# Why Small Markets are Better Than Big Markets

The Biggest Delusion of Early Stage VC, Why AI Investing is like a Horserace and Why The Most Ambitious Companies Growing the Fastest are not the Best Investments with Adam Fisher, Partner @ Bessemer

20VC · Jan 22, 2024 · 72 min · 15,457 words
Speakers: Adam Fisher, Harry Stebbings
Source: https://www.996.fm/episodes/20vc--ep-ce59cd6b/

## Cold open

**Adam Fisher** [0:00]:

I don't think that the way you build a big company or the way you get a big exit is by investing in the most ambitious companies, growing the fastest. Those are also the companies that crash and burn. I think we delude ourselves into thinking we know exactly which company is gonna be a big outcome. We don't. Oftentimes, 90% of the value that is created in the company happens in the last twelve or eighteen months of the company's life. As an investor, you need to decide, are you going to make your mark by having hit one out of the park or by having multiple hits?

**Harry Stebbings** [0:29]:

This is 20 VC

## Intro

**Harry Stebbings** [0:30]:

with me, Harry Stebbings, and I started 20 VC nine years and 2,700 episodes ago because I wanted to be the best investor in venture, and I wanted to learn from the best. And the podcast today is a great example of this. The learning still carries through to today, and this episode is one of my favorites that I've done recently. So joining me in the hot seat, one of the most successful Israeli investors of the last two decades, Adam Fisher, partner at Bessemer Venture Partners, where he's made over 60 investments and, check this out, had an astonishing 23 x's. What a hit rate. He's led the seed rounds for Melio, HiBob, and many other incredible companies, including also Fiverr and Wix. But before we dive into the show's

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**Harry Stebbings** [1:10]:

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## Conversation

**Harry Stebbings** [3:45]:

Adam, I am so excited for this. I stalked the shit out of you beforehand. I spoke to Byron, Amit, Daniel, the list goes on. But thank you so much for joining me. Thank you. It's a pleasure to be here. I would love to start with your entry into venture. We had a little chat about it before. Tell me, Adam, how did you make your way into the world of venture and come to be at Bessemer today? So it was serendipitous.

**Adam Fisher** [4:05]:

I was a student. At the time, I was an undergrad at Georgetown University, and I did a one year program at the Hebrew University of Jerusalem. And in the first days, I was looking for an internship. That's just what we did at Georgetown. Every single semester, I had an internship somewhere. These are unpaid types of roles where you learn, and somebody pulled out and went through this, like, box full of letters or faxes, and they said, well, here's one. Now that I told them I was interested in business, and it was for a venture capital fund. Now it's serendipitous because literally a month before, I had read an article about venture capital in Israel and a now defunct Israel American business magazine called Link at the time, and I just leapt at that opportunity. I said, yes. Now nobody knew what venture capital was at the time. Certainly not in Israel, but also not in The United States, not at college students. And for years, would tell people what this was and what I did, and they would kind of, you know, look at me. And this is 1996. This is 1996, and so that's how I got started as an intern. This is a tiny fund. All funds in Israel at the time were tiny. We're talking fifteen to twenty million dollar funds. There was one partner, one secretary, and one internet connection. And I had to ask the secretary to get off her computer so I could search the internet. This is pre Google, obviously. Business plans would come in the mail in a big fat Manila envelope. And I like to say that those business plans actually taught me more than my undergrad degree did because they really spent a lot of time explaining everything, and these were very technologically oriented companies. So that's how I got started. Very young, I'll admit, very early.

**Harry Stebbings** [5:42]:

When I listen to you there, I think of actually Doug Leone's statement that we've moved from a boutique high margin business to a commoditized low margin industry. When you think and compare the two different times, which do you prefer operating in as an investor?

**Adam Fisher** [5:58]:

Well, I prefer now. Just because of the experience I have back then, there weren't many people you could actually learn from. And even if they existed, they didn't write down their thoughts, you couldn't access them. It was a very closed industry. It was not only local. Was very closed. Nobody shared their investment strategies online the way we do now. Nobody even exchanged their war stories of what went right and what went wrong. So it's a much more open industry. I And think it's not just that other investors benefit from that and new investors, I think entrepreneurs do as well. And so that openness now that you have with entrepreneurs is refreshing. I worked back then at a time where it was much more adversarial relationship with entrepreneurs. The VCs acted as if they knew what they were doing, that they knew the right way. A lot of these VCs were former, maybe entrepreneurs themselves or at least executives in in larger corporations, and the relationship was one of very very paternal, if I might say. In a good way or a bad way? In a horrible way. I hated it. Also, being a very young and inexperienced venture capitalist at the time, I didn't like it. I didn't like seeing that. And one of the things that I eventually did myself when I started at Bessemer, this is in 2007, was to take a very different approach, to take this partnership type of approach with the entrepreneur. Because I realized what they really need is not somebody to tell them how to do it, but a partner that they can confide in, that they can tell them what good happened today, what bad happened today without hesitating.

**Harry Stebbings** [7:23]:

Do you think we've swung you know, like, we we have this schedule. Harry, why do you go off it so soon? Do you think we've swung to a time of too much founder NPS? We often actually see that investors don't perform their duties in a rigorous way like they maybe would have done, and they're too focused on having a great NPS. Do you find we swung too far the other way? I

**Adam Fisher** [7:42]:

don't think it's NPS. I think it's the speed. There's something about the speed that is not fair. It's literally speed dating. It's speed dating where the outcome is actually a marriage proposal. Because that's what founders are doing when they're choosing their VC and partner. They're essentially adding another founder of sorts. Now, of course, they don't get common shares, they don't get that rights, but there's a higher likelihood that that partner from that VC will be on your board than your co founder will, just statistically. And yet, you wanna make a decision as an entrepreneur within two meetings, within seven days, that to me is is horrible. And as obviously from an investor standpoint, having been on the board of companies for ten plus years, I realized that I also don't like that. My worst decisions have been the ones that I made in the least amount of time due to pressure.

**Harry Stebbings** [8:27]:

So do you do those deals? I mean, I'm looking at a deal now and, like, honestly, it's a very competitive deal. I'm meeting for the second time tonight. I'll probably have a third meeting on Wednesday, Thursday, and then I've gotta make a decision. Do you do those deals?

**Adam Fisher** [8:40]:

I don't. But I think when it's a smaller check, when you're amongst other VCs that can take your place if you bow out, I think there's a place for that. I'm talking about the types of deals where I'm the only VC in the round, I'm leading it. If I move forward, I assume all the burden going forward. I can't withdraw at any point, or if I do withdraw, it's the end of the company. Those are real decisions, fateful decisions, and to force that to happen in such a short amount of time is crazy. I mean, I remember a time when it was three months to diligence a company and get to know one another, and I actually enjoyed that process. But when it's so concentrated in time, you're gonna make a lot of mistakes.

**Harry Stebbings** [9:19]:

I always think, partly, for a pre seed or seed, the best thing is when you know the founder so well that you actually don't care what they're doing. I call them the blank check founders. Were like, you know what? I've I've known Adam for five years. I've seen him across these different situations. I've seen him execute in these different environments. I didn't care what he's doing. Real estate, health care, I just buy him some food pre seed.

**Adam Fisher** [9:38]:

Yeah. Maybe. I have a different view on that. I've had the Hit me. Privilege of having back many second time entrepreneurs. Yeah. And I challenge them because I think there are sec second time entrepreneurs who sometimes they're somewhat blinded by their previous success. They think they can do anything, and they wanna build something bigger, typically. Nobody wants to build something the same size, let alone smaller. And their idea about building something bigger is being more ambitious, raising more money, higher valuation. That's actually not the way in which you build something bigger.

**Harry Stebbings** [10:09]:

Do you find that though? Or do you find that actually they're a lot more rational going, gosh, I'm aware that if I raise too high valuation, it'll cap me on my next round, it'll put a lot of pressure on, the options will be higher. They're much more intelligent about the price they raise at.

**Adam Fisher** [10:20]:

So that's the other style of second time entrepreneur, and those types are also the ones that want to hear feedback. They actually wanna brainstorm with me. They wanna share the idea, they wanna hear pushback, or they wanna hear confirmation. But if they're so certain about the idea at such an early stage, to me, that's a bad signal.

