The Full Ratchet (TFR): Venture Capital and Startup Investing Demystified

Jaclyn Hester of Foundry Group joins Nick on a special Crisis Coverage installment to discuss GP and LP Alignment, Challenges for Emerging Fund Managers, and How the Explosion in Seed Fund Volume Plays Out. In this episode, we cover: Tell us about your background and path to VC. For those who don't know, talk about the approach at Foundry with both the LP and GP model. Foundry traditionally had no apprenticeship model and no junior investors... were you the first? Pandemic... Are you making investments currently and what are you hearing from other LPs? What's your advice for GPs re. building relationships and momentum w/ LPs during these uncertain times? What's the biggest mistake emerging managers make when fundraising? What do new fund managers underestimate when starting a venture firm? Does it matter how specific a thesis is? Do you need to see a unique, focused and compelling edge or are you just as receptive to a generalist w/ a strong network and track record? What question tends to trip up GPs? What are some of the most important things GPs should ask LPs when raising? What do you think are the most important things GPs and LPs need to be aligned on for a successful relationship? How does the explosion in volume of seed funds affect you approach to selection? How do you think this plays out -- most funds fail? Returns more evenly distributed? Power law no longer applies (or is less pronounced)? Fast forward 5 years and let's assume there's been a fundamental shift in early stage Venture. What do you think is the most likely, largest change that's occurred? What advice do you have for young people that aspire to be a VC someday? Not going to ask for favorite GPs but, I will ask, if you could break quarantine to grab a cocktail w/ one GP -- who do you choose? ; ) 3 Data Points... You're approached by an emerging VC firm raising fund II. The fund manager did not work for a large, brand-name venture firm before and she has never had an institutional investor. Net TVPI is 1.4, and Net IRR is 35% and it's a 2018 vintage. The catch is you can only ask 3 questions (for 3 additional data points) to make your decision. What 3 questions do you ask? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Nick Rishwain and Hannah Konitshek of The LegalTechLive Podcast interview Nick to discuss Advice for Founders -- Reaching out to VCs, Pitching over Zoom, and Closing Capital Amidst a Pandemic. In this episode we cover: How have valuations been impacted from the pandemic? How long will lower valuations persist? Are VCs actively doing deals right now? What's the most common mistake that founders make when approaching you for funding? How much information would you prefer a founder share with you upfront (deck, financials, incorporation, docs, etc.)? How often have you met a founder early, been added to their monthly update list and then come back to make an investment? Should founders become more clinical when selecting investors? How do you convince founders on New Stack as an investor? There is one area that New Stack is really hands-on -- what is it? What are some things a founder can do to get funded while he's only got a well thought out idea and business plan? Many founders don't know if their business is venture scale. How do you determine if a business is venture-backable or not? How does a sector that hasn't had huge exits at large multiples (like LegalTech) impact the way you assess startups in that sector? How do you evaluate high recurring revenue vs. low recurring revenue? Do you have any suggestions for a founder that is pitching now that it is completely remote? Overall advice you're giving your portfolio companies right now? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following Investors are featured: Alex Osterwalder Beezer Clarkson Michael Cardamone Leo Polovets Each investor illustrates a critical lesson learned about startup investing and how it's changed their approach. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Shawn Carolan of Menlo Ventures joins Nick on a special Crisis Coverage installment to discuss the Four Fundamentals of Investing; the Future of Micro Mobility; and Hunting Consumer Unicorns. In this episode, we cover: Tell us about your background and path to venture. What's the thesis at Menlo Ventures? Can you explain the "Four Fundamentals" framework for investing and give us a brief description of each? What are you looking for in terms of unit economics? You like to invest in technologies that change everyday life for the better. Do you have a sense for the needed technologies and then find founders in those areas, or do you identify compelling entrepreneurs that then guide you to emerging technologies that will shape the future? Have you been in the situation where you identified the right consumer trend and technology required to deliver but you picked the wrong startup? Is there a priority of importance amongst the four? Which do you think investors most often get wrong? Let's talk about consumer a bit...Many VCs think that consumers and consumer