20VC: The Memo: How to Raise a Venture Capital Fund (Part I) | The Core Lessons from Raising $400M Over The Last Four Years| The Biggest Mistakes VCs Make When Fundraising | How To Find and Build Relationships with New LPs
The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch11 Jan 2023

20VC: The Memo: How to Raise a Venture Capital Fund (Part I) | The Core Lessons from Raising $400M Over The Last Four Years| The Biggest Mistakes VCs Make When Fundraising | How To Find and Build Relationships with New LPs

How To Raise a Venture Capital Fund

Over the last 4 years, I have raised around $400M across different vehicles from many different types of investors. Today I am going to break down the early stages of how to raise a venture capital fund and then stay tuned for a follow-up to this where we will break down a fundraising deck for a fund, what to do, what not to do etc. But to the first element.

Your Fund Size is Your Strategy:

The most important decision you will make is the size of fund you raise. So much of your strategy and approach will change according to your fund size target (LP type, messaging, documentation, structure etc). Remember, your fund size is your strategy. If you are raising a $10M Fund, you are likely writing collaborative checks alongside a follower, if you are raising a $75M fund, you will likely be leading early-stage seed rounds. These are very different strategies and ways of investing.

MISTAKE: The single biggest mistake I see fund managers make is they go out to fundraise with too high a target fundraise. One of the most important elements in raising for a fund is creating the feeling of momentum in your raise. The more of the fund you have raised and the speed with which you have raised those funds dictate that momentum. So the smaller the fund, the easier it is to create that heat and momentum in your raise.

LESSON: Figure out your minimum viable fund size (MVFS). Do this by examining your portfolio construction. In other words, how many investments you want to make in the fund (the level of diversification) and then alongside that, the average check size you would like to invest in each company. Many people forget to discount the fees when doing this math and so the traditional fund will charge 2% fees per year and so across the life of the fund (usually 10 years), that is 20% of the fund allocated to fees.

Example:

We are raising a $10M Fund.

20% is allocated to fees for the manager and so we are left with $8M of investable capital.

A good level of diversification for an early-stage fund is 30 companies and so with this fund size, I would recommend 32 investments with an average of $250K per company. That is the $8M in invested capital. Big tip, I often see managers raising a seed fund and are only planning to make 15 investments, this is simply not enough. You have to have enough diversification in the portfolio if you are at the seed stage. No one is that good a picker. Likewise, I sometimes see 100 or even 200 investments per fund, this is the spray-and-pray approach, and although works for some, your upside is inherently capped when you run the maths on fund sizes with this many investments.

A big element to point out in this example is we have left no allocation for reserves. For those that do not know, reserves are the dollars you set aside to re-invest in existing portfolio companies. Different funds reserve different amounts, on the low end there is 0% reserves and on the high end some even have 70% of the fund reserved for follow-on rounds.

In this example, given the size of the fund being $10M with a seed focus, I would recommend we have a no-reserves policy. Any breakout companies you can take to LPs and create SPVs to concentrate further capital into the company. This is also better for you as the manager as you then have deal by deal carry on the SPVs that are not tied to the performance of the entire fund.

So now we know we know $10M is our MVFS as we want to make at least 30 investments and we want to invest at least $250K per company. Great, next step.

Set a target that is on the lower end, you can always have a hard cap that is significantly higher but you do not want the target to be too far away that LPs question whether you will be able to raise the fund at all. This is one of the biggest reasons why many do not invest in a first time fund, they are unsure whether the fund will be raised at all.

The Team:

Alongside the size of the fund, the team composition is everything, simply put, LPs like managers who have invested in the stage you are wanting to invest in moving forward. They like to see track record.

IMPORTANT: I see so many angels write checks into breakout Series B companies and then go out and try and raise a seed fund with this as their track record. Do not do this, this does not prove you are a good seed investor but merely shows you have access at the Series B. These are very different things.

