The Biggest Misconceptions & Hardest Truths About Seed Investing Today; Why The Best…

Thanks for having me back, Harry.

I’m excited to be here.

So my name’s Terrence, a seed investor. I’ve been fortunate over the past ten to fifteen years to back some incredible founders at their earliest stages, Figma, Notion, Hugging Face, Vanta, Robinhood, Patreon, Front, just to name a few. Started off my tech career originally at at Google. I was there o five to o 10. I did various product development and product marketing roles, and then started professionally investing in 2010. I I joined Index Ventures, actually joined over in London, and led and managed the seed practice for them for seven years.

Did that both in London for a short stint and then in San Francisco. You know, they gave me a lot of rope to innovate, and one of the things that innovated it on was actually giving capital to founders to invest. And so I incubated a fund for them, which later was the genesis for Otherwise. So Otherwise is the fund that I invest out of. The model is give capital to a network of top founders, and they discreetly make multistage investments, primarily at seed. We don’t publicly talk about the fund or the strategy, so I’m gonna hold to that.

In terms of investing, write 250 k checks. I do mostly seed, but I do some later stage investment. I’m sector agnostic, but do mostly applications and really try to support amazing founders.

I’m not gonna compete, I will just I’m David. I live in New York, and I collect toys. That’s where we’re at. I’m David Tisch. I run BoxGroup, which I’ve been doing for about fifteen years. Before that, I started and ran TechStars in New York for a couple years, but left in 2012 to do BoxGroup full time. As of recently, we just closed our sixth fund, so it’s a 2 and $12,000,000 early stage fund. We do pre seed seed investing. We’re at a 500 k to a million dollar check.

We’re happy to be the second or third biggest check-in a round. We don’t take board seats. Believe in what we call collaborative seed investing. It’s what we’ve been doing since the beginning of the fund, we do so in conjunction with the whole ecosystem. So we come in peace, and we work nicely with others. We also have a follow on fund to go with that. BoxGroup six and BoxGroup PIX because that rhymes and we’re into rhyming. We are a team of nine investors. Seven are based in New York, two in San Francisco, and we’ve been working together for a long time.

It’s important to meet the best founders. So the first step is, do you see them? Do you get to know who they are and what they’re working on as early as you can in that journey? A relationship starts ideally well before the transactional portion of raising capital. I’ve been doing this a long time. I Repeat founders come to you if you’ve provided the level of relationship that they’re looking for as they raise capital. First off is the first time you work with somebody, did you do well enough by them for them to come back?

I think that is a foundation of a long career in venture, is building repeat relationships. I think for first time founders, you have to find them where they are, and you have to get to know them in a style that meets them versus a product that I think can differentiate. I think at the end of the day, for the most part, all VCs offer the same product. We are giving money and we are taking equity. What comes after that is obfuscated in a sales pitch. Pick me for all of these reasons.

When you are a amazingly unique lead investor of multi stage rounds, a la Sequoia, Andreessen, founder’s fund, Keith now at Cosla. You have a history and a track record of a brand that I think is really hard to compete with. And it’s not saying that you can’t compete sometimes, but the probability that you can win against one of the top three, five, 10 firms on a repeat basis, I think is a really challenging proposition.

It is very much either or. And I think if you have a sharp elbow, people are gonna be aware of that and come at you with sharper elbows. Even with 500 k checks? Well, I don’t think we compete. I don’t think we’re trying That’s be what was saying. We’re not an or firm. We’re an and firm.

And an amazing and firm. So I don’t think people necessarily compete with BoxGroup, but I think you can tell that and story as a counterbalance to to a multi stage book.

We don’t try to compete. I think if we tried to compete, we would lose our ability to work well with others. And I don’t think our value proposition is to say, Pick us instead of somebody. So, back to your question, Harry, why should people pick us? Because they like us. And I think that at the end of the day, that is why people should work with investors. There is a value component to this, but I think all that value gets played out after you accept an investor, not before.

And I think the idea that you’re going to be able to prove value ahead of the pitch, I think is a nice head fake that a lot of investors try to do, but I don’t think is realistic.

I tend to agree with David on this that a lot of this value add is commoditized. It’s also often when you talk to founders, might be like a couple quick motions to try to win the check and then people kind of fade into the background.

You’re building a decade long relationship with a founder if things go well. And the idea that in a week, a day, a month, however long that transactional sales pitch goes at the beginning of a round, that you’re going to prove all of your value in that short compressed fake time frame versus this actual long relationship of ups and downs and needs and wants. I just think isn’t the way to do this. So, how we’ve built our firm at BoxGroup is by being consistent. We’ve never changed who we are or how we invest.

We want to build a relationship at the earliest stage, and we’re there to help founders. What does help look like? It’s different every day for each founder. Every founder is gonna want different things at a different point in the company’s life cycle, and the style and the personality of a founder is gonna be different depending upon who they are, what their background is, what industry they’re working in, what they need in a given moment. The idea that in that sales pitch, we’re gonna prove value, I think, is just not the way that we approach our business.

What we want to do is build a reputation that when a founder asks another founder that we worked with before, they say, we love BoxGroup. BoxGroup is our favorite investor. Not necessarily best, favorite. What’s the difference? Best is this, what did they do? Name the things that they did for you. Favorite is, I would work with them in a heartbeat because I like them, and they are a friend. They are somebody that we go to when we want to talk to an investor without the sort of parent in the room.

We wanna be the friend in the room.

I think they can be done. I I have a similar investment philosophy, and I think it is really around this, like, relationship. I think David’s spot on. Like, these I think these, like, value adds and these things, I don’t know. It might sound kind of impressive, but it just yeah. It degrades. It commoditizes. And, ultimately, you’re not gonna get there through, like, just commoditized services. It really is breaking through to that love you know, that level of trust. It’s the relation ultimately, fundamentally, like, a really human relationship.

I think our business a lot of the time gets summarized in a tweet, in a blog post, in a tech media article, or in a podcast as these very abstractable, objective values, data, stats, summaries, tactics. All of this magical thought leadership gets projected out there as like here’s how to do the business. But at the end of the day, I think what Terrence said is how we view it. This is a human business. We get to know people, we build relationships, most of them fail. Most of the companies that we back fail by natural statistics.

If you’re in early stage pre seed seed venture, most of the companies you back will fail. And what comes with that failure is a human who had a dream whose company didn’t work out. And that’s an incredible, emotional, psychological letdown. These are mostly people that have succeeded in everything they’ve done up until that point, and then their company fails. If you, as the human investor, aren’t aligned with that journey on the down, and on the other side, aligned with the journey on the up, I don’t think you’re gonna be in this business for very long.

applies to both the seed and the venture. And I think we’ve got, like, three long trends coming, and then one really recent one that’s just really creating a absolutely really unique market right now. So I think the long trends are, if you look at, like, the funds, the expansion and the fragmentation of both the seed and and the venture market. It’s a story we know in well, new managers, all that kind jazz. But that’s been a trend maybe ten years in the making. Another trend that’s kind of ten years in the making is generational change.

