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Phil Black

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28
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2017-09-04
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2017-09-04
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1
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  1. “Yeah, I was thinking about that. I think the most recent one is this company called Oreco, which is out of Ireland, and they are in the personalized sports medicine for initially elite athletes, but also it'll come down to those, you know, down to the weekend warrior, if you will. And I think the part that was interesting to us was this idea that you could use a reference set of blood work and through some magical algorithms and artificial intelligence applied to blood and medicine data, they can come up with a predictive model for if you're at risk for injury like a hamstring pull, and they can help with rest and recovery if you've been hurt. So there's some fascinating work that is coming out around health data. And Areco just happens to have, we thought, some really interesting algorithms and reference blood work for athletes. And I think more and more people...”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “Exactly. It's kind of like, what? You got to be kidding me. They could have had that for a dollar. They just would have waited for you. So the unicorn status, one of our investors said this is kind of funny. He's like, oh my God, I've got so many unicorns in my extended portfolio. He's like, I just hope that there's no virus that overcomes all the unicorns out there in the field because that was going to have a big net value decrease for them.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “Yeah, so I had a Twitter post about this nine months ago, and I said my three favorite unicorns that I think are in trouble were at that time jet.com Xenithitz and Magic Leap. And then Walmart goes and buys Jet for $3 billion. So I thought I just thought the world was so unfair when for that day.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “Well, you know, my partner Omalik is a good blogger, so you should always listen to him and follow him on Twitter because he's got all the good stuff. I really like Dan Primac within Venture Capital News and everything. He's now at Axios. Yeah. And then what else have I been doing? Well, those are the two for sure.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “So, my biggest mentor for sure was the gentleman who hired me out of undergrad, so his name is Greg Avis, and he was at Summit, and I worked for him for six and a half years the entire time. And to this day, he's been a mentor to John and to me, because John was also at Summit, and he's just been a fantastic person for me in my life.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “So, when I was growing up, it was where the red fern grows that really spoke to me, and like I said, my southern Oklahoma roots, you move on to bonfire of the vanities in the 80s, which was all the rage around excess and money in Wall Street. And then I've mellowed in my age here, and one that I just recently loved was the Patty Hearst book and just all the history of San Francisco and the story behind that. So a little kind of cross-section of as I grew up”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “Yeah, I care less about money invested and we care more about efficiency and for us ownership and being a significant partner for those founders.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “So, we care about ownership and the underlying company, not so much about, oh, I've got 10 million in or I've got 2 million in or I've got 22 million in. So our thesis is a small to modest size check for our first investment, you know, a significant minority ownership. And then you just stay with that company through their life cycle of investing. So, you know, we start small, but we don't think small. That's what John likes to say. So, you know, we've got some companies where we've got 10, 15, 20 million invested, but it started off as a $12 million check or even a half million dollar check.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Rally the entire firm around a common ideal and a common investment thesis that is, I think, very powerful for us as a firm as we have more capital.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Well, you kind of go back to your first principles, and what is it that we started true based upon? And that was based upon the idea that the things that we care about are founders going after big, what we call blue ocean markets, so not yet formed necessarily, and that we're raising an amount of money at a price that we were comfortable with. Those three things haven't changed. So today we're still looking for an outstanding founder or founders, usually one to four, going after a big market opportunity. Now, the markets are different. We're never going to go after another fitness counter, a step counter kind of idea. That's old and in the market now. But in 2008, Fitbit was a really intriguing investment opportunity to us. So we just have to stay current with kind of what's on the horizon. But the first principle upon how we want to go after those investments has not changed. And I think that allows us to”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “Right now, in today's funding market, to me, the gap that has been present for a while has been what we've referred to as the rational B round. And that historically has been kind of a three to five, five to seven million dollar round of funding. The company has made good progress, but they're not scaling rapidly yet. But, you know, they've got customers, they've got product. It hasn't reached critical mass on the revenue scale yet. And so that's a tough round, I think, to get done because lots of people want to do the first little bit of money in something and lots of money wants to go to the companies that appear to be the sure thing. But it's that good size amount of capital into something that is still kind of fairly risky, but it has been de-risked to a large degree because they can show you customer use cases and references and the like. But that's a harder round to get done, I think.