Must a company be a generational, category-defining business to be an excellent investment, or can ordinary businesses meeting a defined framework suffice?

Sam Lessin · Aug 11, 2023

Seed investing should target the huge number of businesses excluded on TAM grounds — billion-dollar-scale companies startable for a few million that will never be public companies; treating everything as infinite TAM is a disaster.

Stripe, AWS and similar infrastructure make these businesses buildable cheaply, and even Facebook, Amazon, Microsoft and Google together are a small percentage of the world's total business activity, which is mostly small businesses.

18:04 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 · Aug 11, 2023

The most interesting opportunity today is companies you can put $3M into and get to near-certain profitability at a $100–200M valuation while retaining an option on something much bigger

Everyone became addicted to the idea that $5B companies can be manufactured, which was a product of the era rather than a durable truth

24:34 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

Rick Zullo · Aug 23, 2023

Outlier venture outcomes are not the only way to make money in private markets, and forcing a company that isn't a decacorn candidate down that path is flushing money down the toilet

Plenty of private equity and growth equity funds deliver 50% IRRs to LPs without owning those outliers; large fund cycles are what force the irrational path

41:12 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

Mitchell Green · Mar 28, 2025

Investors don't have to play the same game as venture; a better strategy is buying boring software businesses at $10–20M revenue and exiting them at $60–80M revenue

There is zero chance these are the next Snowflake or Datadog, but they can be reliably built and sold without competing for hyped assets

14:56 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Mitchell Green · Mar 28, 2025

Companies do not need to be generational or game-defining to be excellent tech investments; what matters is whether they meet a defined investment framework

Examples like ExaGrid — bought at a $130M valuation, $165–170M revenue, 70% gross margins, $26M EBITDA — can be grown and sold at 10x EBITDA for roughly 4x money

15:31 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Mitchell Green · Mar 28, 2025

Investors should stop requiring that every company be a Silicon Valley business that IPOs, and instead target capital-efficient companies outside that mould

The law of large numbers means it's impossible for every one of these companies to keep growing at scale from a $1-2bn valuation; meanwhile hundreds of mid-market PE funds now have sleeves to buy software companies, creating a deep buyer base

29:41 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Jason Lemkin · Aug 11, 2023 · hedged

VCs will not get comfortable with old-school $200–300M exits — that train has left the barn.

17:54 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

Trae Stephens · Apr 3, 2024

Highly capable repeat founders who choose easy, trivial businesses like simple enterprise SaaS are wasting their potential and should aim at world-changing problems

Silicon Valley is full of talented people who could do something world-changing but instead do something easy they know will make money — like George Clooney selling commodity tequila off his brand

Scope: there are some great enterprise SaaS companies and great founding stories in the category; criticism is of the category being largely uninspired, not all of it

35:40 20VC: Founders Fund's Trae Stephens on Why The Most Competitive Deals are the Worst, Why No Company is Successful Because of their VC, Why We are Making ZIRP Mistakes Again Today, Why Loss Ratio is BS and Upside Maximisation is Everything

Kevin Hartz · Jul 22, 2024

He only wants to back founders whose aspirations go far beyond returning a fund, and turns off when someone wants to build a nicely-sized cash-flowing business

He has always been around people with extremely high standards and is looking for extraordinary outcomes

28:12 20VC: How I Lost Airbnb at Seed Because of an Exploding Term Sheet | Investing Lessons from Roelof Botha & Peter Thiel | Why VC is Less Collaborative Than Ever and Great Companies Are Being Destroyed by Too Much Cash with Kevin Hartz @ A*

Harry Stebbings · Mar 28, 2025

Early-stage venture investors like himself must back generational, category-reshaping founders, which makes control deals with brought-in teams a fundamentally different business

Scope: framed as the standard early-stage objection to Mitchell's model

15:15 20VC: Why Traditional VC is Broken: How VCs Learned Nothing from 2021 | Why LPs are More Important than Founders & Advice to Emerging Managers | Bull Case for Bytedance & Why TikTok's Ban Doesn't Matter with Mitchell Green, Lead Edge Capital

Nabeel Hyatt · Apr 4, 2025

A company without a competitive barrier to entry is an easy no, because the goal is to back businesses that become enduring public institutions decades from now

You have to believe a company has enduring value that lasts a long time; 'big enough' outcomes may work for a small enough fund but not for theirs

Scope: allows that it could be acceptable for a sufficiently small fund

18:21 20VC: Why To Win in AI, Investors Need to Change Their Approach | Why VC is Run by Principals and Associates and is a Broken System | The Bull Case for Anthropic & Whether Deepseek Changes Their Strategy with Nabeel Hyatt @ Spark Capital

Sam Lessin · Aug 11, 2023

Building a $100–300M company does not forfeit the option value of building a $10–50B company; getting on first base is often the best way to set up a ten-year run at a home run

History has many examples of companies that built the obvious winner well and then graduated it, like Squarespace; unlike baseball, getting on first doesn't remove your chance at a grand slam

25:21 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

Frank Rotman · Aug 11, 2023

Great companies are not manufactured; they are built on top of good companies, so founders must get to good first and only then can survey their optionality

26:08 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

Mitchell Green · Mar 28, 2025

Only about 100 out of 10,000 companies meet all eight of Lead Edge's criteria, and about 10% meet five or more — and many of the qualifying hundred are at insane valuations or unwilling to take money

The framework is deliberately narrow, so missing companies is acceptable

38:39 Narrow multi criteria framework yields few qualifying companies many overpriced or unavailable

Steve Jurvetson · Aug 3, 2020

The right filter for this style of investing is asking whether a history book will be written about the company in thirty years; incremental startups — roughly 90% of enterprise software — fail that test and aren't in the game.

Only monumental change justifies this kind of investing; middleware efficiency or slightly better ad matching won't shift the playing field.

22:05 History book test thirty years out filters genuine frontier bets from incremental enterprise software