With regards to track record, in the past, TVPI or paper mark-ups were enough, now there is a much greater focus on DPI (returned capital to investors). LPs want to see that you have invested before at that stage and they also want to see that the team has worked together before. You want to remove the barriers to no. If you have not worked with the partners you are raising with before, LPs will have this as a red flag, and as team risk, it is that simple.

Navigating the World of LPs (Limited Partners)

The size of the fund you are raising will massively dictate the type of LPs that will invest in your fund.

MISTAKE: You have to change your messaging and product marketing with each type of LP you are selling to. A large endowment fund will want a very different product to a Fund of Funds.

Example: If you are a large endowment, you will invest in early funds but you want the manager to show you a pathway to them, in the future, being able to take not a $10M check but a $50M check from the endowment. Whereas the Fund of Funds will likely want you to stay small with each fund. So when discussing fund plans, it is crucial to keep these different desires in mind.

If you are raising a $10M fund, you will be too small for institutional LPs and will raise from individuals and family offices. An LP will never want to be more than 20% of the LP dollars in a fund and so the size at which an institutional LP (really the smallest fund of funds) would be interested is when you raise $25M+ and they can invest $5M. Generalisation but a good rule of thumb to have.

LP Composition of Your Fund:

Speaking of one LP being 20% of the fund dollars, it is helpful to consider the LP composition you would like to have for your fund. The most important element; you want to have a diversified LP base. A diversified LP base is important in two different forms:

  1. No LP should be more than 20% of the fund at a maximum. That said you do not want to have so many investors in your fund it is unmanageable. LPs need time and attention and so it is important to keep that in mind when considering how many you raise from. Some LPs will want preferred terms or economics for coming into the first close or being one of the first investors, if you can, do not do this. It sets a precedent for what you will and will not accept and then for all subsequent investors, they will want the same terms and rights.
  2. You want to have a diversification of LP type (endowments, fund of funds, founders, GPs at funds etc). Why? In different market cycles, different LPs will be impacted and so if you only raise from one LP type, if a market turns against that LP class, then your next fund is in danger.

Example:

We will see the death of many mico-funds ($10M and below). Why? The majority raised their funds from GPs at larger funds and from public company founders. With the changing market environment, most GPs are no longer writing LP checks and most public market founders have had their net worths cut in half by the value of their company in the public market and so likewise, are no longer writing LP checks. In this case, the next funds for these funds will be in trouble as their core LP base is no longer as active as they used to be. We are seeing this today.

Prediction:

  • 50% of the micro-funds raised in the last 2 years will not raise subsequent funds.

Going back to the question of diversification, my preference and what we have at 20VC, the majority of dollars are concentrated from a small number of investors. Of a $140M fund, we have $100M invested from 5 large institutions. These are a combination of endowments, Family Offices, a High Net Worth Individual and a Fund of Funds. The remaining $40M originates from smaller institutions or individuals, for us we have over 50 making up that final $40M. For me, I really wanted to have a community around 20VC Fund and so we have over 40 unicorn founders invested personally in the fund as LPs.

Bonus Points: The best managers select their LPs to play a certain role or help with a potential weakness the manager has. For example, I was nervous I did not have good coverage of the Australian or LATAM startup market and so I was thrilled to add founders from Atlassian, Linktree, Mercado Libre, Rappi and Nubank as LPs to help in regions where I do not have such an active presence. If you can, structure your LP base to fill gaps you have in your ability.

Status Check In:

Now we know our minimum viable fund size, we know the team composition we are going out to raise with, we know the LP type that we are looking to raise money from and we know how we want our desired fund cap table to look.

Now we are ready to move to the LPs themselves.

Fill Your Restaurant with Friendlies:

As I said, the appearance of your raise having heat and momentum is important.

Mistake: The biggest mistake I see early fund managers make is they go out to large institutional investors that they do not have an existing relationship and spend 3-4 months trying to raise from them. They lose heat, they lose morale and the raise goes nowhere.

