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The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch

The Twenty Minute VC (20VC) interviews the world's greatest venture capitalists with prior guests including Sequoia's Doug Leone and Benchmark's Bill Gurley. Once per week, 20VC Host, Harry Stebbings is also joined by one of the great founders of our time with prior founder episodes from Spotify's Daniel Ek, Linkedin's Reid Hoffman, and Snowflake's Frank Slootman. If you would like to see more of The Twenty Minute VC (20VC), head to www.20vc.com for more information on the podcast, show notes, resources and more.
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Now displaying: January, 2023
Jan 30, 2023

Hunter Walk and Satya Patel are Co-Founders and Partners @ Homebrew, one of the leading seed funds of the last decade. Following 10 years of stellar returns with investments in the likes of Chime, Plaid, Gusto and many others, they decided to not accept any further LP capital and to only invest their own money moving forward through Homebrew Forever.

In Today's Discussion on Homebrew We Breakdown:

1. ) The Foundings of a Great Partnership:

  • What was the moment when Hunter and Satya decided they were going to go out and raise their first fund with Homebrew I?
  • What are the core principles that all founding partners need to align on before they start a firm together? What questions should they ask of each other?
  • Why does being independently wealthy coming into a partnership make the partnership easier and more efficient to operate? What changes when the partners have money already?

2.) What Changes When Moving From LP Dollars to Personal Capital:

  • Why did Hunter and Satya decide to not raise any further capital from external LPs?
  • Asset allocation-wise, how did they determine how much is the right amount to set aside for the first 2 years of investing? How many investments do they want to make with that cash?
  • How does investing their personal capital change their deployment pace and cadence?
  • How does it change their approach to reserves management and follow-on financing?
  • How does it change their approach to pricing? How price sensitive are they today?

3.) Analyzing the Seed Landscape Today:

  • Why do Hunter and Satya not think that a $100M seed fund is enough to properly execute a world-class seed strategy today?
  • Who is their competition with the new strategy? How does it change their relationship with large multi-stage funds? How does it change their relationship with seed funds?
  • Do they agree that the last generation of sub $20M micro-funds will not raise another fund in this cycle? How did their entrance impact the seed landscape over the last few years?
  • Why are LPs also to blame for many of the original seed managers raising larger and larger funds?

4.) Companies: Money and People are The Problem:

  • Why has too much money been such a problem for many Homebrew portfolio companies over the last few years? How has too much money changed their execution plans?
  • What happens to the "living dead" companies with many years of runway but no product market fit?
  • Who does this market cater to well? Who will thrive in this market?
  • What have people forgotten about both startups and venture in the last 2 years that we have to remember?
  • Why is this generation so entitled and expectant? Why are startups not a get-rich-quick scheme?

Jan 27, 2023

Cliff Obrecht is the Co-Founder & COO @ Canva, the free-to-use online graphic design tool that makes it easy for anyone to design anything from presentations to videos and social media. Cliff and Mel have scaled Canva to over 60 million monthly users, 2,000 employees, and 500,000 teams from companies like Intel and Zoom using Canva. During this incredible growth journey, they have raised over $580M with their last round valuing the company at over $40BN.

In Today's Episode with Cliff Obrecht

1.) From Teacher to Billionaire Tech Founder:

  • How did Keith make his way into the world of tech with his founding of FusionBooks? What did the process with FusionBooks teach him about how to run Canva?
  • How did the early fundraising days for Canva go? Why does Cliff think they got over 100 no's?
  • What are Cliff's biggest pieces of advice for founders today, not in Silicon Valley, looking to raise from Silicon Valley VCs?

2.) Scaling to $40BN: The Biggest Lessons:

  • What does Cliff mean when he says the secret to successful hiring is looking for "distance traveled"? How does he determine this in the interview process?
  • What have been some of the single biggest lessons in what it takes to acquire the best talent?
  • What are some of the biggest mistakes Cliff has made in talent acquisition? How has his process changed as a result?
  • What do Canva do to get the best operators as advisors in the company? How do they compensate these advisors? What does Cliff advise founders on how to do the same?

3.) The Art of Deal-Making:

  • How does Cliff think through what makes a "good deal"? How does he approach negotiation?
  • What are the biggest mistakes founders make when negotiating and doing deals?
  • What have been Cliff's biggest lessons on successful investor relations over the years?
  • How does Cliff and Canva approach acquisitions? What do they look for? What is their process? Why do most tech companies approach acquisitions the wrong way?

