YouSaid · the spoken record

David Frankel

lines on the record: 105
first: 2024-10-14
most recent: 2024-10-14
sittings or episodes: 1
sources: podcast

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“You know our view is kind of teams versus themes. And even in AI, like the teams have to get some kind of product market fit, some before, I think that can still be done reasonably capital efficiently. I think after that, if you look at the capital required to scale and to distribute, you look at like Josh Kushner's $1 billion at $100 billion in OpenAI and I go, would I take that bet or not? all things being equal, I probably would take that bet. If you said to me, you have to, are you for or against? I would say, is Josh in the winner there going to make 2x and maybe much more than that, but bet against the 2x? I wouldn't bet against the 2x. I think his LPs will make 2x on that. But at some point to play in that, that's a whole different world. If you want to play in the hyperscaler game, wow, you're going to need ridiculous amounts of capital. And by the way, we're seeing like, what's a TLM, like Tiny Language Models, which run on the mobile.”
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“You've really gotten an interesting competition on your hand. But then incumbents don't go away, but their share of the market can change dramatically”
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“And actually, you could say, really, what is Spotify? It's just another distribution mechanism. In some ways, that's just another way of distributing music. The recording industry, the publishers, the owners, they didn't love when CDs disrupted LPs or when tapes happened to CDs. And in a way, like all Spotify, it's Herculean outcome. But if you look at how much of their revenue the record labels actually take, soon is something very, very different. This is where AI is fascinating and really interesting. It allows Harry, it's like basically it's the breadth of your creativity. If you're creative, I will give you like the most professional tools that the best DJ in the world has. You've got that on your phone now. This is really, really problematic. Now, is the recording industry going away? Is Spotify going none of them are going away? In fact, in some way, the biggest threat is if Spotify does this with their incredible distribution.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“They do. They do. By the way, you can't do, you can have all the cash you want, you can have all the strategies you want. The first thing you need is customers that absolutely love and adore you. If you don't have customers that love you, right? Like, what are you doing this whole thing for? So if you don't have actual, and I would say this is pill pack, suno, like every one of those companies had customers, their revenues were increasing. And that's why they're a pen in the ass to the incumbents is the incumbents go, oh my God, like customers are actually going there. Like what's this thing about? And usually they don't have their shit together, right? So the incumbent is like playing for time or just like going like, I want this to happen when I want this to happen. I don't want this to happen to me.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Lot of value. So if you go look, this is going to happen to you. Here are, this is the way the game's played. Here are the lobbyists, here are the lawyers, here are the PR consultants, and here's how you're going to have to use your money. I don't know. It's like war, air, land, sea, and that's how you win. So you take TJ speaking to Mikey Schulman at Suno going, this is the playbook. This is the only way you resolve this.”
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“Not a chance Yeah, yeah. We've seen this again in Suno. So Suno is a fun for a company. The record, the recording industry has just gone wild against Suno. And often it's exact same playbook, but I think this is a place where VC is going to add a ton of value. It's the same playbook. So they're lobbying their ass. The recording industry first says you're illegal. Like what you're doing is illegal. And open AI and lots of people have that same legal challenge, although it's slightly different. So the open AI challenge is on the output, right? The LLM suno, the challenge is on the input. And Suno is going back and saying we're training on the open internet. That's like Harry learning to play the piano and listening to the Rolling Stones. Is that okay? But the first thing is legal and you go, what's this actually about? And sometimes the answer is, I don't want you in business. I do not want you in the sector, and I'm going to use all my heft. And then sometimes it's about like, I want my pound of flesh. But I do think this is an area where VCs, by the any stage VC, can add a little.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“You. And what you've got is you've got you take vertical after vertical. So live nation ticket master that merger should never have been allowed. But once it's allowed, we will occupy, monopolize that position all day long. Harry, we've got it right now. I had it in my business in terms of taking on the legacy telcos in my startup. Like impossible. And we can talk about some of the strategy around that.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you, SeatGeek, I actually gave testimony to a panel of lawyers for the Department of Justice. Rusta Souza is the co-founder of SeatGeek. He says to me, come on a sales visit with him. So I go to TD Garden in Boston, which is like Madison Square Garden. We meet with a manager. She's awesome. She says, we turf ticket mass in a heartbeat and go with SeatGeek. Like, we love your ticketing policy. We love the open thing. We can't give up Ticketmaster. Go like, I look at, I go, but hold on. You're like, there's no other ven you like you in Boston. Like this is this, you know, covered arena. It's beautiful. It's where all the basketball and ice hockey takes place. Like where, you know, when you two comes to town, where else are they going? Right. She goes, no, no, no. It's not that. She says like Live Nation straight out said to us, you two will come to Boston. You'll have one night in Boston instead of three nights. I make like a million or two million dollars net profit a night. I literally gave testimony to the Department of Justice telling them exactly what I've just told.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Like to actually rouse a leech, like unbelievable. Because the incumbent is now pissed off or worried about you. It's a badge of glory. But I think going through that, what it takes to take on these leeches is tremendously underestimated.”