Whatever fund size you are raising, do not do this. Fill your restaurant with friendlies first. What does this mean? Go to anyone you know who would be interested in investing in your fund and lock them in to invest. Create the feeling that progress is being made and you have momentum.

BONUS POINTS: The best managers bring their LPs with them for the fundraise journey. With each large or notable investor that invests in your fund, send an email to the LPs that have already committed to let them know about this new notable investor. This will make them feel like you have momentum, they are in a winner and many will then suggest more LP names, wanting to bring in their friends.

MISTAKE: Do not set a minimum check size, some of the most helpful LPs in all of my funds have been the smallest checks. Setting a minimum check size will inhibit many of the friendlies from investing and prevent that early momentum.

The bigger the name the incoming investor has the better. You can use it for social validity when you go out to raise from people you know less well or not at all. Different names carry different weight, one mistake I see many make is they get a big name invested in their fund but it is common knowledge to everyone that this LP has done 200 or 300 fund investments, in which case, it does not carry much weight that they invested in your fund. Be mindful of this as it can show naivety if you place too much weight on a name that has invested in so many funds.

Discovery is Everything:

The world of LPs is very different to the world of venture. 99% of LPs do not tweet, write blogs or go on podcasts. Discovery is everything. When I say discovery I literally mean finding the name of the individual and the name of the organization that is right for you to meet.

This can take the form of several different ways but the most prominent for me are:

  1. The Most Powerful: Create an LP acquisition flywheel. What do I mean by this? When an LP commits to invest in your fund. Say to them, "thank you so much for your faith and support in me, now we are on the same team, what 3 other LPs do you think would be perfect for the fund?" Given they have already invested, they already believe in you and so 90% of them will come back with 3 names and make the intro. Do this with each LP that commits and you will create an LP acquisition flywheel.

Bonus Point: The top 1% of managers raising will already know which LPs are in the network of the LP that has just committed and will ask for those 3 specific intros. They will then send personalized emails to the LP that has just committed. The LP is then able to forward that email to the potential LP you want to meet. You want to minimize the friction on behalf of the introducer and so writing the forwardable email is a great way to do this.

  1. The Most Likely to Commit: LPs are like VCs. When one of their portfolio managers makes an intro and recommendation to a potential fund investment, they will place a lot more weight on it than they would have otherwise. So get your VC friends to introduce you to their LPs, it is that simple. Remember, you have to remove the friction from the introducer. So, make sure to send the email they can forward to the LP. Make this personalized and concise.

Mistake: Many VCs do not like to introduce other managers to their LPs as they view it as competition. This is moronic. If the manager asking for the intro is really good, they will raise their fund with or without your intro. If they are not good, then you can politely say it would not be a fit for your LP and move on. Do not be too protective of your LPs from other managers.

  1. The Cold Outbound: I am not going to lie cold outbound for LPs is really hard. Here is what I would suggest:

  • Pitchbook: It is expensive and many cannot afford it but if you can, it is worth it for LP discovery. They have thousands of LPs of different types on the platform all with their emails and contact details. Those are less useful as a cold email to an LP is unlikely to convert but just finding their names and the names of their organization is what is important. You can then take that to Linkedin to then find the mutual connections you have with that person and ask for a warm intro.
  • Linkedin: Many LPs have the funds that they have invested in on their Linkedin profiles with the title "Limited Partner". If they are invested in a fund that is aligned with the strategy that you are raising for, there is a strong chance they might be a fit. For example, I invest in micro-funds and have invested in Chapter One, Scribble, Rahul from Superhuman and Todd's Fund, and Cocoa Ventures, so you see this and see I like sub $25M funds with a specific angle.
  • Clearbit: Often you will know the name of the institution but not the name or position of the person within the institution that you are looking to raise from. Download a Google Chrome Plugin called Clearbit. With Clearbit you can simply insert the URL for the organization you would like to speak with and then all the people within it will appear and you can select from title and their email will be provided. Again, if you do not want to cold email, you now have their name which you can take to your community, to ask for the intro.