4.) Cliff Obrecht: Money, Fatherhood and Marriage:

  • How does Cliff analyze his relationship to money today? How much money is enough? How has his relationship to money changed over time?
  • Why have Cliff and Mel given away over $10BN to their foundation? Why is philanthropy so hard to do effectively?
  • Why would Cliff hate for his children to be brought up in excess wealth?
  • What does "great fatherhood" mean to Cliff? What are the most challenging aspects of parenting?
  • What are the secrets to a happy marriage? How does co-founding a company with your other half work well? How does it work poorly?

Jan 25, 2023

Stevie Case is the CRO @ Vanta where she oversees Vanta’s go-to-market team to support the company’s rapid growth. Prior to joining Vanta, Stevie was Vice President of Mid-Market Sales at Twilio, joining as one of their first account executives, Stevie helped to grow the sales team from a dozen to over 1,000 team members and played a pivotal role in establishing Twilio’s enterprise business with key Fortune 500 customers, generating more than $400 million in annual recurring revenue. If that was not enough, Stevie is also a Founding Operator @ Coalition Network and a prominent angel investor.

In Today's Episode with Stevie Case We Discuss:

1. ) From World's First Pro Female Gamer to CRO:

  • How did Stevie make her way from pro gamer to CRO? How did her career in gaming make her a better CRO and sales leader?
  • In her early sales career, how did being a single mother with a child impact her approach to sales?
  • What can founders do to make workplaces more inclusive for parents today?

2.) Enterprise or PLG: Which One To Choose:

  • Why does Stevie believe it is not right to do both PLG and enterprise at the same time for startups?
  • How can startups and sales teams move into enterprise selling gradually through testing and without committing a significant budget to an enterprise sales team?
  • How do founders know when is the right time to move from PLG to enterprise? What are the signs?

3.) The Mythical Sales Playbook:

  • How does Stevie define the term "sales playbook" today? What is it not?
  • Should the founder be the person to create the sales playbook? If not them, then who?
  • When is the right time to make your first sales hire? When is the wrong time?

4.) Mastering the Hiring Process in Sales Recruits:

  • How should we structure the interview process for new sales reps?
  • What is the right profile for these first sales hires?
  • How do the best sales talent answer questions and perform in interview processes?
  • How can we really test for grit and curiosity in the interview process?
  • What are the single biggest mistakes founders make when hiring for sales?

5.) Discovery, Discounting, Deal Velocity:

  • With sales cycles being so long, how do you know if enterprise sales reps are good?
  • What is the difference between good discovery vs bad discovery?
  • Should founders engage in discounting to get deals over the line? When does it work?

Jan 23, 2023

Albert Wenger is a managing partner at Union Square Ventures, one of the most successful venture firms of the last decade with a portfolio including Coinbase, Twitter, Twilio, Etsy, and many more. Before joining USV, Albert was the president of del.icio.us through the company’s sale to Yahoo and an angel investor (Etsy, Tumblr). He previously founded or co-founded several companies, including a management consulting firm and an early-hosted data analytics company.

In Today's Episode with Albert Wenger We Discuss:

1.) From Failed Startup Founder to Leading VC:

  • How Albert transitioned from being a failed entrepreneur to being one of the most respected venture investors with USV today?
  • What were the clear signs for Albert that he was not a good entrepreneur?
  • Why does Albert believe this downturn is different compared to the dot-com bubble? Why was there more hope and promise coming out of the dot-com bubble?

2.) Income Inequality, The Rise of Depression & The Role of Politics:

  • Why is income and wealth inequality more concerning than ever? Why does Albert believe universal basic income is the right solution?
  • Why is mental health worse than ever? What can be done to improve this?
  • Why are our politicians failing us? What should our politicians be doing?
  • How does the rise of Trump show us what society is looking for in politicians?

3.) Climate Change: Misnomers, Developing Countries, Civil Disobedience:

  • What are the single biggest misnomers people have when it comes to climate change?
  • How can we shift spending on climate change solutions from 5% of GDP to 50%? Is that possible?
  • Why do developing nations have an advantage when implementing climate change solutions over more developed economies?
  • Why is civil disobedience the right course of action to ensure society is on a path to change our approach to climate change?

4.) Crypto and Central Banks: The Future of Finance:

  • Why does Albert believe that over the past few years, for many, crypto was a good hedge against inflation?
  • How damaging does Albert believe SBF and FTX will be to crypto in the long term?
  • How does Albert evaluate the potential for governments to create a "central bank digital currency"?
  • What would Albert like to see in a potential currency like this? How could stable coins be the solution to this? What is Albert fearful of with central bank digital currencies?
  • Why does Albert believe now is the best time to be investing in crypto?

