YouSaid · the spoken record

David Friedberg

lines on the record: 44
first: 2022-03-14
most recent: 2022-03-14
sittings or episodes: 1
sources: podcast

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“Very loosely tied to any form of schedule, but I've absolutely. You so much for doing this, and it was great. Thanks, Harry. It was great You want wide ranging discussion. I think we gave it to you there. If you'd like to see more from David, you can, of course, on Twitter at Friedberg. I do recommend that, or you can see more from us behind the scenes at 20VC.com. However, before we leave you today”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Governments as ways to solve problems. Because if someone's willing to pay you to solve the problem and you can make money doing it, it means that you've created a tremendous amount of value and it creates an engine that drives that solution exponentially, right? The government can only operate linearly. Nonprofits can only operate till they run out of money. A capitalist enterprise can operate infinitely and it can compound its capital back into solving the problem. So for me, I would hope that we have the option to do that because we have cash being generated by several businesses that then afford us the ability to reinvest and rebuild and build new things that can work on the next generation of problems.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, I would hope that we would be a public company. I think that that's important because it would give us access to capital markets to raise additional capital to have equity to a currency we could use, a publicly traded currency to do things with. And, you know, I hope that we have significant stakes in significantly profitable businesses that are compounding value and doing meaningful things that are changing the face of the earth. I care very deeply about advancing systems of production, advancing industries, advancing human health in such a way that we can kind of reduce the impact and the destruction on the planet, improves people's lives and livelihoods. And, you know, and it would be great for these businesses, for this not to be kind of a fundamental cash-in, cash out business where we're trading stocks or, you know, trying to make money just to make money. But look, for me, profitability and scaling profitability is a reflection of value creation. It means that you've created something of value because the market is willing to pay you every year for it. That's why I love capitalism so much more than nonprofits or governments.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't kind of view luck as being this passive thing that happens to me. I view luck as being the thing I didn't see happening because I didn't do the work to find it and then I didn't act fast enough to either bring it to me to bring the opportunity to me or to resolve the challenge out of the path out of the way.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Luck versus skill, do you think? So, if I knew the quantum state of every atom in the universe, I would be able to predict the future perfectly. And I had an extra universe model to run it. So it couldn't be in the universe. I think that a large part of skill is to figure out what you don't know, is to identify the risk, to identify the things you haven't identified, and to try and resolve an answer to them as quickly as possible. And as quickly as possible is the key. So many people I know that are super smart are too analytical and not action-oriented enough in the sense that they kind of want to gather data before acting. More often than not acting gives you the data you need to answer the question. So if I could move at an infinite speed, I could quickly resolve the perfect business, meaning I could run through a million different scenarios in one day. Like think about Grandhog Day, right? Like I could run my business over and over and over again, make it perfect. So the faster I do it, so let's say it takes me a week to do that versus one day. So the faster I can do it, the faster I can resolve to the perfect outcome. You know, number one is I think.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Over and over again, particularly in this model where I'm building new businesses. I've come to the harsh realization over the last few years that you're going to have winners and you're going to have losers.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Was a lecture that a woman named Elizabeth Gilbert gave, TED, that she gave a TED talk years ago about how she had this great book called Eat Pray Love that had great success and accolades. And then she felt this extraordinary pressure on success because she had been successful before the expectation was she would be successful again. And her next book would be just as good. I started a business at the end of 2006. I sold it for a little over a billion dollars at the end of 2013. And I was 33 years old at the time. And I think it created an expectation or a belief that I was a great operator, that I was a great business builder, that I had some sort of superpower or some set of superpowers that allowed me to do that. And I think that expectation leads to a great degree of pressure and expectation on myself that everything I do, everything I touch has to succeed. Because my mentality when I was building my business was I have to win. There is no option for failure. There is no chance this business will die. I'm absolutely going to make sure it wins. I'm going to do everything and I killed myself and we got it done. And I think that the pressure that that has to be repeated.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I saw this question. It's hard for me to be honest. I am much more of kind of an objective analyst of information than I am kind of a subjective advisee. Maybe I'm just not a good student or I don't trust people enough, but I'm much more oriented towards trying to figure out the questions I'm trying to answer and then sourcing all objective truth that I can identify to try and answer those questions. So call it Wikipedia, YouTube, scientific journals, and the independent objective feedback from many different people. So I don't know if that answers your question. Terrible answer, but no.