MISTAKE: LPs invest in lines, not dots. Especially for institutional LPs, it is rare that an institution will meet you and invest in you without an existing relationship and without having followed your work before. A mistake many make is they go to large institutions and expect them to write a check for this fund, it will likely be at best for the fund after this one or most likely the third fund. This does not mean you should not go to them with your first fund but you should not prioritize them and you should not expect them to commit. I would instead go in with the mindset of we are not going to get an investment here, so I want to leave the room understanding what they need to see me do with this first fund, to invest in the next fund. The more detailed you can get them to be the more you can hold them to account for when you come back to them for Fund II.

Example: If they say, we want to see you are able to price and lead seed rounds and we are not sure you can right now. Great. Now when you come back to them in 12 months' time, you can prioritize the fact that you have led 80% of the rounds you invested in, and their core concern there has been de-risked.

In terms of how I think about LP relationship building, I always meet 2 new LPs every week. I ensure with every quarter, I have a check-in with them and ensure they have our quarterly update. This allows them to follow your progress, learn how you like to invest, and communicate with your LPs. It also really serves to build trust. Doing this not in a fundraising process also removes the power imbalance that is inherent within a fundraise and allows a much more natural relationship to be created.

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20VC: NEW FORMAT: Mega Funds Will Come Back, Why Markups Have Corrupted VC, Why RIFs Should Always Be An Embarrassment To SaaS Founders and Why Pitching is BS and Fake with Jason Lemkin and Rick Zullo

20VC: NEW FORMAT: Mega Funds Will Come Back, Why Markups Have Corrupted VC, Why RIFs Should Always Be An Embarrassment To SaaS Founders and Why Pitching is BS and Fake with Jason Lemkin and Rick Zullo

Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few. Prior to SaaStr, Jason was an entrepreneur, selling EchoSign to Adobe for $100M where it is now a $250M ARR product. Rick Zullo is the Co-Founder and General Partner at Equal Ventures. Prior to co-founding Equal Ventures, Rick was an investor at Lightbank, Prior to Lightbank, Rick worked with investment firms Foundation Capital, Bowery Capital, and Lightview Capital. In Today's Episode We Discuss: 1. Why Venture Capital Needs It's Jerry Maguire Moment: Why does Rick believe that VC needs it's "Jerry Maguire" moment? What needs to change? What needs to stay the same? Why does Jason believe we will see even more mega funds in 2024 and 2025? 2. Unicorns are So 2019: Why does Jason believe that "unicorn investing is mostly dead for bigger funds and none of them are looking for a $1BN outcome anymore?" Why does Rick believe that multi-stage fund investing at seed simply does not make sense? What does Rick believe many founders need to know when they take multi-stage money at seed? Of the over 1,000 unicorns created over the last few years, how many of them do Rick and Jason feel are actually unicorns today? 3. Efficiency and Growth: We Need it All: Why does Jason believe, as a founder you should be embarrassed if you ever had a RIF (reduction in force)? Last year many founders got a pass on growth as they were more efficient. Is that pass over? Do they need to get back to growth? What is the single biggest reason that companies do not scale from seed to Series A? What happens to the many companies with years of runway but no product-market-fit? Are we entering a new age of efficient company building or will we go back to high burn environments and excessive spending? 4. Entering the World of LPs: If Jason and Rick were to advise LPs today on how much to discount the value of their venture books, what advice would they give? How have markups completely corrupted the venture ecosystem? How does LPs being incentivized by paper-marks make the industry even more screwed? What are the single biggest misalignments between GP and LP?