So you’re having storied funds with storied partners. They’re kinda riding into the sunset. And I think this is both true sometimes even at the Series A and even at the seed. It’s unclear, like, who’s going to to take the reins. There’s some young partners. They’ve got a really great generational resonance, but maybe not the track record experience. That’s another trend. And I think another trend that’s kind of, you know, very fascinating is if you really look at, like, founders and the for lack of a better term, like, the power and the optionality that they have now, it’s really shifted.

Like, when they you know, ten years ago when they were starting a company, it was really hard. Capital was scarce, tooling, how to do it, all that. And over time, just more and more tools, more and more options, more and more capital, know how, everything. And what you’re really having is, like, I think the founders went from or the VCs kinda went from customers to now the founders of the customers. So those are, like, really kind of long standing kinda compounding trends, which I think in even in its own right could be very destabilizing and create, like, a really interesting ordering.

The most interesting data point that I get is I often ask founders, like, who do you wanna raise your Series A or your seed from? And there’s just no, like, clear set answer. And ten, fifteen years ago, it was tight. Then there’s a lot of, like, interesting just super variance in that answer, and that that answer is coming from founders. So that’s an interesting data point. And then I think AI is coming along and really fascinating market. It’s like the brand pairings on who’s great at that, who’s not great at that, how these companies even rate seed rounds or even early stage rounds or even how they’re raising ventures, kind of all a little bit over the map.

So I think in, like, two years, like, you you mush that all together, it’s ripe for incredible disruption. Or I’d say there’s a lot of opportunity there for funds and managers to really take leadership positions because there’s just so much change and corresponding opportunity right now.

The biggest fundamental change is really right before COVID, the shift to online and distributed venture firms is the accessibility of founders to a venture firm. So, if you go before 2010 through probably ’18 or ’19, getting a meeting with a top tier VC firm was hard. Took logistics, you probably had to fly to San Francisco, you probably had to go sit in a parking lot and a waiting room, do this weird march down Sand Hill Lane to these very old stiff firms, and it was a really tight funnel to get in front of them.

Coming out of COVID, the accessibility of the multi stage firm is fundamentally different. You can spin up a meeting, could spin up a partner meeting, you could spin up an investment decision exponentially more agile way. I think that’s a huge change in the market. That’s created more founder optionality to raising rounds and raising rounds quicker and getting in front of more firms in a tighter timeline. That change is real and impactful and has changed the way that multi stage firms have an ability to access the seed market, because they move faster.

I think speed was an advantage before 2019 for early stage investors that has been equalized by all firms across the entire spectrum. And I think that’s a huge permanent change that I haven’t seen go back. I think more than anything, that allows founders even more accessibility and optionality when they think about their rounds.

Because seed is random And seed is shifted the word seed is shifted from a million to $3,000,000 round to a 5 to $8,000,000 round. If there is a pre seed or a starter round, if a founder’s gonna take initial capital, so call that sub $2,000,000, That part of the industry is so random, and the idea that that deal is exposed and widely available and competitive is unknown. Those things happen quickly. They happen a lot of the times with built in networks. They happen a lot of the times with friends, with angels, with angels who actually aren’t angels but are backed by funds that raise capital and distribute it to founders that look like angels.

Whatever that capital is, that just continues to be random. I don’t think you can index seed, and I don’t think you can aggregate seed into a low margin product. If somebody could buy the seed market, that’s a very different story. We haven’t seen that yet. But it does

I don’t think the $5,000,000 seed round is a new product. I think there’s a nuance. If that’s first capital in, or if there’s a sub million $2,000,000 round that happened before that, that’s an interesting fact at an individual company level. Not every company takes that million to $2,000,000 round. Some do. Some start with a $5,000,000 round. But the $5,000,000 round has been around and existed for a long time. I don’t think it’s a new product. Again, more accessible to founders. Do you guys wanna play in those five on 25 rounds?

Sure. So, shifting away from the human emotional side of venture, which is actually I think the art of venture. The math of venture is you have to invest in the best companies. If you invest in the biggest, best companies, you will have great returns. If you are structurally adverse to funding things with really hard rules, you are limiting the opportunity set of accessing the best companies. If the best company is going to raise a $10,000,000 on a $100,000,000 seed round and you say no, but that turns out to be the $100,000,000,000 opportunity, that was a mistake.

If that $100,000,000 seed round turns out to be a $200,000,000 company, that was also a mistake to say yes. But the option of being the $100,000,000,000 outcome, you can’t just fundamentally say no if you believe that’s the one.

100%. Building on that, the one undisputable law, empirical law of a venture is the power law. The rare thing is not price. The rare thing is conviction in the company. And so if you’ve got conviction and you found the company, you write that check. 10,000,000, 20,000,000, 100,000,000. You write that check. Because as David said, it’s the exit price. And if that’s the winner, that’s our game. Our game is to find those companies. And if we’re lucky, we find a handful or maybe even one a year.

And every time you pass because the price is too high, if that was the right company, that was the lowest price you could ever invest in that company. 100%. And you should say yes. And if I go back in my career, in twenty ten through fifteen, a 10 to 15 to $20,000,000 seed valuation was egregious. Today, you take a 10 all day. If you play out the two thousand fifteen through twenty period, a 20 to $30,000,000 round was egregious. It was totally off market or the top of the market.

But today, that is an expensive but normalized price. And does that mean that the valuation the returns compress? Only if the exits compress. If the exits find their way over time, not in this moment, not in this depressed public company SaaS multiple market. But if you fund a generational company and the outcome is insanely enormous, you should say yes to whatever that number is at this seed stage. When do

Series B?

It’s a totally different game. It does. It really matters in growth investing, crossover investing, but that’s just a fundamentally different game.

Venture’s two different jobs. There’s the pre series B job, and there’s the post series B job. And I don’t think they have any relation to each other. I think at pre Series B you are doing more art, and at post Series B you’re doing more math. There’s maybe some nuance in certain companies where Series B or C looks like it’s an early stage style risk, And that might be a company being pulled forward, and you saw a lot of that happen in the froth of mid-twenty to mid-twenty two.

But I think traditionally post Series B is a different job. Does valuation matter at a portfolio level? Probably. If our blended entry point across our seed fund is $50,000,000, that’s not great. If our blended entry point is $3,000,000, I don’t think we had access to the best companies in that vintage. So I think there is some middle ground that says at a blended portfolio level your entry point is going to be reasonable and your hope as an early stage manager is that you own the most at the cheapest valuation of the best companies.

That’s not in your control. And so, I don’t think it’s on me to say, here are our rules, here’s our band of things we say yes and no to based upon these objective rules. It’s not how we operate. Just

building on that, and it’s the way that I run my book of business. If you’re just just to simplify that, you just say you’re you’re just not valuation sensitive. Right? To David’s point, you’re gonna have a sampling based on your work of what you saw and picked and won. And some of those might come in at five, and some of them might come in at 50. But if you just release yourself from the constraint of valuation and really focus on conviction and finding those special companies, I think that’s the better way to do the job.

