David Frankel

“I think we're being seen and I'm, I could be over extrapolating the last 20 deals that we've been involved in almost as an insurance policy. Where we're side by side, we're putting in 500 K or a million. There's been eight, nine million dollars going in, and T…”

“There's very little evidence yet that These hot, hot AI companies that are raising huge amounts of money are capital efficient, right? They're anything but capital efficient. There's, like, the jury's out on whether that's going to work still.”

“Well, the problem is the mega platforms are taking call options. So is this good for the mega platforms? Is this good for the LPs or is this good for the entrepreneurs? Well, probably for 95% of the entrepreneurs, it's not good.”

“And the more junior, the principal at that big fund moves on. They start their own fund, they move to another fund, happens all the time, right? So the person who invested doesn't have mandate. They can't sit around with a partnership and say, look, let's just…”

“A little less since twenty-twenty. Like, if you look at the DPI analysis, like, the jury's out from twenty-twenty onwards.”

“I've never turned it down. Never.”

“I think pro rata is generally not great for entrepreneurs. It's a call option against you.”

“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.”

“And we're working for DPI, and the bigger we make the fund, the tougher it is on the DPI.”

“The job is to be in there five years or 10 years ahead, and it's not where the momentum is. It never is.”

“The more embedded you are, like the more difficult you are to dispense because real time, Thousands, billions of orders are being run in your system, or like mission critical biotech research is being run in your system. The more embedded you are, I think the …”

“The contrarian in me, this is not what I do, would say buy a basket of like the top SaaS stocks that have all lost huge market cap. You're going to do okay.”

“We have at our team meeting, I love it because dot dot dot. If you can't complete that sentence, you can't invest.”

“There are folks who have been in these verticals since they were kids. He watched his uncle in this vertical. It's like, there was nothing else he was going to do. And I go, like, they have more edge, and they know what to do with.”

“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.”

“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…”

“I still see that the vast minority of the time. Like, I think it's easy to extrapolate and go, that's a trend, and I could be very Pollyannish about this, but for the most part, like, I see founders wanting to make it work.”

“And I think overall we've done a little better on second time founders who didn't do that great up front. They didn't, they did okay, right? It's life changing. Like the first million dollars is so life changing. But they're really hungry. They've learned some…”

“That anthropic and open AI are going to be disrupted. It's like unequivocal. Like our whole careers are about disruption. Those platforms never, ever stay forever. Where is it going to come from? Excellent chance it comes from China. It's coming.”

“There was an arbitrage. There was a real arbitrage because the risk premium at the seed stage was way overstated. That has changed completely.”

“Like, I think that you and I could be buying the very last drive driven cars. Like, I think that in five to 10 years time, like our kids will not need to drive.”

“I look in the rear view mirror and I go, everything I've sold pretty much has been a mistake. So I'm a contrarian.”

“If you are so committed to this that you are willing to drop out of Harvard Business School, just withdraw your admission, not a deferred admission, you actually have to say you're not gonna go. Like, you're just withdrawing. And you can quit and tell Linda at…”

“In that situation, I broke every rule under the sun, and we put in a hundred K check, right? I broke my rules. But we don't do that.”

“If I'm on your board, I can't write a hundred K check. I can't write a 500 K check anymore because you need my time and you need my interest.”

“I think some founders still see, you know, a name in lights, and they go, I want that name beyond anything. I, if it's Sequoia, A-sixting Z, Accel, you name it, I want that name, and I think there will always be a steady supply of founders who think that way.”

“You know, you're in a world of hurt because someone that the world thought was, like, very, very serious and very smart about you just said no to you. Go try sell against that. I think it's very, very difficult.”

“They didn't do, but I was, they don't understand that 90% don't get follow on funding.”

“I remember saying to my wife on Olo, this is done. We've lost a lot. This was pre-founder collective saying, we have lost our money. Like, Noah is never going to get there.”

“Running Tide, we just closed down the business. This was a carbon sequestration business, ag, literally ag in the ocean. Unbelievable business. We've got ten million dollars, and he's burning three million dollars a month.”

“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 …”

“I would say generally founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I speak about this personally. I sold my first business And I thought I could conquer anything. And they look at any vertica…”

“Entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back, they want that prize. They want to prove. Chip on the shoulder. And if they can bring back the team somehow, so …”

“I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? So, I'd rather it happens early to me. It happens to everyone. But I'd rather it happens early to me than later on, because it was pretty…”

“Well, I would disagree with Nick, because I would say, prefs are fundamental. Saying, you should give your investor your, their money back, right, before you kind of, you know distribute the spoils to everybody. I think that's a fair tenet.”

“And the PREF stack, like peri-passu, feels like something of the past. There's a real PREF stack coming.”

“So if you look at SAS multiples in 21, 20, Where that was 20 X, and then you look at those SAS multiples as five, six X, that trickles down.”

“Like if I think of the secondary we've had over our entire kind of, you know over a career, I can count it maybe on two hands.”

“Like in your high flyers, so in your really well-known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they'v…”

“I do. I do. You know, I think it's for the entrepreneur, It's like, there comes a point where it's like, you can have, it goes back to your earlier question, you can have words, you can have as many discussions. If the business is just not working out, like, d…”

“If I look back, I go, like, never sell a single thing. If you could, and, you know, people have to live and People have various desires, but if you could, never sell a share. And I know we've gone through the up and the down cycle, but great companies, compani…”

“Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I'm impressed with them that they thought about that, and they executed on it. I think the timing was unfortunate.”

“I actually gave I gave testimony to a panel of lawyers for the Department of Justice.”

“But I think it's the most unfair feature of capitalism, Harry, is the most you can lose is all your money. The most you can make is three, you know, 3000 X, right, or unlimited. If you just look at that, it is such an unfair feature of capitalism, and my LPs m…”

“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.”

“No, not at all.”

“In fact, in an ideal situation when there's insane heat in something that we've gotten earlier, like that's a great moment to take secondary if you can.”

“Well, Trade Desk, I regret every single share I sold. Uber, I regret every single share I sold.”

“If you take, you know, less, 10% or less off the table, Nobody's gonna really mind too much.”

“By the way, I always say the first million dollars, like when the first million dollars makes, like, it's binary. It makes all the difference.”

“The biggest sin of the last era has been Just the huge amounts of capital.”

“If you kick off and you own on a board, like, less than 15% of that company, I think it's problematic.”

“We don't think about dilution much. We really don't. Our MO has been, we dilute alongside the founder. As a seed stage fund, we get involved at the beginning, and it's been a strategy, and we don't think about dilution.”

“I, by the way, I can't afford in my fund, if I've done my job right, and you are, you know, raising your next set of capital at three X or four X, I just can't afford to actually maintain my percentage ownership.”

“You know, I, I've, in a career, I've been through one bankruptcy. Like, one bankruptcy. So in a career, in hundreds of investments, I've had one bankruptcy.”

“I'd been paid out a couple of million dollars. The first thing Lou said to me is, you're gonna give back every last cent. You're gonna be the first person who gives back all the money, and in the end, and all the other investors are gonna hate you for it, but …”

“I think they could come out. I think the era gave, you know, gave, I think, Harry, I think the era gave rise to that, unfortunately.”

“I used to think that PE firms were like the enemy of the seed stage, and I've changed my mind on that. We've got some PE firms in two vertical SaaS companies that I'm involved in, and their rigor, their financial discipline, and the help they've given to those…”

“I have to, like, strong arm my partners into, like, putting five million dollars into a company.”

“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.”