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I was very, very skeptical about cryptocurrencies. And for most, I still am. The principle, however, of decentralizing central banks and decentralizing authority away from governments that just like any living organism want to accumulate and acquire and grow, I think is a critical part of the cycling of our species that needs to happen now. And I think it will happen. And I think that cryptocurrencies and decentralized digital systems have an important role to play in that cycling.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Zen Mind Beginner's Mind. It is a compilation of Dharma lectures by the founder of the SF Zen Center. I've probably read it 50 times. I don't want to speak too much about the intention of the book. I just encourage anyone that hasn't read it to take your time to read it. And it really talks about the practice of sitting in Zen Buddhism.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I mean, my kids are everything to me, so I can't understand when I was 24, my boss at Google was like, he had kids and he was like, you just don't understand until you have kids. You just won't understand. I was like, yeah, right, kids are just kids. Like, I see other people's babies and kids. I could give a shit. But then when I had kids, I mean, you just realized how much of life is designed, not to propagate, but to teach you to be selfless, right? And how much we forget that in our hungry youths, we're all about going out hunting on the open plain, finding our territory, locking it down, winning. And then, you know, so it's a very kind of selfish set of acts. And then when the mindset becomes one of selflessness, it becomes one of service to others. It doesn't just change your relationship with respect to your kids, but I think it just changes your mindset with respect to doing more for others and doing more for the planet and for the species and being less concerned with one's own kind of personal gain and more realizing the benefit of maybe being a little bit more selfless.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“We're going to resolve. Meanwhile, there's this wonderful substrate of society called science, and science continues to plug away and solve problems, and then all of a sudden, you know, we pop up 40 years later and we're all living to 200 years old and we're all flying around in cars and we all have nuclear fusion reactors in our backyard. But, you know, we've just gone through probably decades of strife as we try and resolve these big shifts that are underway right now, these big social shifts.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I don't worry, so I'm extremely techno-optimistic. I see myriad solutions to all of the problems we face as a species today. So from a fundamental threat perspective, I'm less worried about the long-range outcome for civilization and our species and our planet. We have the opportunity to kind of resolve energy, resolve carbon, resolve human health. I mean, many of these challenges are resolvable based on first principles analysis of science as it sits today. What's going to be challenging is the next couple of decades as our species kind of meanders our way to those outcomes. There's more kind of, I think, social issues than there are technical issues to try and resolve as we kind of realize that, hey, maybe, you know, the United States doesn't have primacy in the century. What is the right governing structure for a people? Is it an old school model of democracy or socialism or maybe a new school model of decentralized governance, right? So what is money going to be? And so these are going to cause like really challenging social issues.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Top decile and the bottom quartile has increased, whereas the absolute condition of everyone has moved forward. So while everyone's better off, most people are unhappy because they see certain people have done better than they have. It's a hard thing to kind of break from. We're never going to break it as a species. It's going to take a couple hundred years. It's just something to be cognizant of in framing one's own life that you're never going to find reward from just constantly trying to climb the ladder.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“us to go and colonize the world and eat everything and kill everything. You know, fundamentally, it also causes deep rooted unhappiness without us finding our next line of sight and then shooting for it. So as a result, I think of that degree of cognizance, there are certainly physical manifest things that I care about and want in the world, security for my kids, all that sort of stuff. But like I'm much more interested in kind of like solving fundamental problems, understanding kind of where things are headed for us as a species, for our planet, for our understanding of science and engineering and the principles of the universe, those are very intriguing things for me and I find intellectually rewarding. more rewarding for me and I try and make sure that that's where I get my great rewards from than making more money. And so I think for me, it's just been a little bit of a mindset, you know, and kind of understanding that. It's unfortunate because I do see a lot of people caught up in the Jones's cycle, which is what does the other guy have that I don't have? And it's a big part of the problem in the United States today and globally. The pace of technology adoption increased wealth disparity globally. Wealth disparity, the difference between call it the”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you've got to be cognizant of the fundamental driver of human psychology. I think in Sanskrit it's called Dhaka, which is desire. Human happiness, I don't think is defined by the absolute condition of the human. Human happiness, and I've talked about this in the past before, human happiness is defined by the relative change in one's condition. And so what happens is over time, there's a great book on this called The Happiness Hypothesis and this researcher from, I think UVA, people are happier as their income levels go up until they make about 60 grand a year. This was as of a few years ago, so it's probably higher now. After that, income is no longer a predictor of happiness. It's the change in income from one year to the next. So if your income's going up 10% a year, you're happy. If your income's going up 20% a year, you're happier. If your income's going up 30% a year, you're way happier, and so on. This creates the unhappiness cycle, which is when you look beyond where you are today, you end up seeing that next strata. You end up seeing that next level, and you're unhappy because you're not there yet, right? This is just how human brains are wired. And it's how we survived as a species and got ourselves this notion of desire.