5.) The Future of Social Media: Twitter & TikTok:

  • What does Albert believe is wrong with Twitter today? Why was the blue check mark such a mess?
  • What does Albert believe Elon should do with Twitter from this point on? How should Elon deal with the debt providers he has?
  • What happens to Twitter moving forward? Why is it so hard to kill?
  • What is the future of TikTok? Will it be banned in the US?
  • How concerned should the consumer be concerning their data being shared with the Chinese Government?

Jan 20, 2023

Mike Cessario is the Founder and CEO @ Liquid Death, the man hacking the healthy beverage market with the first hilarious water brand. It is working, Liquid Death's latest valuation was over a staggering $700M and Mike has raised over $200M since founding the company from the likes of Science Inc. Away's Jen Rubio, Dollar Shave Club's Michael Dubin, Swedish House Mafia and Tony Hawk to name a few. Prior to founding Liquid Death, Mike was in the advertising industry at a number of dirrect firms including VaynerMedia.

In Today's Episode with Mike Cessario We Discuss:

1.) From Canned Water to $700M Business:

  • How did rockstars' hydration problems lead to the founding of Liquid Death?
  • How did growing up with guns and heroine needles around him at school, impact how Mike sees the world today? What is he running from? What is he running towards?
  • Everyone said, "canned water, that is a stupid idea". What does Mike tell to all entrepreneurs who are told their idea is stupid? How does Mike advise on picking your idea?

2.) How to Build a Truly Great Brand:

  • What does the term "brand" mean to Mike?
  • What does he mean when he says, "truly great brand transcends functional value"?
  • What are the single biggest mistakes Mike sees founders make today on branding?
  • Why does Mike believe people will always hate your brand, if it is good?
  • What are the biggest brand mistakes Mike has made with Liquid Death?
  • What brand does Mike most respect and admire? Why that brand?

3.) Marketing: The Secret to Reaching Millions of People with Little Budget:

  • How does the Liquid Death team come up with the ideas they have for content? Why does Mike believe the label "storytelling" is kinda BS?
  • Why does Mike believe people will always hate your marketing? What was Mike's biggest lesson from their Superbowl commercial with kids drinking Liquid Death, looking like beer?
  • How does Mike decide which channel to prioritise? How has the rise of TikTok and short form video changed their approach to content?
  • How does Mike approach resource allocation for new pieces of content? Do they spend big on few bits of content or spend little on many and see what works?

 

Jan 18, 2023

Hila Qu is one of the leading growth execs of the last decade. Hila helped scale Acorns from 1 million to 5 million users as their VP of growth. Hila then joined GitLab, where she launched their PLG motion (on top of an established sales motion), and built their first-ever growth team. Today Hila is an advisor to amazing companies like Replit and funds like Mucker Capital, Openview and First Round Capital.

In Today's Episode with Hila Qu We Discuss:

1.) From Biology and Explosions to Growth:

  • How Hila made her way into the world of growth with growthhackers.com?
  • What are 1-2 of the biggest takeaways from her time with Acorns and Gitlab?
  • How do B2B growth orgs compare to B2C growth orgs? What is different? What is the same?

2.) WTF is Growth? When? How & Why:

  • How does Hila define growth today? What is it not?
  • When is the right time for early-stage founders to hire their first growth hire?
  • Why does Hila always look for data analysts in this first growth hire?
  • From a data standpoint, what should founders have ready and accessible for their first growth hire to have access to and learn from? Is Google Analytics enough?

3.) Hiring Your First Growth Hire:

  • How should early-stage founders structure the hiring process for the first growth hire?
  • What do the best growth job descriptions include? What do they not include?
  • Once applications are in, how does Hila advise founders screen for the best candidates?
  • How should founders structure the interview process post-screening? What are the must-ask questions? Who is involved in the interview process? What are some red flags?

4.) The Master of Onboarding:

  • What should new growth hires want to achieve in the first week?
  • What should they want to complete in the first month?
  • In the first quarter, what do the best candidates have completed?
  • What can founders do to set their growth hires up for success in the best way at this time?

5.) Growth Models, North Stars, Activation and Onboarding and Key KPIs:

  • What really is a growth model? How do founders and growth teams create one?
  • How does Hila advise founders on how to pick the right North Star Metric to focus on?
  • Why are activation and conversion Hila's two favorite growth metrics?
  • What are growth loops? What are growth funnels? How do they work together?