**Harry Stebbings** [10:37]:

Adam, I'm loving this. So I always get pushback from the team here because I don't love first time founders because I I look at myself, I look at many that I've worked with. There's so many mistakes that you make as a first time founder that if you had your time again, of course, you wouldn't have made those mistakes, but you waste months and months doing them. I find second time founders do not make those very foundational mistakes. Do you agree with me in terms of my kind of fear of the first time founder because of those very obvious mistakes that they make commonly and lean towards second time founders? And how do you think about that? And advise me.

**Adam Fisher** [11:09]:

Like I said before, there are two types of second time entrepreneurs. There there are those that don't recognize the luck that was involved. They think that building something big is just more ambition. I steer clear of those. And then there's those that are much more rational. And those, I will back again. But do I prefer them over first time? Not really. I actually love first time entrepreneurs. The key for looking at first time entrepreneurs is identifying somebody that you have chemistry with, that you have back and forth from, that they can learn from you, you're learning from them. It's also people who progress very fast on the learning learning curve. Meaning from meeting to meeting, you can witness what they've discovered, what they've learned, other people that they've discussed it with. That is generally an indication of what the next several years are going to look like. And the fact that I haven't created a company before, it doesn't mean they can't learn from other people's experiences and from your own experience. And so for me, that's fantastic. I often look at my portfolio and I again, I have a lot of second time entrepreneurs, but I often say, I need more first timers. I shouldn't have such a bias to second timers.

**Harry Stebbings** [12:09]:

In terms of those first timers or second timers, there's two ways you can approach a marketer or a company. One is an insider. I've lived that problem. I know it to a t, and I'm gonna build to solve it. Or another way, you almost have the benefits of naivety and you solve it as an outsider. Do you have a preference on which approach is taken? And what are your lessons from what's worked and what hasn't on which one is more effective? I like the

**Adam Fisher** [12:33]:

outsider approach. It's common to Israel because Israelis typically are coming from outside, not only physically from a from a market perspective and industry. It's just also the attitude. The Israelis think they can do anything. I find they just bring a lot more innovation and openness. Of course, again, they they have to figure out what they don't know, and they have to recognize there's a lot they don't know. So as long as there's that self awareness of I don't know anything and I need to figure it out, they can be the best. Because they can innovate in ways that insiders can't. Insiders are blinded by convention, by knowing a little bit too much of what hasn't worked in the past, of where others failed. Naivety is a strength in these cases. And if you have the right entrepreneur who again is self aware and perhaps also has a certain degree of charisma, meaning to kind of sell a vision both to his employees and investors and eventually to customers, it's incredible.

**Harry Stebbings** [13:26]:

Okay. So if we have that as like a foundational, we like outsiders who are innovating in markets with some elements of naivety. Then there's the question of like category creation versus working in an existing market. How do you think about that trade off? Often, we see the biggest wins in category creation, but it's also fucking hard. It's expensive. Which do you prefer in that lens? I think

**Adam Fisher** [13:47]:

from the get go, if you're talking about creating a category, you're making a mistake. I think a lot of times when we talk about category creation, it's in retrospect that we see that a category was created. It wasn't started that way. It became an independent category, and it's typically not because that one company created it, but because there were multiple companies with very similar mindset. And sometimes that also includes some of the incumbents who are also moving in that same direction. And luckily, you were ahead of the curve. But if I was to start and make an investment that is trying to create a category of out of nothing, it's challenging. I think where category creation makes sense is when they've identified a new type of customer or a new type of buyer, perhaps it's a new vertical industry. If you decided all of a sudden that e commerce was a new vertical segment that I wanted to sell into, meaning e commerce shops, that would be an insight. It's not so much a category creation. The category is being created. You're now creating a product for that category. Or if you were to decide that I'm going to sell into the developers within organizations from the bottoms up. They exist. You're not creating that category, but you're essentially identifying a need in a new buyer with a product. That makes sense. Again, in retrospect, you'll say they created a category of of developer SaaS. It's not exactly true.

**Harry Stebbings** [15:04]:

Mike Maples at Floodgate, an investor in The US, always asked, what do you see that no one else agrees with? And then you have this kind of insight development process that takes place post that, which I find really interesting as a question to ask. When we think back to that, that, you said there about, you know, many people can create the category in retrospect, but many people going after it kind of ushers a movement forwards. I don't like to be in companies where it's what I call it n of one, where it's like there's six different SaaS pricing players, and you're one of many. Excel funded one, Sequoia funded one, Bessemer funded one, and it's kinda like race. I like companies where, really, it's it's kinda just them doing it. Mhmm. Do you agree with me? Totally.

**Adam Fisher** [15:44]:

Yeah. I think there's two types of investors out there. There are those that get comfortable when there's competition, and they get comfortable because that gives them a sense that there's investors out there willing to put money in it, and that there must be a market if multiple people see the same opportunity. But I'm the other type. I say, oh, no. There's already competition and there's not even a market, and that competition can attract the better talent or they can raise more money, or maybe they'll get acquired by the only potential acquirer. I get comfortable when I think, well, it's only us.

**Harry Stebbings** [16:14]:

But if we're right, we're gonna be the leader. Did you always have that? Because that takes confidence and conviction in yourself. And when you're young, you question yourself. Well, I have to think

**Adam Fisher** [16:24]:

back. That's many years to think back. The pace of investing was so different back then. It was one investment every eighteen months. I did a little bit of both, including investing in companies where there was lots of competition and deciding that despite the competition, this was the one. Only have really one case I'm thinking about right now is a chip company called Do Networks that made a switch fabric chip. This is back in the year 2000. I'm really dating myself. But they made a very compelling argument why all the competition belonged to a different era and a different architecture and how they all had the same fundamental problem, and how they were gonna succeed. And they convinced me. And I remember when I wrote the investment recommendation, I had to list 20 different competitors at the time. This is in the late nineties, fabulous chip companies were funded, you know, left and right. They were acquired and even went public with design wins, not even revenues. So the idea that most of them would fail never really crossed my mind. I just thought this one would succeed. In retrospect, they all failed except for this one. Now that doesn't mean I I can be right in the next one, but I think over time, I realized that it's it's a better arbitrage opportunity to be the lone player or or or the first mover in a even in a smaller market, even in a niche market than to be the number two or three in a large market. Because a number two, it's like a gladiator competition. Number two is still a loser most of the time.

**Harry Stebbings** [17:47]:

Have you ever got in trouble though for having that contrarian approach in terms of follow on funding? You see the world in a way that venture investors maybe don't, and you do a noncompetitive deal that's outside. That probably is not gonna have the same magneticism for follow on investors, and you might have to carry the bag for a lot longer. Have you had that? Of course.

**Adam Fisher** [18:05]:

And I think about that when I invest. Yeah. As much as I am willing to be contrarian, I'm not willing to invest in something that others are not going to fund. So I need to find it's a fine line, but I need to find something that perhaps is not mainstream, perhaps is not and yet a headline in TechCrunch, but it's also not gonna be dismissed by other investors as not interested. And maybe because they're entrepreneur, and maybe because some of the trends that this company is riding on. But I'm not gonna go completely contrarian and do something that everybody says that they no longer do. Making sure that next round of funding is accessible and doable is a critical part of my strategy. It's so easy to fail by simply not being able to raise that next round of funding.

**Harry Stebbings** [18:47]:

What does that look like? Do you like map out in your head, these are the three players that I know would invest in this next round. This is a type of deal for x. Would you just generally have a smell test of, yeah, I can feel that other people would like this? Right. I

**Adam Fisher** [19:02]:

don't think in terms of specific investors ever. It's easier to predict who will acquire a company that is who will invest in the company. It's a combination of the entrepreneur, the CEO in this in this case. Will they be able to raise money? I invest in people who I think can raise money even when they don't meet their plan. It's so important, I can't emphasize this enough, the ability to fundraise with ease. We can talk about what that person needs to show, but if they're a storyteller, they've got a history of execution, and they connect with like minded investors.

**Harry Stebbings** [19:30]:

Can I just dig in on that one while we're there? Sorry, because I didn't in terms of, like, the ability to tell stories, be a great fundraiser, I think one thing that's challenging in the last two years in zero interest rate environment is you've got some great storytellers. With a wink and a smile, raised they $50,000,000, and they were great at storytelling. But there wasn't much depth to them. Do you worry that often the great storyteller and the great fundraiser isn't actually the great operator and executor? And actually, sometimes the quiet but diligent person is the better one. Absolutely.