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Level, you have less of an incentive to do those things that are short sighted that can give you a huge payday because you don't need the payday and you'd much rather play for the very, very long term. Someone told me, I don't know if it's true or not, that John Dor maybe hasn't sold a single share of Google or Amazon yet. There's something that may or may not be true in that statement, but I think it really speaks to the fact that John had obviously significant success at Kleiner over the years. And like his point of view on Google and Amazon is these are going to be compounding value creators forever and was able to kind of hold on to that stock and look at what that decision did for him. Whereas someone who only had a couple million dollars and wanted to upgrade their lifestyle to a yacht in a private plane and a nice home and so on would be like, you know what, I'm going to take this $500 million check and move on with my life. Yeah, I think that's where the bifurcation happens. You end up with the extraordinarily hungry, motivated, high value crating, early stage funds, and then you end up with these massive post-economic folks. The middle ones are the ones that maybe have the diminishing returns.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that's true, right? And so Sequoia Founders Fund, this is where I think Mark Andreessen's point is quite fair, which is this bifurcation in the market that's underway, which is the folks that have made it, they've gotten to the top of Mount Everest. At this point, I would argue those funds are post-economic, and now they can operate more rationally over the long run, like Founders Fund, like Sequoia, like Andreessen Horowitz, whereas, you know, the mid-level funds, the $600 million third fund or second fund of four, four, five folks, GPs, they're like, look, if we could take a $200 million carry check, we'll take it versus waiting another seven years because maybe they haven't had that big payday. They don't own that $150 million home that Mark Andreessen owns in Malibu, right? So there's an incentive for them to want to take the distribution check and exit the position. And I see this a lot with my friends. And it's funny because I see different behavior with friends of mine that are at different economic strata. And there's an infinite number of economic strata I've kinda realized, both directions, by the way. And as you move your way up that economic strata to the top.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Massive distribution check. The marshmallow is on the table. I'm probably gonna wanna take that sale at billions of dollars and get that marshmallow. Think about Google selling to Yahoo for a billion dollars. The VCs might have wanted that. By the way, I'll give you another good example. Applied semantics, which was acquired by Google in 2003 or 2002, which became AdSense. The founders got equity in Google. And I think still may own a lot of it. And the founder ended up being one of the top five holders of Google stock when Google's IPO happened in 2004. It's listed in the S1, Gil Elbaz.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“That is a bit of a disincentive for LPs. And I think there's, Harry, you'd know this more than I would, but I think that there's been a little bit of a trend lately in new managers of folks trying to find new managers that are going to be, you know, I think hungry and proven themselves in one way or another versus, you know, being on the ninth fund. Now, all that being said, that doesn't mean that you can't create a great business at scale. So the business you're creating as a craft in the early days, hands-on workshopping with CEOs, et cetera, versus like a company that a firm that now has 50 employees and is distributed across multiple funds with billions of dollars, you know, the way that you would operate that larger fund is probably quite different. And it doesn't mean that you can't scale and succeed at scale. But I think that there is this natural incentive model to always raise more capital and make more fees. One of the biggest flaws I see, the other one, everyone talks about having a solution to, but I don't believe it, which is this idea that we're all kind of deep tech or and or long-term oriented. At the end of the day, as you and I know, if you are in carry on a fund and you can sell a business and get a”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, look, the capital under management incentive, the asset under management incentive is true for all asset managers. It is a natural incentive to want to raise more money, get those juicy fees every year. And I'm not saying that's a bad thing or that the business is evil in that sense. I'm just saying that there is an economic incentive to do that because, you know, if you put a marshmallow in front of a kid and say you can have this now or you put three on the table and say you can have this in an hour, I think most kids are going to eat the marshmallow. So, you know, my incentive would be to have more capital under management wait for the marshmallows. So what happens when you raise more fees? Let's say you're a fantastic board member. Now you have to raise more fees. You're either going to hire people that aren't as good as you to come and be your partners because, you know, you need to have more people sit on boards and make more investments. So the quality of the investments will go down. The quality of the support you can provide goes down. And the way that your time gets spent is now diluted because you can't sit on all those boards or you're going to have to sit on more boards, but you can't sit on all of them. So ultimately, like I think that that incentive creates kind of a model.