behaviors evolve quickly in unpredictable ways. And b/c of that many VCs avoid consumer. What's your response? We've seen an explosion in Cloud and SaaS recently, and some question whether there's room for another big consumer company, what is your response to this and which areas do you see the biggest opportunities in? Before the pandemic, the future of scooter companies was murky with challenging unit economics and fleet maintenance... while governments were, in some cases, were imposing regulations and putting a halt to deployment. What does the future hold for the scooter companies? How do you view these situations, like scooters, where there's low differentiation and a number of players trying to scale and grab share quickly? Any other micro-mobility trends that you're watching closely, aside from scooters? Changing gears away from micro mobility and into AI for a bit, why do you think we haven't seen many unicorns in consumer AI? Where (sectors, categories) do you think the initial consumer AI unicorns will come from? Let's say that you have a micro mobility company that is currently operating in 3 cities within one region, grossing $500K monthly and growing 30% month to month. Which 3 data points do you ask for and why? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following Investors are featured: Patrick Gallagher Sarah Tavel Byron Deeter Jim Kim Each investor discusses sectors, drivers and/or trends that may have significant impact in the future and are potentially positioned for outsized-returns. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Tamara Steffens of M12 joins Nick on a special Crisis Coverage installment to discuss Why Corporate VC Gets a Bad Wrap; Microsoft's Fresh Approach to CVC; and Key Insights to Acquire Mass Users. In this episode, we cover: Background and path to venture. Overview of the thesis at M12. Investments since COVID? Changes in strategy, markets of interest. CVC has the reputation of being very slow, not leading deals, imposing restrictive terms, and thinking only about broader success of their parent company— what's different about M12? What's your approach to sourcing? You are known as a user acquisition expert in the valley... having generated millions of app downloads for Path, Color and Acompli. One of your main suggestions is to "Dismantle the silos" ... what do you mean by that? You've cited the top three things you need to make your app part of the zeitgeist -- can you walk us through each and why they're critical? Talk about the 'Leaky Bucket' of new user acquisition and how to avoid it? What's a good level of user retention (%) after 6 weeks? What are the biggest differences in approach when acquiring consumers vs. enterprise customers? What are the main KPIs/OKRs you track when optimizing a sales funnel / team? I'd like to talk a bit more about the startups you work with...What are the key factors you're looking for in investments? How do you work with your portfolio companies? Why should every startup be thinking about culture as they build their companies? How are founders today different from founders 20 years ago? What tips do you have for founders pitching investors remotely? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Brian Hollins of BLCK VC joins Nick on a special Crisis Coverage installment to discuss Breaking into VC; Excelling at Goldman Sachs; and the Origin of BLCK VC. In this episode, we cover: Background and path to venture? What was the most surprising thing about venture that you only realized after working in it for awhile? So you've got this great job in venture... Why'd you decide to go back to HBS? Tell us about the origin story of BLCK VC? What are some of the specific activities and programs that BLCK VC is running? On June 4th, BLCK VC held an event, "We Won't Wait", for people in venture to take action. What were the primary goals and outcomes of the event? I want to talk a bit about your experience at Goldman... did you have an opportunity to invest in black and/or underrepresented founders? What, if anything, did Goldman do to support black investors and founders? It's so hard breaking into this industry and orders-of-magnitude harder when you're black -- how have diversity issues and racial profiling affected your professional journey? Can you give us your take on the current social unrest and what path you want to see going forward? Do you think we'll see the systemic changes required this time or do you think progress will be limited? Who are some investors, founders or people in the space you see paving the way and driving change? What can white VCs do, specifically, to contribute to more better balance and stronger representation for black founders and investors? What organizations do you care about? What are sites or resources that our audience can visit to get more involved? Aspen Fellowship... At New Stack we're rolling out a fellowship program to train young, college students in VC... you're back on a college campus... what are some ways that we can get our job description in front of more black, latin and underrepresented minority students? Are there any national organizations or communities for college-aged, black students that are interested in tech? 3 Data Points... Let's say you are approached to invest in an enterprise SaaS business. The startup has $10M ARR, Growing 10% MoM and LTV:CAC is 4:1. Catch is you can only ask 3 questions (for 3 additional data points) to make your decision. What 3 questions do you ask? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

