YouSaid · the spoken record

David Waxman

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27
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2017-11-29
most recent
2017-11-29
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1
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  1. “So we recently invested in a company called Velocity, and Velocity has created a huge catalog of human motion, I think they call it the human genome of motion. And they can tell based on the motion sensors of your phone what you're doing at the time. So as you know, the motion sensors in current mobile phones are extremely sensitive and extremely precise. And so these guys have had people going up and down escalators and pushing shopping carts and grocery stores and driving around. And they can distinguish between all these different actions. They can tell if you're in a grocery store, they can tell whether you're pushing a cart or standing in line. If you're in a car that can tell whether you're the driver or the passenger. And obviously this has applicability in mobile advertising, but it's also more broadly applicable in any app where the context of what the user is doing matters. And as all of these apps get smarter and sort of more personalized, that context is really essential.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Absolutely. You need to know at any moment a CEO needs to know her cash zero day monthly burn and projected revenue for the following month.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “You've been prepped. One of my pet peeves. Finance and accounting are totally different disciplines. Finance is completely prospective, and it's super important for startups. It helps guide where it's going, it helps you model the future, helps keep the company on the right track. Accounting is retrospective. It's all about just sort of making sure that the money ended up where you thought it was supposed to end up. And while it's essential, it's not as fundamental to the business planning process as finance.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “I've been there. You know, I read strictly VC pretty regularly just to sort of get the news. And I'm a nuzzle user, so I get a lot of recommendations from my network. I listen to a lot of podcasts, but I don't have any other daily reads.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “And make them feel bad. But there are tons of great academic institutions that feed this ecosystem, and now more people than ever are looking at LA as a place to move to, which is terrific.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “Oh, there's a real tech ecosystem being built. There's so much going on here right now. And of course, people think about LA for the Hollywood and the fashion and the media businesses that have always been here. And there's a great reason that companies like Snapchat and Tinder and the like are being built here. But there's also both a legacy of really hard tech and a lot of really hard tech companies that are growing here all the time. So a legacy industry like aerospace, which has been here since probably the 30s, has new life with SpaceX and a bunch of drone companies. one we're invested in called AirMap. And VR was born here with Oculus being born in part in a USC lab and also in Irvine. And we have a whole legacy of Visual Effects Studios that I think is contributing to the talent in that space. So there's really, as the tech ecosystem here grows, it becomes more rich and more diverse. And we're able to tap to the incredible talent we have in the universities and the LA basin. We have Caltech and USC and UCLA and Harvey Mudd. And I'm sure I'm going to leave somebody out.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “I try to be aware of all the cognitive biases that affect BC. So let's take loss aversion. It's very painful when a company fails, when it feels terrible, and LPs don't like it, and I don't like it. But then I try and remember that a 1x loss is the same as the difference between a, say, a 12x or a 13x gain. Emotionally, they feel completely different, but financially, they're the same. And if you look at the data, the best VCs have slightly higher loss ratios than the middling ones because they're not afraid to swing hard and take more risks. And so actually right now our loss ratio fund one is extremely low and it worries me. I want to make sure that we are taking all the risks that we ought to be.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “I refuse to pick a favorite book. I read a lot and I love a lot of books, so I'm just going to go right against it. I'm going to be a contrarian right now. But a book I recommend you read is The Last Lion, especially because you're English. It's a three-volume biography of Winston Churchill. And he's an amazing man. He had real flaws, but without him, we'd probably be having this interview in German, or more likely as a Jewish person, I probably wouldn't be here at all. And it's just astonishing to think of how much one person can change human history. But also he had just an amazing lifespan. And this book, Churchill, grew up in very Victorian England and died, I think, I believe Kennedy was president when he died. So he just spanned this incredible period of human history and was part of much of it. So book really not only illustrates him, but it illustrates those times and how they changed throughout those decades.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “I haven't thought about that maybe as much as Samil. We haven't gotten to the point in any of our companies where I would want to sell our steak prior to an exit. I think that there probably are some sensible situations that probably if I were an Uber now, not to pick on them, I would be ready to be liquid and figure that maybe in the next few billion dollars, I could catch somewhere else.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “There with you for the duration, whether you like them or not. And it's nearly impossible to. There's some highly public cases right now where people are not happy with their investors. It's impossible to get them out. So before you get into a divorceless marriage, it's probably worth doing your homework.