**Adam Fisher** [20:00]:

When I say storyteller, I don't mean somebody who can perform on stage or a podcast. I mean, you know, one conversation

**Harry Stebbings** [20:07]:

get funding from you today, Adam.

**Adam Fisher** [20:08]:

You know, one on one conversation with customers that they can give a pitch to the customer, that they can identify the customer's pain and explain why their solution is going to work. And, of course, you can't just raise on a story. You have to have some execution behind it. You have to show that you've delivered the product that's working, that there's some customer love, that you've been very efficient, that you have plans that make sense. I mean, any early stage company that's raising $50,000,000, I don't know what stage that was that you were thinking about, it's inappropriate. Those are not the type of entrepreneurs that I back.

**Harry Stebbings** [20:40]:

I mean, in in the last years, it could have been a pre seed at that rate. You wouldn't I would not have been involved. It would it would not have been a deal for you. Can I actually say that about efficient before we get to your second point? And you're like, god. I really drill down. But you said about efficient. For founders that listen, is there been a fundamental mindset shift in you and how other investors think in terms of when analyzing a company, I wanna see efficiency, not just growth, or actually, does growth still rule all at the early stage?

**Adam Fisher** [21:05]:

It's a combination. It's rarely growth at all costs in my book that just doesn't last, and and it's very painful when it stops. Everything about your model to your culture to where you source funding to your evaluation becomes a serious problem for the company. Having said that, trying to focus on KPIs when a company has $500,000 of ARR also doesn't make much sense. Those numbers, if they're fantastic numbers, I say it's anecdotal. And if they're horrible numbers, I say, well, if we need a bit more scale to get a set make sense of it. The important things that the company and the CEO in particular is thinking about efficiency, that it's an important attribute for them, that they care about it, that they're not just trying to satisfy me as an investor, that they also view it as a key to their own success.

**Harry Stebbings** [21:52]:

What are signs that someone cares about efficiency? Is it in terms of how they talk about, you know, ramp time for sales reps? Reps? What is that this founder's got a good eye towards efficiency?

**Adam Fisher** [22:03]:

It starts in the very beginning. I can't tell you lately or or at least in the past few years how often I met with entrepreneur, and they were raising money for their first round. And then it occurred to me that two of the founders are still working at their current employer. They haven't even left. They haven't even shown the most basic sign of taking risk. Now you might say, what does it have to do with sufficiency? Well, generally speaking, taking risk is is what it's all about. Using your own money, taking career risk, working from home in the first few months, putting on some debt on the credit card, these are really important signs. Now, those people generally go on to do things on their own, to meet customers on their own, not to hire a salesperson, but to actually figure out themselves. Wait. How do I pitch this? What are customers actually saying? These are critical critical steps. So you ask what am I looking for? Well, if they've already established the company, yes, I'd like to know who made the first sales. I would actually expect the CEO to have made the first sales. Sometimes that's the CEO who's also written the first code. Those are signs of efficiency. Those are signs of of somebody who doesn't wanna hire somebody which is spending money before they know themselves that it makes sense that they're the right going in the right direction.

**Harry Stebbings** [23:08]:

I always ask, how did you first make money? I And find that that's very telling. The greatest entrepreneurs I find of all time when I look at pattern recognition on the people we've had on the show is all the best entrepreneurs made money or showed entrepreneurial signs in some way in their childhood. I made websites. I sold lemonade. I sold baseball cards. Whatever, whatever. None of them came out of university and then got a job at McKinsey, that was the first money they made.

**Adam Fisher** [23:34]:

Well, you're probably right. I think the ones that have shown an entrepreneurial streak in their background, they they generally are entrepreneurs, but I wouldn't exclude others. Sometimes they don't have the right environment. Sometimes they grow it up in an environment that is a little bit too conservative, that doesn't allow them to explore that. So I wouldn't write off those who grew up in a in a more corporate state environment. It's it's it's certainly possible.

**Harry Stebbings** [23:57]:

Another core element when we think about kind of unpacking the evaluation or the kind of decision making process is always market size, and I find it's one where Adam Price, which we can get to, but where I've most commonly gone wrong, I just it's great. I love the founder. I just don't think it's a big enough market. So common for our industry. How do you think about market size? Do you need the massive market day one? Or do you quite like the niche vertical approach which can expand? How do you think about that?

**Adam Fisher** [24:26]:

Well, there's some markets that any way you cut it, you look at it, you just say, I just this is never gonna be a big market. That's a fair assessment. I think I've more often been right than wrong on those. But there's a problem that investors make when or even entrepreneurs as well, when they think it's a large market. But what they're really focused on is a small subset of that market, and that doesn't make it really any easier. I personally like to invest in in smaller markets for two reasons. The first is that there's unlikely to be competition focused on those same market. And the second is that if you price it right, the deal that is, and you've come in at the right valuation, you can still achieve an exit in that smaller market, what you would might call a niche. Now, a niche that has no potential of expanding, that is problematic. I like niche areas where there are adjacent sectors where you can understand they could grow this way, they can grow that way, they can go up market, they can go into a second related niche. I think that's a fine way to grow into a bigger market.

**Harry Stebbings** [25:25]:

You you said there were kind of, you know, if the price is right in those cases, you can still have great, great investments. And I I completely agree with you. I think, like, multiple invested capital is what I care about, not necessarily size of outcome. If I get in at 200 or whatever it is and we sell for 5,000,000,000, I'd rather get in at 6 and sell for 700. But then everyone's like, oh, Harry, you don't get venture. Venture's about those multibillion. Do you ever question yourself on going, like, should I really be doing this investment if I'm thinking, it's an 800 to a billion outcome?

**Adam Fisher** [25:55]:

800 to a billion sounds fan It's great. Sounds fantastic.

**Harry Stebbings** [25:58]:

But it's not what funds are made on, and especially, like, when you think about, like, Bessemer sized fund. It's not a fund return in a lot of cases. Even even, you know, you think about 15% ownership on it. Is

**Adam Fisher** [26:09]:

it I just have a very different approach being an early stage investor. That makes sense for later stage. Being an early stage investor, you have to accept that the further you try and peer into the future, the the less clear it is, and the more chance there is for surprises, both good and bad. I think when you invest in good people with compelling ideas in big enough markets, you just have to be a bit more imaginative for how it can unfold. Some of my smallest investments ended up being my biggest outcomes, and I was very hesitant to make them for the same reason. Who would buy this? How big could it be? What is it? And 2 or $3,000,000 turned into hundreds of millions of dollars.

**Harry Stebbings** [26:46]:

I heard that Wix was a very controversial one from Byron. But when you say that and you say the small investment that turned into hundreds and you're quite nervous about writing, What's the one that's most poignant to you when you hear yourself say that?

**Adam Fisher** [26:57]:

Well, the easy ones are Wix and and Fiverr for me, because at the time, I was the first institutional investor to come in both of those. The entrepreneurs themselves didn't entirely know yet what they were doing. It's it was too early. And I think many other investors passed or would have passed had they seen it. In both cases, I received what would be politely say what we would say is very lukewarm feedback from the partnership. In fact, in the case of Wix, it was outright negative feedback, but it had arrived a little bit too late. Why was it negative? They didn't present well. I wasn't at all really focused on exactly how were they gonna make money. I was just a little bit too focused on the entrepreneurs and the surface area of opportunity of being able to create anything you want on the web, which to me just seemed like the future. But I couldn't yet bring it down to a product and business model that was compelling. And so it's it's one of my toughest investments to explain in retrospect how and why I did it.

**Harry Stebbings** [27:51]:

If you were to do outcome scenario planning, do you do outcomes? We do. Okay. So you do outcome. Is that not appearing into the future? Like you said that it gets less and less clear.

