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

20VC: Why VC Subsidizes the Wrong Type of Business, Why Capital Gains Tax is Crazy, The Biggest Misalignments Between VCs, Founders and LPs, Why Business Model - Product Fit is as Important as Product-Market-Fit with Chris Paik @ Pace Capital

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May 8, 2023

Chris Paik, General Partner at Pace Capital and former Thrive Capital leader, shares his journey from novice to a prominent VC in NYC. He delves into the critical distinctions between business model fit and product-market fit, emphasizing that clarity in business descriptions drives successful investments. Chris discusses misalignments between VCs, founders, and LPs, and critiques the current venture landscape, arguing that virtuous companies often suffer in enterprise value. He also highlights the importance of market timing and the interplay of timing and execution in startup success.

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INSIGHT

Sinful Motivators

The seven deadly sins are fundamental motivators for human behavior, including consumer decisions.
A company's "virtuousness" might be inversely related to its enterprise value.

ANECDOTE

Surfing the Market

Startup success is like surfing; founders need to be in the right place at the right time.
Market timing is crucial, as founders can't create waves, only ride them.

INSIGHT

Market Risk is Essential

Any company with pure execution risk, without market risk, is unsuitable for venture investment.
Tesla, despite its success, carried significant market risk initially.

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Chris Paik is a General Partner @ Pace Capital, an early-stage venture firm in NYC. Pace's first fund was $150M and their second was $250M. Before co-founding Pace, Chris was a General Partner at Thrive Capital where he spent an incredible 8 years having joined the firm when they were on their first $10M Fund.

In Today's Episode with Chris Paik We Discuss:

1. From Hipster to One of NYC's Best VCs:

How Chris made his way from not knowing about venture capital to being one of the most prominent in NYC?
What are 1-2 of his biggest takeaways from his 8 years at Thrive? How did they impact how he thinks about building Pace today?
What are Chris' biggest lessons from working with Josh Kushner? What did Josh do to spot young talent in a way like no one else did?

2. The Core Pillars of Successful Venture Investing:

"Invest in companies that can be described in a single sentence". What does Chris mean by this? How does that impact the type of companies he looks to invest in?
"Business Model Fit is as important as PMF". What does Chris mean by this? How does he determine where a company has business model fit?
How does Chris analyze his relationship to market sizing? How does Chris think about how willing he is to take a bet on market timing?
Why does Chris believe that the more "virtuous" a company is, the less enterprise value it will have?

3. What is Wrong with Venture Capital: The Misalignments:

What does Chris believe are the single biggest misalignments between VCs and Founders?
What does Chris see as the biggest misalignments between VCs and LPs?
Why does Chris believe we should scrap capital gains tax and all be taxed as an income tax?
Why do acquisitions allow investors to be screwed over by the acquiring company?

4. The Future of Social and User Generated Content Platforms:

How does Chris analyze consumer businesses according to "The Seven Deadly Sins"? Why does he call them, "The Seven Deadly Motivators"?
What does Chris believe is the future for Substack? Why does it not have Business Model Fit?
What are 1-2 of his biggest lessons from being on the Twitch board? How did that experience impact his mindset and approach to what good is in UGC and social?
What does Chris believe is the number one thing to look for in a potential consumer social investment? What do so many miss?