The Wisdom Wall

“If, if the LPs knew, like if they, if they tracked, what's the return on follow-on checks versus first checks, there'd be pitchforks and like, Revolts in the street. It's so bad.”

“I believe that the outliers usually start out at a low price, because they're outliers. Because they're non-consensus and right. People tend to believe that the world is divided between low price deals with low upside and high price deals with high upside. I don't agree with that, right? I disagree with that. And so I…”

“the problem with most firms is that they have less than or equal to one really good investor, and then they force the, what's called the limited partners or the LPs to buy the bundle of everybody else who's not a good investor.”

“Your fund size is your strategy, and I guess I'm kind of famous for saying that for a long time. I don't know if I've ever really expressed why that is, so here's why. The power law is real, and so people don't realize that Pareto is not just eighty-twenty, it's a curve, it's a continuous curve, so 80% comes from 20%,…”

“And so the loss ratio is about the same between a three X fund and a 10 X plus fund. What matters is the magnitude of your big winners”

“You can make money on the buy, and you can make money on the sell. And what most people don't understand is that the seed funds are actually better positioned to make money on the sell than anybody. Better, better positioned than the multi-stage by a wide margin.”

“When a seed round is priced at 20 post, 30 post, it's not non-consensus. It's priced to perfection, and it's priced in a way that everybody believes it's gonna succeed, that it's a hot deal. And that's bad for two reasons. It's bad for the investor, Because even if the investor's right, they're probably not gonna make…”

“It's, it's really not. It's an edge case for a very rare condition where it's clear that the market is pulling these features out of the market massively quickly, and somebody has to fulfill that demand the first.”

“Yeah, and I mean, like, um, that's not the decision I would have made, right? I'm not gonna judge who made what decision, but my view is that it's not my money. And, and, uh, you know, if I was the Stanford Endowment, if I was, uh, you know, Sloan Kettering, what would I want Floodgate to do? Uh, you know, that's what…”

“If we get product market fit, we will be successful almost no matter what else happens. And if we don't get product market fit, we can do everything else right. It won't matter.”

“I believe that you can't really skip a step. You got to have an insight before you do customer development, and you got to do customer development before you do smart growth. And so to the extent that raising too much too soon Causes people to skip those steps. I think that's when they get in trouble and start to…”

“when I think about what is seed investing really, it's not investing in a business because it's not a business yet. In fact, evaluating it as a business will give you precisely the wrong answer most of the time.”

“I like to assert it should be a minimum three years.”

“most bridges really aren't bridges. They're what, what I would call a pier. So, you know, sort of like, yeah, we need more money. I'm like, a bridge is like when somebody's come in and said, I'm going to put money in this company, but we're out of money until the deal closes. And so you bridge it to that well-defined…”

“the number one reason I pass on companies is I don't think the idea is worthy of the founder's talent.”

“We had a dedicated partner, Iris Choi, do follow-ons and that's all, and she's accountable for follow-on returns, which more, more seed funds should do.”

“Five percent of our checks need to be a hundred X cash on cash on the first check, and about 10 to 15% need to be 20 X cash on cash on the first check. You achieve that, you're 10 X fund.”

“what usually happens that's even worse, is these companies raise a lot of money before they have legitimate product market fit, and they hire ahead of achieving it, and now all of a sudden they're doing a bunch of wacky nonsense that's not contributing to product market fit, And they just become culturally broken,…”

“And to get product market fit, there's an advantage in being lean, and there's an advantage in having N minus one resources rather than N plus one, because, like, having too many resources lets you pursue losing ideas for too long.”

“Uh, and so, you know, I think that part of why people want mulligans on their twenty-twenty-one funds is, um, they were investing their funds in an eighteen-month cycle. And, you know, what they should have been doing is investing in a five-year cycle because the, the, everything was so frothy,”

“When a company has product market fit, that's a rare thing, and when they have strong product market fit, that's an extremely rare thing. It's like, don't underestimate how important that is relative to all other things.”

“the multi-stage firms, like any firm, your fund size is your strategy. So if there's a crisis, you're going to tend to worry about the companies that move the needle in your large fund. Less so than, oh, I wrote a million dollar check to this company 18 months ago.”

“if customer development is about getting out of the building, insight development is about getting out of the present, and it's about trying to put yourself into situations where you can live in the future and notice what's missing before other people notice”

“In fact, that's, I think, one of the least imaginative questions a VC can ask is, like, well, 10 people have tried this, and it hasn't happened, so I don't think it's going to happen.”

“I generally believe that most great startups are born of these exponential improvement curves that are beneath them. They're like gathering waves in an ocean that you surf back to the beach. And I think it's really hard without a gathering wave to really be great.”