It’s a hard job. It’s hard. Until there’s a day when every company applies for your check and gives you plenty of time to get to know them, meet them, and then somebody tells you what the future is and what the outcome of those companies are and you’re like Oh, this is a good company because I know it’s a good company. Then it becomes easy. Until then, this is a game of gut. It’s a game of as Terrence uses the word conviction I struggle with the word conviction because I don’t know what it looks like if I’m gonna be wrong most of the time.

It’s like is this human, is this idea, is this market capable as a package of building something of unrealistic scale? Because when you talk about the outcomes in our business and when you talk about changing the world or funding something that will have this enormous behavioral and economic impact ten years from now, and then sitting here and be like, oh, I knew it. I saw it. I don’t buy that. We’re gonna be wrong most of the time. That’s bullshit. Such bullshit. What are the other it’s such bullshit of seed investing, guys?

Nobody’s that great at this. I don’t think there’s a seed investor that you can find who has figured out how to be right 10 times more often than another seed investor.

He did mostly He did some seed investing and a lot of Series A investing. And if you look at the combination, Series A investing is quite different than seed investing. I think Roger is an outlier. Roger invested in an era when he had a thesis and he was able to find companies that fit his thesis with immense conviction and build incredibly deep positions in those companies. And the returns proved themselves out. And he went off into the sunset to do Act Two because he was so good at it.

So I think there’s aberrations but I don’t think if you look at pure seed investing that there are people who are just mostly right.

The longer you’re in the game, if you’re really honest with yourself, you have to acknowledge, you have to have so much humility on how luck and how random and how just like any of these companies that you back, like, if they really like you can’t imagine the success. So I won’t be as provocative, David, but I think a lot of the things that put is put out on VC Twitter, it is content marketing to make the person seem smart. But if you really get them, whatever, two beers deep, they’re gonna be like, shit.

I don’t know. Or at least the longer that I’ve been doing the game, the more humility I’ve gained.

It’s also we’re not building the companies. The hard work is being done outside of this podcast and outside of Twitter. The hard work is being done by founders, by their first 10 employees, by their ability to find customers and traction and users. It is so easy to sit here and put out, as Terrence properly said, content marketing to attract people to think that you are this magic maker of their success. I just don’t buy that. Our job is to allow people that are outside of this room to go fulfill their dream.

Some founder has a dream, they have an idea, they have conviction, and they go out and they have an N of one opportunity to go build the thing that they are building to a level that is unrealistic if you are playing out the outcomes that are required for venture scale. They go do that with blood, sweat, and tears. And we sit here and we talk about how we knew it when we met it. And I just don’t buy that.

Say that again. Say you agree with me.

I don’t think it’s luck though. I think that’s a misplaced work. If you don’t see it, you can’t invest in it. And so I think the hard work as a seed investor is meeting with that opportunity set that has a chance to be those outlier companies ten, fifteen years from the day you met them. And that is actually the skill. But if that’s the case, the content marketing that

denigrated just now Yes. Very valuable. That’s why I’m here doing my own content marketing. You’re gonna take this, you’re gonna summarize this into a 30 TikTok, we’re gonna go viral, and I’m gonna get the next generational companies to come to me because we made a great TikTok. Yeah. Thank you for that. I’m using your distribution rails to my benefit. You see why I love him, Terrence.

If you just even step back, when David and I started, ecosystem was so small. Like, the seed deals would almost pass through everyone’s inbox. Like, almost everyone would it was like you you almost had, like, 50 to 75% coverage of any given deal. And Ian’s like, oh, that person did it. And, like, year after year, just geographies expand, funds expands, relationship, this expansion, fragmentation, geographies, the whole thing. So I

mean And then tech shifted from a vertical to a horizontal. So the types of businesses that that venture and early stage tech venture capitalists were funding fundamentally expanded at a huge level too. So to what Terrence said, we had in 2010 through, again, probably 15 real scaled coverage that today is a fraction of that. It’s a fraction of that.

I think that’s just like a market shift. I mean, there’s, of course, people who have better coverage, but, like, we’re just dealing with a much larger, highly fragmented market. And to David’s point, a really efficient seed round too. So, like, this guy can be raising around, and it’s just done in in days. And it’s just like, the Zoom is done. Multi stage fund does it. Boom. As opposed to, like, driving around the deals on the market for a couple weeks, you’re you’re meeting them multiple times, you’re thinking about it, boom.

Yep. Gets sent out on AngelList, you click make intro, it’s Uber.

See, pick, win. You have to see it in order to pick it in order to win it. Seeing it, the earlier you see a founder, the better your relationship is when that transactional moment comes into play. And so if you can meet people before they’re starting a company, before they’re thinking about starting a company, if they’re at a university, if they’re working at a different company and thinking about starting one, that is the best time to meet them and to build a relationship that you can have conviction when they do show up for that transactional moment to say yes.

I think that is the essence of seed investing. The hardest part is getting exposure to founders at a scale that allows you to see in a given year, in a given fund cycle, enough of those potential great opportunities. The pick, I don’t know how to get better at picking when you don’t find out the results of your picks for like five to ten years. How do you wake up tomorrow and do work to be better pickers? You can be prepared in markets, you can be prepared in the businesses and the types of businesses that you’re trying to fund.

So I come back to it of like, can you build relationships that you get excited enough about to say yes because somebody comes to you with their dream, presents it to you, you say that is magical. You get this feeling of a human that shares with you what they’re thinking about. You so sophisticated and deep and passionate about what you want to go build that I have to say yes. You’ve gotten me as excited as you are to go build this company, I’m in.

Prerogatively, just to start a little bit, on the pick, I believe, actually, a group decision is the wrong way to to make a seed investment. I really do believe that. If you look at even, like, the history of as a quick aside, like, the history of venture funds modeled after law firms, partnership model, group decisions, If you really dispassionately look at, like, the decision science of what that optimizes for, it is for consensus. It is for SAFE. Often, these companies at seed stage and I think the consensus in the in the group huddle is, like, maybe that series b, that’s super smart and super valuable.

But, like, day zero stuff, you really round the edges, and you can miss a lot of great things because and I think a lot of this on the picking, in my view, is instinctual, intuitive, hard to explain. David meets a founder. He’s like, there’s something in his eyes. And you know what? In seed investing, sometimes that’s actually the best reason, but articulating that to a group, you know, it’s just seeing that x factor in someone is really hard.

I don’t know who you’re provoking because I fully agree with you. We’re a team of nine. Everyone on our team can say yes. Everyone on our team can say yes in an individual meeting. We don’t vote. We don’t try to find groupthink. It has to operate in your gut.