**Adam Fisher** [28:00]:

It is. Some people focus on what the outcome could be. It could be $50,000,000 outcome, 0, 500,000,000, 1,000,000,000. I actually focus on what could go wrong and what can go right. Forget the valuations for a second. Now what could go right, we typically just think in terms of growth rates. That's oversimplistic. That's not the way a company evolves. It's not simply a growth rate. A growth rate is a function of other things that are happening in the market, and their product strategy, and their go to market vis a vis the competition, partnerships. That requires a lot of imagination, but it just shows you that there are avenues to get there. The harder part and one we probably don't spend enough time in is what could go wrong? Because that's infinite as well. How And we typically just, again, talk about it in terms of growth. They won't grow very fast, or they might have trouble fundraising. But having done this for twenty five plus years, oh, let me tell you, there are so many other ways in which you can fit.

**Harry Stebbings** [28:55]:

How often is what you think will go wrong the reason why a company does go wrong versus the Mike Tyson, the thing that will get you is, you know, punch in the face that you didn't expect?

**Adam Fisher** [29:05]:

That's a tough one. I think it's when I talk about the entrepreneur. I'm unsure about the entrepreneur. I'm not always a 100%.

**Harry Stebbings** [29:12]:

And you've still written the check?

**Adam Fisher** [29:13]:

Yes. Because I try and move out of my comfort zone. I accept that sometimes I have a lot of biases towards certain types of entrepreneurs, and I can't always invest in the same Adam Fisher typecast entrepreneur. That even though that works for me, it doesn't scale, and I'll probably miss out on some very good ones. But on occasion, my misgivings were about the entrepreneur. It could be a lack of transparency or pure communication or just some signals in the beginning that threw me off, and I wasn't quite sure to dismiss it as a bad first impression or something that was gonna presage what was gonna happen now over the next few years. They're also most difficult. You could you kind of saw it.

**Harry Stebbings** [29:52]:

I totally agree with you, and it's kind of this nagging feeling when you're writing the check. Like, you have it in the back of your mind that that's the concern, and that's when I'm like, one thing I don't ever do is, like, when I feel icky. You know when someone makes you just feel, like, uncomfortable and you just start feels off? I never write that check. Can I ask you know, you mentioned Wix there, obviously, being an incredible success? And the lesson from it, in terms of a mistake and one that didn't go right, what's one that comes to mind there, and and how did that change your thinking? I could think

**Adam Fisher** [30:20]:

about four companies that I have written off. They're not enormous investments. I've yet to have an investment where I kind of doubled down and kept raising the stakes and then failed. I'm not saying I I won't, but I'm nervous about those big losses. The four losses I have are all about between 10 and $15,000,000 apiece. The one I can think about most was a chip kind of company, who were they're actually doing something in the area of memory, and it was an incredible technology and team, had literally 90 patents to their name, and they were pursuing a what we call an IP strategy. They actually wanted to sell the IP, both because it's a more efficient model, but I thought it made a lot of sense for the types of customers they were selling into. I convinced myself that this is the right strategy, whereas their competitor was actually developing a chip. And I just said to myself, wow. But the customers that they're selling into are themselves large chip companies. They're not gonna buy it another chip company. They want the IPs that they can incorporate in it. Ultimately, was wrong. I mentioned this because I was convinced that that was the right strategy, meaning I've I can't hide behind anything. You know, I can say the entrepreneur made some mistakes and he did, I can say a lot of things, but at end of the day, that was my thesis. And the underlying thesis was completely wrong, and I've really learned my lesson. And so anybody who now wants to invest in an IP chip company, I'll tell them exactly why I was wrong. I still can explain my reasoning and explain why I was right, but I I know a bit more, and and it's enough just to have the opposite

**Harry Stebbings** [31:44]:

conclusion at the end. To what extent is pattern recognition good or bad? Because you now have that experience, and I've lost money in healthcare, for example, And I go, it is so hard to make money if you're selling to any public healthcare provider. It is long sales cycles. I know all of these things. Ugh. I don't wanna touch it. And pattern recognition is really impacting my future decision making positively or negatively. But is it a good thing or a bad thing? On the whole, it's a good

**Adam Fisher** [32:10]:

thing. It definitely helps you recognize winners that you've seen before, and it gives you the confidence to move much more quickly than you otherwise would. At the same time, you're absolutely right. When you've lost money or you've seen others Yeah. Not succeed in that particular thing, it's very hard to say this time is right. Yeah. This time it's gonna work. But I would say that the best thing about pattern recognition over time is that you recognize what won't work. It's not what will work. Now if you recognize what won't work, it will help you avoid spending time on bad deals or bad entrepreneurs, or if you're on the board of a company, strategies. That is where pattern recognition is priceless, and it takes time and experience to develop that. But but that's ultimately what I think I'm paid for, and why entrepreneurs are attracted to me. It's not because I know the right way, it's because I know all the wrong ways.

**Harry Stebbings** [32:58]:

I I think sometimes our job as board members and partners is actually to tell founders the people that they shouldn't hire.

**Adam Fisher** [33:05]:

But that that's it. That that's exactly it. I I the analogy that I use is that we're not like, you know, the entrepreneur is the captain of the ship, but we're not next door, you know, shouting which way to go. We're like the lighthouse. We just tell them where the rocks are so they don't crash. But we actually don't know how to get there. That's the entrepreneur's job.

**Harry Stebbings** [33:21]:

But I spoke to Daniel at Choco, who's one of your founders, specifically on this in the hiring process. And he said, it comes to hiring, I want them to meet Adam, and I want you as part of that interview process for candidates. I would love to understand from you how you do this, because I don't have a process. I don't have I'd like to learn from you. How do you structure the process of an in interviewing a candidate? What does that look like? I don't structure it much. I

**Adam Fisher** [33:43]:

don't duplicate the interview that the CEO had, which is about their background and and and they know what they're doing and what they did. I assume that he or she has already done that. I'm trying to find things that may not have asked. So I'm gonna ask different types of questions. I'm gonna assess the personality, their temperament, with the goal to see if they're a right match for this entrepreneur who hopefully at this point, I also know their personality and temperament and style, and for this the company. And with the company, that's often really just the the stage of the company. So often, it's just a mismatch. And so, similar to what I said before, I'm not so much looking for, is this the best candidate? So as much as I'm looking, is this gonna be a horrible hire that you're going to regret? Because as you know, if you've hired somebody and end up being a disaster, you've lost an incredible amount of time, and there's also damage. And then your next hire, you're you're even more hesitant about making that hire. So I'm much more interested in not making a mistake with a hire, than making sure that this is the best possible candidate we could hire. And a lot of that rests on the personality. Do they understand what it's like working for an entrepreneur? Do they understand what the stage is like and what they actually need to do? Perhaps they need to roll up their sleeves, one that they're familiar with? Perhaps they need to hire on their own instead of relying on a a recruiting team to hire? These are all the types of things I'm trying to look for. And so I ask questions about them to understand what experiences they've gone through. How have they handled stress? How have they handled sensitive personnel situations? How have they handled disagreements? Or other types of macro crises. And slowly, can try and figure out what this kind of a person this is and are they a good fit?

**Harry Stebbings** [35:16]:

What happens more often? A mismatch between the talent and the entrepreneurial style or a mismatch between the talent and the stage of company that they'd be entering into?

**Adam Fisher** [35:26]:

The latter, because hopefully, I've done my work and I figured out the personal chemistry and the founder is pretty good at that themselves, which I, again, I look for when I I find people. But sometimes there's a mismatch in the stage. There's a big difference between being the first, like VP of sales Uh-huh. Let's say, That's often the first executive hire because they're not one of the founders. Being the first VP of sales when there are no customers, or when the only few customers they have are really friends of of the founders, and coming in when there are 20 customers or a 100. It's a very different type of workload, and it's not just sales. It requires a lot of thinking. It requires a lot of patience. And so that's often where you get it wrong. The person just was not ready to handle that stage, or they realize that, you know what, can't they do anything on their own anymore. They really need everybody else to do the work for them.

**Harry Stebbings** [36:14]:

I think people forget that it's like, you know, maybe a three month hiring process, six months in a role, that six months doesn't work out, and then you've got three months to kind of off board them again and search again. It's a twelve month process when you get a mishire. And that in an early stage company, and almost fatal in some respects. And that's why also I love serial entrepreneurs because they go, worked with Adam last company. He comes over to this company. The chemistry is there. We built it from day one again. We were in some repeating this process, and I love that.

