The real reasons behind Airtable's success

Summary

Discover the real reasons behind Airtable's success in this podcast episode! From their innovative pitch deck to their unique distribution strategy, learn how Airtable became a venture capital sensation.Early-stage founders, this podcast decodes the secrets to startup success! Learn from a VC investor's journey, craft a winning go-to-market strategy, and discover the power of distribution innovation. We'll guide you through pre-seed funding, pitch deck mastery, and the VC ecosystem. Plus, we'll debunk investment myths and explore the future of AI in VC. Get ready to transform your startup from hopeful idea to soaring success story!

Takeaways

1. Distribution innovation is crucial for startups, and founders should consider it from the beginning.
2. Collaboration in the VC ecosystem depends on the business model and the stage of investment.
3. Building a go-to-market strategy requires understanding the product-market fit and the right distribution channels.
4. The value of a VC firm lies in its ability to increase the likelihood of raising the next round of funding. Meaningful investment from a VC firm involves more than just a financial contribution; it requires a partner who is aligned with the founder's vision and actively supports the growth of the business.
5. Fund size is an important factor in determining a VC firm's investment strategy and the level of commitment they can provide to portfolio companies.
6. Starting a small VC fund requires building a track record, proving differentiated access or picking ability, and gradually scaling up while maintaining alignment with the fund's strategy.
7. Pre-seed and seed funds play a crucial role in the startup ecosystem by providing early-stage capital and support to founders who may struggle to raise money from larger funds.
8. Key slides in a pitch deck include those that clearly articulate the problem the business is solving and the founder's vision for the future.

Chapters

00:00 Trailer
01:13 Early Life and Journey to VC
05:22 Investing in 50 Companies and Providing Help
08:41 Effective Use of Funding
15:30 Building a Go-to-Market Strategy
19:00 Distribution Innovation
14:26 Early Days at Airtable
17:10 Building a Go-to-Market Strategy
20:30 Innovating Distribution
26:40 Edge of Ex-Founders in VC
29:00 Collaboration and Chasing Deals
32:45 Working with Sequoia and Brand Value
37:43 The Relationship Between Fund Size and Investment Strategy
42:27 The Overrated Investment Thesis
45:27 Starting a Small VC Fund
49:55 The Need for Pre-Seed and Seed Funds
56:30 How much time spending in looking pitch deck
57:10 Key Slides in a Pitch Deck
01:08:00 Ritual Time
01:11:10 Ending

Connect with Mudassir

🎥 YouTube Channel - @prodcircleHQ
🐦 Twitter - https://twitter.com/ProdcircleHQ
📸 Instagram - https://instagram.com/prodcirclehq
💻 Website - https://prodcircle.com/
👥 Linkedin - https://www.linkedin.com/in/mudassir-mustafa/

Transcript

Mudassir (00:02.531)
Okay, please do a clap for me.

Awesome, thank you for that. Alright, so we're rolling now. Hey David, welcome to the show, how are you doing today?

David (00:14.026)
I'm doing great, thanks for having me. Excited to be here.

Mudassir (00:24.748)
I lost you. Can you hear me?

David (00:26.482)
Oh, yeah, I can hear you.

Mudassir (00:30.099)
Okay, I lost you for a second, but you're back. So just starting again, okay? No, no, it's okay. This is a platform that does this thing, but it's okay. Yeah, just a small thing. Even if you feel like my video is stuck or your video is stuck, the recording is still going on in high res, so just continue to, we just don't need to do that, okay? I forgot to tell that, okay, at the beginning. Cool, rolling again. Hey David, welcome to the show. How are you doing today?

David (00:32.958)
Okay, sorry.

David (00:47.058)
Mm-hmm. Yeah, yeah, yeah. Cool.

David (00:56.002)
Doing great. Thanks so much for having me.

Mudassir (00:59.007)
It's a pleasure to have you. All right, so I'm gonna start us off with a question that I ask almost everybody that had a pleasure of hosting on the show is, what's the earliest context you have of your life and how did you end up becoming a VC of all things?

David (01:15.938)
Wait, the earliest context? Like the earliest memory? The earliest memory? Oh my God. I don't know if I have a good answer to that. That's an interesting question. I mean, I feel like, look, I feel like a lot of my earliest memories are...

Mudassir (01:19.144)
Yeah.

David (01:36.878)
childhood running around my backyard, you know, like that sort of, I feel like this very carefree, classic, millennial suburban childhood, right, where you, you come home from school and you go outside and you're just running around until it's dinner time and you eat dinner and then you go run around until it's dark, right, like that. I feel like that.

When I think about my childhood, that's what I think about. And in terms of being a VC, jeez, that has absolutely nothing to do with my initial memories of my life. My road to being a VC really goes through being a startup founder and working at startups. That's what I've been doing for the past 15 years. And I had a little bit of exposure to venture.

You know, I worked at a firm in the States called Founder Collective while I was in business school at MIT. So I kind of saw what it was like, but I very quickly was like, don't want to do that. Let me get back into, you know, working at startups. Um, so the road, it really was, I worked at startup for a long, long time. And then I was trying to figure out what I was going to do next. Wanted to go back and work in early stage, like building something again. And I kind of got convinced that.

Maybe the best way for me to work on something early was actually to be a super early stage VC that leads really early rounds in pre-product, pre-revenue companies. The beauty of that is that I get to work on early stuff every single day. It's like Groundhog Day. I'm always working on something early. So I think that's how I kind of ended up in VC. I certainly never expected it.

Mudassir (03:33.543)
All right, awesome. Is being a VC as exciting as being a founder?

David (03:39.598)
Hmm The you know, the jobs are so they're so different they it feels very different every single day feels very different the

When you're a founder, the highs are higher, the lows are lower, and they're closer together. In a single day, you can have the best morning of your life and the worst afternoon. And that happens all the time. So it's very quick. It always felt there's an urgency to your life as a founder. Venture just isn't like that. Everything is protracted.

Mudassir (04:06.068)
I know.

David (04:21.25)
Which isn't to say there aren't urgent problems that sometimes you need to deal with, right? But the time scale is so much longer. The fund is a 10 year fund. It takes seven to 10 to 15 years for an early stage bet to turn into anything. Your relationship with an LP, the people who are investing in us, when they are investing in us, they're usually underwriting.

to invest in three funds. That's how they think about it. That's even more protracted. So your stakeholders are just different and the time scales are different. Just the day-to-day feeling of the job is so different. But I find it very intellectually interesting too. As a founder, you're so laser focused on the one thing right in front of your face. That is all you care about,

problem. But as an investor, you have a portfolio of problems that you're thinking about. And that's very intellectually interesting, I've found.

Mudassir (05:27.146)
Okay.

Mudassir (05:32.383)
Yeah. So one question that always fascinates me, so I've hosted a lot of VCs on the podcast. And every single time I ask this question, every single time I get a weird sort of an answer. Like not a different, but a weird sort of an answer. Yeah. And the question that I ask is, suppose you invest in like 50 companies over the period of time. The fund is like 10 years, it has a lifetime of like,

David (05:47.731)
Okay, yeah.

Mudassir (06:00.463)
So you've already heard that. Suppose you've invested in 50 companies, right? And all of them are exactly the same, early stages. There's 50 problems. So how do you help founders in navigating through those problems?

David (06:00.654)
Mm-hmm.

David (06:07.278)
Mm-hmm.

David (06:14.784)
Yeah.

I think the real answer to, or like the unfortunate answer to that is that

Mudassir (06:22.188)
Yeah.

David (06:24.578)
there are only certain types of problems that VCs can actually help with. And so, right, like a big part in my mind, a big part of being a VC is figuring out which problems you can help with and which problems you like, which problems you can't help with. You know, another way of putting it is that

Mudassir (06:30.227)
Interesting.

Mudassir (06:42.1)
Hmm.

David (06:47.978)
You know, something I thought a lot about when I was at Airtable is I remember having some very long conversations with the CEO, Howie, about this, that there was a certain point, look for a long time, his job at the company, he was basically the, he was the product person. He was the, the fundraiser. He was every like, he was everything, right? Like he was doing it all. There was a certain point in the company and it was much earlier, I think, than any of us would have thought there was a certain point in the company where

His job was really to be a capital allocator. His job was like, how do I become excellent at investing? And that could be, partly that's investing his time, but it's also about like, who should I hire next? Because that's gonna cost money and money is limited. So I need to make a good investment in the next, the marginal person that I hire. What product do I focus on? I mean, it could be actual investments too,

Mudassir (07:32.066)
Yeah.