23 Aug 202354min

20VC: The Biggest Lies of Silicon Valley, Why Entrepreneurship is Not For Everyone, Why VCs are Out of Touch, Why Many Would Be Great Entrepreneurs Will Burn Out, Why You Should Let Your Children Suffer and Why You Will Choose The Wrong Partner with Nick

20VC: The Biggest Lies of Silicon Valley, Why Entrepreneurship is Not For Everyone, Why VCs are Out of Touch, Why Many Would Be Great Entrepreneurs Will Burn Out, Why You Should Let Your Children Suffer and Why You Will Choose The Wrong Partner with Nick

Nick Huber is a serial entrepreneur, investor, and content creator focused on real estate and small business. In the last 9 months, Nick has co-founded 6 companies including RE Cost Set, RecruitJet, Titan Risk, Blue Key Capital, Tax Credit Hunter, and WebRun Labs. His primary business, Bolt Storage, owns 1.8M sqft of self-storage facilities across 62 locations in 11 states. In Todays Episode with Nick Huber We Discuss: Wealth: What the richest families in the world all understand and what the majority of people forget? What are the two best ways to make money as an employee? What do most forget/not do? Why money does make you happy and why society drastically undervalues wealth today? Why we should not be concerned by the levels of income inequality? Marriage and Parenting: 5. Why it is BS to not pass your wealth down to your children? 6. Why you have to let your kids suffer in order for them to grow? 7. How do you stop kids from becoming assholes if they are brought up with money? 8. Why the majority of the time, people choose the wrong partner? What should we look for? 9. What is the number one thing you can do to set your child up for success? Silicon Valley and Entrepreneurship: 10. Why entrepreneurship is not for everyone? Who is it for? 11. Why VCs are out of touch and naive? 12. What is the single biggest lie of Silicon Valley? 13. Why will so many would-be great entrepreneurs burn themselves out when they should not have to? Management and Brand Building: 14. How to build a brand today? Why you have to be controversial to be interesting? 15. How to deal with hate and criticism? Why you cannot please everybody? 16. Why woke culture can give you an advantage if you do not have it? 17. How to build a strategic network the right way? How to become a card in someone's rolodex? 18. What is the single worst thing you can do when hiring? 19. What do you do when you lose trust in an employee?

21 Aug 202357min

20VC: Does Value Accrue to Incumbents or Startups in the AI Race, Why Model Size Matters More Than Data Size, Why Artificial General Intelligence is Far Away, Why Carpenters Will Be Paid More Than Software Engineers & Future of Jobs with Richard Socher

20VC: Does Value Accrue to Incumbents or Startups in the AI Race, Why Model Size Matters More Than Data Size, Why Artificial General Intelligence is Far Away, Why Carpenters Will Be Paid More Than Software Engineers & Future of Jobs with Richard Socher

Richard Socher is the founder and CEO of You.com. Richard previously served as the Chief Scientist and EVP at Salesforce. Before that, Richard was the CEO/CTO of AI startup MetaMind, acquired by Salesforce in 2016. He is widely recognized as having brought neural networks into the field of natural language processing, inventing the most widely used word vectors, contextual vectors and prompt engineering. He has over 150,000 citations and served as an adjunct professor in the computer science department at Stanford. In Today's Episode with Richard Socher We Discuss: 1. The Decade-Long Journey to Becoming an AI OG: How did Richard first make his way into the world of AI over a decade ago? What are 1-2 of his biggest lessons from working with Marc Benioff? How did 5 years at Salesforce impact how he both thinks and operates? 2. Models: Does Size Matter: How important is model size? Is data size more important? What are the biggest misconceptions people have around models today? How does Richard respond to the suggestion that "many startups are wrappers around LLMs"? Are hallucinations a feature or a bug? 3. Where Does Value Accrue: Where does Richard believe most of the value will accrue; startup or incumbent? Which incumbents are best positioned to win? Which are the laggards and behind? What do many not see about the startup vs incumbent race in the AI war? 4. Open vs Closed: Which Wins: Does Richard favour Yann LeCun's open approach? Or is the world of AI more closed? What are the biggest challenges of an open ecosystem? What are the nuances that make both challenging? 5. Richard Socher: AMA: Why will carpenters be paid more than software engineers in 10 years? Why is AGI still way off? Are people too unrealistic? How much money does Google make off search every day? Why does that leave them vulnerable?