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“Stop there. Oh, Harry, this is a subject I can keep you here all day on. But Leach's lethargic economic extractor causing harm. These are these legacy companies. A great example of them is the PBMs, the pharmacy benefit managers. Companies that were very innovative 40 years ago. So a PBM connects the pharmacy to the insurer. You know, 40 years ago or 30 years ago, they were great companies, right? And the insurance codes and how much you should pay out for your meds, great. And then you have the whole internet and you've still got hundreds of billions of market cap, hundreds of billions adding no value. And the problem is that these incumbents use every trick in the book. Capitalism's so beautifully set up for them. So they use lobbying, they use lawyers, they use PR to say that the challenges are illegal. That's like job number one. I have had this time and time again. And in one way, I go, it's a badge of glory, right?”
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“And then the company still have to be extraordinary, right? So the company's in there, and you could argue that they had those. So I think the strategy there was actually sound.”
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“Well, I think the timing was problematic, right? Clearly. But I think the theory that they had, I'm impressed with them that they thought about that and they executed on it. I think the timing was unfortunate.”
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“For instance, it got to the point where it was like, I don't know, worth $10 million. We sold and we take the cash and we distribute the cash. So I would say quantum or size versus the fun size is pretty much how we decide around that. Now, what our LPs did with their stake, so Trade S25X, Uber 150 billion. I don't even remember what the IPO price was. But Harry, that is, if I look back, I go like never sell a single thing. If you could and people have to live and people have various desires, but if you could never sell a share. And I know we've gone through up and the down cycle, but great companies, companies with real moats, right? Like you want to be in those companies forever. That's when we get into buffet land, right? And like you're not good at that.”
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“I have to channel one of our LPs, Timberly Amtus, who is the CIO of Weather Gauge. And I remember around Uber Kupong, some of the situations where we had shares to distribute, speaking to Timmermans saying what we should do. Tim said, whatever you do, you're going to be wrong. And of course, like the answer to that is you sell prematurely and you didn't capture the upside. You don't sell in think tanks and you didn't preserve value. And frankly, it gets more complicated than that. Some investors want to give the shares to their foundations and they get pissed off with you for cashing out and giving them cash instead of shares. Some investors say to you, LPs say like, I don't know what to do with that share. Like I've never heard of the trade desk. Why didn't you make the decision for me? The answer there typically has been with big distributions, large positions, so fun movers or it's half the fund, we distribute and we say it's up to you. With smaller positions when at IPO so desktop men”
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“I think it's for the entrepreneur, there comes a point where it's like you can have, it goes back to your earlier question, you can have words, you can have as many discussions. If the business is just not working out, do you expect your investors to be around? That comes back to relationship, I think. That comes back to some degree of sentimentality. And if you're purely commercial about this, the investors are moving on down the whole ecosystem. Just like the LPs are moving on, they invest in those companies. If I invest in you and we're personally still involved and I'm going like, Harry's going to get this right at some point, maybe it's this abundance of faith. Maybe it's crazy and sentimental. If I believe in the call option of Harry Major still get this right, maybe I'll stick around.”
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“Yeah, but the ones who didn't have product market fit, they're being abandoned. At some point, like their boards start to abandon them or they just get incredibly frustrated. Some of them, frankly, you know, it's at every single stage, late stage. Some of these companies have IPO'd even, right? And then you really kind of know what that looks like because the market walks away from you. In some respects, being private then is a luxury, particularly if you've got a lot of money. But if you're burning it fast, it's just a matter of time, Mary.”
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“It's funny. You think about product market fit as in the early stage only. But if you don't maintain product market fit and you don't maintain growth, right, it just becomes”
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“Yeah, so, you know, it's elusive. Like, in your high flyers, so in your really well-known companies, there's a real secondary market. Try to get secondary in your smaller private company. It's almost impossible. So I found secondary to be very, very difficult. Where we've done secondary, they've been pre-IPO, really high flyers. The secondary market's all over them. And then you fall off a cliff.”
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“I'd say the first thing is secondary is so elusive. Like if I think of the secondary we've had over a career, I can count it maybe on two hands. So secondary tends to be in your, and by the way, do you mean companies or do you mean funds?”