David (07:45.494)
this growth marketing channel versus that growth marketing channel, whatever. Um, so anyway, we, we talked about that a lot, like that, like that is the real job of the CEO is as a capital allocator. And that's a conversation I try to have with the founders that I work with too. Is that like, you know, I'm not going to be able to help you decide whether like this investment is better than that investment or, or whatever, but like, let

But most of the time, I can try to help you see around corners and all that stuff that VCs always say, which I think is all right. That's what you should do. But ultimately, it's about helping founders have this mindset towards being capital allocators rather than most founders are thinking of themselves as being like, I'm a salesperson or I'm a product person. And that is what I am doing. I'm building product all day long. I'm shipping. That's all I'm doing. It's like...

actually abstract yourself out one layer and think of yourself as a capital allocator. So that's probably a weird and not great answer to the question too, just like everybody else gives. But I think if I do my job well, I'm having that type of conversation with people. And then we can have a very, whenever they have a problem, the problem that we're talking about is probably a capital allocation problem. So it's always within this same context.

And then I might be able to actually help. Whereas if you come to the table and say, oh, I have this HR problem, and there's so many specific problems that happen at companies, that investors, I guarantee you, cannot help with. They're just useless. Even if they say they can help, they can't help.

Mudassir (09:29.655)
Okay, totally agree to that. So there's a whole bunch of things that I wanna ask you about your time in Airtable, but now that you've mentioned one thing, so I just want to touch that a little bit. When a founder raises money, it could be any down, so specifically pre-seed seed and seed is there, so the three stages. As an investor, what do you expect them to do with that money? Because, and I'll give you some context with that question.

David (09:52.958)
Yeah.

Mudassir (09:53.695)
Most of the times, and I happen to meet founders almost every day, a couple of times at least, there's a very funny one that I'm going to share with you. A guy who just raised two and a half million, that was a year ago or something, two years ago in 2022, and then they just hired a bunch of C-level executives, a CPO, a CTO, a CMO, or something like that. A year later, they just ran out of money like that because you know.

David (10:18.082)
Yeah.

Mudassir (10:21.651)
CMO wants to have half a million ad spend budget or something like that. So this ran out of money. Yeah. And now they're like in the same problem again. It's 2023 now. They need to fundraise again. Nobody's paying them. So all kinds of problems. So as an investor, what do you actually want to see from founders? Like, okay, so you raised it now and you're taking the money. What do you want them to see doing with that money?

David (10:25.994)
Yeah, right.

David (10:44.19)
Yeah. So I think this comes back to like, what is a startup? A startup is a small group of people that are dedicated to testing a novel hypothesis for creating outsized value. If we agree about that, then the best founders in my estimation are excellent experiment designers.

Mudassir (10:51.924)
Okay.

David (11:11.242)
Because essentially what you're doing is you're raising money to run an experiment. And the experiment that you're running is testing that hypothesis. We think that we can create outsized value. Can we? Yes or no? Right?

Mudassir (11:21.791)
Right.

David (11:30.686)
I think that sounds obvious, you know, when I phrase it that way, but you'd be surprised how often, you know, there's this myth in Silicon Valley and the startup world in general that the best founders are grinders, right? The best founders are those that persevere, right, through all the shit, right? You get to the other side and you succeed because you persevere, right?

Mudassir (11:46.623)
Oh yeah, yeah. Yeah, yeah.

David (11:57.51)
I just don't think that's actually, I don't think that's a helpful way of thinking about it. Right, I think what's, because the reality is, you know, Eli Gill says this thing that like, things that work tend to work very quickly, right? And I don't actually fully agree with that, right? Like, I think that there are lots of examples of things that didn't work fast, but ended up being huge, right? Airtable is one of them, right? Like, Airtable took four years to get to product market fit.

Mudassir (12:22.804)
Yeah.

David (12:27.818)
And it's an amazing product in a big company, right? That did not work quickly, right? That's four years. So I don't fully agree with it. But his point, I think like the real point he's trying to make is that founders shouldn't valorize the grind, right? Like don't think that just because you're grinding, like that is in and of itself good, you know?

Mudassir (12:54.028)
Yeah.

David (12:55.634)
And so really, I think like this idea towards thinking of your startup as a experiment that you're running, it creates a real, or it requires a real shift in mindset, you know, so that when, like when I talked to founders, I really, and when I'm talking to a founder that I just invested in, right? Like I really want to be talking about experiment design. I'm thinking like, that's what I'm thinking about. I'm thinking about like, what is the hypothesis we have and how can we get a

definitive yes or no as quickly and as cheaply as possible. That's the whole game, you know.

Mudassir (13:34.764)
Does that understanding come from your background in growth? Because primarily when you're in marketing, that's what you're doing. So you just design these little experiments. Okay, try that channel, that ad copy, that something, that something else. And then you figure out which one works the best.

David (13:49.471)
Yeah, maybe. Maybe that's why, yeah, I mean, I've always kind of thought about it this way. And maybe that's why this was the intuitive way for me to think about it. Because ultimately, my background has been so much, you know, based in experimentation.

Mudassir (13:55.203)
Okay.

Mudassir (14:04.551)
Yeah. OK. So let's just take us back to your early days in Airtable. So one of the things that I was reading, you were the first growth hire in that company. So there's a whole bunch of things that we can talk about. But the first thing is, what does it exactly look like inside Airtable when you joined, actually? Was it still like chaos, and you didn't figure it out? Like, what the heck? Oh my god. Like, this is, I don't know if it's going to work. It's not going to work.

David (14:26.176)
Yeah.

David (14:33.07)
Sure, yeah.

Mudassir (14:33.356)
How's the how's the whole thing feels like?

David (14:36.606)
Yeah, it was, look, it was certainly chaos, but every startup is chaos. That's not unique. Yeah. Yeah, so when I joined, right, the product was still in beta, and we were, you know, we probably had a few thousand users, and we were thinking about starting to monetize. Like, that's basically the moment we were at. Now, the product itself was not, it wasn't really feature complete yet, right?

Mudassir (14:41.175)
Chaos. Yeah.

David (15:06.518)
But we were kind of, I mean, candidly, we were like under pressure from investors to start making money. That's kind of where we were at. So if we could have done whatever we wanted, we probably would have built for a while longer before charging. But it was like, hey, we need to prove that we can actually make money here. So let's think about monetization. So then my job was, as a first growth person, was really thinking about, one, how do we start?

pricing and monetizing at a high level, but also more specifically, how do we as a horizontal product, how do we build a go-to-market strategy? Like, what does that look like? Because up until that point, we had kind of run like some random experiments, but really we hadn't really focused that much on go-to-market at all. Like if you looked at all of our, you know, those few thousand users, most of them were, you know, like friends.

or like friends of friends or introductions from friends or whatever. So now we were thinking about how do we actually go to market? And the reason this was challenging is because Airtable was a horizontal product. So it really required trying to figure out what are the use cases and then how do we build novel go-to-market strategies for each of these use cases? And then how do we build a team that can execute

on many go-to-market strategies in parallel and drive growth efficiently.

Mudassir (16:41.795)
Okay, so for the audience, can you just clarify like what do you mean by horizontal products and vertical products? And two is, yeah, okay. And the second question on top of that is I want to have your expert take on how a startup can build.

David (16:47.387)
Oh sure, yeah.

Mudassir (16:57.311)
I go to market strategy like from point one to point 10 by the time it's like working, it's monetization. That includes all the things like, how do you structure the pricing? How do you add the tiered sort of pricing structure like okay, different tiers and all that. So can you please just lay the path for us?

David (17:10.498)
Yeah.

David (17:13.773)
Sure, yeah. So by horizontal product, I mean, Airtable is not a piece of vertical software that is built to solve a specific use case for a specific industry, right? Airtable is a database that looks like a spreadsheet. You can use it for almost anything, right? Like a lot of different things across every industry you could imagine and across every function within that industry.

there's probably a use case for Airtable. So in that way, so that's very complicated. How do you focus, like where do you focus? That was the real challenge we had early on. Now in terms of your second question about building a go-to-market strategy, so I think that probably the best reading that I can recommend on this is Brian Balfour, who's a VP of Growth at HubSpot and now runs Reforge.