On this special segment of The Full Ratchet, the following Investors are featured: Minnie Ingersoll Adeyemi Ajao Richard Kerby David Horowitz Each investor highlights a situation where they decided not to invest, why they passed, and how it played out. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

Kane Hsieh of Root Ventures joins Nick on a special Crisis Coverage installment to discuss Investment Decision in Backstory/Path to Venture Tell us about the the thesis at Root and your focus areas. Any unique outcomes or behaviors you are observing as a result of the pandemic? What's your investment position on 3D printing... bullish or bearish? I used to work in the industrial automation area... developed two different products there and saw limitless opportunities but also many challenges. From your standpoint, what have been the biggest challenges to progress in industrial automation? What excites you most about industrial automation going forward? How will jobs in the industrial space, or any space for that matter, change with the immersion of automation and robotics? Is this a net job eliminator? Startups w/ hardware as a part of their solution (whether off the shelf or developed internally) are often are more capital intensive than their pure software counterparts. How do you balance progress and capital efficiency for these businesses? Do you think the expectations of progress/traction, at different stages, is different for hardware as a service vs. software as a service? One piece of advice for founders of industrial automation startups... what would it be? What are some of the deep tech or capital intensive investment areas that you're avoiding? Heard a rumor that you're starting podcast? I came across a side project, "Transformer Poetry," a book of famous poetry reimagined by OpenAI's GPT-2 language model. I don't even know what to ask here but would love to hear what the inspiration for it was. To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.

James Currier of NFX joins Nick on a special Crisis Coverage installment to discuss Network Effects; 9 Days Until a Funding Decision; Software as the Foundation for the Modern VC firm; and the Future of Social Media. In this episode, we cover: Background and path to venture Thesis: Overview of the thesis and your specific focus at the firm Pandemic: Unique outcomes or behaviors you are observing as a result of the pandemic? Overview of Software: You're a huge inspiration to me... I love that you're bringing innovation to venture -- building software and tools that help founders and allow them to access more investors. For those in the audience that don't know, can you give a brief over of the major software and tolls that you've built. FAST Program: You launched the FAST Seed Financing Program ($1M, $1.5M or $2M for 15% of their company) which ran April 16-May 22.... were you allowed startups to apply for funding and you committed to responding in 9 days. Why'd you launch the program? What did you learn that was surprising? Will you do it again and, if so, what will you change? All this software focus could run the risk of investing in startups that look great on paper but could underestimate or not fully assess the founding team's mindset. How do you consider the qualitative? Creators vs. Opportunists: How do you insure that the founder's you are backing on true creators with the right motivation instead of just opportunists with great skill addressing large markets? Unusual vs. Conventional thinking: You have said that exceptional outcomes are the result of unusual thinking and that conventional thinking is the death of many companies -- explain what you mean by these types of thinking? 1st time vs. 2nd time founders: What's the biggest challenge to working with second time founders? Social: One of your key observations was that social media is becoming less social and more media. What are some of the consequences of this shift? It seems that social media is moving away from broadcasting towards intimacy and sharing. Does the pandemic accelerate any trends/behavior/psychology within in social? Do you think business models and advertising as a primary revenue stream with have to change w/ it? 3 Data Points... Let's say you are approached to invest in a consumer social business that has a network effect. Their user base is 20k DAUs and is growing 30% MoM and they have not yet monetized. Catch is you can only ask 3 questions (for 3 additional data points) to make your decision. What 3 questions do you ask? To listen more, please visit http://fullratchet.net/podcast-episodes/ for all of our other episodes. Also, follow us on twitter @TheFullRatchet for updates and more information.