**Adam Fisher** [36:42]:

That's right. Experience in hiring is definitely underrated. You're absolutely right. That's one of the greatest skills of second time entrepreneurs is that they actually don't need me to interview any of the candidates. Typically, they move so fast.

**Harry Stebbings** [36:55]:

It's interesting. That's what I always say there with, like, managers or with, like, VCs themselves, which is actually, like, if you operated pre AI, pre cloud, honestly, it's such a different world now in terms of infrastructure, in terms of stack. Having operator experience technically speaking then, I don't think it makes a huge difference to versus now because it's so different, but people always stay the same. And actually, the ability to detect talent higher, maintain talent, retain talent, That's always the same.

**Adam Fisher** [37:19]:

But also knowing yourself as a manager or leader, you know, everybody's different. And the more experience you have having been in that situation, the better you are about hiring the people that are a good match for you. Are you the type of CEO that wants to kind of give somebody a mission and they're off, and they just come back when they've delivered? Or are you the type that needs to know all along what's going on and wanna wanna collaborate and wanna contribute? Those are two different styles. They're both legitimate, but sometimes there's a lack of self awareness if you don't have experience having been a CEO before.

**Harry Stebbings** [37:49]:

I love that in terms of knowing who you are. So we've gone through this process, and we now wanna do the deal. We get to the deal making stage, and Keith Raboy actually said on the show the other day, it's such a competitive world. You have to know why the best founders choose you. If you can't answer that question, you shouldn't be in venture. How would you answer that question? Why did the best founders choose Adam Fisher?

**Adam Fisher** [38:10]:

Well, in my local market, they choose me based on reputation. I hope it's personal reputation, not just the brand of Bessemer, although the brand of Bessemer definitely helps. I've been doing this for a long time, one of the few that are still very active and very active across many sectors. So I've done everything from, as I mentioned, semiconductors to consumer software to SaaS and infrastructure. I hope that my name precedes me, but in a way that relates to the ups and downs. I mean, I make it very clear to entrepreneur that I'm choosing them more than I'm choosing the market or the particular product. And that I'm choosing them because I'm also not just choosing somebody that I hope will succeed or want to succeed, but somebody that I look forward to working with even if ultimately we fail. And there are companies that I look back at and I think, wow, we didn't really do that well, but that was fun. I like working with him or her, and you know what? I'd do it again. I think when you go back to what I said before about thinking about an investor as a partner, as a quasi founder of sorts, somebody's gonna be with you really through ups and downs, is really important. I see my role as a VC as picking up an entrepreneur when they're like on the ground because of some kind of disappointment or challenge, but also pulling them down when their head's in the clouds. And they get too giddy about some recent success or about the recent valuation or some interest from an acquirer. And that's what I try to do. And so the entrepreneurs that come to me, they realize that I have that balance. And when you express that kind of balance, when you react to entrepreneurs, whether it's good news or bad news with some kind of composure, they become more transparent with you, more forthcoming. They'll share the good information, the bad information as soon as it comes in, and ultimately, that's the secret of a great partnership that can last.

**Harry Stebbings** [39:51]:

You we mentioned kind of head in the clouds and you mentioned valuation there. I do have to ask on price. I I interviewed Peter Fenton years ago, but he said something that always stuck with me, which is that price is a mental trap, and it's a litmus test for conviction. How do you feel about price sensitivity, willingness to pay up, and when you will and won't stretch?

**Adam Fisher** [40:09]:

I'm typically the first institutional investor, sometimes the second. Rarely have I turned down deals in the very early stages due to price alone? That price is often a function of raising too much money. Meaning, they didn't ask for $40,000,000 pre money valuation, they asked for $25,000,000 in their first round of financing. That was the problem. Now I realized that as a result, it required a high valuation, but the issue for me in that situation was much more about what do they think they're gonna do with so much money? They don't know what they're doing yet, and that was a mismatch for me. So rarely is valuation alone the issue that caused me to back off. Again, being early stage, I'm not exposed to some of the the growth stage valuations where really you get into exit territory, and that is very challenging. I'm very conscious of that. I try and make sure my the companies I back never raise at valuations that they wanna sell the company at, and I warn them of that. And again, I have the scars to explain what exactly that looks like when your last round valuation is essentially ahead of the valuation you wanna sell now, and how acquirers interpret that, how you work with different sets of preferred shareholders, one that's in the money, one that's completely out of the money. It's a nightmare. What

**Harry Stebbings** [41:22]:

happens for those generation of companies that are in that position now? We've seen many with multibillion dollar valuations on 10,000,000 ARR, not excessively growth by high growth rates. What happens to them? It

**Adam Fisher** [41:34]:

really depends on the strength of different shareholder classes. There are some time if they need a lot more money, it's a recap opportunity, or it's a sale at a very depressed price in which the latter investors just wanna get their money back. It's not pretty either way. I don't think that entrepreneurs and their investors understand how bad that situation is, and it's it's not so much that it's a potential down round. Down rounds are not problematic. Much more problematic, again, are valuations that are essentially in exit territory or far in excess of of exit territory. It's really hard to recover from that.

**Harry Stebbings** [42:06]:

I hear you, but I just also hear how fundamentally fatal a down round can be to company morale, to the feeling inside of a company of progression, and it actually is just so hard to come back from a down round. Is that inflated in your life now?

**Adam Fisher** [42:19]:

I think it's inflated. I think if you were talking to a public company CEO, they wouldn't know what you're talking about. They'd say, I understand. My stock goes up and down every day. Why should a private company be any be any different? Six months ago, the market thought we were valued at this. Luckily, we raised at that price, and I avoided dilution for all of you, but now it's back down. That's the way the market works. I think being honest as a CEO and speaking to your employees, like adults and not children, is

**Harry Stebbings** [42:43]:

the way

**Adam Fisher** [42:44]:

to get past it.

**Harry Stebbings** [42:44]:

You mentioned that it's often not the price, but it's like, it's a concern on how much they're trying to raise. It could be a very large amount in many cases. I often tweet about this and just the dangers of raising too much and what it entails from that. Parker Conrad at Rippling, a very famous founder in the valley, always goes, that's a VC ism. The best founders know what to do with the money. And, actually, you know, you're wrong, and that's just a VC trying to get smaller rounds and smaller prices. Do you agree that the best founders do know what to do with the money and can raise larger amounts? Or do you take my perspective that actually, no, raising too much creates a ton of excess speed challenges? Which side do you sit on? I think it depends

**Adam Fisher** [43:24]:

on the stage. I think there are growth stages where there's just tremendous opportunity. The company is growing very quickly. This is this is precede the seed. No. At at seed, I don't think so. I think it distorts everything. I think you create everything from the go to market model to how you hire to the offices and the culture you're creating, that's all wrong. So I completely disagree.

**Harry Stebbings** [43:44]:

How do you feel then about these or very often, I mean, 10 is low, but 20,000,000 seeds for AI companies that we see today. Would you do them?

**Adam Fisher** [43:52]:

No. I don't. I don't do them, but for different reasons. I don't do them because the way they rationalize needing $20,000,000 is because their six competitors also raised $20,000,000. And in that sense, they're absolutely right. Why would you be number six and and raise less money? If anything, you need to raise more money and show them that this number six company is even bigger or better or and more ambitious. That makes sense, but it's the backwards way of thinking.

**Harry Stebbings** [44:15]:

It goes back to our point actually on liking things that other people don't like, and so having that one is a very different analysis.

**Adam Fisher** [44:20]:

Right. I made several AI investments early on before AI was was hot. And luckily, I got out with nice exits, but since AI has become what it is, I've run the other way. The simple reason that I just can't make sense of the competition. I don't like betting on a horse race, and this is what it feels like to me. You're sitting down in the stands, and there are 10 horses, and you have to assess which one is going to win.

**Harry Stebbings** [44:44]:

I agree totally, but then I also fear that this is the platform shift that everyone says it is, and you have to play the game on the field, and you have to move for the tide. And I don't wanna be left in a world where vertical SaaS apps are killed by the kind of democratization that AI tooling brings and the ability to build your own instead of buy. And so I don't know what to do.