He has a set of blog posts that are basically about the four types of fit. It's like product market fit, market channel fit, product channel fit, and there's one other permutation of that, something fit. I think those are required reading if you're thinking about building a go-to-market strategy. The TLDR that I would take from those is basically that...

Mudassir (18:10.571)
Yeah.

Mudassir (18:24.951)
See ya.

David (18:42.347)
the right channel for, like the right go-to-market channel is going to depend on the product and going to depend on the market that you're going after. And similarly, like the right product is, like it's obvious that the right product is going to depend on the market and vice versa. We always talk about product-market fit, but that's also true for the channel. That's also true for how you go to market. And that's something that I...

Mudassir (18:59.583)
Yeah.

David (19:08.106)
You know, I think very often distribution is like a, it's a, it's an afterthought with, with startups, right? You think about, cause you're so obsessed with building a product for a specific market and that they like it, right? You're so obsessed with product market fit that you don't think about like, what is your distribution edge going to be? And, you know, it's one of my many kind of hobby horses is that

Mudassir (19:17.611)
Hmm.

David (19:36.074)
Right? Like you should be talking about what your distribution edge is going to be from the very beginning. Like it needs to be part of, because the best distribution edges are part of the product themselves. And that's another way of saying that like, you know, it's kind of taking, uh, you know, Balfour's argument to its like logical conclusion, which is just like product market fit is kind of inherent to the product in the market that you choose, right? Like product channel fit, right? Is also inherent to the product.

So you should be building with that channel in mind, from the very beginning. And so I always encourage like the startups that I talk to, I'm kind of, and the founders I talk to, I'm encouraging us to talk about distribution like uncomfortably early. Because it should affect the way you build the product.

Mudassir (20:30.195)
I wholeheartedly agree to that. This is one of the key lessons that I learned years ago. Like, forget about the product that you have in mind. Figure out the distribution. If you have the distribution figured out, the product itself is going to figure it out itself. I'm going to... So, there's a post that you put out on LinkedIn, and kind enough of you to just write a blog post on that. So, I'm just going to, you know, plug that one in here. So there's this tweet I forgot by Justin, I think. And in the tweets...

David (20:40.835)
Mm. Right.

David (20:57.906)
Oh, Justin Khan, right, this, yeah.

Mudassir (20:58.951)
Yeah, just, yeah, yeah. And he said something like, you know, first time founders assess about building products, second time founders assess about building, you know, figuring out the distribution. But the key takeaway for me was, you know, in that footnote of that post was, the founders should also innovate distribution. Like you talk about PayPal, you talked about Notion, and you talked about Canva. But one of the things that the key takeaway was, founders should also innovate distribution.

David (21:19.459)
Mm, yeah.

David (21:23.105)
Mm-hmm.

David (21:29.25)
Yeah.

Mudassir (21:29.335)
Couple of questions on top of that. So one is, can you please explain that distribution arbitrage blog post? And two is, what kind of distribution innovation you're looking for?

David (21:42.486)
Yeah, yeah, the, the argument I made in that, in that post was, was I was kind of like what, you know, the question I posed myself is, you know, this is like this tweet from 2018 or however long ago, it was even longer, longer ago than that, I think, has kind of reached the level of like, it's like default startup wisdom, right? It's like people say it without even knowing that Justin Khan tweeted it, right? It's just like a thing that people say.

Mudassir (22:08.071)
Yeah, yeah.

David (22:11.722)
I was like, okay, why has it become so well-worn so quickly? Like, why does it resonate with people so well? I was trying to, I was asking myself that question and you know, the answer that I came up with is I think it's because, you know, founders recognize who have like played the game, right? They recognize that like any advantage that you can build in distribution is competed away very, very quickly. So.

kind of need and once it's competed away, then you're just kind of like playing the game that everybody else is playing and it's expensive and it's hard and you have no edge, whatever. And because that edge gets competed away so quickly, if your plan is just to like look at the market and be like, I'll just do what that company did, you're already going to lose, right? Like you're already starting from behind. So

Mudassir (22:51.287)
There's no edge.

David (23:09.534)
And this is what I kind of call it, like this idea of the law of like diminishing marginal distribution advantage, right? It's like over time, any distribution advantage you have will be competed away. So if you believe that if founders believe that, then they should also believe that from the very beginning, you need to build in some sort of distribution arbitrage. Right. That, so you have just a little edge right from the beginning.

And then I started thinking about like, okay, well, what are examples of companies that actually had some sort of distribution arbitrage and what did it look like? You know, and so some examples I came up with, as you mentioned, were, you know, PayPal and PayPal had this whole, like, if you remember PayPal from the early aughts, right, like PayPal enabled you to email money, right? That was basically the innovation. And that was like the underlying technological innovation, right? But the.

Mudassir (23:52.019)
Yeah, yeah.

David (24:04.866)
distribution innovation was, we're going to send you $10 for every user that you invite. And I was thinking about like, why was that so viral, right? And it just worked so well. And on the one hand, it's like, look, giving away money for free always works. You know, like that's pretty easy, right? But on the flip side, you know, at Airtable, we had a referral.

Mudassir (24:27.868)
Yeah.

David (24:33.258)
Right, like every other SaaS company in the world, right? We had a referral thing where you could invite a user and you'd get credit. And I know from my time at Airtable that the referral program did not matter at all. Like that just was not an impactful thing. It just didn't move the needle at all. And I think the reason is because at Airtable, you're swiping your corporate credit card.

to get an Airtable account, this is like SaaS that you use for work. Like you don't care that you have $20 in credit. It's like you can't even use this for anything, right? It's like, it just doesn't make any sense, right? What was interesting about what PayPal did is they were giving you $10, but they also were giving you, like it was actual dollars in your PayPal account that you could then use to pay other people via email, right? Like it was a closed system.

Mudassir (25:03.926)
Yep.

Mudassir (25:08.8)
I know.

David (25:29.73)
There was an immediacy to it. So like the, the distribution, like the distribution innovation was linked deeply with the product innovation itself. And that is, I think the critical takeaway, right? And that's why that's fundamentally interesting. And that's why I think Uber's referral, which I mentioned in the post too, that's why I think Uber's referral was also really meaningful, right? Uber had their whole referral program where, you know, you would invite somebody to get five bucks, I think it was. And.

Um, I remember as a total aside, I remember I had a friend in New York who back when this was a, you know, was a thing they had, um, against, against Uber's terms, they had like posted their referral code on Reddit and like a ton of other places and they had, they had earned like thousands of dollars in credit such that they were taking the Uber copter to the Hamptons like every other weekend.

Mudassir (26:28.947)
My god.

David (26:30.23)
because they had so much money in credit and the whole thing fell apart because one time, by the way, that is like such an example of like the venture, what the world was like when everybody was flush with venture dollars, right? It's like, how ridiculous that Uber was giving away that much money, you know, it's like completely insane. But the way that, you know, this dream situation all fell apart for him is he had like incredibly dangerous like

Mudassir (26:43.747)
Ha ha!

Mudassir (26:48.2)
Exactly.

David (26:58.326)
what he felt was dangerous driver one time, who was like, you know, doing all this crazy stuff, right? And he was like, I need to like, I need to report this. Like this was not safe. Like I, you know, this is not okay. So he, you know, gave a bad rating to the driver. And by giving a bad rating, it like prompted a review by somebody internal at Uber who saw that he had like $10,000 in credits and they took them all away. They were like, this is clearly against the terms. So anyway, okay, that was a total aside.

Mudassir (27:26.411)
Yeah.

David (27:27.702)
But I think that's why the Uber referral worked as well, is because, yeah, you get $5, but the $5, as my friend experienced, was immediately useful for something that was core to the product. So giving away the dollars as a user acquisition tool also drove more usage of the product. So there was a compounding effect.

right, to giving away that money, that CAC made sense. So anyway, I think that those are examples of this idea of tying product innovation to distribution innovation. And I think that's something founders in general should be thinking about from the very beginning.