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Of different corners of the world, and many of those corners are here, obviously, in the Bay Area. But I think that more capital for the system to start businesses is probably a good thing. We will never be able to do all the early stage seed deals that are out there, nor should we. And so I think it's fine. We as a firm, though, have to kind of stick to what it is that we do best. And we as a firm have a set of beliefs and offerings to the founders that come to us that I think make us”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “My co founder, John Callahan, and I, um, when we started out in 2005 timeframe, I like to say that if you start a brand new firm, you need to be able to answer two questions, one which is, why in the world does the world need yet another new venture capital fund? And secondly, if you answer that question, then why are you all the ones to do that? And for us, the answer to question number one was that the angel money had kind of dried up because so many people had just been burned not too many years ago on all their internet.com bus stocks. So they didn't feel very rich. And the large firms had gotten larger and they had large initial capital requirements for their checks. So we were able to have an institutional fund at $165 million. And we could say, whatever size check you want, or Mr. Entrepreneur. And that was for us, you know, that $250 to $2.5 million. And that was kind of unique back then. Fast forward to today, there are tremendous sources of capital in lots.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “It turns out we don't have very good senior leadership, and we need to make changes, or we're not going to make any changes, but we have bad senior leadership. That's a horrible idea.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “Again, it's kind of case specific. I think it is, so I would go back to, so I talked about the four major risk categories, right? So there's market risk, there's product risk, there's execution risk, which the proxy for people and the senior team. And then there's financing risk. So by definition, if you're doing a bridge round, you've got financing risk. So the other question that becomes is, is it because your product is not working or is it because your market hasn't evolved yet? Or is it because you've got team members who are not doing the job and shouldn't be there? And so I would say of those issues, if it really is, you know, it took a little longer for the product, but it's awesome. We just need three more months before we can have that customer traction. I think that the bridge round is probably going to be fine. If it's, well, we need six more months because the market hasn't evolved yet and we think it's going to evolve by that time. That's probably not a very good bet. And if it's, well,”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “If you're unable to do it now, the risk is that money just extends the issue. It doesn't solve your problem for you. And so I think that's the concern that most investors have around bridge rounds of funding.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “Yeah, I would say the difference to me there that it was never a bridge note per se, but there was this, you know, we did a round and then we did what I would call like a little stub round, soon thereafter, which allowed him to do a technology buy that was important. But I think the one, so he never really had that as that appear or not kind of problem. But what Mike is talking about really is, is you put in additional money, and what are you funding towards? By definition, the bridge round probably means you're going to run out of money. So you either have to raise more money or you have to sell your business. And so if the idea is that you're going to do this bridge round and you're going to get to the next round, then I think you have to be really clear about what is it exactly that you're going to be able to show that is going to unleash this additional capital for you in three or six months that you can't raise right now. You're selling the future on every round of funding.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “Retrospect, when they don't work out, that's what you call them. And when they do work out, you're like, oh, that was just the bridge round to your next up round.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “Smaller, you know, round at that time, which may be, in fact, I think a better story for you as you then make progress and go out and read your other rounds after that.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “There's a Goldilocks moment of just the right amount of capital, right? But I think that that's a little bit case specific, and each founder kind of has to find their own sweet spot of what they're comfortable with. What I like to talk about is from a fundraising standpoint, you want time to be your friend. And when it is not your friend and you're trying to raise capital and you're trying to do it in a rushed frame of mind or more limited data than what you want, that's a bad position to be in as a founder. So you need to raise enough money that allows for you to have that time where you can then go and raise additional capital at some format of an uptick that you're comfortable with. And the problem with saying, well, we'll just raise a whole bunch more on the first round is that it's human nature. You don't divide that number by 36 and spend accordingly. You tend to just divide that number again by that 12 or that 18. And so then you're spending a lot more money initially than what you maybe would spend if