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“We have to spend not just our capital but also our time. And so we don't want to have lots of little bets sprinkled around where people are making calls to us and wasting our time for little things. We want to make sure that when we're spending time, we're adding value and it's in high conviction bets. So we have a, you know, I'd say about a dozen businesses today. We're not trying to increase the rate of new business creation. We're trying to increase the overall absolute value creation for our portfolio of businesses. So in some cases, that means spreading new bets into new businesses. In some cases, that means giving new existing businesses capital to grow. In some cases, it might mean making one giant bet on one very sure, very high growth thing. We're really pretty flexible in that sense.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I think in terms of absolute value creation across a portfolio, if I have a business, let's say the business is a golden goose and I just feed the golden goose capital and it makes eggs that are worth 10 times as much as the capital I feed it, I should put all my capital into that golden goose. If I have high certainty and high value accrual by applying a concentrated amount of capital into one bet, maybe that's what I should do. Someone you've had on your show, I don't know if you've talked about it publicly, from probably the top performing venture fund or second or third top, probably top performing. I don't know if he's talked about this publicly, but basically their point of view at this venture fund is they should be making one massive bet each fund cycle. Like they should take at least a quarter of the fund. And yeah, and basically making like one big bet on something that you have high conviction on. So, you know, I don't think in terms of like dribbling out dollars across 50 companies and then hoping thousand flowers bloom, we spend a lot of time at the production board, right? We have about 25 people at our holding company level, mostly in operation. So we're mostly helping build these businesses. And so”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“So, our objective is not business value creation. So I think about absolute value creation across our portfolio of businesses. At any point, if the business value creation rate starts to diminish, meaning like each year or for the next couple years, we don't think we're going to be able to get the value on this thing up by another 50%, 100%. Maybe we should turn it into cash and reinvest that cash in other projects.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Us in the form of debt, and ultimately that debt's going to either dilute you or it's going to have to be paid back before you guys can make any money. And so we didn't want to just keep funding the businesses continuously for no additional equity. And we also didn't want to just keep diluting the team. So we set it up as a convertible note structure. So after we put in our initial tranche of capital, the continuous capital we put in after that is in the form of converts. And then everything gets resolved when we raise outside money. So at that point, it's a question of what do you do with the convertible notes and so on.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Businesses succeed, right? No room for failure. So we've got to make sure that we're really clear around what are the gates. Okay, what are the options if that gate doesn't work? Where are we going to go? We sometimes have very complicated charts on like, what are we going to do if this doesn't work and what are we going to do if this doesn't work? And so we fund against that. And the way we capitalize the business, we'll typically own majority of the equity when we start, reserve the rest of the equity for the team. And then we actually fund the businesses in those stage gates on a continuous kind of convertible note cycle. So we'll just keep putting money in. And ultimately, you know, we'll be able to get that money back out as the company raises a big outside round. So that way the team feels the pressure of the additional capital coming in, right? One of the things you don't want to do is create a Google X situation where everyone makes 600 grand a year and they eat at a fancy cafeteria and they drive their Teslas to work and chill out. And if the business doesn't work, they hop onto the next project. We need the teams to feel like this is a business. If it works, you're going to be very successful. You're going to do really well. If the business doesn't work and as you take on more capital, there's going to be pain. The pain is like, look, you're taking on all this money.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, how risky is that? How much time? How much money are we willing to put against hitting those milestones? And then we have a timeline and a set of goals and work with the team to help them achieve those milestones and those goals. At that point, like, let's say we put in $5 million into a business and we say, look, if we can get this thing built with that $5 million, this company's worth $150 million. And so we can start to do the calculus on does it make sense to put that $5 million in versus like if it's going to take $15 million and you're only going to get to $175 million valuation, you're like, well, let's just do the five, not the $15. And so you try and assess like what's it going to take to achieve different outcomes for the business over what period of time and what amount of capital. And that's how we start to make our kind of decisions. Then we typically take those milestones and we stagegate the capital. So, you know, we'll say like, look, we've got to achieve certain stages along the way to make sure that we're not just going to end up burning all the money away, right? This isn't like a VC where you give a founder a bunch of money and you hope that he does well with it or pivots away into something else. We're very actively managing and working closely with the teams on making sure these.