**Adam Fisher** [45:05]:

Well, I know it's it's hard to sit out in an entire market, and it feels like AI is like the equivalent of cloud. And so I'm not suggesting sitting out of anything related to AI. Of course not. I'm talking about some of the very mainstream type AI use cases Yeah. Especially those that consume enormous amounts of capital with very low margins. As an investor, you need to decide, are you going to make your mark by having hit one out of the park, so to speak, using baseball parlance or by having multiple hits and maybe also getting lucky with one that you didn't expect to get lucky. My preference is the latter. I go for base hits. I try and get on base. What does that actually mean? It means doing things that are within your control. Like I said before, I don't think that the way you build a big company or the way you get a big exit is by investing in the most ambitious companies, growing the fastest. Those are also the companies that crash and burn. My experience has been different. It's been companies that require patience, and that over time, figure it out and surprise everybody out of nowhere. I mean, Wix, by the time it was known, it was already public for two or three years. And then people look back and they say, in retrospect, oh, yes, it was obvious. And I mean, when we invested, these days we call it a SaaS company. But back then, even though we used the term SaaS, it wasn't a SaaS company. It didn't fit our strict definition of SaaS. We were learning as we went. It was PLG, but PLG hadn't been invented yet. This is what you're looking for. It's not just being ahead of the curve in terms of the market. It's being ahead of the curve in terms of how you think, how you build the company. You're gonna miss some of the terms. There's not gonna be a term to apply for it, and you may be a loss of words, but you're gonna say, you know, I see here something that I haven't seen before and I really like it. And so when I go back to Wix and I think, what did I like so much? Yes. I like the concept of the product and I liked entrepreneurs. There was something else they were doing that shocked me. They were doing things in the area of marketing, online marketing, that I didn't know you could do. There There were all these types of they called it guerilla marketing. That was the term they used. But it fascinated me that they were thinking about that so early on, and that they would spend at the time $50,000 to buy a three letter URL. Now we think, oh, that's obvious. But this is 2006 that they decided that they they should definitely do that. I love that way of thinking. I'd never heard that before. And I realized, you know, this is something special. If they could do that over the last twelve months, I think that was about the time I invested, then they're probably gonna do some other interesting things over the next twelve months and over the next twelve months after that.

**Harry Stebbings** [47:26]:

Can I ask you, you mentioned there kind of about the base hits? I have Brian Siegman on the show from Founders Fund, and he said that great venture funds are due to capital concentration in the best companies, and capital concentration limits are the enemy of great returns. Do you agree with that in terms of the importance of capital concentration on a per company basis to really get great alpha and venture? Or as you said there, do you prefer the more bets and get lucky on one or two?

**Adam Fisher** [47:52]:

I don't know if I fit either. I there's no question that at the end of the day, most of your returns are gonna come from very few deals. It's not gonna be spread evenly. That's a fact. The question is, can you recognize it early on, or can you recognize it really at any point? And I don't think you can. I think we delude ourselves into thinking we know exactly which company is gonna be a big outcome. We don't. These are all retrospective retrospective stories stories that that we we tell ourselves, and we do it over and over again. And even I do it myself, and I have to go back and look at what I actually wrote to see what I actually thought and remind myself, no, Adam, you didn't think that was gonna happen. That was not yet a term, or that was not yet a concept, and you've just told yourself the story that makes you feel good.

**Harry Stebbings** [48:30]:

I totally agree. In that case, should we do reserves at all? If we cannot predict the winners, and it's us, you know, looking back with the benefits of hindsight, surely we shouldn't do reserves then, or we should do reserves to everyone as a kind of contract agreement.

**Adam Fisher** [48:44]:

I think reserves are for fund management. I don't think reserves are a commitment to a company or a team. I I don't think I I think you in order to manage a fund properly in terms of resources, you have to have some sense. It's just important to realize you have to assume that there are gonna be some companies that you abandon to a certain extent in terms of not investing much more. It can't be a situation where everything you've invested in is going well. You always have to decide which ones are just not good enough relative to the others. Yeah. And so I think it's very important to have allocations, but you also also very important to constantly adjust them.

**Harry Stebbings** [49:17]:

But then on the flip side, you also have to be able to tell which ones are good enough. And that's my problem, which is like there are many companies where I've invested in the seed, they've grown unbelievably fast. If I were to do reserves, I would have concentrated capital into them, and they were not sustainable growth. They were in consumer. They were in whatever they were in. And that would have been flawed because, again, we can't predict which ones win.

**Adam Fisher** [49:38]:

That's right. Again, everybody has their own personality in terms of investing. Mine is I'm risk averse. I worry more about losing on those types of investments than having missed an opportunity to make a bit more money. It works for me. I don't necessarily recommend it for everybody, but I don't I don't mind I don't mind having missed an opportunity to invest 3 more million dollars in a company that could have generated another $30,000,000 of gains. But I do worry a lot about doubling down on a company, investing another $20,000,000 when it was growing at an unsustainable rate with way too much burn. That causes me much more pause. I'll pull back on those ones.

**Harry Stebbings** [50:12]:

Has that risk aversion ever hurt you? Say you could have done the Wix b, you could have done the Wix C, what whatever or you could have done the fuck, you could name any of your winners. But has that ever been, like, the real chance?

**Adam Fisher** [50:22]:

Yes. I have 23 exits to my name, and in every one of them, I had an opportunity to invest more. So that's that's really easy.

**Harry Stebbings** [50:29]:

Would you not be a better investor if you didn't have that risk aversion then? Given your ability to pick clearly with 23%.

**Adam Fisher** [50:35]:

Every decision you make just affects your next decision. So it's really hard to do as kind of counterfactuals. I may have gotten ahead of my skis, so to speak, in some of these investments where all of a sudden I I doubled down, let's say, on Wix, and then there was a challenge. And there were challenges. And that might have affected my confidence to then invest the next company, which in this case might have been Fiverr. And I might have said, you know what? I've gone too far on Wix. I'm gonna hold back on Fiverr. So you have to think about every decision you make, whether it's successful or not, how it may impact your next decision.

**Harry Stebbings** [51:03]:

I understand completely. I'm just thinking about the 23 assets, the ability to concentrate capital and some massive winners. If I'm sitting in Bessemer as, like, internal partner meeting, I'll go, can pick unbelievably unbelievably well. Well. He's concerned about future decision making on reserves. Let's have an independent person on the team actually analyze the reserve decision making process so it doesn't impact his decision making. We kind of protect the preciousness of your decision making and pick, but someone else does it. Do you think that's a good way to do it? You sometimes see perhaps have something

**Adam Fisher** [51:33]:

If we're looking over a a finite period of time, like, that's easy in retrospect to say that. If if you now tell me to change my strategy, this could be the worst decision of my career. I could be, you know, investing three times in every single company thinking everything I do is fantastic and discover that I've I've just erased half my gains. I don't think that's really possible, but you know what I mean. No. I don't I don't think so. And I don't think you can really change your style that easily. You get out of your comfort zone when you invest a lot more money, a lot higher valuations. You actually end up behaving a little bit different as a board member even. When all of a sudden you have a 100,000,000 of cost basis in a company, in which I do have several companies where that's the case, the way you think about things is is more risk averse. All of a sudden, you you kind of shift gears and you start thinking, wait a minute, how do I ensure that I get one x? Forget about the five x that I dreamed of. And if you don't wanna be in that situation, then don't get there.

**Harry Stebbings** [52:24]:

What do you think are the biggest misalignments between founders and investors? Like you said that, you know, when you have a 100,000,000, you bring a very different mindset to risk. What do think are the biggest misalignments between founders and investors?

**Adam Fisher** [52:35]:

Well, early stage, there's not that much because generally at a certain point, you know, you've you've acquired enough. Hopefully, the company has accreted in value, and you're kind of both in the money. Think I for later stage investors, there's there's a misalignment, especially when founders start to sell secondary. Those growth stage investors are kind of stuck. And I think it's just less appreciation for that growth stage where founders tell themselves, listen. I I worked to get to this point. I spent seven years, you know, toiling and getting a low salary. I deserve to sell. But the growth investors don't care what they did in the past. All they care about the future that didn't happen as they hoped it would. And so there's just true misalignment. I just don't think the same is true of early stage.

**Harry Stebbings** [53:13]:

Have we got to the stage in the cycle now where at late stage investors, they just want their money back? Just give me my money back. I wanna recycle. I wanna distribute. One x is fine. 100%.