Jan 16, 2023

Jeff Jordan is a General Partner @ a16z where he serves on the boards of Airbnb, Incredible Health, Instacart, Lookout, and Pinterest, just to name a few. Before a16z, Jeff was CEO OpenTable, where he led the company during a period of hyper-growth and oversaw its IPO. Prior to OpenTable, Jeff was Senior VP and General Manager of eBay North America where he oversaw eBay's early growth into one of the Internet's leading commerce brands. In this role, he drove the successful acquisitions of PayPal and Half.com and went on to become President of PayPal, where he was responsible for establishing the company as the global standard for online payments.  

In Today's Episode with Jeff Jordan We Discuss:

1.) From Taking Opentable Public to Being a GP @ a16z:

  • What led to Jeff making the jump from CEO @ Opentable to becoming a GP at a16z?
  • How does Jeff believe his operating career impacted how he thinks and acts as an investor today, both positively and negatively?
  • What is his 1 biggest learning from eBay and then Opentable that has really shaped his mindset today as an investor? How did those experiences impact what he looks for in companies?

2.) The Two Core Features To Look For in Marketplaces:

  • Fragmentation of supply side: Why does Jeff look for fragmented supply sides? Does this not take longer and is more expensive? How fragmented is fragmented enough?
  • What are the most common reasons founders fail to acquire a fragmented supply side?
  • Intelligent Lead Generation: What does Jeff really want to see in the way that new marketplaces acquire their customers? How does this change with the rise of TikTok and short-form video?
  • What are some other really core features or traits that excite Jeff when he sees them in an early marketplace? What are some massive red flags for Jeff when he sees them early?

3.) How to Acquire and Retain the Demand Side of a Marketplace:

  • Messaging and Brand: What are the biggest lessons Jeff has on how to craft the messaging of a marketplace to make it resonate with the target consumer?
  • What are Jeff's biggest lessons from working with Brian Chesky on how they craft their messaging at Airbnb? What works? What does not work?
  • Perfect Customer Cohorts: What does Jeff most want to see when examining prospective marketplace investment cohorts? What do the best have?
  • What is the sign of a truly retained user in a marketplace? What is a good date duration to measure retention against? What are the biggest mistakes founders make presenting their cohorts?
  • Lessons from Instacart: What are Jeff's biggest lessons from being on the Instacart board on cohorts? What makes good cohorts? How cohorts can seem bad but be good?

4.) Growth vs Profitability, CACs and LTV:

  • Uber, OfferUp, Instacart, Deliveroo, respectfully, the level of profits these businesses are able to drive is questionable, why does Jeff believe marketplaces are good investments still?
  • Many marketplaces start with poor unit economics, how does Jeff think about having the mental plasticity to project out to a time when unit economics could be better?
  • Does Jeff pay attention to CACs at all? When are they important? When are they not? How can they be misleading? What is the best way for founders to present their CACs?

5.) It's Time to VC: Jeff Jordan: The Board Member

  • What are the single biggest misalignments between VCs and their founders?
  • How would Jeff describe his style of board membership today? How has it changed with time?
  • What is the best way to deliver hard feedback as a board member? What are the biggest mistakes board members make? What does Jeff advise young board members today?
  • What are the single best and worst changes that have happened at a16z in the last 24 months?

Jan 13, 2023

The question is: "are VCs still investing?". Today we are joined by Jason Lemkin; one of the OGs of SaaS of the last decade. As the Founder of SaaStr, he has inspired more SaaS founders than one can imagine building “The World’s Largest Community for Business Software.” Jason also invests out of the $100M SaaStr Fund and in the past Jason has led rounds into TalkDesk, Pipedrive, Algolia, Gorgias, Salesloft, and many more incredible companies. Prior to founding SaaStr, Jason was the Co-Founder of Echosign, an early e-signature business, funded by Emergence Capital and that was acquired by Adobe for $100M.

In Today's Episode on "Are VCs' Still Investing" We Discuss:

1. What Does it Take To Get Funded Today:

Early-Stage:

  • How has what VCs want in early-stage investments changed in this new environment?
  • Should startups prioritize growth? Profitability? Capital efficiency?
  • How long a runway is sufficient enough for founders to feel comfortable?
  • Why does Jason believe most founders are still deluded that they are fundable?

Growth Stage Companies:

  • Is the growth stage totally dead?
  • What will we see happen to all the companies that raised $50M+ at large valuations that have very little revenue?
  • Why does Jason believe that any operator who joined a $BN company in the past few years will not make any money on their equity? What should they do now?
  • Will we start to see down rounds and structured rounds at the growth stage? If so, when?