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so for each of them during the RD phase, we're typically trying to demonstrate what we call a proof of concept or a prototype, which is like, is this technically feasible? Going back to that first principle point I made earlier about like, can you make a product? In the software world, that seems like the simplest thing and you move right past it. It's of course anyone can write a website or an app or whatever. But in technically difficult businesses and life sciences, in synthetic biology, the kinds of areas that we're operating in, you need to actually prove that the science or the engineering works. So that's a proof of concept or prototype cycle. During that phase, we're just funding it. And, you know, usually there's a budget against it. So we'll say, here's how long we think it'll take. Here's how much we're going to fund against it. Here are the things we're trying to prove. Once we prove them, then we're going to start a business. Before we start a business, we build a milestone and budget plan. So we say like, look, here's how much it's going to take to achieve these outcomes in the business. Here's what those outcomes are going to do from a value creation perspective. Like if we can do X, this business is going to be worthwhile. If we can do, you know, A, this business is going to be worth B. And so we kind of ask ourselves the question.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Think about a funnel. The funnel being like, here's all the research that's going on in the world. And I would say that that funnel needs to be a big wide vacuum. And there just needs to be a lot of ingest going on there. Separately, the prioritization needs to arise from kind of understanding where there are big problems that need to be solved. Kind of first principles for me is always you got to solve problems. What problems do you solve? Well, let's solve the biggest ones. Okay, well, what's the smartest way to solve those biggest problems with known knowns? Okay, well, what's the academic research showing us, you know, what's the technology showing us? What's cutting edge? What are things that other people haven't seen? What's non-obvious? And then that ability to answer that question is drawn from that wide funnel of science and academic research that we take in. And so we can start to answer those problem solving questions with a fundamental understanding of what's going on in science, a fundamental understanding of what kind of new emerging technologies might be. And then from a business model perspective, how can we apply them in such a way that can kind of solve this problem?”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Do is what people call deep tech. And so sometimes we'll just have RD once the RD de risks the technology, we start a business, and then after the business kind of builds their first product or proves something, then we go hire a CEO. And so there's a sequencing depending on the technical challenge of the business. So our work is quite different. We're typically not bringing in people that we start businesses with that are otherwise trying to be entrepreneurs. The scientists, the academics, the engineers, the researchers that we primarily start businesses with are not out there going up and down Sandhill Road with PowerPoints with their crazy idea. Their core principled people that have very strong interest in helping the world. They're very mission oriented, and they're very deeply technical. And so we can help them build a business and we can kind of be effectively the founder of the business with them. And then over time, bring in the right management team and the right support staff and, you know, build out a whole company around it.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“No, so that's not where we participate. We spend a lot of time in markets. The life sciences, food, agriculture, human health, markets that we start to know very well. We spend a lot of time with scientists and academics and researchers and engineers that are working on emerging technologies. And we read a lot of papers, a lot of scientific papers and journals. What we're trying to do is we're trying to identify scientific and engineering breakthroughs that can be applied to the markets in a non-obvious way to connect that dot, we try and bring the right people in to help build that business. So there'll be a research paper published, let's say, and some new discovery was made. We'll go find the best scientists we know with our concept on how can we take that discovery and build a new business or create a new business model. And that scientist and research team, we say, guys, can you run an R&D cycle with us if this works, we're going to start a company and you can be the chief science officer, the CTO, and then sometimes we'll bring in a CEO on day one, sometimes a CEO doesn't even show up for three years, depending on kind of, you know, the build cycle on the business because a lot of what”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I wasn't the biggest fan of when I invested my money in venture capital firms, all the fees that they took. And I thought that it created a significant misalignment of incentives that VCs are incentivized effectively to raise more capital and make more fees. And, you know, we all have plenty of friends that have built a great business doing that. And there's nothing necessarily wrong with it. But I wanted to be much more aligned with my shareholders. I also wanted to own more of the business. So I didn't want to make a 20, 25, 30% carry. I wanted to be the majority owner of my holding company. And then over time, a lot of the value that we're creating, I could kind of participate more meaningfully in and continue to be the central driving force of value creation. And also, I just don't think that there's ever an end to opportunities for building new businesses in the area.