18 Aug 202345min

20Growth: Why Product-Market Fit is Not Enough, Revenue Does Not Create Usage, Metrics Must Be Before Strategy, Why it is Always Better to Concentrate than Diversify Marketing Channels and Secrets from Hubspot's Growth Engine with Brian Balfour @ Reforge

20Growth: Why Product-Market Fit is Not Enough, Revenue Does Not Create Usage, Metrics Must Be Before Strategy, Why it is Always Better to Concentrate than Diversify Marketing Channels and Secrets from Hubspot's Growth Engine with Brian Balfour @ Reforge

Brian Balfour is the Founder and CEO of Reforge. Previously, he was the VP of Growth @ HubSpot. Prior to HubSpot, he was an EIR @ Trinity Ventures and founder of Boundless Learning and Viximo. He advises companies including Blue Bottle Coffee, Gametime, Lumoid, GrabCAD, and Help Scout on growth and customer acquisition. In Today's Episode with Brian Balfour We Discuss: 1. Entry into Growth and Lessons from Hubspot: How did Brian make his entry into the world of growth? What does Brian know now about growth that he wishes he had known when he started in growth? What are 1-2 of his single biggest takeaways from his time at Hubspot that impacted his mindset? 2. The Foundations: What is growth? What is it not? What does Brian mean when he says "all growth can be boiled down to 4 things"? When is the right time to bring in your first growth person? Should the first growth person be senior or junior? Should the growth team be standalone or sit within an existing function? 3. The Importance of Product Channel Fit: What is product channel fit? How should founders approach it? How do you know when you have it? What are the single biggest mistakes founders make with regards to PCF? 4. Next Comes Channel Model Fit: What is channel model fit? How should founders approach it? What are clear indicators that you have or do not have channel model fit? What are the biggest mistakes founders make with CMF? 5. Finally, Model Market Fit: What is model market fit? How should founders approach it? What are clear indicators that you have or do not have model market fit? What are the biggest mistakes founders make with MMF? 6. Brian Balfour: AMA: Why is product market fit not enough? What does Brian mean when he says "revenue does not create usage"? What are the biggest dangers of mixing customers and users? What do Hubspot do better than anyone else to know when an existing product/strategy is dying? Is it always better to diversify marketing channels?

16 Aug 202357min

20VC: Scaling Wait But Why to 600,000 Subs; Behind the Scenes on The Research Process, How to Learn Entirely New Topics Fast, The Writing Process and Building Good Habits & The Distribution Process and the Business Behind the Blog with Tim Urban

20VC: Scaling Wait But Why to 600,000 Subs; Behind the Scenes on The Research Process, How to Learn Entirely New Topics Fast, The Writing Process and Building Good Habits & The Distribution Process and the Business Behind the Blog with Tim Urban

Tim Urban is the writer/illustrator and co-founder of Wait But Why, a long-form, stick-figure-illustrated website with over 600,000 subscribers and a monthly average of half a million visitors. He has produced dozens of viral articles on a wide range of topics, from artificial intelligence to social anxiety to humans becoming a multi-planetary species. Tim's 2016 TED main stage talk is the third most-watched TED talk in history with 66 million views. In 2023, Tim published his bestselling book What's Our Problem? A Self Help Book for Societies. In Today's Episode with Tim Urban We Discuss: 1. The Founding of Wait by Why: What was the a-ha moment for Tim that Wait but Why should be his life's work and sole focus? What does Tim know now that he wishes he had known when he started? What does Tim believe he is running away from? Why is he so fearful of constraints? 2. Wait But Why: The Scaling Journey to 600,000 Subs: What was the first piece to really go viral? How did that change the trajectory? What single piece is Tim most proud of? What piece is he least proud of? What has been the hardest element of scaling Wait But Why? What was the most surprising and unexpected elements of Wait But Why's scaling? 3. Topic Selection: Choosing What To Write: What does the process look like for Tim when deciding what topic to write about? How does Tim know what his audience will want to hear about vs what they will not? What topics has Tim thought would be interesting but post initial research, are not? 4. The Writing Process: How does Tim approach the writing process? How has his changed over time? What mechanisms does Tim put in place to avoid writers block? What are some of Tim's biggest tips to aspiring writers and authors? 5. The Distribution Process: How does Tim approach distributing the content once produced? What works? What does not? Why did Tim choose newsletter, Twitter and Instagram as his channels of choice? How important has the newsletter been to the growth of the business? 6. AI: Super-Intelligence and The Future: On reviewing his pieces on AI back in 2015, what does he believe he got right? What would he change with the benefit of hindsight? Is Tim more or less positive looking forward at AI proliferating through all of society? What is Tim most concerned about in the world right now?