Mudassir (28:17.759)
Yeah, yeah, a wholeheartedly agree. And thank you for sharing that in depth as well. OK, so when back in the day, 12 years ago, 13 years ago, when I get any idea about what exactly is a venture capital and there's this thing called startup, I had a project and I mistook it for like, hey, I can build a company on top of that. So I had my fair share of dumb mistakes. But.

David (28:22.858)
Yeah, sure.

David (28:44.102)
Yeah.

Mudassir (28:45.063)
Since then, at that point in time, I've seen like most people back in the day were finance people, corporate bankers or something like that in that VC ecosystem. But now I get to meet people who have founders' background, people who have products' background, growth background. They're in that VC ecosystem, quite well like merged into it. So a few random thoughts on that. So one is, what do you think in terms of an edge that you guys have?

David (29:04.299)
Mm-hmm.

Mudassir (29:13.555)
as being an ex-founder or an ex-growth person or an ex-product person, how does that give you an edge working with any company compared to any traditional, say, investment banker? Yeah.

David (29:22.542)
Mm-hmm.

David (29:28.398)
Sure. I mean, yeah, look, I think there's very, like the trick in venture is that there's tons of different ways to do venture, right? You can be a successful venture capitalist with tons, like there are lots of flavors, you know, like some of the best venture capitalists in the world are not ex-founders, right? They're just analysts, equity analysts, bankers, whatever, you know, right? Like Bill Gurley, ex-

Mudassir (29:51.492)
Yeah, yeah.

David (29:56.33)
you know, from benchmarks, ex equity analyst, Fred Wilson, Union Square, right? Venture is all he's ever done. And he's one of the best investors of all time. So, you know, for me to come in here and say that founders are the best investors because of ex, it is like clearly demonstrably false. And so I think that the key to your, to answering your question is to figure out like, what are the...

David (30:24.878)
As an investor, you need to ask yourself, what game am I playing? And can I make sure, how do I make sure that I'm like the best at playing my version of the game? You know, um, that's the question that I think about a lot. And ultimately, when I think about being, you know, having worked early at a startup and having been a founder and everything else, but I think about like, how is that actually helpful in playing the venture game? Probably the way it's most helpful is.

empathy with founders, right? And hopefully I'm able to win a deal that I otherwise wouldn't be able to, right? Earlier in my career without as many wins under my belt, that's probably the, if I'm being brutally honest, that's probably the only thing that it could possibly help with. I don't think it really helps with like giving good advice or being a good partner.

Mudassir (31:21.239)
Hmm.

David (31:21.422)
to a founder or anything like that. I mean, I think it might, but the point is that there's lots of different people who are amazing partners to founders. So it's hard for me to say that my background is the only background that works.

Mudassir (31:36.235)
Cool, all right, so you mentioned something the other day when we met, and you exactly brought the same thing right up now. So I'm just gonna ask you some contrarian sort of questions now, okay? Usually, when I ask anybody, and by usually I mean almost all the time, right? So nine out of 10 times, like I ask VCs about what exactly is this market looks like?

David (31:42.027)
Hmm.

David (31:47.054)
Sure, yeah.

David (31:53.902)
Sure.

Mudassir (32:00.867)
So the answer that I get is it's very collaborative. There's like very little to no competition going on. Just very collaborative sort of environment going on. So and the question and the thing that prompted this question was when you mentioned this thing that you are chasing, you are chasing a founder which, congratulations, closing the deal by the way. So.

David (32:04.298)
Mmm.

Mudassir (32:21.783)
Couple of questions on top of that. Do you actually believe it's a collaborative environment? If it's a collaborative environment, how often do you guys have to chase good founders, good deals? Yeah.

David (32:32.586)
Yeah, sure. Whether or not it's collaborative entirely depends on your business model as a VC, like your model. If you write small checks that can slip in alongside a lead investor, then you can be as collaborative as you wanna be. But the minute that you're a lead check writer, it is like definitionally not collaborative, right? So yeah, whoever is saying it's collaborative is

Mudassir (32:43.564)
Mm-hmm.

Mudassir (32:50.517)
Okay.

Mudassir (33:02.579)
The text size. Okay.

David (33:02.646)
selling something, I'm not sure what they're selling. But it's, yeah, it's not collaborative. And in terms of chasing, I mean...

Look, the way I think about this is the minute that you think you don't need to chase the best founders is the minute you've lost. I always ask my question, why would the best founder in the world want to work with me? Why do I even think they know who I am? They have no idea who I am. I need to go find them and I need to convince them that I can be a great partner. That is my job.

David (33:41.814)
One, because I don't work at Sequoia or Founders Fund or whatever, right? I'm like, you know, work at my own firm, you know? But two, because there's a ton of VCs out there, right? Like there's so many. So even if I did work at Sequoia, I would be a founder, or again, at any of the firms, right? Sequoia is just a placeholder for whoever. Even if I did work there, why would just, why does the next great founder,

Mudassir (33:55.735)
Yeah.

David (34:10.762)
Why should I believe that they know who I am? Right, and I think by the way, like the minute that you start thinking that is the minute that you lose your edge. So like the challenge with this job, I think, is for decades, like for decades being paranoid that you're missing out on the next great deal. That you just need to constantly be terrified. That is how you do this job well, I think.

Mudassir (34:20.948)
Okay.

Mudassir (34:40.506)
Is that a high pressure sort of a job as well?

David (34:45.999)
Yeah, for sure. I mean, look, it's high pressure, but it's high pressure, like I said at the beginning, it's high pressure over these very long time horizons. You know? So it is high pressure, but it's a very weird diffuse pressure, which is what makes the job very strange. Because I think one result of this idea is that, the...

Mudassir (34:47.273)
I mean...

Mudassir (35:02.976)
Yeah.

David (35:14.05)
venture firms can, or venture partners in particular, investors can lose their edge and still be in a job for a very, very long time because firms have a long life and LPs make deep long-term relationships, right? Like they're often underwriting, as I said, for three funds. So, you know, you may have lost your edge as a...

investor or as a firm, and yet you're still kind of around for a while. So it is high pressure, right? Absolutely. But the pressure doesn't bite for a while.

Mudassir (35:47.331)
Make sure to subscribe to our channel for more videos like this.

Mudassir (35:53.587)
Yeah. Okay. All right, so tell me this one more thing on top of that. Why a founder would want to go to Sequoia?

Mudassir (36:06.655)
I mean, and I'll tell you why I'm asking this question, because it's a very broad question that I asked. Most of the time, suppose any startup at any given point in time, at any given stage that he's raising a fund, early stage I'm talking about, suppose he's raising a seed, couple million bucks or whatever, he could get that money. If it's a good idea, good founding team, all the things aligned, all things equal, they can get money from pretty much any...

Pretty much most of the points right they can they can get a lot of money by the way One small thing to mention here when you said like there's tons of VCs founders don't think it like that So founders actually think oh, there's ton of companies out there, and there's only a handful of VCs So it's that it's that kind of a narrative that we have on the founding on the founder side, but right Yeah, but anyhow coming back to this thing like suppose if they're like all things equal Why a founder would go and take Sequoia's capital?

David (36:37.483)
Mm-hmm.

David (36:48.974)
Sure. Yeah.

David (36:53.258)
Yeah, yeah, no, of course I get that, yeah.

Mudassir (37:04.463)
Isn't that gives them this sort of a sense like your employee, I don't know, 5001 in General Electric or something like that. Like, you know, you are just like, like whatever in Sequoia because Sequoia is Sequoia, like they're like all over the world, they're big, right? So it's so big, exactly. And you're probably dealing with an associate, let alone a partner or like whoever. So why people would still would want to work with Sequoia?

David (37:11.415)
Yeah.

David (37:19.018)
Yeah, yeah, right. It's so big and yeah, yeah.

Mudassir (37:32.987)
is just because of brand name, brand value.

David (37:35.338)
Yeah, sure. Like, I mean, this is a funny question to ask me because usually I'm telling people why not to work with Sequoia and why they should be taking my money instead. But I will I will happily play along. I forget who said this, but you know, you know, I forget who said this, but somebody it might have been Bryce from NDBC, but it was, you know, there was a conversation about like, you know, what is the value that VC actually provides?

Mudassir (37:41.804)
Okay.