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“We're a lot like company, so we have a balance sheet. We raised some money from investors, we have shareholders. They all own shares in the company. I own shares in the company. And unlike a fund, it's not just committed capital. We actually take money. We put in a checking account and we hold it there. And then we can use it to do whatever we want. We run R&D cycles. We start businesses. Occasionally we'll make minority investments. But that capital is very flexible and it's primarily used for the building and operating of businesses that we're the majority owner in. But we do set up as independent C Corp. So they are standalone companies. we are the majority owner in those companies, but we construct a board. The people that work at that company all have options and equity in that company. And in many cases later on, we'll bring in outside investors into those individual companies. So even though we are the original majority owner and holding company that owns those shares, that owns those businesses, we do kind of sell stakes in those businesses over time as they need additional growth capital.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I will say there have been a number of examples where I've been offered the opportunity to invest in companies that I turned down based on price. As you've heard, I'm sure time and time again, that's really not the reason to pass on a company. If you believe in the team, you believe in the market, you believe in the technology competency, you believe they can move up that business value creation framework, you know, let the market set the price. David Sachs does a good job kind of framing this, which is like, look, we're not price makers, we're price takers. Like, you know, let the market set the price and we'll determine if the business is a good business or not. And if we want to back them.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Factors that are going to drive success. And in that case, they had room to expand. They had room to charge restaurants more. They had room to pay drivers a little bit less. Whatever the right way to balance that economic was, that was a function of some external force.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Know a lot of our businesses struggle with unit economics until scale. So I don't mean to diminish that point. So it is critical, though, to have a first principles, ground truth-based fundamental model on like how do you get to the unit economics, how do you get to the LTV to CAC, how do you know that these things can actually be delivered? In DoorDash's case, you can do price testing and you can price elasticity, like how much can our customers actually willing to pay? How much are restaurants willing to pay? And the delivery network may be marginally inefficient today, but at scale, the delivery network gets more efficient. I can believe that. And then based on what people are willing to pay and what restaurants are willing to pay, I can see that the unit economics work out. I actually went with the DoorDash founder last night. Funny enough, one of the things he mentioned to me was they do not think they would have as successful as they were if Travis was still CEO of Uber. You know, there was an aggressiveness that went out of the market that gave them pricing power and gave them an ability to compete effectively after Travis's ultra aggressive, you know, pushing everyone else out of the way by basically, you know, taking away any margin possibility. So there are also extra.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Business should raise as much capital as they possibly can, provided it meets their dilution or ownership criteria. But at the end of the day, the deployment of that capital within the business, I believe, should be phased based on a recognition of are you stepping up value across my very simple business value creation rubric, but anyone can have their own before kind of assuming that you're going to get there at scale. And we see this across the board. I'll give you another example. All the energy companies during the biofuels revolution, it was unclear if they were ever going to make a positive gross margin. I mean, just the second step in that, you know, technical competency, sure. Do customers want jet fuel? Yes. Okay. The next question is, can you actually make a positive gross margin? Well, the assumption is if we deploy $500 billion and wake up positive gross margin, you deploy the 500 billion, you don't actually make a positive growth margin. Now you just create a negative value. You know, we see this in different forms as people try and assume that they can make that leap. And really, if it requires a lot of capital to make that leap, I'm not sure it's really going to work.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I have a fundamental rubric for business value creation. It's super simple, but we could spend hours dissecting it. Number one is can you make a product? Technical competency. Number two is do customers want your product, product market fit. Number three is can you make a positive gross margin selling your product? Number four is can you deploy marketing dollars to acquire customers in a positive way, meaning LTV greater than CAC? The next step is, can you actually increase that LTV to CAC or increase your unit economics as you scale? And this is an important one that gets distorted in a lot of these cases. And finally, it's can you become a platform, meaning can you be multiple product or bring partners on so you get true leverage out of the network you've built between customers and suppliers in some form? Those step functions really do define value creation. The problem that you point out is that in a lot of cases the assumption is you're going to get to that next step of value creation with capital and it's not necessarily true. And then you're stuck where you completely fail on the next step of value creation and you actually create negative value for the business by putting too much capital too fast. So I would argue every”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Interestingly enough, I think that there is another dynamic which is playing out really meaningfully right now, which is the velocity of capital deployment. I would argue that Andreessen was the first to kind of make this statement.