14 Aug 202358min

20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

20VC Roundtable: NEW FORMAT: Why the Seed Investing Model is Broken, How to Make Money at Seed Moving Forward; Who Wins and Who Loses, Why Venture Value Add Platforms are BS and Failed and Why There Will be an IPO per Week in H2 2024

Sam Lessin is a Co-Founder and Partner @ Slow Ventures with a portfolio including the likes of Airtable, Robinhood, Slack, Solana, PillPack and many more unicorn companies. Prior to Slow, Sam was a VP Product at Facebook having sold his company to Meta. Frank Rotman is a founding partner of QED Investors, one of the leading fintech-focused venture firms investing today with a portfolio including the likes of Klarna, Kavak, Quinto Andar, Credit Karma and more. As for Frank, prior to QED, Frank was one of the earliest analysts hired into Capital One and spent almost 13 years there helping build many of the company's business units and operational areas. Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few. Prior to SaaStr, Jason was an entrepreneur, selling EchoSign to Adobe for $100M where it is now a $250M ARR product. In Today's Discussion on Why Seed is Broken We Discuss: 1. The Seed Model Was Broken and What Comes Now: Why does Sam Lessin believe the model for seed of a "factory line" was broken? What does he believe will replace it? Why does Jason Lemkin argue that this might not be the case for SaaS and enterprise? 2. Round Construction: YC, Multi-Stage Funds and Party Rounds: Why does Sam Lessin believe we have seen the end of party rounds? Why does Jason Lemkin disagree and we will see more than ever? Why does Sam Lessin believe the factory model of YC churning out companies is over? Where does Jason Lemkin believe the value lies in the YC model? Will the multi-stage funds remain in seed? How has their entrance and deployment changed the seed market? 3. VC Value Add at Seed: Is it BS? Why does Jason believe all talent arms in venture firms have failed? Why does Sam believe that no VCs provide value? Do the best founders really need help? Why do Jason and Sam disagree? 4. What Happens Now: Why does Jason believe that every manager can write off their fund from 2021? Who will be the winners in seed in the next 10 years? Why does Sam believe if you want to bet on AI, just bet on Meta or Microsoft? What will happen to the many companies with no PMF but 10 years of runway?

11 Aug 202353min

20VC: The Memo: The State of the VC Market: Why Seed Funds Can't Invest in "Hot Startups" Anymore, Why Series A & B is Terrible, Why the IPO Market Will Explode in 2024 & Why VC DD is BS & Every VC Has More Fraud in their Portfolio with Jason Lemkin

20VC: The Memo: The State of the VC Market: Why Seed Funds Can't Invest in "Hot Startups" Anymore, Why Series A & B is Terrible, Why the IPO Market Will Explode in 2024 & Why VC DD is BS & Every VC Has More Fraud in their Portfolio with Jason Lemkin