And if we meet this magical founder and she just left her job at a different company, she’s coming out of university and my partner, Nimmy, Adam, or Greg meet them and they get excited, or if Adena, Claire on our team meet them, or we have two Claire’s which is low probability on a nine person team, if Claire or we have two junior people on the team, if they meet somebody and they get to this level of conviction, I want to listen to that more than I need to find a way to get group think internally.

I think it happens at the edges.

We don’t operate our firm in a way that we actually try to extract that sentiment. The people who are spending time on that deal should make that decision. By people, I mean one or two people. That’s great. It does not need to operate at a firm level. I think seed investing, to Terrence’s point, cannot be about consensus or groupthink or safety. It has to be on the edges. Everyone on our team thinks about people differently. We think about spaces differently. We get excited about different things.

And my job at BoxGroup, and our job at BoxGroup, is to have people here who we believe can make great decisions. Terrence takes that model and, in essence, runs the same thing. He just does it we’re not going to talk about it because it’s a secret, so I don’t want to touch on it but Terrence takes that decision making and distributes it to other people outside of the room, founders. We do that in the same room in some way, but we’re still distributing the gut to the individuals at the firm who we think are all of us capable of making a decision.

We talk about things. We don’t vote and we don’t look for consensus. Not everybody is equally ramped up onto each company such that their voice is valid. The easiest thing to do at seed is find a reason to say no. You name a company, you give me an idea, you give me a market, I could tell you the 32 reasons why it’s not gonna work. That’s not the job. The job is to squint and see the one reason it’s going to work and say yes when it matters.

And the yes is so much more important than the no. The cost of omission at seed is so much more expensive than the cost of commission. And if you say no to the wrong company, you blow your returns. If you say yes to the wrong company, it’s a rounding error in your model. To jump

in on this, I think this idea of, like, conviction, it’s very intuitive and it’s probably empirically weak and it can crumble. You can crush it and and conceptually super easy. To David’s point, here are 20 reasons why this won’t work and there’s super rational reasons. The market’s low margin, blah blah blah, all this stuff. You can crush any of those ideas so easily. These voting mechanisms or even these group meetings, either explicitly through voting or implicitly through cultural norms, often just crush those flames. I think there’s some, like, cheesy Johnny Ive quote about ideas that are so fragile when they’re early, but I do believe that about startups.

They’re super fragile. Right? So I think to do the job well is you actually wanna celebrate empowered people to make those instinctual decisions even if they are a little bit unreasonable.

We structurally push our group to not allow that. We have vocabulary internally, we say like throwing a grenade. You’re not allowed to throw a grenade on some deal. It doesn’t help If you come in and you just have this loud no, everybody who is excited about it, the level of pushback that you need to have to say, I hear that grenade and I reject it and I’m still a yes. I don’t think that’s where the best decisions get made. I think that’s where group decisions get made.

Especially if you have a firm where people have been around longer or if people are newer or if people are thinking about harder, newer, interesting spaces, this gets challenging. AI. Nobody knows the answer to AI. How the market plays out, where the value gets created, what the best tenure out companies look like, other than probably Vinod Khosla. He probably knows the answer. Or someone like that. But we don’t have perfect answers. We don’t know the future. If you knew the future, you would be higher percentage correct than any seed investor is going to be.

And so the more that you allow for negativity to creep into conversations amongst the firm, the less variance you will have in outcomes and the safer you will play, and I don’t think that that model works at seed.

I think it’s way beyond that and I think you bring up a good point. Right? Like someone’s individual mood on a specific day, the weather, the political climate, of those factors go into gut. And if you cannot find zen, some focus, some operational place that you are making clear headed decisions from, you are likely going to be on tilt, to use a poker analogy, and bad decisions will happen. If I look at the firm, we have again nine of us, I believe the job is to try as best as we can to all of us on a daily basis operate in some form of evenness.

I think that’s really hard. But, when I look at BoxGroup and I look at the evolution of what we’ve built here, staying consistent to where we play, to how we do the job, those are really important holds to allow that equilibrium, that zen, to happen. If we, instead, every fund cycle, changed our strategy, changed how we operate, where we invest, like the style of investing, you have no ability to actually get better and to try to find that zone of clarity investments from.

So the Otherwise models, there’s two. There’s the founders making investments, and there’s myself making investments. The founders making the investments, I think it’s a really simple I mean, I mean, it’s see pick win. The sea is off the charts. I mean, they’re about to dinner. They’re in their chats. Like, the amount of, like, founder community and camaraderie is just incredibly high, and there is differentiation in alpha there, a 100%. So they see, and then they also win. Right? So you could just take those two pieces of, like, let’s just take picking outside, pull it out for a second, but just seeing and winning, they are a standard deviation ahead of David and and we just saw

Sure. I mean, sometimes, like, the rounds are closed or there is. Like, do I take this founder’s money? Or There are sometimes, on the edges, tight situations. And, you know, founders of exceptional companies with exceptional reputations, they see and win without exception. And I would even argue that they’re very, very good at picking, and I’ll tell you why. Like, most founders are just investing in people they know or in things they know. And that I do think that they’re either investing in their networks or they are being sought out by someone building an analogous company or that that’s someone in their domain.

Founders are rarely chasing heat at YC demo day at some random thing and they’re not playing that game. So I think you combine that that unfair scene, that natural high accuracy picking and that winning, they are very good investors.

Building on what Terrence said, his requirement is picking the right founders. So, I agree that they win on seeing and they win on winning. If Terrence picks bad pickers, the model falls on its face. But Terrence picking great founders actually makes the model, as he said, beyond a standard deviation, better than everyone else’s model. And so, I don’t think all founders are inherently great pickers, and I don’t think all founders are inherently great investors. I do think all founders see better than investors do. Do you agree with that, Terrence?

I agree with the see and the win. On the pick, I think most world class founders do naturally best in their own networks and in their own domains. And if they do that, it is high accuracy picking. And there are sure. There there is a subset who are going to run around YC demo day. And you know what? Those folks should probably stop building and go raise a fund. Do you have a reserves model, Terrence? No. Provocatively, and maybe we might get a little bit of attention here, David, opportunity funds.

But the on balance, I don’t think reserves and follow ons I think it actually hurts seed investing, and it hurts seed investing in two ways. One is it depresses DPI. So on the financial side, how does it do that? You know, you have whatever, a dollar to invest primary, dollar for follow on, maybe even a dollar 50. So even if you look at on that on a dollar basis, you’re almost more of a growth fund there. But and, anyway, that’s an aside. So you’re taking capital, and you’re trying to put it into Series A companies.

There is adverse selection there that the best companies sometimes are really difficult to get in. That’s not to say that you won’t get in because, you know, legal pro rata and all that. But will you get haircuts? Absolutely. Just like everyone else is getting a haircut. So now less dollars are going into into the right companies. Then you also have this weird compounding factor that just because it raises hot series a, that might not be the right company into this idiosyncratic walk in seed. That sleeper that kinda went from seed rate is nothing series a and all of sudden explodes at series b.