Public Markets:

  • Why does Jason believe this is a time unlike any he has seen before?
  • Are we in full recession now in Jason's mind? In Dec 2023, will this be better or worse?
  • Which are the most under-priced assets in the public markets today?
  • Why does Jason believe VCs investing in public markets are losers?

2. Micro Funds Will Be Decimated and LP Behaviour in 2023

  • Why does Jason believe that micro-funds in 2023 will be decimated and unable to raise new funds?
  • How will the majority of LPs approach new fund investments?
  • How will LPs approach re-investing in their existing managers? How has what they need to see changed?

3. Marketing and Sales: We Need To Change Budgets and Targets

  • How should CEOS be changing their marketing budgets in 2023?
  • What are the single biggest mistakes CEOs are making in this downturn with regard to their marketing budget?
  • How do sales targets need to be amended in the face of changing buying patterns?
  • How do the best sales and marketing leaders respond to these changing budgets and targets? How do the worst respond?

 

 

 

 

Jan 11, 2023

How To Raise a Venture Capital Fund

Over the last 4 years, I have raised around $400M across different vehicles from many different types of investors. Today I am going to break down the early stages of how to raise a venture capital fund and then stay tuned for a follow-up to this where we will break down a fundraising deck for a fund, what to do, what not to do etc. But to the first element. 

Your Fund Size is Your Strategy:

The most important decision you will make is the size of fund you raise. So much of your strategy and approach will change according to your fund size target (LP type, messaging, documentation, structure etc). Remember, your fund size is your strategy. If you are raising a $10M Fund, you are likely writing collaborative checks alongside a follower, if you are raising a $75M fund, you will likely be leading early-stage seed rounds. These are very different strategies and ways of investing. 

MISTAKE: The single biggest mistake I see fund managers make is they go out to fundraise with too high a target fundraise. One of the most important elements in raising for a fund is creating the feeling of momentum in your raise. The more of the fund you have raised and the speed with which you have raised those funds dictate that momentum. So the smaller the fund, the easier it is to create that heat and momentum in your raise.

LESSON: Figure out your minimum viable fund size (MVFS). Do this by examining your portfolio construction. In other words, how many investments you want to make in the fund (the level of diversification) and then alongside that, the average check size you would like to invest in each company. Many people forget to discount the fees when doing this math and so the traditional fund will charge 2% fees per year and so across the life of the fund (usually 10 years), that is 20% of the fund allocated to fees. 

Example:

We are raising a $10M Fund. 

20% is allocated to fees for the manager and so we are left with $8M of investable capital. 

A good level of diversification for an early-stage fund is 30 companies and so with this fund size, I would recommend 32 investments with an average of $250K per company. That is the $8M in invested capital. Big tip, I often see managers raising a seed fund and are only planning to make 15 investments, this is simply not enough. You have to have enough diversification in the portfolio if you are at the seed stage. No one is that good a picker. Likewise, I sometimes see 100 or even 200 investments per fund, this is the spray-and-pray approach, and although works for some, your upside is inherently capped when you run the maths on fund sizes with this many investments. 

A big element to point out in this example is we have left no allocation for reserves. For those that do not know, reserves are the dollars you set aside to re-invest in existing portfolio companies. Different funds reserve different amounts, on the low end there is 0% reserves and on the high end some even have 70% of the fund reserved for follow-on rounds. 

In this example, given the size of the fund being $10M with a seed focus, I would recommend we have a no-reserves policy. Any breakout companies you can take to LPs and create SPVs to concentrate further capital into the company. This is also better for you as the manager as you then have deal by deal carry on the SPVs that are not tied to the performance of the entire fund.

So now we know we know $10M is our MVFS as we want to make at least 30 investments and we want to invest at least $250K per company. Great, next step. 

Set a target that is on the lower end, you can always have a hard cap that is significantly higher but you do not want the target to be too far away that LPs question whether you will be able to raise the fund at all. This is one of the biggest reasons why many do not invest in a first time fund, they are unsure whether the fund will be raised at all. 

The Team:

Alongside the size of the fund, the team composition is everything, simply put, LPs like managers who have invested in the stage you are wanting to invest in moving forward. They like to see track record.

IMPORTANT: I see so many angels write checks into breakout Series B companies and then go out and try and raise a seed fund with this as their track record. Do not do this, this does not prove you are a good seed investor but merely shows you have access at the Series B. These are very different things. 