Jason Lemkin is the Founder @ SaaStr one of the best-performing early-stage venture funds focused on SaaS. In the past, Jason has led investments in Algolia, Pipedrive, Salesloft, TalkDesk, and RevenueCat to name a few. Prior to SaaStr, Jason was an entrepreneur, selling EchoSign to Adobe for $100M where it is now a $250M ARR product. In Today's Episode with Jason Lemkin We Discuss: 1. WTF is Happening At Seed Right Now: Why does Jason believe seed is more active than ever? Is the pricing of seed rounds impacted since the downturn? Why does Jason believe it is not only not the end of party rounds but just the beginning of them? Why does Jason believe you cannot fail if you have $1M in ARR and an amazing founder? Why does Jason believe that seed investors cannot participate in "hot seed rounds" anymore? 2. Is Series A a Dead Zone: How does Jason analyze the Series A and B environment today? What has changed in what investors expect and want to see in potential Series A and B investments? What happens to the many companies who raised pre-emptive Series As and have 10 years of runway but no product-market fit? Why does Jason believe founders should offer to give the money back when it is not working? What happens to the Series A and B market in the next 18 months? When does it come back? 3. Growth: People are Too Negative! Why does Jason believe that growth is more active than many are giving credit for? What are the ARR benchmarks required to get a good growth round term sheet today? Why does Jason believe that VC DD is a load of BS? Why does Jason believe that every VC has fraud in their portfolio? Will they come out? 4. Ring That Bell: IPOs and M&A: Why does Jason believe 2024 will be an amazing year for IPOs? Why does much of the IPO market rely on Stripe and Databricks? What is needed for an amazing 2024 IPO market? How does Jason evaluate the M&A market in 2024? Will regulation get in the way? 5. Jason Lemkin: AMA: Why does Jason Lemkin believe this generation of workers will never work hard again? What is the only way for seed funds to make money investing in serial entrepreneurs? What does Jason know now that he wishes he had known when he started investing?

9 Aug 20231h 9min

20VC: Vinod Khosla on How AI Impacts The Future of Healthcare, Education, Income Equality, Geo-Politics, Music and Climate Change

20VC: Vinod Khosla on How AI Impacts The Future of Healthcare, Education, Income Equality, Geo-Politics, Music and Climate Change

Vinod Khosla is the Founder of Khosla Ventures, one of the leading venture firms of the last decade with investments in OpenAI, Stripe, DoorDash, Commonwealth Fusion Systems and many more. Prior to founding Khosla, Vinod was a co-founder of Daisy Systems and founding CEO of Sun Microsystems. In Today's Episode with Vinod Khosla We Discuss: 1. The State of AI Today: Does Vinod believe we are in a bubble or is the excitement justified based on technological development? What are the single biggest lessons that Vinod has from prior bubbles? What is different about this time? What is Vinod concerned about with this AI bubble? 2. The Future of Healthcare and Music: How does Vinod evaluate the impact AI will have on the future of healthcare? How does Vinod analyse the impact AI will have on the future of music and content creation? Does Vinod believe that humans will resist these advancements? Who will be the laggards, slow to embrace it and who will be the early adopters? 3. Solving Income Inequality: Does Vinod believe AI does more to harm or to hurt income inequality? What mechanisms can be put in place to ensure that AI does not further concentrate wealth into the hands of the few? Does Vinod believe in universal basic income? What does everyone get wrong with UBI? 4. The Future of Energy, Climate and Politics: Why is forcing non-economic solutions the wrong approach to climate? What is the right approach? Why is Vinod so bullish on fusion and geothermal? How does fusion bankrupt entire industries? How does the advancements in energy and resource creation change global politics? Does Vinod believe Larry Summers was right; "China is a prison, Japan is a nursing home and Europe is a museum"? 5. Vinod Khosla: AMA: What is Vinod's single biggest investing miss? What does Vinod know now that he wishes he had known when he started investing? Why did the Taylor Swift concert have such a profound impact on him? What was Marc Andreesen like when he backed him with Netscape in 1996?

7 Aug 202343min

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