Anyway, so so there there’s all these confounding factors that I think on balance, if you just did a one check, it would just increase your total DPI because playing that pro rata game is very, very, very difficult, a different game, and it’s rife with landmines. That’s one effect. And the second effect, and I don’t want you to answer your ask your question, is just on a relationship factor. It’s very clean when you’re just like, hey. Listen. Here’s my check. And we don’t have to answer, you know, with the founder whether you’re investing or not investing and and all those reasons.

You’re just super supportive. Do you think you can even pick the winners at such an early stage? But I think that’s the point. I think post series b, these things become not only like they become painfully obvious, and it’s picking is not the thing. It’s just access. Right? I mean, you just up to series b, it’s super hard. Right? And so you’re really putting a tremendous amount of capital on this really, really hard game and a game that if you’re doing the job well, which, like David articulated, it’s it’s a totally different game than whatever running cohort analysis or customer reviews and all this kind of jazz, which is a little bit more in the later stage.

So I don’t do it, and I think it’s a net benefit. I I do think it is a hangover of there’s some conventions that LPs want to hear. Some of them have good rationale. Some of them, I think, can be fairly questioned. But, like, the convention is have 30 to 50 shots on goal, have a reasonable reserve strategy, so be concentrated, have some reserves. Like, you go talk that to an LP, they don’t think. If you say, hey. Listen. We’re gonna do no reserves or maybe have larger portfolios.

You’re getting out as outside those norms, and they’re harder conversations. And because they’re harder conversations, a lot of managers say, I’m just gonna have the simple conversation because that’s how it’s done. But if you empirically look at it, I think it’s better. David, how do you feel?

Our job is to make great decisions with every check that we write at each step of the way. And so is everything that Terrence said inherently accurate to a good level? A 100%. But it doesn’t mean that you can’t be great at follow ons. It means you have to be great at follow ons if you have capital that needs to do follow ons. And so our job is not to say fundamentally, we don’t do this. And our job is to say structurally, every time a round comes together, we’re saying yes.

Our job is to from LPs give us money to deploy into companies in a way that gets them the returns that they expect. And for our business, our job is to generate the best returns we can get. So from our opportunity fund, our follow on fund, A, it slants early. We don’t want to be growth investors. We want to be venture investors. And so we want to put money into the best opportunities that we can in a given fund cycle. If it means we’re slower to deploy our follow on fund in a given moment, or we’re quicker to deploy it, I think those are the variables that we can control.

Our job is to get as much money as we can into the best opportunity.

This model will work. If you establish that relationship at the founder at day zero, you can knock on the door at Series B and get a reasonable slice, 100%. So if you do your job well at A and you establish that relationship, that trust, people never forget the people that bet on you early, and they will do that versus yet another growth fund coming knocking. So it is it is harder, but if you do it well, the cycle does work.

I don’t think anything makes this job easy. To me, it gets so muted in people looking at what venture capitalists do from the outside and assuming opportunities, there’s this endless set of access that you can just get into this game run to what Terrence said, the generic playbook of 30 to 50 companies, high ownership, reserves, follow on, and you’re suddenly going to be great and have magical returns. Just like the company side of it, there’s a power law dynamic on the venture side of it that needs to be accepted and understood.

The best firms in venture have the highest probability of being the best firms in the future. Because brand matters, the quality of investors at that brand matter, and they’re gonna see and win better than the challengers are.

I think our strategy on reserves is to try to put capital into companies right before the market realizes how good a company is. Is that easy to do? No. But nothing’s easy. And so all of these questions and answers, the goal is to take everything and make it a sound bite, and take everything and make it a tactic or or an easy to learn lesson. But it’s not. It’s this nuance. So a company and not every story is that. Not every company takes a long time to figure itself out.

Some companies start and they just work. And they work from the beginning. And, yes, there might be a hiccup later on. But the path from seed to D actually might be smooth. You should probably lean into that company if it’s a great one. Equally, the company that raises a seed takes a long time to figure out how to get product market fit, revenue, how to get traction, you want to sense that they are moving towards that great opportunity. And you want to sense it before an outsider realizes it, or other insiders realize it.

Do I have many examples of each of those cases? Yes. Can I figure out what the next one looks like because of the history? No. I don’t think you can. In our seed portfolio we have about a 150 companies. I truly don’t believe in pattern recognition at scale. I think there’s nuanced pattern recognition, but I view each one of those companies as an individual relationship, as an individual journey, as an individual idea, in many ways an individual market that they’re operating in. And we have to understand the nuances of each of those factors, of each investment we make, and build each of those relationships at a quality level that scales.

I think the hardest part in an early stage model is when to switch funds. How much of the fund should be deployed into initial dollars versus how much of the fund should be saved for reserves. As a fund manager, goal is to invest as much money as we can into companies versus into management fees. So if you take a $100,000,000 fund, just to make the math easy, and you have a 2% fee, 20,000,000 of your 100 is management fees. And so if we only invest 80 of the 100, we don’t have enough dollars at work.

Our goal is to get a 100 or a 110 or a $120,000,000 of that 100 into companies. Yet, at seed, recycling is gonna happen at an egregiously later date. How do you figure out how to get that extra extra $20.20, $30,000,000 later back into investments? I think that’s really tricky. And so that’s one.

This is hard. It’s all hard. And you have to figure out creative ways to do that. If that means you have 30¢, 40¢ back on a dollar of a company that shuts down early, you deploy that. If you’re spending your management fees in the back end of your fund, that’s another way to do it. But I think one is figuring out how to get as much money of the fund into companies. And at what point do you say we’ve deployed enough initial dollars that we should switch to the next fund.

I think that that is really hard in a scaled model. I think it’s much easier when you say we’re going to fund 30 companies, we’re going to reserve one to one, so the math is very straightforward. For us, it’s not as straightforward, and I don’t know the right answer. So when I think about reserves, I would say over reserving is the bigger mistake than under reserving.

We don’t sell secondary.

As a general rule, no. No on secondaries. I do think you need to kinda hold to to really make the fun math work. I think you just need to hold. I do believe secondaries. I mean, if you look at the charts of it, like, it’s been doing, talk about something that’s been compounding. Like, the secondary market has been slowly compounding. Compounding. And just like the amount of LPs are willing to do it now, these various organizations that email you every day about this company and that company, they’re compounding.

The VC funds becoming registered. Right? You know? And so now they can buy more more common stock as a result. So I think if the MNA market does contract, we’ll see if that’s, like, really long term, but maybe. I do believe the secondaries are gonna be a really robust option. And then, yeah, the company is at $510,000,000,000 evaluation, and you wanna sell off some portion of it as a seed investor. I don’t think from, like, a relationship standpoint. I have done, like, one or two secondaries over the years.

It’s like, I think if a company’s at a certain level, selling off a tiny bit is fine. I think if you’re, like, wholesale, you know, as a seed investor, if you’re wholesale taking the position off at, like, Series B, that’s weird. Companies at 10,000,000,000 and you’re taking off 20% of your position, I don’t think that is as odd for the relationship, but I generally don’t do that for just the return profile.