you had a”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “Yeah, I think the number is a little bit of function of the time, right? So for us in 2005, 2006, our real sweet spot was a $250,000 investment to $2.5 million or so. And that was, we felt like that was the right number to probably have somewhere between $12 to $18, maybe 20 months or so of runway to be able to prove what you were attempting to complete. The decreasing cost, I think what it unleashed is a whole raft of new founders who didn't have to go through a three-month excruciating process to try and get $5 million to then have to go out and raise another $5 or $10 million, 12 months later because they'd spend all that and all the capital that had been used on what is now a much more expensive resources in the past. Those resources today are much, much less expensive. To me, there is probably, you know,”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “I think you just kind of have to look at it as within the holistic view of what it means to be a venture capital fund manager. So there are major blocks of time that you have to spend on that, right, which is you have to talk to your investors, raise your capital, and then there is the investing phase, which is probably in the two to four year time frame. And then there is the working with all of those companies as they succeed or fail. And then there is the liquidity element, the exit element from those companies. So I think as a fund manager, you have to be cognizant of”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “And quarterly reports and annual kind of investment return metric that you're showing, those were really important days for me as a fund manager.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “I would say that managing that $5 million fund or $4.6 was probably the most seminal moment for me in my venture capital career in the sense that you got a front row seat of what it means to be a fiduciary of your investors capital and having to make those investment decisions and living with all of those from start to finish. And then I think the part about I didn't have a lot of money, obviously. So I was kind of drawn to companies that were more interested in those smaller rounds that could get them started and then based upon a lot of traction in the market that could go out and raise further capital. So it was a really important time for me to kind of become that investment fund manager. Everyone talked about being an investor in X, Y, and Z in company. You can invest in any number different company that you want, but kind of having a fund and with returns.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “At the time that you had all this increasing money coming into the market and then there being no liquidity, it really underscores for you as an investor that one of the four major risks of venture capital investing is financing risk. And financing risk is one of those things that you don't notice until it's right there up on you. And then as a company, you can be in trouble if you're exposed to that kind of financing risk at the time in that market. So to me, the contrast was tremendous amounts of capital. Everything could get funded to nothing could get funded. And then there was this capital efficiency movement and kind of by necessity, as well as the decreasing cost required to start businesses, which started happening in that 2,000 timeframe. I had a very small angel fund. I now refer to it as the first super angel fund, although I would have never thought of that at the time. How big? Oh, it was 4.64 million dollars.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Everyone wanted to invest in it, and all these companies were able to raise increasingly large amounts of money. And then they couldn't. And there was no money. There was illiquidity in the market. And so you had this horrible ratcheting down in fairly rapid fashion with all these companies having to make cuts and laying off employees and a lot of them shutting down.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “Yeah, so the dot com bubble is often thought of as the crash of 2000, the lead up to it was the really exciting times within technology investing. And everyone kind of cites the Netgape financing and the IPO as really kind of setting it off. And I think what you had happen within the industry is, oh, well, if so-and-so is worth X, we are worth 2x or half X or 5x. And so everyone started using these benchmarks. And then you just kind of ratcheted yourself up to completely ridiculous valuation levels. And then, of course, you had the ensuing crash in March, April 2000, where that's when it kind of started going down. But, you know, the times from 1996, 1997 up until that point were really heady days within technology. And there was no such thing as financing risk in the market out there.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “Sure, I was an undergraduate out of Stanford University. Originally, I got there via my Oklahoma route. And when I was in undergrad, I had this idea that I was going to work in venture capital, investment banking, or consulting. And all three of those were the exact same thing to me, which of course that is not the case by any means. But when you're 20 years old, you don't really understand the differences of both things at the time. And so I applied for positions to all those kinds of industries, and I got one job. And that was with the group summit partners. It was at that time about a three and a half-year-old new venture capital firm that I joined their analyst program and stayed there for about six and a half years and then went on to do other things within staying within the venture capital world.”

    2017-09-04 · The Twenty Minute VC · 20VC: True Ventures Founder, Phil Black on 4 Major Risk Categories for Startups, Why The Funding Gap Is At The "Rational B" Round & Why VCs Must Start Small But Think Big · IDENTIFIED FROM THE TRANSCRIPT · source