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Well, I think you need to do what we do to them, which is to figure out, you know, to talk to references. I think that's really important, talk to off-record references, talk to a founder who's in their portfolio who has failed or done badly. And, you know, you have to discount for maybe some hard feelings, those processes are never smooth. But, you know, it's easy to be a great investor. As I said before, that it's easy to be a great investor when things are going up and to the right. When you see someone's true metal is when things are going badly, when things are scary and difficult. And it's important for founders to know what they're dealing with when they get into that situation. And one way to do that is to find someone who's been in that situation. Asking a lot of sort of detailed questions about their limited partnership agreement or anything like that. But it's really just getting to know, first of all, what their intentions are with regard to following on, but also other founders' experiences in good and bad situations. It's crazy because it's a marriage that is very, very hard to get out of, as you know. When you take in an investor, particularly that first A round investor,”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Yeah, absolutely. I think this is another maybe longer conversation, but I think there's a big asymmetry in how much diligence investors do to companies versus how much companies do to investors.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Yeah, well, nearly every LP I talk to wants them, but certainly the family office and high net worth kind of LPs, there's a lot of appetite out there for co-investment rights or the ability to come in and take the pro rata right. I think we certainly never give them as a contractual right because once again, back to the founder, they know me, right? They know my partner. They know my Austin, our associate who works with us. They want us around for a reason. They don't necessarily know our LPs and they don't know whether they're going to be good investors or difficult investors. And so while I like to make these opportunities available and have, we have had an LP invest in one of our portfolio companies, it's really a deeper conversation and it's very situational involving the founder getting comfortable with that LP as an investor on their cap table.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “Yeah, it always shocks me, but founders are rightfully, you know, they want to get through the process. Often these are big name, great VCs that they really want to get in. And I understand how much pressure they feel. But I think that they underestimate the power of the situation that they're in. Because when one of those firms really decides that they want to invest in you, it's not, as you say, it's not a couple percent that's going to push them off.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Think there's a couple things to do to mitigate it. One is think through the pro rata rights as you're giving them out early. So there's a thing called major investor threshold, which is tunable. People who invest less than the threshold often don't get pro-rataites and people invest more than it do get pro-rataites. I think you can tune that up. So you have fewer investors who have a contractual right. And then I really think that founders can push back a little harder on the A-Round investors. There's a lot of folks who say, we just won't do it. We'll walk away if it's less than 20% or 19% or whatever their number is. And I think a lot of times they won't actually walk away. I think a lot of times you can push on them a bit and say,”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “And all of those investors have models that require that they follow on. And then there's a newish phenomenon, and I think we can sort of thank Chris Saka, where ProRata rights are sort of viewed as a separate asset class, an additional asset rather than just a means for a fund to protect his position. And so it's so easy these days to form an SPV and find there's so much money out there, find an LP who wants to fund it and invest directly. Early investors who normally might pass on their pro rata rights or just let them go after a certain point because they've had enough for their fund will want to hang on to them. And at the end of the day, I don't know if any of one of these forces can be held responsible or to blame, but it's tough for founders, and I keep seeing it over and over again that we have these difficult transitions from the seed period to A and beyond.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Why? Well, I keep seeing situations where founders are put in this terrible situation of trying to do right by their early investors and respect all of the contractual rights that they signed up for and new investors demanding minimum ownership thresholds. These founders are forced to either screw over their first investors or strongarm them, maybe walk away from a great A-round investor who they really want, or take more money and dilution than they really need. And none of those are really good answers. And I don't think that there's anyone who's right or wrong here. I think there's several forces that compound to this problem. One is that these ownership thresholds are stricter than they used to be. So for my last startup, which we raised our A round in 2006, so over 10 years ago, battery ventures and index ventures co-led our A round. You almost never see that anymore because I guess their thresholds were less strict then. And then the problem is compounded because you have all these new layers of professional investors like me, but now you have pre-seed investors and seed investors and some like bullpen who specialize in post-seed.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Something that I've noticed lately that's become kind of a mess, and it's probably worth a whole different podcast, which is that pro rado rights have become kind of a mess.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Yeah, I don't like party rounds either. I liked for the whole team to be strong, right? The team that's operating the company and the team that's investing in the company. And that's not to say that there aren't strong investors who are smaller investors or angel investors. But when the company encounters challenges, sometimes an investor group really needs a lead because they need leadership. It's very, very easy to be a good investor when everything's going up and to the right and the founder is doing all the right things and they're sort of on their own and building the company. But when things go wrong, when unexpected things happen and someone needs to step up and say, create a bridge, if there's no one who is in that leadership role to pull everything together, often it doesn't happen and it's bad for the investors and it's bad for the founders.