Does it make sense? Sure. I think if you believe that is the outcome size of that company and there isn’t another 10 x or five x on the table, sure. But I think to Terrence’s point, the compounding at the end is so much more valuable than the compounding at the beginning. The path from zero to 1,000,000,000 is impossible. The path from 1,000,000,000 to 5,000,000,000 is more predictable, and it’s more easy to see at a given moment. But do we fundamentally reject the idea of ever doing a secondary?

No, but I don’t believe our job is to figure out how to hack the system. Our job is to figure out how to back unique outlier, long term, generational companies. And if you look at the time that it takes to build those companies, you have to stick with it sort of till the end.

It doubles your seed return. That’s the easiest math in the business.

Keeping yourself relevant. And I’m old. I need to understand what’s coming, and what’s coming today is different than what was coming yesterday. The spaces that technology impacts Software ate the world. Is hardware eating the world? Is software and hardware together eating the world? Is AI eating the world? How do we compete in AI against experts? How do we compete in science? How do you compete in all of the spaces that we as a firm spend time in? How do we understand what we should be excited about and what we shouldn’t, and how do we get into the next network?

I think the next network of great founders exists somewhere, and our job is to find that network and be relevant in it. Every day, the panic that we have is, are we seeing things and are we understanding them? If you don’t understand them, you’re probably not looking in the right places to see them. And if you see them and you don’t understand them, you’re gonna miss them. And so it’s this very complicated start every day from scratch in this business. I think the one thing that does matter and help is that network compounds and brand compounds.

When I look back, founders that we backed fifteen years ago, five years ago, two years ago, we build that great relationship with them and they’re willing to send us their friend who’s starting a company, those things matter. Do

No. If there’s one round, and I think this is like an interesting topic, like how funding dynamics and whether you need VC. But I think if there’s one round that is will be essential forever, it is that first round. It is that, like, I need money to get going. Sure. There’s gonna be founders who are this is their second show and they can self fund. Fine. But, like, as a persistent basis, like, the one round you need is the one to get going. And then, sure, AI and other tooling.

I mean, I’ve seen this across my own portfolio. These companies can become and get scale. They can become hyper capital efficient, hyper profitable, and venture capital is kind of really optional to them. And I think that’s actually, like, beautiful. I think that’s actually, like, where you actually want to get. And it’s often how I guide my own founders is, like, I think it’s the right way to look at venture is, like, raise that initial capital. And if you get to the point where venture capital is optional, you can dip dip in and dip it out, that’s the ultimate.

You know, you choose your own destiny. You control dilution. You can control your board. You can grow when you wanna grow. You take on more, and then you don’t. You don’t necessarily need to take it every step of the way. And if AI will do anything, I think it’ll just make companies that much more capital efficient. Seed’s seed’s not going anywhere. And I think that’s also why, you know, some of the multistage funds continue just to to look upstream because I think that’s partially understood.

Investors invest. Our job is to say yes, not to say no. And our job is to communicate that decision to a founder in a transparent and quick way. And our job isn’t to waste people’s time, and our job isn’t to mislead people. And I think as I’ve looked at this business, for years, there’s people that come and go that are just wasting founders’ time. Our job is to not waste their time, and our job is to give them money and get out of their way until they ask you to do something, at which point you should try to do it as best as you can and as quick as you can with as little friction as you can.

And so my job as an investor is to invest. And it’s to give people money and do what they ask me to do.

Another bit of advice that also sticks in my head is founders that are going to be the most successful need you the least, which is also true. And it does inform the way that I invest. I do think if there’s anything that you can sort for, at least in myself, is I do truly try to kind of underwrite and pick really special people. Whether they build something amazing, who knows? But at least in in my belief that they are sometimes, you know, special. What’s your biggest advice

The cold water plunge, just the shock to the system for any seed manager is that we live in this our front office job is so fast, and it’s like deals get done very, very, very quick, like and you’re just used to this, like, introduction to meeting, being within days, decisions, this all and you think, like, that’s the world that capital moves, but there’s this whole other world, which is the LP world. And they’re patient, and you get an introduction, and their first meeting might not be for three months.

And you just gotta just, like, this is gonna take a really long time. There’s a different sort of protocol and culture around this, and it’s going to be hard. It’s not hard in terms of, like, intellectually hard. You’re just gonna get hundreds and hundreds of no’s, and you just have to slowly crank the turn. And it’s just realize that fundraising, especially fun ones, can take time, and you have to be patient. Twelve to eighteen months is fine. People not meeting with you for a couple months is fine.

People taking months, if not, sometimes a half a year to reach a decision. It’s not even fine. It’s normal. I think that’s, like, the hardest thing to understand if you’re a hungry angel investor who’s only dealt with, like, the front office, like, the back office just moves in a totally different pace.

For a new fund manager, my advice is have a reason and a vision. Why are you doing this? Why are you starting a fund and where is it going? Because if fund one is the vision, define that. If fund one is not the vision, define that. So you don’t just do this because it’s easy to do because it’s not easy to do and the timeline for ROI on this business is egregious. So have a reason and have a vision.

What no do you regret the most? It’s gonna be something in the past year that we said no to, that we know better to have said no to.

You still don’t know. Like, these things could even be at a 10 to $20,000,000,000 and still flame out. Like, you don’t know until its end. The thing that I get most upset of is if I’m just not true to, like, the style of investing that I do that sometimes you might get caught up in, like, around or you’re not investing in a way that’s true to yourself. Like, that I really beat myself up of. If I play the game the way that I believe you play the game and I miss, fine.

But sometimes, I mean, you’re just not being true to your principles, that’s when I beat myself up a little bit.

I answered this with a specific answer on a stage once, and the founders got furious that I named a name. And I I thought it was a compliment. I thought it was like, I screwed this up. What a mistake, and the founders were pissed. I don’t wanna just avoid that because I don’t wanna not bother somebody. Said to what Terrence said like the nose that looked bad today might not be wrong tomorrow. So I literally try to wake up every day and find myself in that zone of clarity to get these the picks right.

And we screwed up something in the past year and I don’t know which one it was and how many and those are the ones that haunt me.

I think there’s a power law dynamic in venture that is very hard to break, and I think the best firms will continue to be the best firms until they are suddenly not, mostly on internal errors and unforced errors. And it’s not that challengers don’t emerge, think there are some great firms that have started in the past ten years to challenge the establishment, but I do believe that the best firms remain the best for a long time.

I’m a collaborative seed investor. We work with everyone. We have no favorites and internally, we don’t view anybody as other than equal. No, I think you can name buckets in each of those categories that are of quality. And on a given deal, they’re all relatively equal. And I think we like working with a lot of people at each stage. I think the second tier VCs are uninteresting. And I think the third tier VCs are harmful. But I think the best x firms at each stage are good enough to not need to overly rank them.