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“We're so small that in some cases we welcome LPs bowing out. So in our last fund in fund five, we had one fantastic family office. We love and adore them. Say if it's less than 10 million, we're out and we went, it's less, your allocation's less than 10 million, they're out. Our fund's small. We don't mind. Harry, we spend a very, very small amount of time on fundraising. If you ask me, I spend truly 95% of my time on finding good companies and supporting good companies. I think I spend 3% of my time on fundraising. But doesn't mean I don't care about ILPs. I'll talk to our ILPs any day of the week, and I love spending time with them, but I'm not out there fundraising.”
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“Real illiquidity. Yeah. Well, so you've seen high net worth family offices pull back even more. I think the vintage just matters a lot. And some of the large LPs will be scared of sitting out vintages. It's kind of like the Axcel Fun 7 era. So I sat out and I missed Facebook. So I think sometimes if you think you're in as an LP and a great fund, you may lower it, but you'll try to stick around. But you got to keep up your track record. You've got to be a great fund.”
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“Oh more, right? So I'm going minimum. Absolutely. Right. Like if you totally, if you look at like the Swenson model was like VCP, it was more like 30%.”
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“Yeah, I think for entrepreneurs and for LPs, size a fund, check in company versus size of fund tells you everything, everything.”
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“Some of them show up. And I just want to give credit where credit's due. There are people who show up. Then there are people who are very disciplined, say, like, I'm not investing. Again, percentage of the fund and what it takes to return that fund is very indicative of whether you'll get time or not. We just want to.”
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“Entrepreneurs need to do the math on that as well. Entrepreneurs need to be doing the math on that. It goes back to our point is if you take 20 million from a billion dollar fund, right, do you move the needle for that? What does it take for you to move the needle there? And if entrepreneurs get a $10 million check from XYZ large-scale fund and a partner doesn't join the board, that is not a good signal. I think if a partner says, I'm putting in $5 million and I'm joining your board, right? Like everybody goes like, you know, multistage firms versus seed. I think there are other ways. If a partner at a multi-stage firm, billion dollar firm says to Harry, five on 20 and I'm going to join your board. I would say that's a strong signal. That's very tough for me to compete against. They're saying to you, I'm going to spend time here, like admittedly, as long as they're not on 20 boards.”
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“I mean, we were in at the beginning of pullpack, right? So we were the largest institutional precede and we co-led the seed with Fred.”
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“I mean, Uber's just in itself, you know, it's just that's incredible. TradeDesk was a bigger outcome for us. Koupong returned the fund and multiple times. If I look at, and then we've got in SeatGeek and Airtable potential fund returners again in Fund one. But Harry, here's the thing is Pill Pak returned fund two. I am so grateful to Elliot and TJ.”
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“I think vintage matters so much. I look at our 2020 fund and I go, that's actually going to be okay. 2018 fund, I go, I'm much more worried about that. We need DPI there. I agree with you. By the way, I think what we've seen is like the more polarization than I've ever seen in my career before. We've seen this completely binary outcome thing where companies are losing it and companies are doing very well. And to return these seed funds, you can't just have these huge, it's great for PR, it's great for your story to say like I was in XYZ great company but actually fund returners you need four or five good fun good companies if we sell four companies at 250 million dollars each we can return a fund if we sell 10 companies at 100 million each like nobody cares about that we can return a fund and if you don't have that you're in trouble again”
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“LPs are pissed off at the moment. LPs are looking at this asset class right now, I think, and going, where is the DPI? And they did unbelievably well. And some of them are scared to sit it out. And it depends what kind of LP you are. If you're an endowment or you're like a parastatal or something, you've got to be in this asset class and your allocation can still be tiny. But I think LPs are looking at this right now and going, where is a DPI?”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“And Instacart won't do it. No, there are tons of four, five, six billion ones. SeatGeeks being IPO ready for two years. That doesn't do it. No, that doesn't need to strike.”
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“You know, there's the saying one swallow doesn't make a summer. And I kind of like think, no, no, no, no, no, no. One swallow can make a summer. So think about this optimistically, one good IPO, and everyone will go, IPO markets are open again. I think pre-election in the US, IPOs are pretty much closed for now. I think post-election, one or two or three great IPOs every single, you're going to have like this swarm of JPMorgan and Goldman Sachs bankers coming to tell you like it is open.”