With regards to track record, in the past, TVPI or paper mark-ups were enough, now there is a much greater focus on DPI (returned capital to investors). LPs want to see that you have invested before at that stage and they also want to see that the team has worked together before. You want to remove the barriers to no. If you have not worked with the partners you are raising with before, LPs will have this as a red flag, and as team risk, it is that simple. 

Navigating the World of LPs (Limited Partners)

The size of the fund you are raising will massively dictate the type of LPs that will invest in your fund. 

MISTAKE: You have to change your messaging and product marketing with each type of LP you are selling to. A large endowment fund will want a very different product to a Fund of Funds. 

Example: If you are a large endowment, you will invest in early funds but you want the manager to show you a pathway to them, in the future, being able to take not a $10M check but a $50M check from the endowment. Whereas the Fund of Funds will likely want you to stay small with each fund. So when discussing fund plans, it is crucial to keep these different desires in mind.  

If you are raising a $10M fund, you will be too small for institutional LPs and will raise from individuals and family offices. An LP will never want to be more than 20% of the LP dollars in a fund and so the size at which an institutional LP (really the smallest fund of funds) would be interested is when you raise $25M+ and they can invest $5M. Generalisation but a good rule of thumb to have. 

LP Composition of Your Fund:

Speaking of one LP being 20% of the fund dollars, it is helpful to consider the LP composition you would like to have for your fund. The most important element; you want to have a diversified LP base. A diversified LP base is important in two different forms:

  1. No LP should be more than 20% of the fund at a maximum. That said you do not want to have so many investors in your fund it is unmanageable. LPs need time and attention and so it is important to keep that in mind when considering how many you raise from. Some LPs will want preferred terms or economics for coming into the first close or being one of the first investors, if you can, do not do this. It sets a precedent for what you will and will not accept and then for all subsequent investors, they will want the same terms and rights. 
  2. You want to have a diversification of LP type (endowments, fund of funds, founders, GPs at funds etc). Why? In different market cycles, different LPs will be impacted and so if you only raise from one LP type, if a market turns against that LP class, then your next fund is in danger. 

Example:

We will see the death of many mico-funds ($10M and below). Why? The majority raised their funds from GPs at larger funds and from public company founders. With the changing market environment, most GPs are no longer writing LP checks and most public market founders have had their net worths cut in half by the value of their company in the public market and so likewise, are no longer writing LP checks. In this case, the next funds for these funds will be in trouble as their core LP base is no longer as active as they used to be. We are seeing this today. 

Prediction:

  • 50% of the micro-funds raised in the last 2 years will not raise subsequent funds.  

Going back to the question of diversification, my preference and what we have at 20VC, the majority of dollars are concentrated from a small number of investors. Of a $140M fund, we have $100M invested from 5 large institutions. These are a combination of endowments, Family Offices, a High Net Worth Individual and a Fund of Funds. The remaining $40M originates from smaller institutions or individuals, for us we have over 50 making up that final $40M. For me, I really wanted to have a community around 20VC Fund and so we have over 40 unicorn founders invested personally in the fund as LPs. 

Bonus Points: The best managers select their LPs to play a certain role or help with a potential weakness the manager has. For example, I was nervous I did not have good coverage of the Australian or LATAM startup market and so I was thrilled to add founders from Atlassian, Linktree, Mercado Libre, Rappi and Nubank as LPs to help in regions where I do not have such an active presence. If you can, structure your LP base to fill gaps you have in your ability.

Status Check In:

Now we know our minimum viable fund size, we know the team composition we are going out to raise with, we know the LP type that we are looking to raise money from and we know how we want our desired fund cap table to look. 

Now we are ready to move to the LPs themselves. 

Fill Your Restaurant with Friendlies:

As I said, the appearance of your raise having heat and momentum is important. 

Mistake: The biggest mistake I see early fund managers make is they go out to large institutional investors that they do not have an existing relationship and spend 3-4 months trying to raise from them. They lose heat, they lose morale and the raise goes nowhere.

Whatever fund size you are raising, do not do this. Fill your restaurant with friendlies first. What does this mean? Go to anyone you know who would be interested in investing in your fund and lock them in to invest. Create the feeling that progress is being made and you have momentum. 

BONUS POINTS: The best managers bring their LPs with them for the fundraise journey. With each large or notable investor that invests in your fund, send an email to the LPs that have already committed to let them know about this new notable investor. This will make them feel like you have momentum, they are in a winner and many will then suggest more LP names, wanting to bring in their friends. 