David (38:05.202)
And somebody, again, I don't remember exactly who, basically said that the main thing that a VC does is that they increase the likelihood of the next round being raised. They lower the risk. They lower the financing risk. Look, I think the argument for taking a brand name firm's money is that there's a, undoubtedly, a halo effect.

of that brand. It makes you and your firm, your startup, it makes you seem like you are further ahead than you are, that you've figured out more things than you are. You're going to get a lot of credit based on that halo effect. And that could be make or break. That could be really meaningful. Now I think what you said is absolutely true, which is I wouldn't just take... I think like...

you know, not every Sequoia dollar is made equal. You know, so I think that money is way more meaningful at a specific stage and tied to a specific partner. Right? Another way of thinking about this is, you know, Mike Maples says, your fund size is your strategy, right? Sure, yeah. Right, and you know, so Sequoia has billions of dollars.

Mudassir (39:09.965)
Hmm.

Mudassir (39:18.495)
Yeah.

Mudassir (39:25.803)
Yeah, I was coming to that in a bit, but yeah, totally agreed.

David (39:33.426)
And if they're writing a $1 million check from their ARC program, right, which is run by whoever, but it's not like, like that is not, that is not a meaningful investment from Sequoia into your business. And what that means is

It's, you know, there's nobody, nobody put their neck out at Sequoia and, you know, to saying, I believe in this business, I'm going to do whatever I can to try to make this work, right? They need more money. I'm there, right? Like nobody did that, right? The check is too small. There's no partner aligned with that check, right? Like, and so that's why every dollar is not, is not equal, you know, and what I always say to founders is like, you want

you know, partnering with a big multi-stage fund like that can be truly a trajectory changing event for a company, right? It can be incredibly, incredibly meaningful. But it's also, it's dangerous if you take that money in the wrong way, right? If you take too small of a check, if you take it from the wrong partner who doesn't get who you are, right? Or if you take it from not a partner.

Right? If it's like a principal who's just kind of like trying to prove themselves and then they're going to be gone in two years and now you're orphaned. Right? Like there are lots of ways that can go wrong. And partly I'm just talking my own book here, obviously, because I work at a small fund where we, because our fund is small, we are laser, we are like perfectly aligned with an early stage founder because if we invest in you and we're only lead check writers, right? So if we invest in you, like you're a meaningful part of the portfolio.

We are making a meaningful bet on you. And so if you invest, we're aligned at that point. Like you know that we're on the same team. And also we're a partner only fund, right? There's nobody else. We're it, you know? And that means you're partnering with somebody who's not dealing with politics, who's not trying to, right? Who's trying to horse trade in the IC to get their deal over the line, to get the next person's deal over line or whatever. It's like, no, like we are autonomous decision makers.

David (41:50.666)
and we believe meaningfully in your business. And I think that's what you want as an early stage founder. That's like the most aligned sort of partner you could get.

Mudassir (41:57.335)
Yeah.

Mudassir (42:01.503)
Yeah, you mentioned one thing which I was coming to. Your fund size is your investment strategy, your fund size is your investment thesis, all of that. So a couple of questions on top of that.

David (42:06.247)
Yeah.

Mudassir (42:15.267)
This is, I know you're gonna say this thing, so I'm gonna ask you a question directly about that. Why you think investment strategy or investment thesis is overrated? And two is, what do you mean by your fund size is your strategy? And primarily for founders, because founders feel like, hey, every pre-seed seed fund is exactly the same, which they're not. Terribly mistake, terrible mistake. But yeah, can you just answer that from a founder's perspective, when they're reaching out?

David (42:23.831)
Yeah.

David (42:36.918)
Yeah, yeah.

David (42:42.574)
Sure.

Mudassir (42:44.007)
how everyone is not the same.

David (42:46.262)
Yeah, so there are two questions and the answers are actually really different. So your fund size is your strategy thing is all about fund economics, right? Like it's actually about like the math, like fund math, right? And so the way to think, like the shorthand you should use as a founder is you should always know whenever you're talking to any fund, you should know how big is the fund, right? Like is it a, how big is that vehicle? And then what is the check?

that this fund is gonna write? And how many checks do they write per year? Try to understand, try to make sure you know that. Because what you want is you want partners where you are a meaningful part, for which you are a meaningful part of their business. And this is why, by the way, that it's really hard for multi-stage funds.

And the other thing I should say, sorry to go back, is that the fund math is all about, ultimately, it's about returning capital to our LPs, right? Like we have a hundred million dollar fund, we're going to make 20 investments, right? Each of those investments are right, one and a half to two million, two and a half million dollars or something like that. Then we have reserves. Ultimately, we need to return multiples on that hundred million. We like three to five X, let's say, right?

kind of the target. And so we're looking at every position in the fund and we're saying, can we return the fund with this one investment? And the answer, like how we think about it is we should be able to return the fund with any of these investments, we need to believe, at least that we could return the fund with one of these, these investments. That's how we think about it. And I think ultimately, that's like a highly aligned, you know, way.

highly aligned approach, right? Because that means like each of these investments is super meaningful for us. Now think about it if you're a multi-stage fund, if you're Andreessen or, you know, Sequoia or whatever, or any of the others, right? Obviously there's so many. And they have like a new seed program, right? And they're doing a bunch of seed checks, but they actually have, you know, five billion dollars under management.

David (45:05.418)
Now they do a $1 million investment in your company and they own 5%, 8%, 10%. How big does your company need to be for that to be meaningful for them with $5 billion in that fund? Yeah, with a fund that's $5 billion. The reality is...

Mudassir (45:19.956)
need to get.

David (45:32.29)
they're not putting enough capital to work for that to matter to them. That $1 million does not matter, right? Like that $1 million is marketing budget, right? They're just like, you know, so what's actually gonna happen when they do that investment is they aren't really gonna pay close attention to you because they don't care. Like, how can you like think about it? They invested a million dollars in you and then $50 million in another company. Who do you think they're going to like pick up the phone for when they call?

Mudassir (45:42.017)
Yeah.

Mudassir (45:53.837)
Yeah.

David (46:02.314)
You know, like, who do you think, right? They're going to, obviously they're going to focus on where their capital is actually deployed because if they can, you know, 20 X that $50 million, that's pretty meaningful if they 20 X that $1 million, it doesn't matter, right? It like doesn't affect, it doesn't affect them at all. So, um, yeah. So I think that's how you, that's why that's, that's really what like your fund size is your strategy is talking about. It's talking about like the fund math, you know, and.

Mudassir (46:02.71)
Yeah.

Mudassir (46:16.308)
Doesn't matter, yeah.

David (46:31.79)
Do you have a reasonable case to believe that this partner you're talking to will pick up the phone? Do they care, right? Are they incentivized to care about you? So that's the, that's the Maples quote, you know, and that's how I think about that. Now, in terms of the investment thesis thing, I think that's actually like an entirely separate topic. That's more about, like I think very often funds,

Mudassir (46:49.631)
Yeah.

David (47:01.186)
use theses as a way to, yeah, it's kind of like as a way to pick, it's, you know, this is very cynical of me, but I think it's often a way of selling to LPs, showing that they're smart, right? To say like, look, we have this, like, we can see the future, we have this unique way of thinking about the world, you know, so they're kind of selling to LPs.

Mudassir (47:03.359)
Up-screening.

David (47:26.526)
And it's a way of, yeah, to your point, like screening, filtering pitches. Like I only want to hear about this stuff. Now, my, my critique of that whole approach is that I think VCs do not know what the future holds. I just don't think any investor actually knows if they did know they would be doing something else. They would be going and starting a business or.

Mudassir (47:30.229)
Yeah.

Mudassir (47:51.531)
Yay.

David (47:54.478)
What I write like you would there's better ways to make money if you see the future than to do venture, right? So I think most of the time VCs have no idea what the future holds So they have these theses that are really like convoluted and they don't actually you know, they don't really make much sense And they're most of the time Lagging indicators of what actually matters You know what's really happening in the world and also they are like and I wrote this in that

host that, you know, where I talked a lot about this idea of investment theses is, you know, they buy, I think one of the challenges with, with having a thesis as an investor is that you, you start looking for a company that's going to prove that your thesis is right. Right. Because you sold this thesis to LPs and then you, and you sold it to yourself, right. You've convinced yourself that you've done a bunch of research, right. You convinced yourself there's something here.