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“There are still PE players who are now looking at a vertical and going, I like that vertical, and they seem to be quite disruptive in that vertical, and I can tie them into XYZ company where I'm amalgamating a whole lot of companies, and they're the tech play. So we've got PE in this company with us, and they're going to ultimately sell to like a bigger PE and they've got a 1X LickPref and they won't take, they'll literally shunt it into the bigger company because they think their outcome could be better. That's how M&A and DPI is going to start to happen now.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Getting involved in companies that had lots of potential, and then 2019, 2020, ZERP comes along day trading at home over COVID and 10 on 40, 10 on 40, 20 on 80. Tiger looks at A16Z and goes, you know, they're 10 on 40, we'll do the 20 on 80. Softbank. And that was the apotheosis. But at every stage, the money was just going out like crazy. Did we do Founders favors? Like, no, no, no. That's the 2018 plus vintage. So LPs at every stage, I think, are looking at this thoughtful LPs. And they still want to get into good funds, so they're not being as direct with the managers. But they're looking at this and going, like, show me the DPI. Harry, we've got no DPI in Fund 3 yet. We've got an LOI in a vertical SaaS business right now. LOI. We haven't got, this is not there yet. The company's done tens of millions. It's got a good valuation. It's PE. It's all PE.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“So, this is a great question. I think that DPI could be dead. And let me clarify that. But I think a lot of LPs look at 2018 plus funds and they go, where's the DPI? And I think that what happened there was a perfect storm. Our fund three is a 2018 vintage. No DPI yet. And what happened is if you look at fund one, fund two, five, six years in, we were giving DPI. It wasn't even our biggest hitters, but we were giving through companies like Cruz or desktop automation that you've never, desktop metal in Fund 2, right? The companies like DataLot and InfoScout, we were ready giving significant DPI. That's way before we got to Uber, Tradesk, Koupong. And we haven't given DPI, by the way, at all in companies like SeatGeek, Airtable. But you look at 2018 plus funds. And the problem is it was this perfect storm. So we were preparing, we were getting.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the listed markets change completely. So if you look at SaaS multiples in 21, 20 where that was 20x, and then you look at those SaaS multiples as 5, 6x, that trickles down. So later stage investors that invested in private at a billion and expected that rule of 40 to be at least profits and huge growth all the time. And that hasn't materialized. They're looking at those same companies who are going out for top-up rounds and they're going, why would I top out at the last valuation? Or they're saying, again, go to the market, see what the market will bear. We've seen down rounds in companies that got valued enormously, hugely. Goes back to at any point, you own your own destiny by minding your monthly burn.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the terms are getting tougher. You know, there's so much capital out there, but later stage capital can call the shots a lot. And it depends on how well the company is performing. But when tougher performance companies raise money, the terms are getting tougher. As well. And the pref stack, like Perry Passeu, feels like something of the past. There's a real pref stack coming from you.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it's a good signal to investors early if that happens. Like, do you want to be in business with that entrepreneur? It happens to everyone, but I'd rather it happens early to me than later on because it was pretty clear that that individual was totally transactional. Josh Koppelman, there was a time where he would say, I'll give you $2 million uncap note ahead of the next round. A lot of this was in his portfolio already, where he went like, what's the quadrant that's really killing it? What first round used to do is in the quadrant that they thought was like amazing, they would go to those founders and say, here are unkept, literally uncapped checks. And what we're doing is your initial founders are showing such enthusiasm for your company that that can only be great as a selling point when you do the next round. So that's a different take on it. But I think you can do that. You can do it in the opposite direction where you just show unbridled enthusiasm. And in a way, that's testimonial marketing. for the founder.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Because you go to the market, you're a stocking horse for XYZ lifetime fund that's in your cap table already. Everybody's going out price this thing, they'll come in at that price only. It's just very difficult, I think, to get deals done. By the way, then you find, unless you're killing it. So I remember I think of coupon and coupon went to Sequoia and said, look, it's a $4 billion pre. BlackRock will put in a billion. You don't get your pro writer. When you're doing incredibly well and you're hot as anything, you can do it. When you're not, even the latest stage investor goes, I want 20% ownership and your cap table saying, no, no, no, no, we're doing our pro rata. And then you get into that struggle of, well, I've got to dilute more than I thought I would. So in good and bad, I don't think Pro rot is great for entrepreneurs.