MISTAKE: Do not set a minimum check size, some of the most helpful LPs in all of my funds have been the smallest checks. Setting a minimum check size will inhibit many of the friendlies from investing and prevent that early momentum. 

The bigger the name the incoming investor has the better. You can use it for social validity when you go out to raise from people you know less well or not at all. Different names carry different weight, one mistake I see many make is they get a big name invested in their fund but it is common knowledge to everyone that this LP has done 200 or 300 fund investments, in which case, it does not carry much weight that they invested in your fund. Be mindful of this as it can show naivety if you place too much weight on a name that has invested in so many funds. 

Discovery is Everything:

The world of LPs is very different to the world of venture. 99% of LPs do not tweet, write blogs or go on podcasts. Discovery is everything. When I say discovery I literally mean finding the name of the individual and the name of the organization that is right for you to meet.  

This can take the form of several different ways but the most prominent for me are:

  1. The Most Powerful: Create an LP acquisition flywheel. What do I mean by this? When an LP commits to invest in your fund. Say to them, “thank you so much for your faith and support in me, now we are on the same team, what 3 other LPs do you think would be perfect for the fund?” Given they have already invested, they already believe in you and so 90% of them will come back with 3 names and make the intro. Do this with each LP that commits and you will create an LP acquisition flywheel. 

Bonus Point: The top 1% of managers raising will already know which LPs are in the network of the LP that has just committed and will ask for those 3 specific intros. They will then send personalized emails to the LP that has just committed. The LP is then able to forward that email to the potential LP you want to meet. You want to minimize the friction on behalf of the introducer and so writing the forwardable email is a great way to do this. 

  1. The Most Likely to Commit: LPs are like VCs. When one of their portfolio managers makes an intro and recommendation to a potential fund investment, they will place a lot more weight on it than they would have otherwise. So get your VC friends to introduce you to their LPs, it is that simple. Remember, you have to remove the friction from the introducer. So, make sure to send the email they can forward to the LP. Make this personalized and concise.

Mistake: Many VCs do not like to introduce other managers to their LPs as they view it as competition. This is moronic. If the manager asking for the intro is really good, they will raise their fund with or without your intro. If they are not good, then you can politely say it would not be a fit for your LP and move on. Do not be too protective of your LPs from other managers.

  1. The Cold Outbound: I am not going to lie cold outbound for LPs is really hard. Here is what I would suggest:

  • Pitchbook: It is expensive and many cannot afford it but if you can, it is worth it for LP discovery. They have thousands of LPs of different types on the platform all with their emails and contact details. Those are less useful as a cold email to an LP is unlikely to convert but just finding their names and the names of their organization is what is important. You can then take that to Linkedin to then find the mutual connections you have with that person and ask for a warm intro. 
  • Linkedin: Many LPs have the funds that they have invested in on their Linkedin profiles with the title “Limited Partner”. If they are invested in a fund that is aligned with the strategy that you are raising for, there is a strong chance they might be a fit. For example, I invest in micro-funds and have invested in Chapter One, Scribble, Rahul from Superhuman and Todd’s Fund, and Cocoa Ventures, so you see this and see I like sub $25M funds with a specific angle. 
  • Clearbit: Often you will know the name of the institution but not the name or position of the person within the institution that you are looking to raise from. Download a Google Chrome Plugin called Clearbit. With Clearbit you can simply insert the URL for the organization you would like to speak with and then all the people within it will appear and you can select from title and their email will be provided. Again, if you do not want to cold email, you now have their name which you can take to your community, to ask for the intro. 

MISTAKE: LPs invest in lines, not dots. Especially for institutional LPs, it is rare that an institution will meet you and invest in you without an existing relationship and without having followed your work before. A mistake many make is they go to large institutions and expect them to write a check for this fund, it will likely be at best for the fund after this one or most likely the third fund. This does not mean you should not go to them with your first fund but you should not prioritize them and you should not expect them to commit. I would instead go in with the mindset of we are not going to get an investment here, so I want to leave the room understanding what they need to see me do with this first fund, to invest in the next fund. The more detailed you can get them to be the more you can hold them to account for when you come back to them for Fund II. 

Example: If they say, we want to see you are able to price and lead seed rounds and we are not sure you can right now. Great. Now when you come back to them in 12 months' time, you can prioritize the fact that you have led 80% of the rounds you invested in, and their core concern there has been de-risked.