Terrence, can you the second and third term I

think the more interesting point as opposed to naming names is I think brand is a very interested, like a not well discussed, not well understood, but probably the most potent currency in venture. And I think it takes a really, really long time to build it. And then I think once you have it, I think it’s very, very durable, but it can slowly degrade. And directly relevant to seed investing, I remember I did this. I was, like, curious, like, why are founders choosing multistage funds versus a great just pure play seed fund?

And the best answer I actually got was the most consistent answer was around brand. It’s like, hey. Listen. If Sequoia does or whatever, if some top tier fund does it, and I need to then hire, that brand means something to that engineer and in terms of validating it. And it really, like, so brand is and I think that’s why multistage funds can play at the seed stage. But if their brand degrades or even dilutes or is less ambiguous, then you have this tension which gets into this other thing around, like, signaling and all that.

But they trade off their brand. It’s not well studied. It’s not well understood, but I do think it’s like the most important factor or one of the most important things in terms of like playing this game well because it determines what you see and how well you win.

I’ll give you a fun sound bite though. I don’t believe in signaling. I think it’s a fake word and I don’t think it exists in this market. I am gonna disagree on that one. There we go. We found our disagreement.

I know. We’ve been agreeing too much. So the alright. Company’s doing incredible. There’s no signal. Company’s doing crap. There is no signal. Company’s doing okay. There can be signaling in that.

Kinda. Andreessen doesn’t pick up the phone to a Sequoia led Series A and be like, hey, Sequoia. What do you guys think about this deal that we’re maybe going to preempt the b for? So a stale deal, a deal that’s been in market, that’s went to market to try to raise and failed to raise, has a ton of issues. If you wanna label that as signaling issues, that’s just a a misplaced word. Signaling

is often defined as the multistage fund does the seed and doesn’t do the series a.

No one expects the multistage fund to do all their series a’s if they bought enough in the seed. I actually think that’s the perfect stage where signaling is irrelevant and not a factor. Benchmark benchmark does a seed or they incubate something. Index isn’t calling benchmark and be like, how’s that seed doing that you did? And the founder is not like benchmark passed on our a. Are you willing to do it? It’s this lack of perfect information that everybody’s operating on. Everybody wants to move quicker than their competitive set to get ahead of what they have convicted themselves to believe is a deal they wanna do.

Nobody’s calling each other. Signaling doesn’t exist.

No one’s calling each other, but they do know if you have money from a multistage fund, the posture of that fund, especially if that fund has got a great brand, can determine the general deal velocity, the general deal heat. K? So now if you said, no. You back your company, it’s like, hey, listen. I took money from whatever Sequoia and the founder’s like, yeah. And they’re wanting to like preempt me again. That deal is going to get done in days. K?

But they might not have wanted to preempt them. That’s a bluff. That’s like a sound a founder sound bite. I think I think good founders on balance tell the truth. I really do. Sure. But, again, that’s your example a of good company. Sequoia leads the seed. They wanna preempt the a. That’s in the top decile or or quartile bucket. The bottom half, let’s call out as irrelevant too. It’s that second quartile. Again, I don’t think there’s perfect information. I just don’t think anybody’s anybody knows what the existing investors think until a deal is stale.

Until the deal has been fully in market, fully went out to raise around, and it’s obvious that the existing investors are not saying yes, that is when signaling happens. But, that’s a failed fundraise or a challenged fundraise which one part of that is some version of signaling but that’s well after the actual signaling is sort of relevant.

It was my job to write seed checks from a multi stage fund for a while. And I’ll tell you the thing that was very important when our companies went out, and I and I really believed Index did a credible job of this, and I I really took a point of doing this well, is arming them with a very clear answer on, like, what the internal posture is. Because the, like, the question is undoubtedly asked when they’re in those pitches room because there’s a pitch, who the investors are, boom, there’s a great multistage fund.

Great. What is what’s Sequoia doing? What’s the question comes.

Right? I think that stopped five plus, maybe longer ago because I don’t I think the market moves quicker, and I think that everybody is panicked that somebody’s gonna get to the deal ahead of them, and they’re not gonna get that perfect information.

Honestly and factually. Right? You know? And and really, as best you can, also, like, getting firm numbers and saying, like, yes, this is what we’re going to do. And that was, on balance, like, really good. Right? And that’s the best that you can do, but there can be tricky situations there for sure.

me, Terrence, that the question still gets asked? The question, I believe 100% the question gets asked. I mean, just like the questions are, like, what are your insiders doing?

If a if a firm wants to do a deal, they’re not asking that question. They’re doing the deal. If a firm wants to do a deal, they are going to move. If you have a multi stage firm on your cap table that can lead your next round and a new multi stage firm shows up to explore your next round, very rarely are they like will you get the answer from the other firm before we make a decision? Because if you do that, you will lose the deal.

So there is a speed and aggressiveness factor that has changed the way the market operates in these follow on rounds that I think has removed that. Again, outside of a company being in market for too long, at which point all these factors play

out. Which goes back to my original point. At the top end of the market, doesn’t matter. Bottom end of the market, it doesn’t matter. It’s when the company’s doing okay, it can create complications.

I don’t think the word signaling is the factor there as much as it’s like somebody needs to decide that they want to underwrite this next round. And whether that’s an insider or an outsider, I don’t think those two things play as tightly together as the word signaling alludes to. David, are there any other BS elements

I don’t think outside of the top five to 25 VC’s individuals that VC’s can magically impact a company. Most of those investors join your board at Series A or B, those five to 25, whatever the number is. The rest of the investment world is a commodity and probably a negative. I think founders view too often the person that is willing to lead the deal as potentially good versus potentially neutral or bad. There is just like a handful of people that are magical, and everyone else is totally fine, and it’s just money.

Do you agree with that, Terrence?

Yep. I agree with that. I would even say as far as like I think it’s it’s very applicable even at seed. I would even go for a step further at seed. I actually believe like the best investors, like, for a company to truly be incredible, it has to come from the founder. It really does. It’s it’s it’s like a real creative process, like, analogy of them and kinda playing around recently. It’s like, you’re patron, they’re an artist, they gotta paint that picture. You’re you’re not opining on the creative process at all, and they have got to really, really do that.

And if you’re a good patron, you’re supplying the money, supporting them, and all that. And this idea that the VC, this notion of, like, coaches, and there’s all these really nice metaphors, but I think it’s actually too intrusive. And I think the really best ones, you gotta let the founder pay. I don’t believe in coaching. There you go. So, I mean but and even if you, like, unpack coach, it’s like selecting players on the team, calling plays.

I don’t believe in the word coaching or mentors. I believe in relationships. And I don’t think that you can take these hierarchical words and apply them to relationships.

experience than you do to them. It’s a friend. I think the best versions of those relationships are back and forth and not one-sided. Do I believe in coaches? At a scale, I think that word coach can be friend, shrink, a variety of versions of that. Like, do I think that coaching has helped CEOs get better? Yes. But if that needs to happen pre series a, to Terrence’s point, I don’t think that’s going to help. Leadership, figuring out how to impact and inspire great culture, those things can be helped from the outside.