Mudassir (48:48.301)
Yeah.

David (48:53.75)
So now what are you gonna do? You're gonna invest in, you're gonna see a company and a founder comes up and they parrot back to you, your thesis, and you're gonna think to yourself, subconsciously or not, you're gonna think, wow, this founder is so smart. And why are they so smart? It's because they're telling you what you wanna hear. That's why you think they're smart. And so you're gonna invest in that company because it makes you feel smart, right? You're gonna invest in that company because it makes you feel like, yes, it was all worth it. This proves everything. Now, is that the best company you've met?

you know, like, who knows, right? Because that's not how you're thinking about it. That's not why you're investing. And that's the problem. You should be investing in the best possible companies, no matter what they look like, where they come from, right? Who the founder is, right? Invest in the best founder and the best company, whether or not it reinforces some thesis you have about the world, you know? So that's why I think theses for early stage investors are incredibly dangerous.

Mudassir (49:48.715)
Thank you, thank you for that. Okay, so David, what we do is we have decent big of an audience. Again, very fortunate to have everybody who listens to watches or read the newsletter. So we have about 20,000 founders, VCs on the newsletter side of things. So what we do is, yeah, before anybody is just coming over to the podcast, we just send out a newsletter or send out this questionnaire like, hey, David is coming tomorrow on the podcast. Any question you would want to ask him. So we get like all kinds of questions that you can imagine, like the worst of the worst and the best of the best. So the idea is to...

David (49:50.7)
Yeah.

David (50:02.135)
Wow.

David (50:11.97)
Hmm.

David (50:17.358)
Cool, okay.

Mudassir (50:18.675)
is to pick the good ones to talk about and not the crappy ones, right? So I have a few that you've already answered in one way or another, so I'm not gonna ask you those. But there are a few that I want you to answer, okay? So the first one is, how can anyone in 2024 start a VC fund, a small VC fund?

David (50:23.283)
Okay.

David (50:32.767)
Okay.

David (50:42.79)
Is the question like, how could you possibly, why would you ever do that? Or is the question like, how do you do it? How do you do it? Okay. Yeah, it's a, yeah, that's a good question. Slowly and painfully, I think is the answer. Look like I'm no expert on this. I wouldn't.

Mudassir (50:49.558)
How do you do it?

David (51:08.29)
I was very lucky in that I joined an existing firm. It happened to be a very early stage firm, right? So we were still emerging, right? But I didn't start it from scratch myself. But I've talked with many, many LPs, so I can at least have like a share of point of view on it. You know, I think ultimately LPs are looking for some sort of...

Like there's kind of like the venture value chain, right? Like, can you source good deals? Can you pick good deals? Can you, and can you add value, right? Can you make those deals, but those companies more valuable over time? And I think you kind of need to prove that you have some differentiated edge across those things.

And so that can look like, like I said before, there's many different ways to do venture. There's tons of flavors. So it's not about, it's about figuring out like what is your edge across those and leaning into that. And one thing that every LP will wanna see is a track record. So like, they're not just gonna believe that you're good at picking, right? You're gonna need to show that you've been good at picking over time.

And the last thing I would say is like the kind of a well-trod path for emerging managers is to start small and grow over time. Right. So you can start with a very small fund that, and you're doing mainly collaborative checks, right? You're writing checks alongside, right? And I think the question you need to ask yourself is, do you want to stay in that zone or do you want to scale up and start writing lead checks?

Mudassir (52:43.788)
Yeah.

David (53:02.346)
And a lot of funds make a misstep in that transition, you know, from going from smaller, right, collaborative to larger and leading, because that's very different investing, right? Just, you're not just putting more money to work, but you're also taking way more risk, ultimately, and the fund math is gonna start looking way different. So you need to, if you're gonna stay collaborative, stay small, great, just keep doing what you're doing.

If you're going to scale up, then what I've seen a lot of funds do, or a lot of investors do is they start to make a few investments that kind of look like what that will look like one day. It's like if your plan is for fund two to be bigger and you start writing lead checks, then in fund one, maybe halfway through, start trying to write a few bigger checks. Try it out. Test it. Like, see, can you do it? Can you?

Can you have some proof points so you can point LPs to that and say like, Hey, we started doing it. We're able to do it, right. We're able to get the ownership we need. We're able to write the checks, right. You know, all of that. Um, yeah. So I look at ultimately, I think it's about like, these are long, long-term relationships and it's about building a track record of a long, over a long period of time and ultimately proving that you have some differentiated access, picking ability, something.

Mudassir (54:31.415)
Cool. Now that you mentioned, do we need more pre-seed seed funds as well?

David (54:37.806)
Do we need more? Yeah, that's an interesting question. I mean, you know, I think that...

David (54:49.074)
My general view is that there are probably, like the venture is still an incredibly inefficient market and there's probably lots of founders out there who could be great, but are not able to raise money. Does that mean that we need more funds? I'm not sure. Maybe, right, potentially. I think one challenge for what it's worth is that

Um...

David (55:24.406)
I think there's a lot, like I think a natural reaction to what I just said would be, oh, then we need to create a fund that's focused on, you know, an area that nobody else is paying attention to. Right, so I'm going to raise a fund that invests in, you know, whatever, like, ex soccer players from the Nordics who are doing whatever, right? Like some like super narrow thing.

The challenge with those sorts of strategies is, you know, you have to believe that there are like enough really, really good companies that fit that bill. And you then also have to believe that you can see them all and that you can pick the best ones. And that becomes, that's just like way harder, right? Like you're increasing the, what's the right way of putting it? Like,

Mudassir (56:04.457)
Yeah.

David (56:20.606)
Like, venture is already really hard, and you're just like making it harder for yourself by creating these constraints. You know, like I've always found in general, you know, like I invest at Angular, we invest across Europe and Israel. And this is less true in the States, but in Europe, there's tons of firms that are like geographic focused, right? It's a Nordic fund or whatever. And I've always found those funds to be...

Mudassir (56:40.587)
Yeah, yeah, yeah. Yeah.

David (56:48.61)
really challenging to wrap my head around strategically because, and it seems like it would be really hard because ultimately, you know, you are, what are you selling to your LPs? You're selling access to the Nordics. That is ultimately what you're selling. And that means that that's challenging for two reasons. One is because a big part of your pitch has to now be about like why there are great founders in the Nordics.

which you have no control over, right? Like that's just like, and now you're telling, you're trying to tell a story, like this nationalistic story that is just like, neither here nor there, right? Like why is that, right? Like that's just a hard thing. It's hard to convince somebody of, I think. The other thing is, what if you happen to miss one of the great companies that comes out of the Nordics? You're...

Mudassir (57:28.352)
Yeah, I got it.

David (57:43.734)
Like you're done. Like what, what reason do you have to exist if you couldn't, couldn't invest in that one company, right? Like the one company that matters from the Nordics of the past decade, you missed it. Right. Like, and the problem is I think it's pretty likely that you'll miss it. Because the best founders who are likely going to create the best, biggest companies. They want to go raise from Sequoia and whoever else, right? Like, just as we said, like that's who they want to go raise from. So.

Mudassir (57:53.42)
Yeah.

Mudassir (57:58.867)
Yeah.

Mudassir (58:05.451)
He'll look outside. Yeah.

David (58:16.299)
Why are they taking your money? So I think that's why it can be really challenging as a VC to have like a narrower and narrower slice of the market that you're trying to go after and why that strategy is ultimately, yeah, I'm just not sure if it actually works.

Mudassir (58:40.833)
Hmm.

David (58:42.098)
And I would much rather see more YCs in the world that are super generalists, right? As well as more, you know, like more angulars for that matter, right? Like yeah, we focus just on B2B, right? But we're generalists within B2B. And I think that is the, in my mind, that's the most interesting way to do the job and the most likely way to generate outside returns.

Mudassir (58:46.252)
Yeah.

Mudassir (59:07.619)
Totally agree. And I was so happy to see that you guys are like not, hey, we're just only B2B SaaS focused because there's gazillion of them out there. It's like, hey, we're just B2B SaaS focused. OK, so the next one is, so these are like pretty sort of a standard questions that I think we get almost every time. What are the cap table red flags for you?