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“XYZ and if you're doing great if your revenues if your rule of 20 is like your rule of 40 is off the charts and you're doing great amazing ProWrider doesn't matter if you're struggling Pro ride is terrible”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I still think of prorata as like the original sin against entrepreneurs. You asked me earlier, is there stuff that entrepreneurs don't understand about VCs? If I said to you, Harry, I've got an option to, I don't know, you know, anything, right? Like, why would you give me a free option? Why would you give me a free option? If I said you like, like, you know, for $10 million, like give me an option to buy 10% of 20 VC. And I can decide if I want to do it or not. You wouldn't in a million years, right? But you've had to learn that the amazing thing about entrepreneurs is they give prorota. It's like, it's like the superpower thing for VCs. And I think it is terrible, terrible for entrepreneurs. You're selling options against you. So standard operating procedure is later stage VCs look at it and they go, go to the market, test the market, see what the market will bear. That's code for like, I don't want to price you. You know, go out. The market's going, I'm a stalking horse. Like, why would I be a stalking horse for?”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“So, you know, is to say, look, you failed for all the best reasons. You failed, it's not because you didn't try your ass off. It's not because this team isn't thoughtful. And, you know, the clock cycle, the frequency at which you got stuff done was enormous. The context was just impossible. Come back to me. You know, my bad on steroids, right, that I didn't say that. And I've learned that the hard way. Every time there's a failure and I love the team and generally that's the nature of this business. Like, you know, I put teams before themes all the time. It doesn't work out and I love that team. Like I have to say to them, come back, please. Not because I'm an options junkie, but because I want to be in business with those people.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Try to outspan kayak in the other players, spend a hundred million dollars a month. Google's single largest advertisers, you can have the best product you want. Tail between their legs, go off, they lost all of our money, brings back the team and starts motorway, billion dollar valuation. They're great people to back. The trick is you got to get them to come back and speak to you because sometimes they”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I would say generally, founders who've had enormous, enormous success and exits come to the next opportunity with some degree of hubris. I speak about this personally. I sold my first business and I thought I could conquer anything. And they look at any vertical and you kind of go, I'm going to disrupt that. I'm going to be the one that's going to show them a lesson. And generally speaking, that hasn't worked out well for us versus entrepreneurs who tried their asses off, raised money, and for some reason or another, it didn't work out. They come back hungrier. They come back. They want that prize. They want to prove, chip on the shoulder. And if they can bring back the team somehow, so second time entrepreneurs where it's where they failed and they come back for more, Tom Lee said, Motorway is an unbelievable example. I was on the board with Sonali De Raker of top 10. They build an unbelievable product in the travel space, but they get crushed in that vertical.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I think what they feel like is their loyalty is to the team that they've put in place, their loyalty is to the last set of capital that still says go for it. And then the same thing that makes these amazing entrepreneurs where they go like, I'll walk through walls. They go, I'm going to be the guy. I'm going to be the person that is going to pull the rabbit out of the hat in the last three months. So down to the last draw and in fairness to them, some of these enterprise clients are still giving them hope. If you do this, this, this, you get a hundred million dollar contract.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“The minute I feel like we should reserve more, I almost feel like the market will go crazy. The minute I think we need to reserve much less, my sense is, oh my God, like the market is going to like you're really going to need more money now.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“I'll tell you what happened, Harry is this is how this moves during COVID, we got very scared. At the beginning of COVID, we went, oh my God, like the market's going to close down. We're going to really have to fund our company. So then we're thinking, we've got to like in the first instance put even fewer funds into our companies. And then what happens is the market just gets a wash with capital. Everyone's day trading. And of course, we run raise fund for prematurely. So I would say reserves and how to do the reserve thing is actually one of the most challenging aspects of venture. How to get it perfectly right? Pretty tough.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“We still have this kind of one to one reserve policy, but we actually struggle on our reserves because a lot of the time our good companies”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I'll tell you what happened we put in a reserve strategy where we said we won't fund if it's more than 20 million post. But then what happened is the market just went away with it. You know, that became anachronistic. So you create these rules, and then the market moves, and in a way, like what you have to do is two years later, you have to try and change those rules altogether again based on what the market's doing.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“It was like somewhere between half a million and a million. Whatever we did, it felt like a lot. In Fun two, we created a reserve strategy, and it was that negative correlation bias that made us do it. We went, if we're going to put in like another 50%, we won't lead ever. But if we're going to put in another 50%, like, how do we do that only in our companies that crave and need the money? And I'll tell you what happened.”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source
“In this company not exist. No reserves in Fund One. And Eric invests in TradeDesk as a follow on because nobody else is going to give them money. How much do you put in?”
2024-10-14 · The Twenty Minute VC · 20VC: Investing Lessons from FC Seeding Uber, Airtable and Coupang | Why Pro Rata is the Original Sin in VC | Why Liquidity Has Died in 2024 | Why LPs are Pissed with VCs | The Hard Truth About Seed Fund Economics with David Frankel @ Founder Collective · IDENTIFIED FROM THE TRANSCRIPT · source