“And so I think if I'm a founder, if I cannot answer clearly what technology inflections are happening that can be calibrated that I'm taking advantage of, I should either evaluate whether my insights powerful enough in the first place, or if I've just thought about it enough, maybe I'm just not thinking clearly about…”

“Being non-consensus and right is not about living in the present and just saying, hey, the world is going right, so I'm going to go left. Being non-consensus and right is discovering something in the future that others don't see yet and making the bet that what seems present improbable is actually more probable than…”

“If they want to be in every part of it, if they want to be in seed, if they want to be in series A in growth, and someday maybe be hedge funds, that's up to them, and I wish them well, but usually I tend to believe that the best long-term strategy is to be more focused and not less, and that if you're not positive,…”

“If you have a customer engagement problem, acquiring more customers is counterproductive because then you just have more unhappy customers.”

“the earlier you invest, the more important picking skills become, right? So if you're If you're investing later stage, branding obviously matters a lot because you're going to have a company that's becoming a more obvious breakout win, and you're going to be competing against firms that have big reputations in the…”

“Mark's advantage was not born of his experience in business. It was born of his experience with the future.”

“Yeah, for me, the job is sort of like, you know, when you're in the Galapagos Islands and you spot some, Finch with a weird looking beak that nobody's ever seen before. Like, I think that's kind of what Eric and I try to do, right? We're trying to, but like, it's like bird spotting. You're not like, it's not very…”

“You want to be very sober, very matter of fact, very clear about what the options are. None of this, oh, woe is me. How did this happen? This isn't fair because you, you don't have the luxury to think those thoughts. You don't have the luxury to worry about who's to blame. You don't have the luxury to, to wish things…”

“Startups start out dead and have to prove they're alive. And they have one job to do, which is get product market fit, And that means answering one very specific question, which is, what can we uniquely do that people are desperate for? And anything that you do not in the service of that is wasted ergs of energy.”

“Your time is the only thing that's zero sum. And so a decision to become a part-time hedge fund bond expert, it subtracts from your efforts to get product market fit.”

“Have money in an account that's not correlated to Brex and Mercury, uh, in two other places, and have the rails set up between those pools of capital, those deposit accounts, so that you can immediately move from one to the other very quickly. It's the discipline of having the multiple places to put your money and the…”

“Even if my first move is wrong, if I'm moving at twice the rate that you're moving, I can adjust and make my next move before you make your first move. And so, even though I was wrong, I end up being right because I'm getting feedback from your decisions, and I'm getting, I'm deciding faster than you are.”

“the worst thing a leader can do in a crisis is hide. And not having information is not an excuse to hide. So you got to lead from the front and be visible.”

“I think you gotta tell people what you know, you tell people what you don't know, and you tell people what you're doing to figure out what you don't know, specifically, and you wanna focus on facts and not happy talk, Zero spin, right?”

“It's dumb to solve a hard technical problem that nobody wants if you solve it, right? That's just dumb. You want to solve a technical problem where people will unambiguously, desperately want it if you solve it, but it's hard to solve.”

“the riskier you are in terms of the stage that you invest, the better it is for you to have a longer time horizon.”

“When you're on too many boards, sometimes you don't learn fast enough. You're not present and mentally awake enough, and you're not, you're not incorporating lessons quick enough.”

“a startup isn't a company because it starts out dead and has to prove it's alive. And so I like to say there's a sequence of breakthroughs. There's the insight breakthrough, and then there's the value proposition breakthrough, and then the growth breakthrough.”

“a startup starts when someone living in the future comes back to the present with a new idea, a breakthrough insight, and the market becomes a movement.”

“But I think that most startups right now wildly underestimate how much runway they need and have for quite some time.”

“if somebody's telling you they know where things are going, they don't know what they're talking about. You know, anybody who's telling you they have any degree of certainty about what's gonna happen is confused.”

“And I think that the other extreme would be what I call the joy of finding greatness. And in the joy of finding greatness, you say, look, I'm going to be comfortable with the fact that I'm not going to see every great deal. I'm going to be comfortable with the fact that I'm going to miss a few. What matters is the time…”

“And so I think fundamentally in venture, you can do more with scale or you can do less, but better. And you just have to decide.”

“the zero to one phase of a startup is just different. You know, you have a jazz band instead of a marching band”

“It's easy in this business when there's so many competitors around you To get kind of caught in the herd noise traffic of what's happening today all around you, and how do you just stay out of that? How do you stay out of that noise? How do you turn off that noise and hype and try to develop ideas that you think really…”

“we've observed that the, the best companies that we've invested in have been pretty crazy at the time you had to decide, right?”

“a lot of times that the founders, when they're picking their opportunity to go start a company around, they rush the pick and get straight to doing the product, and a lot of founders would be better off if they didn't rush the picking part of it, just like a lot of VCs would be better off if they didn't rush the pick.”

“Category kings are trying to create not just a company, but they're trying to create a movement. And, uh, they're, they're trying to enlist people to their cause outside of even the employees of the company, and outside of even necessarily just the customers of the company.”

“And so the best founders, what we saw, they were doing scenario planning. They, and with the scenario planning, what you try to do is you try to map the choices that you have, you know, the different options against the, the different uncertain outcomes.”

“Whenever you're in a crisis, you have to take the initiative, right? You, you're a shaper and not a reactor, and that's what I mean by that.”