**Adam Fisher** [53:23]:

That is exactly what's gonna happen over the next twenty four months. Various ways in which to get you get your one x. And when you know that you want your one x, you want it now. You don't wanna wait two, three, four years from that. Normally from an IRR perspective, just in terms of the time commitment and the risk, you know, as as time goes on, the risk can get worse. That one x can become point seven five x or an x, and then you get even more stressed about it. And I don't think entrepreneurs fully appreciate that situation when they have a set of investors that just wants their money back and how that affects decision making at the board level.

**Harry Stebbings** [53:55]:

Do you think that's fair to ask your founders? Like, when you actually think about it, you know, we invest in you because we believed in you, the company, the vision, whatever it is, even at late stage, it's not your money anymore. You have no right to be like, I want my money back.

**Adam Fisher** [54:07]:

Oh, no. They're not gonna say that. Well, sometimes they do. Yeah. I'm not I'm not on those boards, to be honest. Not yet, at least. I think if I was, I would tell the entrepreneur to ignore them and and to figure out to tell them why they need to be patient and why you still appreciate them as an investor and understand that it might not be the outcome that they had hoped for. But there's a way in which to do this that is in the interest of all shareholders, including them, and they still get their they still will get their money back, but

**Harry Stebbings** [54:35]:

that's

**Adam Fisher** [54:35]:

it.

**Harry Stebbings** [54:35]:

But, Adam, help me because, like, m and a is not exactly incredibly active market. You know, obviously, Figma put a lot of downness on a lot of m and a hope. So where does that liquidity come from? Where does that one ice come from? Like, you said about kind of depressed pricing and sales there.

**Adam Fisher** [54:48]:

I I didn't say it was easy. I don't it depends on the company, I think, and the price they're willing to to sell at.

**Harry Stebbings** [54:53]:

But do think, like, there is even liquidity windows open in any ways for these one x's back?

**Adam Fisher** [54:58]:

I think there will be. I think it's just a matter of price and matching it. A lot of these companies grew very quickly, burned a lot of money, but without burning a lot, they can't grow at all. And they have to right size, and all of a sudden that company that was doing it was growing a 100% and is at 50,000,000 is now still at 50,000,000 and not growing at all and still burning money. And how much is that worth? It's worth a very low multiple of that. And I do think there are acquirers for these companies, but it's hard to get there, you know. Like, you always want the previous deal. This is the stage where you always want the previous deal. You want what they off what you could have had before. You have to preempt that, meaning you have to realize that it only gets worse from here. And so you you actually have to get ahead of it and accept what is ostensibly a low offer. Because if you wait, you're gonna want that offer, but it won't be around anymore.

**Harry Stebbings** [55:43]:

It's so true you always won the previous deal. The amount of times I've said, you know, I would have loved to have done Adam's last round.

**Adam Fisher** [55:50]:

And so often Well, in a in a up market, it's the other way around. You want the next deal because it all goes up. But in this market, you want the previous deal, but it's much harder psychologically to realize that. To realize that you're on your way down, you don't need to act like it. You actually pretend that it's not the case, but you need to decide as if that is the case. You're sliding down the side of a mountain. If you time is not on your side, you're gonna hit bottom, and so you want that previous deal. Just preempt it. Try and find a way to get the acquirer to make an offer you don't really want, but then to take it.

**Harry Stebbings** [56:23]:

So speaking of kind of taking the offer, Daniel at Choco said, most investors or many investors have good investments. Adam has good exits. Like, the man knows how to make money. My question to you is how do you think about when to sell, how to think about liquidity? What have been some big lessons for you there?

**Adam Fisher** [56:39]:

When to sell, it's typically when I think the company has peaked or is about to peak, I would say, ahead of it. If it's peaked, I'm already probably it's too late. Are you good at predicting the peak? I think I am. That's one of my skills. I I am because I have a I have a lot of exits where that is the case. And it's a combination of the business just not really working the way we want it to. It might not be efficient. The market might not be as big as we thought. We may not be able to spend money to make money, if you know what I mean. We can we can double the headcount, but it won't really change anything. Maybe because competition is really gaining and this whole market's gonna be awful, low margins, too much competition, and so you have to be ahead of it. You just gotta be slightly ahead of everybody else. It's just like investing. You just wanna be six months ahead of everybody else. Same thing in exit. You wanna be the first to exit. You don't wanna be the last. And so in orchestrating this, the first thing is to make sure that the CEO is on the same page. Sometimes they are. Sometimes they're the first to come. Other times, you have to actually work with them and explain the risks of continuing with the same strategy. And that takes time, but if you have a good relationship, if they understand that they're still gonna do well and make money, or that you're gonna take steps to ensure that they're gonna make money on any kind of outcome, you can work together and figure out, okay, what do we do now? Who are the likely buyers? How do we get close to them? And this is not a decision that within three months then you have offers. It's typically a year long, if not more, process. Now, this takes me back to how I invest in entrepreneurs and what I look for. I look for people who are, like I said, storytellers, have charisma. I look for people who I think acquirers would want to buy. Like, the person, not just the company product. That they get excited about that person leading a division or a group in their company. And then I tell the entrepreneur, listen, as much as you built a great product and you're in a hot market, let me tell you something. We're not gonna be acquired for that. They're gonna acquire you. Now don't let this get to your head, but you need to understand that if you can win them over the way you won me over four, five, six years ago, you got it in the back. And so, let's say at least six or seven times, I've had exits where, I mean, the company was almost worthless. Less than $2,000,000 of revenue, and we had offers that shockingly good.

**Harry Stebbings** [58:48]:

Why would they shockingly good for a company with less than two is this a pure technical buy? This is pure

**Adam Fisher** [58:53]:

actual buyer? It's a combination. It's a combination. It's never just technology. It's usually a team, technology, and, of course, timing. You have to ensure that the buyer feels like they're getting something that they couldn't otherwise get.

**Harry Stebbings** [59:06]:

I think the thing that's terrifying in vanish distributions is when you look at the kind of historical arc of vanish distributions, there's these tiny finite windows, which is really where the majority of returns are predicated. And if you don't fit in them, it's very hard to make money in this business at all.

**Adam Fisher** [59:21]:

Yeah. Timing is so important. It's hard to know where you are. All you know is the past. You have no sense of the future, but it's critical. And ultimately, these companies that I mentioned, you know, within a certain amount of time, it was clear that, wow, we sold at peak. Either it was market peak or company peak or or the acquirer themselves afterwards, their stock dropped or now I've had the opposite. I've had situations where, you know, acquisition offers were pulled because something happened to that acquirer, you know, in other words, the worst possible time. But that's how you engineer it. And, of course, it's easier when it's not a very well known company, when there weren't a lot of headlines, when they're not burning a lot. You know, acquirers don't wanna buy ongoing losses. So you have to have a manageable burn. And, of course, there are various ways of looking at that, but it's typically as a percentage of the acquirers' EPS, how much they can absorb, how many how many kind of losses they can absorb.

**Harry Stebbings** [60:08]:

I'd love this, but I I do wanna ask one final question before we do a quick follow-up, which is slightly off piece compared to what we've done, which is you've taken a very proactive stance, and Amit on your team told me to ask this, so I hope it's okay. He said you've taken a very proactive stance really fighting against Israeli judicial reform and now fighting for Israel's right to protect itself against global antisemitism. And I've seen some of these, especially on Twitter. Why did you decide to be so active publicly? Especially, also, and it sounds awful, when it it's easier to not and most don't.

**Adam Fisher** [60:38]:

I think I just reached a stage in my career when I don't really care for any repercussions, and that I trust myself to express myself in a way that is honest and not antagonistic. If you're going to have an independent mind and live in a in a place that's free, if you don't feel comfortable expressing it, then it's just not worth that much. And so that was a realization I made. The the first was in 2022 when the new government in Israel was formed. Even before the so called judicial reform was announced, I could see it happening, I wrote about it on my Medium blog. I said that, you know, this government's going to try and gut the independent judiciary. And I said I explained why, and I explained why it was so bad in the context of Israel's political structure. And it was a very vocal move, But I said, I don't care if there are some people, entrepreneurs, that don't agree with me. You know? What's the worst that can happen? They won't come to me. Fine. But I felt that was a fraction. What I didn't realize that there were a few others who felt exactly as I did, venture capitalists in this case who also spoke out. Within days, the entire tech sector, 90% was on the same side. That's reassuring. But I think maybe a better question would be, what if there was more of a backlash? Would you have continued? I think so. I think carefully about all these issues. I attempt to think carefully and patiently before I write. Obviously, sometimes you write quickly on on platforms like Twitter without without thinking at all through. But again, I trust myself. I know the issues, and I'm not afraid to say also if I make a mistake that, you know, I I misspoke or I miswrote, although I don't think I have in the past year.

