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

20VC: How Multi-Stage Funds Changed The Game For Seed Rounds, Why Signalling Risk is BS, The Three Most Important Variables for Founders When Raising Rounds & A Debate on Portfolio Construction: Does Ownership Matter with David Tisch

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Feb 27, 2023

David Tisch, Managing Partner of BoxGroup, dives into the transformation of seed funding, revealing how multi-stage funds have reshaped the investment landscape. He argues that traditional ideas about ownership and portfolio construction need rethinking. Tisch shares insights on diversifying investments and managing reserves, especially during economic downturns. He emphasizes the importance of personalized advice for entrepreneurs and the challenge of balancing fundraising strategies with meaningful relationships. Ultimately, he advocates for a committed approach to supporting visionary founders.

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INSIGHT

Focus on Outlier Returns

David Tisch believes that producing outlier returns is the ultimate responsibility, regardless of check size.
He focuses on portfolio-level ownership rather than individual deal ownership.

ADVICE

Long-Term Focus

David Tisch prioritizes investing in good companies for the long term, regardless of market conditions.
He emphasizes that building a product and business model are more critical than short-term valuations.

ADVICE

Founder Advice

David Tisch advises founders to be realistic about valuations and consider market conditions.
He suggests optimizing for amount of money raised, investor choice, and price, in that order.

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David Tisch is the Managing Partner of BoxGroup, one of the leading seed-stage investment firms of the last decade having invested in over 500 seed-stage startups, including Plaid, Ro, Ramp, PillPack, Amplitude, Flatiron Health, Stripe, Warby Parker, Harry's, Oscar, Flexport, Classpass, Vine, GroupMe, Airtable and more. David is also the Chairman of GoodDog, a marketplace to find pets online.

In Today's Episode with David Tisch We Discuss:

1.) From Techstars To Founding BoxGroup:

How did David start his own firm in the form of Box having started at Techstars?
What advice from Brad Feld does David always remember and hold close?
What does David know now that he wishes he had known when started investing?

2.) The Debate: The Math Does Not Work: Portfolio Construction:

Ownership Does not Matter: How does David justify writing $100K checks from a $127.5M early-stage fund? Even if it is a home run, it does not make a difference to the fund?
Level of Diversification: If David is writing small checks like this, with his fund size he will have hundreds of companies, what does David believe is the right level of diversification?
Reserves management: How does David think about the ratio of initial to reserves when deploying the funds today? How does reserves management change in a recession?
How does David prevent other VCs from using this to try and push him down to always writing a $100K check?
Why does David believe that the size of check he is able to invest is the VC's problem and not the founders?
Price Sensitivity: How does David assess his own relationship to price today? Why does he believe that company valuation is not something that the investor controls?

3.) Advice to Founders Raising Rounds:

What does David believe is the #1 role of the CEO?
What are the three most important variables for founders to focus on when raising their round?
How should founders analyze the tradeoff between the brand of the VC and the size of the round?
Does signaling really make a difference when a large fund invests at seed?
How did multi-stage funds change the seed landscape forever with a new product?
Who does David believe are the tourists in early-stage venture? Will they leave in the recession?

4.) David Tisch: AMA:

Why does David believe that consumer social is not fun anymore?
Who when they send him a deal does David take it most seriously?
How does David want to ensure that bad VC behaviour is exposed?
What would David most like to change about the venture landscape today?