud to be in both, but sooner, you know, sooner has been a very quick journey. So if you look at like how lower, how much lower the dilution is, part of it is just how quick the momentum of that has been versus a whoop, which is hardware took a…”
Frankel: Founder Collective sold some Uber early near $10B valuation
“You know, in retrospect, we probably sold a little too early, so this was early on, you know, this is a business that's getting close to ten billion dollars in valuation, and there's an opportunity to take some off the table, and you're very new.”
Founder Collective never participates in follow-on rounds or pro-rata
“Founder Collective only does first checks. They never do any pro rata afterwards, period.”
Frankel: Founders Fail to Cut Burn Due to Loyalty and Overconfidence
“But these founders get onto this treadmill, and it's just, it's almost impossible to slow this thing down. I think what they feel like is their, and their loyalty is to the team that they've put in place, their loyalty is to the last set of capital that still …”
Frankel: Founder Collective kept zero reserves in its first fund
“We did no reserves in fund one, zero.”
Frankel: Backing product ideas without founder chemistry is a major VC mistake
“When I look at it and I go, I fell in love with a what? Like, I fell in love with a what, but I really didn't love the entrepreneur at the beginning, and I wasn't, you know, the chemistry wasn't there, that's a mistake.”
Frankel: I must strong-arm my partners to write $5M seed checks
“I have to, like, strong arm my partners into, like, putting five million dollars into a company.”
Frankel: Founder Collective maintains 1-to-1 reserve ratio but struggles to deploy it
“We still have this kind of one-to-one reserve policy, but we actually struggle on our reserves, because a lot of the time, our good companies get bit up fast.”
Frankel: Founders selling under 10% secondary equity face minimal investor backlash
“If you take, you know, less, 10% or less off the table, Nobody's gonna really mind too much.”
Frankel: Major decisions are made on 51% conviction, not certainty
“The, every great decision was never binary. It was always weighing up scales, and I think getting to conviction is confusing for people because they listen to this and they go, oh, you were binary about that. Like, you knew unequivocally, and the truth was, li…”
Frankel: PillPack single-handedly returned Founder Collective's second fund
“PillPack returned fund two.”
Ehrenberg: IA Ventures Co-Led The Trade Desk's Seed Deal Off a PowerPoint
“We literally committed on the basis of a PowerPoint. And we worked on that deal with Founder Collective. So Eric Paley and I both sat on the board. And so we literally co-led the seed round together and then IA breached them three times before raising their Se…”
Paley: Almost all top Founder Collective companies had previously unsuccessful founders
“Almost every one of our best companies, almost every single one, the founder founded something before that wasn't a success or a big success.”
Paley: Startup Execs Should Compare Real Financials Against Valuation Hype
“If you're coming into a company as a senior executive and you have a CEO is bragging to you about how big their last round was in dollars and how big the post money was, ask to see the financials and compare those financials to what they're claiming in the van…”
Paley: Founder Collective owned 12.5% of The Trade Desk at IPO
“We owned, I think, 12 and a half percent of the company at the IPO.”
Frankel: Overcoming VC incumbency bias requires relying on unbiased partners
“Incumbency bias is real. The only way through it Is to have people around you who you feel more objective and less tainted, less biased than you.”
Frankel: Launching an institutional seed fund multiplies deal flow a hundredfold
“When you hoist a flag and say, look, we're open to give capital at the earlier stage, if you're any good at it, the amount of opportunities that you see seem to go up a hundredfold.”
Frankel: Founder Collective exclusively does seed and never leads later rounds
“We've never let an A, and absolutely never let a B or a C. We are unequivocally involved in every funding round, and we've built a business around there, but we only do seed.”
Frankel: Founder Collective has been outright lied to only once
“It's amazing that in over a decade of doing this institutionally, we've had one difficult situation where we were out and out lied to.”
Frankel: Founder Collective Fund 1 has over 60 active companies
“So like 12 years after doing this, we've got over 60 companies in fund one that are still active.”
Frankel: Hardest VC transition is learning to accept partner disagreement
“I would say the toughest part of that transition for me was actually having a partner and having someone say, I think you're wrong, and really listening.”
Frankel: Founder Collective has backed 25 billion-dollar companies
“I've got 25 companies worth over a billion dollars, and some of them are better known than others.”
Frankel: Founder Collective bans the term "deploy" for capital
“I think that there are some no-go zones in Founder Collective in terms of words. Deployment, we never deploy, we invest.”
Frankel: Team venture investing "kills" solo angel investing
“I would never go back, ever go back to Angel. I think that that working as a team with my partners just kills Angel investing”
Boujarwah: Founder Collective passed on Dia & Co's initial pitch
“Yeah, we like to give Mike a hard time about this sometimes because founder collective did pass on Dia the first time we met them.”
Investing and founder support are the only top priorities in VC
“In venture, investing in helping companies is the only A activity. Everything else is a B activity.”
The highest-returning venture investments are non-obvious deals that consensus rejects
“It's sort of a core belief that the best investments we've made and the best investments out there were not obvious, and they were the kind of wacky deal in the corner of the room that everybody else sort of passed on”
Founder Collective co-led SkipTheDishes, which sold to Just Eat for $200M
“We ended up, you know, leading the round with golden golden ventures out of Toronto. So I think, you know, they recently sold to Just Eat for, you know, two hundred million Canadian, so we're excited about that.”
Eric Paley says capital should accelerate proven models, not search for fit
“It's using capital to accelerate those things that are working as opposed to using capital to find things that work.”
Founder Collective's small Uber seed check would move the dial for anyone
“Yeah, so, ok, so we are, you know, as investors in Uber, and we didn't write a very big check, I think that current value alone of that small check would be very attractive to any venture fund of any size, even though our check that we started with was small, …”