**Harry Stebbings** [62:10]:

You have had debates with some very prominent Silicon Valley investors, entrepreneurs. I mean, like, bluntly PG comes to mind. Is there backlash there, though?

**Adam Fisher** [62:18]:

No. I'm not aware of it. Actually, was never a debate. Most people I've engaged with, they block me right away. So I'm not interested in any alternative opinions. I would have liked to have a discussion. No. I mean, the the Israeli market's very different. That's my market. It's not a name that's spoken about much. Mine is more prominent, so I didn't think much of it.

**Harry Stebbings** [62:37]:

I've so enjoyed this. I wanna do a quick fire. So I say a short statement, and then you give me your immediate thoughts. Does that sound okay? Sure. Okay. So let's do what have you changed your mind on in the last twelve months?

**Adam Fisher** [62:46]:

Well, I'm usually the kind of person who says that I am pessimistic about the short term, but optimistic about the long term. In the last twelve months, I've felt the opposite. I hope that reverts.

**Harry Stebbings** [62:57]:

You're optimistic about the short term and pessimistic about the long term?

**Adam Fisher** [63:00]:

Yes. Yes. In the context of Israel and business, I think business has bottomed out and things are getting better for now. But I do worry, for instance, in venture capital that there's still far too much capital to make this a business that we can all do or even a lot of us can do well in. When I in the context of Israel, yes, like, I think back where we were even twelve months ago in terms of this judicial coup, we're in a much better situation. I think, security wise, over the last three months, things have actually improved even though it doesn't look like that. But I do worry a lot more about the long term, and that's a bit of a flip in my mindset. I hope I revert back to where I was in the next twelve months.

**Harry Stebbings** [63:35]:

Geopolitically, are you optimistic? I'm quite

**Adam Fisher** [63:38]:

what? Yeah. No. No. No. Again, short term, I am, but I I worry about loss. There's lot of long term trends in the case of in The US, I worry a lot about isolationism Yeah. Which I actually think is the natural state of The United States.

**Harry Stebbings** [63:51]:

Do you not think we're moving to an isolationist world, though, actually? And we actually operate in independent blocks as China, as Europe No. The US?

**Adam Fisher** [63:58]:

No. We won't. We're going to attempt that, and then we'll discover it again, then it's impossible, and it's a disaster.

**Harry Stebbings** [64:04]:

Is that a decade long failure attempt? It it

**Adam Fisher** [64:06]:

probably is. It probably is. Yeah.

**Harry Stebbings** [64:09]:

Do you worry about Trump getting in? Yes. Do you think he will?

**Adam Fisher** [64:12]:

I I think there's a real good chance. Yeah.

**Harry Stebbings** [64:14]:

What's the biggest misconception of the Israeli startup ecosystem?

**Adam Fisher** [64:18]:

Oh, it's probably that they're all techies and they're all in cybersecurity, which is just not the case. I've backed a lot of entrepreneurs that have no technical background or minimal technical background, and obviously, I have very few, if not any, cybersecurity companies. I've got entrepreneurs who were lawyers in HR, you name it. And so I think that's a big misconception.

**Harry Stebbings** [64:39]:

The thing that I did find was the commonality of the name IDO or IDE. When I was speaking to you, I'm like, IDE? I have 50% of Iddo. I'm like, Iddo? Yeah. It's me. Okay. Good. Tell me, what's the best investment advice you've received?

**Adam Fisher** [64:52]:

I would say it's a there there are two pieces of advice which are contrary. The the first is that when things are are just going awfully right in the beginning, like, just get out. Stop right there. In other words, if within twelve months or eighteen months, just I mean, all your assumptions are wrong. The entrepreneur is awful to work with. The market doesn't look right. Just stop right there. Don't try and fix it. But the second piece of advice that I received was that oftentimes, 90% of the value that is created in the company happens in the last twelve or eighteen months of the company's life. And so that requires both patience, but also recognition that that sometimes that's the way it works out, and there are companies who had that's the way it's gonna manifest itself. And so it's that combination of being able to cut, but also being patient and knowing when to apply what.

**Harry Stebbings** [65:33]:

Biggest investment advice that you give most often to people? For

**Adam Fisher** [65:36]:

fellow investors? Yeah. Well, generally, when they're starting out, I tell them, just get points on the board, which is to say, again, don't don't try and pack the biggest thing. That's just not the way it works. Just get some exits. I'm a person that really understands the psychology of investing, and I know what it's like to get ahead of your ahead of yourself and to have $30,000,000 going feel like they're going down the drain. It really affects every subsequent decision you're gonna make on that company and any other investment. But if you've invested $5,000,000 and there's been since been an up round and the company is doing well and it's now valued at, let's say, three x of that, you're gonna feel good. You're gonna have a lot more confidence in making your next investment. And so my view is get points on the board. Of course, when I mean points, I mean actual exits, but you don't have much control of when that happens. Timing wise stuff. But that I believe you need to have that initial foundation of investor confidence. Have you ever You know when it's unfounded, but that helps a lot. Have you

**Harry Stebbings** [66:29]:

ever got ahead of yourself as an investor? Of course. What happened?

**Adam Fisher** [66:33]:

The company was doing very well. Other investors thought it was also amazing. They wanted to lead a very large round and a very high valuation, and I had to decide, do I just bow out saying this is way too much, or do I do my pro rata? But in these cases, my pro rata is enormous. You know, it's $30.40, $50,000,000. And then all of a sudden, I'm truly doubling down in ways that I never imagined. Did you do it? In a few cases, did. I'm not sure yet whether I read it or not, but I feel uncomfortable in a few cases.

**Harry Stebbings** [66:59]:

What was the biggest sin of the ZEP era? You know, the zero interest rate environment era?

**Adam Fisher** [67:03]:

Well, I'm sure most people would say just the valuations. I think it's more about thinking you could be number three or four or five in a market and still succeed. That's such a mistake on the part of entrepreneurs, investors, and even employees who join these companies. Obviously, are exceptions, and everybody will cite the exceptions, but that's so often the clearest path for failure. Because you knew it from the get go that you're not the pioneer, you're not even the second, and you're just kind of riding somebody else's wave, so to speak, that they've created for you. That's easing it's helping you raise money more easily, to recruit, maybe even to sell, but it's not your wave. Where will you be in ten years, Adam? Well, it's more about how I'll spend my time. I'm hoping that I'll have a smaller board load, and that I'll have more time to read and write, and probably also more mentoring. I really enjoy working with with younger investors or newer investors and imparting whatever wisdom I can. What are the things you learn over this kind of a period twenty five, thirty years? You learn them too late to make them truly valuable to yourself, and so the best thing you can do is then try and give it to younger people and hope that they'll take it and work with it.

**Harry Stebbings** [68:13]:

Honestly, I think it's the biggest joy of doing the podcast, which is bluntly I learned from you. I learned from the best in the business, hopefully, younger ages, and actually can impart what you know now on my career earlier. That's why I started this show. But that that's

**Adam Fisher** [68:26]:

humanity. That's what separates us from animals. We can teach our young, so to speak, what we've learned. They don't always listen, and sometimes you have to go through the same experiences. You you doesn't matter what somebody tells you, you actually have to make the mistakes, and that's and that's fair. This is what progress is. Progress is we actually get to learn from those that came before us, even if it's ten years before us or five years before us. And so I think that's an important part of our role in society, in business, in technology.

**Harry Stebbings** [68:51]:

Adam, I've loved this. Thank you so much for putting up with my very off sheet questions, but you've been fantastic, and it's really been one of my favorites to do. This has been great. Thanks so much. I have to say, I had really high hopes for that episode, but it really went above and beyond. What a great show. You can watch it all on YouTube by searching for 20 VC. But before we leave you today,

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**Harry Stebbings** [69:11]:

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