David (59:17.34)
Totally.

David (59:24.063)
Yeah.

Oh, cap table. Interesting. You know, look, ultimately it's, uh, you know, you kind of, you, you care about a few things when looking at a cap table. One is you want the founders to own enough of the business that they are. They continue to be incentivized, right? To, to do a good job, right? Like you want them to, you want this to be incredibly meaningful to them. And if they don't own enough of the business, then, you know, just serves as a disincentive.

The other thing is you don't want like a bunch of dead weight on the cap table. So that could be a, you know, that could be like a founder, like a co-founder that's left, right. And now like a significant portion of the business is owned by somebody who is not involved at all. Um, or it could be like an investor who is tapped out, right? They don't have a no fund. They can't invest any capital. So they couldn't help the company if the company needed it.

Mudassir (01:00:08.247)
Hmm.

David (01:00:25.746)
Those are all situations where you're like, we need to fix this because we need those shares to be available for either investors who can help or employees who can help.

Mudassir (01:00:40.786)
Are there ways to make those shares available?

David (01:00:44.81)
Yeah, so I mean, that's like what a recap is basically. So you can do, well, there are many painful ways you can do this like legally. So you can create a ton of ESOP, like a credit big option pool and then grant that option pool to the existing founders. So it dilutes everybody else, right? But the founders...

Mudassir (01:00:56.515)
Mm-hmm.

David (01:01:15.987)
gain ownership, or you can do things like, you know, pay to play where like people need to invest and if they don't invest, their shares are diluted. So this is what happens, by the way, in like normal venture time, right? This did not happen from 2015 to 2021, 2022, but you know, this is, I think this generally much more.

Mudassir (01:01:37.484)
Yeah.

David (01:01:43.348)
and it's certainly something that happens all the time.

Mudassir (01:01:46.483)
Yeah. OK. OK, cool. How much time do you spend looking at any page deck that you get?

David (01:01:54.166)
Hmm. Oh man.

Uh, I mean a minute probably something like that

David (01:02:06.838)
I mean, we'll also spend way more time than that, but that's probably like the, you know, well, that's like the minimum, right? Like I'll try to understand it, but.

Mudassir (01:02:09.838)
Yeah, yeah. And that was it.

Mudassir (01:02:19.871)
But so I'll ask you a question which is very interesting to me as well. And interesting because again, I host people from different verticals, different front sizes, different investment thesis, all that. So the question is, when you get a pitch deck.

David (01:02:20.396)
Yeah.

David (01:02:33.931)
Yeah.

Mudassir (01:02:38.131)
What are the slides that you immediately go to? So some, like, one of the VCs that we host, so they're in consumer, so they invest a lot of money in consumer, so they would immediately go to GTM, like virtual distribution, go to market strategy that you have. Other than just saying, okay, we're just gonna run Facebook ads. So if I'm talking to a deep tech, they would just immediately go look at the team member, like, okay, if you're building an XYZ, have you worked in similar experiences before? That kind of thing. So what do you look for immediately in those page tags?

David (01:02:42.488)
Hmm.

David (01:02:50.483)
See you later.

David (01:03:03.33)
Right. Yeah.

Hmm. Yeah, we're a little bit more generalist. Yeah. Yeah, I think, look, I think for me...

Mudassir (01:03:07.935)
Because you are kind of, yeah, exactly.

David (01:03:17.414)
Um, that's a good question. I'll tell you what I, I'm spending a lot of time trying to figure out the, trying to figure out the problem. So I probably, that's probably where I spend most of the time is really trying to understand what, like what the problem is that they've identified and what the, like what vision they have for the future of the world, right? Like that, that kind of, that's what I'm trying to understand really early.

What I would say is...

David (01:03:57.078)
The thing that I'm looking for more than anything else is something that I've never heard before. That's what I really wanna see. Whenever I'm looking at a pitch deck, I want, what I really want is to find something novel. Cause look, the reality is when you're sending a deck to a VC, right? Just know that they are looking at like

hundreds of decks. And there's a weird thing that happens in the startup world. I don't really fully understand why, but there's this thing that happens where like, people across the world will have the same idea simultaneously, right? And you see this, by the way, like this is true in startups. This is true in the history of technology too, right? People, right? Like it's been shown, right? That things are invented on opposite sides of the world at the same time. And you're like, how is that possible?

Mudassir (01:04:41.559)
Yeah. I know. Yeah, yeah.

David (01:04:55.054)
a long time ago too, right? Like before the internet, right? It's not like people were talking about it. And it's like there's lots of reasons for this. In large part, it's because we're all standing on the shoulders of giants here. We're all building on top existing technology and existing infrastructure. So all of a sudden something is possible. A bunch of people start working on it at the same time. Okay. So, but what that means is if you're working on something that

just know that the investor has probably, this happens to me all the time, I'll all of a sudden one week, one month, see the same pitch like seven times in a row. And when that happens, it just kind of immediately becomes way less interesting. Because you know, you kind of know that if I'm seeing seven of these, and I, as we have discussed previously,

and not necessarily an investor that everybody is trying to pitch to. If I'm seeing seven of them, I've got to assume there's 70. And why should I assume that the seven I'm seeing are the best? They probably aren't. Let's just assume they're middle of the road at best. But there's 70 of them. And probably there were a few that were first. And those were probably a little bit ahead of the game. Maybe they were six months ago. They were founded.

Mudassir (01:05:55.507)
Yeah.

Mudassir (01:06:00.854)
Okay.

David (01:06:22.262)
They've already raised a bunch of money from some investors in the U.S. Right. So when I see like the same thing again and again, my immediate reaction is like, it's already too late. It's already uninteresting. Right. So anyway, that that's why what I spend a lot of time on whenever I'm looking at any deck is just like, I'm asking myself, have I heard this before or is this actually new and if it's really new and weird and hard, like that's when I get excited, you know, I, um,

I was talking to an investor who I really, really respect a few weeks ago, and I was kind of asking him about how he spends his time. Because I feel like that's a much more interesting question than like, you know, whenever investors get together, there's always this like weird thing where people are like, oh, so what are you looking at lately? You know, and you're kind of talking, you're trying to like mine for information about what they think is interesting or what deals they're looking at.

without actually asking. So people are like, so what do you find interesting lately? What are you finding interesting? That's what people say all the time. Which is like such, the whole thing is like a very painful, there's like hate in those conversations. Cause it's all just like a, it's a show, right? We're all just kind of going through the motions and everybody knows what is going on. It's very tiring. So what I've taken to asking people is I'm like, I actually don't really care what you're looking at. I mean, like I do, but I don't care.

What I really care about is like, how are you spending your time, like dividing up your day? Like I'm curious tactically how you're doing it. Because I find one of the hardest things about this job is just balancing, right, like time allocation. It's just like really, really hard. And you know what this guy said is he said, you know, I find that I'm spending more and more time looking at, like trying to understand markets that...

other people probably don't have the time or interest in understanding. And the point that he was making was, you know, if you think about most of the funds out there, like, and this, by the way, this guy's a partner in a partner-only fund, so similar to Angular, right? It's just a few partners. And the point that he was making is he was like, look, like most of the funds out there, they have a bunch of associates or principals who are all filtering.

David (01:08:48.59)
companies for the partners. That's basically what their role is, right? Like we're gonna go source deals and filter and give the best to the partners. And he said, you know, the effect of that is those associates want things that they can easily package up, right? That are immediately like understandable, easy to categorize, right? Like, ooh, I can, right? Like I can package this up and give this to the partner. I know the partner likes this kind of thing.

Mudassir (01:09:11.883)
Thank you.

David (01:09:18.534)
So I'm going to package up and give it to them. He's like, what that means is that they're never going to look at the thing that is hard to understand. It's an easy pass. An associate talks to one of those companies, and they're going to be like, I don't even get this. It's not worth my time. I have to go talk. I have to go look at 100 other companies this week. I need to go find something that I can package up and give to my partner. Whereas I'm a partner. I can do I can spend my time on whatever I want.