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, I think I can't quite remember, but I'm almost sure that the first round of joy mode was an equity round and it was led by Homebrew. And I think all of my peers and me believe that equity rounds are much better than convertible notes. There's definitely a place where convertible notes, there's a real bridge situation where you just want to have a few more months before you raise or a little bit of buffer before you raise. There's also that 500 grand sort of grab and go idea where you're just getting started. But when you get into a multimillion dollar round, I think that convertible notes make absolutely no sense at all. The reason that people use them is because they're supposedly easier and quicker, but the reason that they're easier and quicker is because so much stuff gets left unsaid. There's just many, many things that are left undefined, like board composition or founder vesting, or there's all kinds of things that are just left for later. And it can go either way. It's not necessarily founder-friendly or investor-friendly, or it's equally unfriendly to both because you never know how these decisions are going to”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Mobility, wanting to having more job flexibility, and wanting candidly to be less tied down to stuff. And that makes perfect sense to me. So I believe, you know, it's a big swing what JoyMode is doing. But if they win, they're really taking on the very idea of ownership. And there's nothing big than that.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “It's much easier to be in a situation where boats are rising than boats are sinking, right? One thing that helps is that if the founder can articulate a real trend that is growing, and I believe that it's growing as well, we have, we're invested in a company. It's a terrific company called JoyMode. And basically the founder, Joe Fernandez, who was the founder of Cloud, experienced guy, really great team of investors around him. And he's basically enabling people to have experiences by not owning the things that they need, that they might need to have those experiences. So you want to go camping or you want to have a movie night at your house, or you want to have a snowplow. He's got all that stuff and you can have it come to your house and you can have those experiences. I guess snowplowing might not be the best example, but you can go camping without necessarily having all that stuff in your garage like an old guy that I like me has. And when he talks about the business, he talks about a whole zeitgeist of people wanting to own less about his generation and the generation after him, wanting to own less, wanting to have more.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “Sure, obviously the market is incredibly important. There's market product and team, and it's essential to figure out if there is a real market for a product and a company's ambitions. But it's really, really hard to get the magnitude right. I doubt that if you went back, and maybe some are revising history, I don't know, but I doubt if you went back to any of the investors who looked at Uber, I doubt any of them imagine that it could be bigger than the black car industry. And maybe a few imagine that it could be as big as the taxi industry, but I'm certain that nobody saw the magnitude of what it could become.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Weird industry because it's super subjective and it's super objective, right? What you do every day is very subjective, especially at the early stage. You're meeting people, kind of trying to judge them and their motivations and what they plan and the sort of delta between what they're showing you and what's actually going to happen. And there's all this stuff. There's a lot of feel involved. At the end of the day, you have to deliver a single number. And that's what gets measured, you know, maybe two numbers, the return on cash and the IRR. But thinking through how those things translate to one another, I've spoken to so many smart people. I know a lot of VCs and a lot of really great VCs and everybody has their own slightly or sometimes extremely different take on how to do that. And that makes me think that it's a craft. It's seeing the difference between, say, how a highly concentrated VC goes about his or her work and how someone who's got a much broader portfolio. It's a very, very different approach to getting those same returns.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “Well, that's been a bigger step candidly than I probably understood when I got into it. It started pretty informally with my partner Gil Albaus and I investing as sort of an investment club, just us, called 10110 Ventures and decided that we should raise a fund and we raised our first fund in 2014. And I've learned a whole lot about how much of a craft it really is. I never appreciated when I was a founder all of the things that happened on the other side of the check, on the other side of the VC. And I'd heard about LPs but hadn't really spent much time with them other than at a few investor meetings and had to think really hard about things like portfolio construction and return as a portfolio and our brand as a company. And it feels a lot like building a startup again.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “As an investor? No, I mean, I try. You have to realize once again to this analogy of the grandparent, you have influence, but you don't have control. It's right. It's not your baby. The founders are in it every day from morning to night and sometimes morning till morning. And you're not there every day. So it's really theirs. And it's important to have the perspective. And I think it's helpful to have the perspective and be able to point out when something's really going into a direction that's obviously bad or one that I've seen before be bad. But I try and keep that in mind. I can't operate every single company in the portfolio and I only know so much. So whenever I have that urge to sort of dive in, I step back and really try and think about whether I'm doing the right thing.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “When I was a founder, I had this cycle and I repeated it several times, which is I'd go into ultra focus mode for several years when I was doing a startup. And I basically wouldn't talk to anybody outside of my immediate family and my colleagues. But after the last night, I made a real effort to get out there and meet people and participate. And the LA ecosystem was really picking up. And I judged hackathons and I went to meetups and I became a more active member of the community and also became an angel investor and advisor. And I loved it. I was surprised by how much I loved it. I heard someone say once that it's like going from being a parent to being a grandparent and I'm not sure I should say that on the radio because it makes me feel a little bit old and for the record I'm not. But the analogy really speaks true to me. You care so deeply about the companies, but everything is a little less emotionally charged. The old thing you have the baby but you get to give the baby back. Like I get to really dive in with these companies, but when it's the end of the day, I go home and sometimes the founder is there all night and I empathize with that person, but it's also nice to not be that person. I appreciate it.”

    2017-11-29 · The Twenty Minute VC · 20VC: Why Convertible Notes Are Ridiculous, Why Party Rounds Are Bad For Both Founder and Investor & Why Pro-Rata Rights Are A Mess with David Waxman, Founding Partner @ TenOneTen Ventures · IDENTIFIED FROM THE TRANSCRIPT · source