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“That the later stage valuations stick for a while, and that'll eventually taper off. And then, as you know, as I'm sure from all the folks you've interviewed, early stage valuations are very easy and quick to adjust. So everyone's like, hey, look, the public market is down 40%, enterprise SaaS at 100x revenue is not going to happen anymore. Here we're giving you a term sheet at half that price”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“What drove a lot of the inflation and pricing. It doesn't mean that businesses in technology today or technology disrupting older industries are fundamentally flawed. Rather, it's a resetting of the time horizon and the value creation cycle. And as a result, I think we see valuations come down in public markets first. Ironically, the valuations then come down in early stage second and later stage third. And the reason later stage third is because a lot of VCs, as you know, have marked up their investments and marked up their books of private companies significantly over the last couple of years with these later stage rounds and polluting values. And they don't want to take a write-down. So they're more inclined to say, hey, let's just keep pumping more money into these companies that we already put money into. Keep the valuation up. Make sure our books look good. Raise our next fund. And we've seen this over and over again just in the last few months as companies that have tried to go public via SPAC have failed. Then they've come back to the private markets and raised money at the same or higher valuation than the SPAC price from their own investors, even though the public markets already said you're not worth that. You know, you're seeing”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“No, I mean, look, things are very different today in the sense that historically technology companies sold technology to other businesses. Today, what we call technology companies are rewriting those other businesses across nearly every industry, we are seeing a tech competitor that is technology-led or technology first kind of reinventing the operational model of traditional businesses. And it's having a dramatic impact. I mean, look at Airbnb and hotels and Uber and DoorDash. I mean, you can go through the category list. These aren't restaurants. These aren't hotel operators. These aren't taxi cab companies. I think that there is a cycle that is associated with interest rates that asks the question, how far out into the future are you willing to look? So when interest rates are really low, you're forced to look out 10, 15 years to make a return because you're only making 1% on bonds for the next 10 years. When interest rates go up, you're like, hey, I can make 4% and invest in bonds for the next five years. Why would I want to look out past five years for whether or not I can make a return? And that's”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's definitely not the Rockstar Glamour show that I think it's made out to be for most people that aren't ever actually building businesses, particularly when I worked in investment banking, we had 11 people in my analyst class when we started. We were left with two after just two years during the dot-com explosion. And then I've just seen it time and time again that none of these businesses are a straight line to success. And we ended up during that period of time actually selling multiple public companies for less than their cash balance because the business models were so flawed, they were burning so much money. private equity firm vulture capital firms were coming in and scooping them up for less than cash. And I worked on fairness opinions for these deals. So, you know, it was a really interesting introduction. And then you go to the greatest monopolistic rocket ship economic engine of all time, Google, and you see how things can and should be done. And you learn a lot in that experience. And then, you know, you try and build things yourself and realize what does and doesn't work. And man, there's a million paths to success and a million and one paths to failure.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source
“I did my undergrad degree in astrophysics at UC Berkeley. I was in the Bay Area during the dot-com boom. You know, I was working in a government lab getting bored to death doing mathematical models. Meanwhile, I was reading the Wall Street Journal and seeing kids in my dorm make a million dollars on some dot-com startup they had built. And it seemed like a better place to make an impact in the world was to go across the bay and live in San Francisco and work in tech. So when I graduated in 2001, I interviewed and got a job in technology investment banking. I'd never taken a finance business or accounting class in my life. I'd only been a physics major. I played a lot of poker in college, so I guess that helped me get the job. And ultimately, the investment banking job led to me being exposed to hundreds of technology companies. And then I started working at Google in early 2004 and left Google at the end of 2006 to start my company, the Climate Corporation.”
2022-03-14 · The Twenty Minute VC · 20VC: David Friedberg on The Framework for Business Value Creation, The Bifurcation in Venture Today That No One Talks About, The Impact of Interest Rate Hikes on Venture and Step by Step; How TPB Incubates, Funds and Exits The Next Generation of Companie · IDENTIFIED FROM THE TRANSCRIPT · source