So I'm gonna go spend my time on the stuff that most people don't have the wherewithal to try to understand. And I think there's a ton of wisdom in that. You know, and so I, that, ultimately I try, I'm pushing myself to try to do that as well. And so whenever I see something in a deck that like I've never heard of before, or it's just weird, or it's hard, right? That's when I'm like, okay, it would be easy in this moment to just say, sorry, no, I don't get it. But actually,

this is the moment when I should really try to dig in and figure it out. And look, it might lead nowhere, but every once in a while, that could be the next big thing. And the reason it's going to be the next big thing is because right now, it's weird and hard to categorize, and it's new. That's why it could be the next big thing, because it's new now.

Mudassir (01:10:43.091)
And almost everybody's passing because it's exactly the same thing. Right? Yeah. How do you think AI is going to change the VC ecosystem?

David (01:10:46.858)
Right, right, exactly.

David (01:10:56.695)
Yeah.

Mudassir (01:10:57.624)
Especially now that you mention associates and principles, it's like a head count sort of a thing. So if AI is gonna replace the head count, and AI is gonna just figure it out, I met somebody, I forgot who that person was. He showed me this thing, if you upload the pitch deck or something like that, immediately they just score how it does and all that. So they're preparing this thing for the VCs. Yeah.

David (01:11:04.918)
Yeah, yeah.

David (01:11:19.192)
Yeah.

Mudassir (01:11:25.035)
He's an ex-executive of Techstars, I think. I believe Scott, yeah, Scott was the person who was showing me this thing. Anyhow, yeah, so they built this thing and VCs are not interested, off the record, but VCs are not interested anymore in the thing that they built. So now they're giving it free to the founders, like hey, you got a cool idea, just upload it here, you're gonna get all the business plans and this and that, like that kind of stuff. Yeah, yeah, so.

David (01:11:29.143)
Mm.

Okay, cool.

David (01:11:48.757)
Oh, I see. Right, right, yeah.

Mudassir (01:11:52.043)
So I was like, cool, it's a good product. Give it a try, it's a good product, but not like proper VCs, anyhow. How do you think AI is gonna change the VC ecosystem, especially knowing that VCs are primarily, the firms are primarily headcounts. And if an AI can come in and then just can screen through the slide decks and stuff like that. So yeah, how do you think that's gonna change? Like we'll see a lot of one.

David (01:12:02.252)
Yeah.

David (01:12:15.607)
Yeah.

Yeah.

Mudassir (01:12:20.543)
personal led, one GP led funds as well in the future.

David (01:12:26.326)
You know, I think that the big impact that AI is having across a lot of industries is headcount replacement to your point, right? It's like we can do more work with fewer people.

David (01:12:42.902)
The challenge with that framing with VC is that there aren't that many VCs. There aren't that many people that work in this industry. So even if all the associates and principles were replaced by whatever, right? Like I just wouldn't be a big, it wouldn't actually have a big impact on the economy. Like it's just a, you know, a rounding error of a rounding error. It just doesn't, it doesn't really matter. Um, now the question is like.

Can AI replace investing, like investors? And maybe AI could help with research, right? Like I can imagine that being the case, like a research and analysis platform that helps you really understand a certain market more quickly. I can see how that would be really useful for later stage investors, where the markets are already pretty clear and...

competitive set matters, right? Like if it enables you to make informed decisions about a particular market a little bit faster as a later stage investor, I can see how that could be useful. It's a little bit harder for me to wrap my head around why that sort of product would be super useful for me as a super early stage investor.

Because very often we're investing in things that aren't markets yet. You know? So, yeah. So like that sort of platform wouldn't really be that useful. And then, you know, like, look, like we, we already, I should say, you know, we have a whole platform that we built obviously on top of Airtable to like manage our deal flow and everything like that.

Mudassir (01:14:13.429)
Yeah.

Yeah, they're not a problem of today, they're a problem of future, market of future kind of thing, yeah.

David (01:14:37.302)
And there's a bunch of AI sprinkled all throughout it actually that we've already, we've already built ourselves and it helps at the margins, but it's all it's, it's helping us be more efficient, right? Like it's doing things like, Oh, pull in a founder's profile and pull out some, like a quick summary of their background so that we can, like, so we can understand it quickly within the air table, right? Like within the interface of air table versus like having to go to LinkedIn and

scrolling through their LinkedIn, right? So it's helping us be a little bit more efficient, but it's not making an investment decision for us, right?

Mudassir (01:15:16.627)
Okay. Yeah.

David (01:15:17.334)
So I don't know, probably not a very satisfying answer. I don't see the end of venture around the corner.

Mudassir (01:15:23.487)
Awesome, awesome. All right, David, thank you so much for the time. So we do have this one small ritual on the podcast since the episode one. So what we do is we ask all our guests a question for our next guest without telling who the next guest is gonna be, okay? So, okay, so I got a question for you, which the last guest left, and obviously gonna take a question from you for the next guest. So the question for the last guest, yeah. The question from the last guest is, who is one person outside your friends and family who has inspired you the most?

David (01:15:37.171)
Okay.

David (01:15:44.639)
Okay, sounds good.

Mudassir (01:15:53.621)
in your career.

David (01:15:55.361)
Mmm.

David (01:15:59.758)
Hmm, interesting.

David (01:16:06.619)
Outside of friends and family.

David (01:16:11.726)
Yeah, lots of family members, that makes it hard. But yeah, sure. So.

David (01:16:19.062)
You know, I worked at a company before a few companies ago, right? I worked at a startup called CompStack. It's a startup in New York city that is basically like crowd sources, commercial real estate data, and then makes that a built like an analytics platform with, with all that commercial real estate data. So relatively, you know, it's an interesting company.

I was a super early employee there. I was the first like, also the first growth person there. So I did a lot of the early stage growth. But this was a sort of, this was the sort of company that like never really, it never really reached escape velocity. Right. And, um,

But it's still going, right? It's been 13 years and it's still going. And I think about this company a lot because the CEO is just like this amazing, the CEO, he's a commercial real estate broker by background, right? Not a startup, not a traditional startup guy, right? But he kind of pulled together a team

And he found an engineer to work with him, found a designer, kind of pulled this together. And there's this real sense about this business that like it wouldn't exist if not for like, it was like just a sheer force of will on his part. He had to will it into existence. And even to this day, 13 years later, it's not, you know, it's not a billion dollar business. And he is, there's something about like the...

Like the, I think about him a lot when I meet founders and I think about like, what does like grit really mean? You know, what does it mean to like keep going and pushing through, right? What does it mean? What does that look like? And I often think about him very inspired by what he's been able to build. So yeah.

Mudassir (01:18:32.643)
Great. Question for the next guest.

David (01:18:36.355)
Oh boy, it's a tough question.

David (01:18:44.458)
Let's see. Okay, how about Okay, I'll give them a more fun question Well, I mean that was a fun question don't worry to whoever gave me that question. Thank you but you know what would what I'm what I often talk about with you know with friends and family when we're kind of sitting around dreaming about the future is you know if you like I'd care less about or

Mudassir (01:18:51.796)
Okay.

David (01:19:12.586)
Basically, I'm really curious, and I feel like this reveals a lot about people, is, you know, let's imagine a world where you can have, you know, multiple houses, and you can kind of choose not necessarily where exactly they are, but like you can choose, like do you want like city? Do you want mountains? Do you want lake? Do you want seas, you know, ocean? Right? If you could choose, right, like what's your stack rank?

Mudassir (01:19:32.204)
Yeah.

David (01:19:41.578)
you know, priority and why, right? Like in that future, like that amazing future world that we're all gonna live in at the end of a successful career, what would that look like?

Mudassir (01:19:54.559)
Okay, that's a cool one. Okay, thank you for that. All right, so a couple things. I'm gonna pause the recording. Let's just save the buys and stuff like that. So we're gonna pause the recording, but please stay after the, after the, I've paused like whatever. Okay. Rolling now. All right, thank you so much, David. Thank you so much for the time, for the wisdom, for sharing all the amazing things with us.

David (01:20:16.802)
Thank you.

Mudassir (01:20:22.375)
I have hosted I think 70 plus people so far. 80% of them are the VCs. You are the most talented slash smart person that I have ever hosted. I can tell that on record, yeah. So thank you so much for the time.

David (01:20:35.425)
Oh, that's very kind of you, undeserved. But thank you so much. This was like, this was a ton of fun. So thank you for having me.

Mudassir (01:20:43.511)
Thank you so much.