In terms of how I think about LP relationship building, I always meet 2 new LPs every week. I ensure with every quarter, I have a check-in with them and ensure they have our quarterly update. This allows them to follow your progress, learn how you like to invest, and communicate with your LPs. It also really serves to build trust. Doing this not in a fundraising process also removes the power imbalance that is inherent within a fundraise and allows a much more natural relationship to be created. 

Jan 9, 2023

Henry Schuck is the Founder and CEO @ ZoomInfo. From ZoomInfo's founding moment, putting $25,000 on a credit card, Henry has led the company to today, with over $1BN in ARR, a market cap of over $10BN, and a team of over 3,600. This is one of the untold but truly great stories in software.

In Today's Episode with Henry Schuck We Discuss:

1. From a $5,000 College Fund to Founding a $10BN Company:

  • Why did Henry always believe early in life that he would be successful?
  • Along the way doubt sets in, what did Henry do to combat that doubt when he questioned his own ability and potential?
  • What does Henry believe he is running from? What is he running towards?
  • How did seeing the work ethic of his single mother impact his work ethic with ZoomInfo?

2. Henry Schuck: The Leader:

  • What does Henry believe is the difference between trust vs safety in team culture?
  • Why does Henry believe safety is built through performance? How does Henry manage and communicate underperformance? How long do you give an under-performer?
  • Why does Henry believe that happier teams outperform? What does Henry do deliberately and specifically to drive happiness in the business?
  • ZoomInfo is magnitudes larger than some competitors who receive a lot more attention, how does Henry think about this? How does he manage his own ego as a leader today?

3. Henry Schuck: A Leader in a Changing Market:

  • How does Henry maintain internal morale when employees see their stock options get smashed every day?
  • Does it suck to be a public company CEO in the current market? What element is the worst?
  • How are the buying patterns and behaviors of customers changing in 2023 vs 2021?
  • How does this impact the sales cycle, retention rates, upsell plans, and the structure of the customer success teams?
  • Dec 2023, will we be in a better or worse macroeconomic position?

4. Henry Schuck: Relationship to Money and Fatherhood:

  • How does henry evaluate his relationship with money today? How has it changed over time?
  • Why does Henry very rarely fly private planes? What does he believe this says about his values?
  • How does Henry instill the same desire and worth ethic within his children despite being a billionaire?
  • What does Henry know now that he wishes he could give to his 23-year-old self founding the company?

Items Mentioned in Today's Episode:

Henry's Favourite Book: The Happiness Advantage: The Seven Principles of Positive Psychology that Fuel Success and Performance at Work

Jan 6, 2023

Jason Fried the Co-Founder and CEO at 37signals, makers of Basecamp and HEY. Over an incredible 21-year journey, Jason and his co-founder David have scaled Basecamp to become the communication tool trusted by millions. Jason is also the co-author of the widely acclaimed, ReWork and has also made several angel investments in the likes of Intercom, Gumroad and Hodinkee to name a few.

In Todays Episode with Jason Fried We Discuss

1. From Web Design Agency to Founding Basecamp:

  • What was the a-ha moment for Jason when they had to make the pivot from a design agency to going full-time launching and running Basecamp as a SaaS company?
  • What is Jason running towards? What is he running from?
  • What is the single biggest fear that Jason is trying to avoid?

2. Jason Fried: The Leader:

  • Why does Jason believe he is running from his position as leader and CEO @ Basecamp?
  • Why does Jason not like or agree with goals or targets? Why are they not helpful?
  • How does Jason make decisions today as a leader and CEO? What one question does he ask that determines his decision-making process?
  • Why does Jason never compare himself to the competition? Why does he believe competition is for losers?

3. Jason Fried: The Politicisation of Leadership:

  • Why did Jason and David decide to not allow politics in the workplace?
  • How did they manage with 1/3 of their team leaving overnight? How was that experience for them personally? How did it impact the company? Is there anything they would do differently?
  • Does Jason believe we will see the continued politicization of leadership in the coming months?
  • How would Jason advise other CEOs when it comes to taking a stance on politics?

4. Jason Fried: Building the Best Team:

  • What is the one question that determines whether you made a good hire?
  • Why does Basecamp start with hiring all employees on a week-long project contract?
  • Why does Jason believe the best CEOs approach management as the art of the individual?

5. Jason Fried: The Partner, Father, and Husband:

  • Jason and David have been partners for 21 years, why does Jason believe it is helpful that they do not see each other much?
  • Is it right for co-founders and partners to be friends?
  • What have been Jason's single biggest lessons on what it takes to be the best husband?
  • What does great fatherhood mean to Jason? How has it changed over time?

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