I’m not dismissing that industry fully, but I think the idea that the success of a company is dependent upon outsiders is nonsense. The success of a company is dependent upon employees one through ten, ten through a 100, and the founder. That is what will make or break a company. The investors, the outsiders, the advisors, the mentors, the coaches, that part of a company building is an amplification of what’s naturally being built internally. Do you think investors can make

But HubSpot was right before that outside impact. And again, you’re talking about the single best or one of the five best investors in the world at this asset. Again, back to where I said, there’s a handful of people inside of a handful firms that can move needles. Outside of that, I don’t think that the outsiders have this magical impact, and later on they can move bigger needles than earlier. The seed creation of a company has to come from a founder. There’s random examples of incubations that you can try to apply value to the investor, but that was a founder.

It was still a founder inside of that incubation that actually was the reason it worked.

that. I I agree with that. Yes. What else do I wanna debunk?

If you go back to the power law and venture, most VC funds will fail. I hope ours doesn’t, but most will. I operate every day under the panic that the investment we make tomorrow is the ability for our firm to continue to succeed in the future. If we aren’t willing to understand our vulnerability in the power law dynamics of venture, we’re in trouble.

And I think this is the exact mentality you need to win and stay relevant in the game. Over the years, I’ve had these interactions with super famous investors and the level of, like, intensity that they swarm around things and the hunger. So I do think you need this. I think that’s what it requires to be great. Absolutely. What’s the biggest misalignment between VCs

I think it really gets around these conventions of, like, what the VCs sell to the LPs and what the founders wanna buy. And so what the VCs sell to the LPs is like, hey. We’re gonna buy 20 of the company. We’re gonna have board seats. We’re gonna have like, they they they sell a very specific product, and that doesn’t always, like, fit what the founders wants to buy.

I think that the biggest misalignment is that most VCs aren’t good. All VCs aren’t created equal. If you take money from a not great VC, there’s gonna be this enormous misalignment.

You have a board seat and then control and then boom, you’re out on the ground. They like do all this stuff and you’re like, just get out of the way. The company’s either gonna work or not work, and you are not the reason for either of those two things. If anything, you’re the reason it’s not gonna work.

Nope. They think they have answers. They’re like, I spent forty two minutes this morning reading an article that I’m gonna forward you that you’re obsessed and deep in this industry for the past, like, seven years. Did you see this? And and please respond to me with what you think. It’s like, thanks for your help.

On TechCrunch? Yes. On Tech. You should read TechCrunch all day and then just forward out the articles to the companies that are relevant to that article. That is super valuable.

Yes. I I don’t think it’s valuable. First of all, think founders have such an awareness of the market. Like, you might get to them like twelve hours, maybe a few days before, but they’re they’re gonna see Right? So I

I

don’t

would just I would take your question and reposition it. Is it important for founders to understand the competitive landscape of what they’re working in? Yes. Is it your job to like be the first informer of some random two person startup?

really interesting people starting something in your space, I just wanted to let you know. Yes. Very very

asymmetrical knowledge of this of like, hey, listen, this one raised or this one raised this much. And that’s not general knowledge, but it’s known because of what you do. That’s helpful.

Or this company’s doing well or here’s why I believe they’re doing well. Those things are valuable. Yeah. Yeah. That that’s valid. But but like You don’t think forwarding TechCrunch articles is why you’re in

retirement? I think you mean dating I don’t even know if TechCrunch I don’t even know. I haven’t read

that Don’t be mean to Yahoo. Apollo owns Yahoo. You can’t piss off Apollo. They can acquire you and then you’re in trouble.

Yes. Have you ever And the amount of deals that we’ve so like back to what have we screwed up? If I looked back at the quality deals that showed up in our inbox that we missed in that and sometimes we see it a year later and it comes through a warm source and we’re like, oh my god it was sitting there. This is an interesting deal. Or like, this was sitting in our golden box and we screwed it up. That’s happened. And more often than I would assume.

How do you

Not not a bad, but a great cold email is a form of hustle. Absolutely. One that’s like human, snaps your attention, personable, boom. That 100 is a form of

hustle. Very different than the copy and paste blast Yeah. Like,

Yes. I don’t care. Very much. I think a deck or a product is a way that a founder can articulate the thing in their head. It takes the idea and puts some picture around it. And I think it’s really valuable to understand thinking.

I’m much more of a bet around the person in the general space, but they do need to convey an authentic, original vision.

Yes. I put certain provisions around them that if they don’t raise at a certain point, that it would convert at something at some point, but I generally do it.

Where? We do an uncapped SAFE. We will catalyze an uncapped SAFE. Yeah. I don’t think my job is to have stupid rules. I think my job is to invest in the best companies in whatever mechanism possible. And the probability, if it’s the best company, is at the point when we are investing and the price we are investing at is the best and lowest point in that company’s trajectory. Final one.

It’s this, but, like, more of it. Maybe there’s some, like, I don’t I was thinking maybe there’s some, like, robotic, whatever, API stuff maybe in ten years, but I think it’s just everything that we see, but just more of it.

Maybe Maybe you could apply, but sure. You apply, they take a look at your Twitter, your LinkedIn, what you did, where you did, and they spit out a score and you get 500 ks or not.

Maybe. I think ten years from now, the bigger firms are bigger. There are, in many ways, less big firms. I’m not convinced that that dramatically impacts the way that the seed market looks in that a ten or fifty or a hundred million dollar fund betting on the right company can be an amazing financial return. And until there are no seed rounds, which I don’t think is the future, I think the seed market will still be up for randomness. And it doesn’t mean that randomness is easy or randomness is predictable.

But I do think that the seed market looks pretty similar and that the multi stage firms are permanently part of that.

To build on that and to bring it back to just to pull it full circle. I think the core of seed investing is what David and I talked about is this relationship and betting on people early. That’s not going anywhere. How you might have some differentiation any differentiation, I also believe, is just basically a market inefficiency. And if it gets if it’s attractive enough, it will get filled. So, yeah, there might be some, like, differentiation around that here and there. If there’s enough kind of edge there, other people do it, and then it just becomes less of an edge.

But the core of what we do is this very human, very personal thing. But I don’t I don’t think that’s going to be replaced by AI in terms of the core thing. If anything, I think being the human in the room is gonna be maybe more important than just really

in the I think the space I have conviction that there will never be efficiency in is the seed market. Because starting something is not efficient. Starting something is messy. It’s ugly. It takes blood, sweat, tears, it takes vision, hunger, dreams. And if you are a founder with a thought, a dream that you wake up with, getting going is the only thing you think about, not the efficiency of the financing market to allow that to happen. And so I truly look at the future with optimism and I don’t think people are gonna stop dreaming and I don’t think ideas are gonna stop coming.

remember one of them. It was unmemorable.

Thank you for having It was fun. Lot of fun.